Commerce Accountancy

Accounting Principles and Practice

1,227 Questions

Accounting principles and practice questions cover core concepts like assets, depreciation, financial statements, and ledger adjustments. These topics are essential for commerce students preparing for academic and competitive exams. Regular practice ensures a strong grasp of standard accounting standards and business operations.

Asset depreciationFinancial statement adjustmentsAccounting standardsSingle entry systemCapital expenditure

Accounting Principles and Practice Questions

Multiple choice

What is the intended meaning of the statement "A penny saved is a penny earned"?

  1. Saving money is a good way to make money.

  2. Saving money is a necessary evil.

  3. Saving money is a waste of time.

  4. Saving money is a sign of greed.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The statement "A penny saved is a penny earned" is an epigrammatic irony because it means the opposite of what it appears to mean. In reality, saving money is not always a good way to make money.

Multiple choice

Which of the following is not a method of computing capital gains?

  1. Indexed cost of acquisition

  2. Fair market value

  3. Actual cost of acquisition

  4. Net asset value
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Net asset value is not a method of computing capital gains.

Multiple choice

Which of the following is not a capital asset?

  1. Land

  2. Building

  3. Jewellery

  4. Furniture
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Furniture is not a capital asset.

Multiple choice

Which of the following is a capital asset?

  1. Shares

  2. Bonds

  3. Debentures

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Shares, bonds, and debentures are all capital assets.

Multiple choice

What is the due date for filing capital gains tax return?

  1. July 31

  2. August 31

  3. September 30

  4. October 31
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The due date for filing capital gains tax return is July 31.

Multiple choice

What is the penalty for late filing of capital gains tax return?

  1. 1% per month

  2. 2% per month

  3. 3% per month

  4. 4% per month
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The penalty for late filing of capital gains tax return is 1% per month.

Multiple choice

What is the holding period for a capital gain?

  1. One year.

  2. Two years.

  3. Three years.

  4. Four years.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The holding period for a capital gain is one year.

Multiple choice

What is the term used to describe the process of transferring government-owned assets to the private sector?

  1. Divestiture

  2. Deregulation

  3. Liberalization

  4. Nationalization
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Divestiture refers to the process of selling or transferring government-owned assets to private entities.

Multiple choice

What is the term used to describe the difference between the purchase price of a property and its current market value?

  1. Equity

  2. Appreciation

  3. Depreciation

  4. Capital gain
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Depreciation refers to the decrease in the value of a property over time due to factors such as wear and tear, obsolescence, and economic conditions.

Multiple choice

What is the term used to describe the process of estimating the rental income that a property can generate over a period of time?

  1. Gross rental income

  2. Net rental income

  3. Operating expenses

  4. Capitalization rate
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Gross rental income refers to the total rental income that a property is expected to generate before deducting operating expenses.

Multiple choice

The concept of 'stranded assets' in the petroleum industry refers to:

  1. Oil and gas reserves that cannot be economically extracted

  2. Infrastructure that becomes obsolete due to technological changes

  3. Investments in fossil fuels that become worthless due to the transition to renewable energy

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Stranded assets in the petroleum industry encompass oil and gas reserves, infrastructure, and investments that become economically or environmentally unsustainable due to various factors.

Multiple choice

Individuals who are influenced by mental accounting are more likely to:

  1. Save more for the future

  2. Spend more in the present

  3. Invest in risky assets

  4. Take on more debt
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Individuals who are influenced by mental accounting are more likely to spend money that is earmarked for a specific purpose, even if it means sacrificing long-term savings goals.

Multiple choice

Which of the following is NOT a type of depreciation?

  1. Straight-line depreciation

  2. Declining-balance depreciation

  3. Sum-of-the-years'-digits depreciation

  4. Annuity depreciation
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Annuity depreciation is not a type of depreciation. The three main types of depreciation are straight-line depreciation, declining-balance depreciation, and sum-of-the-years'-digits depreciation.

Multiple choice

What is the formula for calculating the annual depreciation expense using the straight-line method?

  1. Depreciation expense = (Initial cost - Salvage value) / Useful life

  2. Depreciation expense = (Initial cost + Salvage value) / Useful life

  3. Depreciation expense = (Initial cost - Salvage value) * Useful life

  4. Depreciation expense = (Initial cost + Salvage value) * Useful life
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The formula for calculating the annual depreciation expense using the straight-line method is Depreciation expense = (Initial cost - Salvage value) / Useful life, where initial cost is the cost of the asset, salvage value is the estimated value of the asset at the end of its useful life, and useful life is the number of years the asset is expected to be used.

Multiple choice

What is the term used to describe the practice of using complex financial instruments and transactions to reduce tax liability?

  1. Tax arbitrage

  2. Tax evasion

  3. Tax avoidance

  4. Tax optimization
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Tax arbitrage refers to the practice of exploiting differences in tax laws or regulations to create opportunities for reducing tax liability.