Commerce Accountancy

Accounting Principles and Practices

2,324 Questions

Accounting principles and practices involve the preparation of trial balances, ledgers, and bank reconciliation statements. This area tests your knowledge of fundamental accounting concepts and routine business transactions. It is a core section in commerce exams and various competitive tests.

Ledger accountsTrial balance preparationBank reconciliation statementAccounting conceptsPrimary books of accounts

Accounting Principles and Practices Questions

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

Journalizing is ___________.

  1. process of having the source of transactions

  2. process of recording transactions in the journal

  3. process of having the sources of transactions for journal

  4. none of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Journalizing is the process of recording a business transaction in the accounting records. This activity only applies to the double-entry bookkeeping system.  

This calls for the identification of the general ledger accounts that will be altered as a result of the transaction.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

A debit note for 20,000 issued to Mr. Z for goods returned by us is to be accounted for in ______________.

  1. Bills receivable book

  2. General journal

  3. Purchases return book

  4. Purchase book
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A supplier when an order is received, this may be due to poor quality, inaccurate quantity, untimely delivery or other reasons. 

Purchase returns are also called returns outward and an appropriate purchase returns/returns outward book is maintained.

All returns are primarily recorded in the purchase returns book unless the returns are not that frequent, in which case they are recorded in the journal.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

_______ is used to record the details of bills receivable by the business organization.

  1. Purchases Book

  2. Bills Payable Book

  3. Bills Receivable Book

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Accounts Receivable (AR) is the proceeds or payment which the company will receive from its customers who have purchased its goods & services on credit. Usually the credit period is short ranging from few days to months or in some cases maybe a year.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

Credit purchase of plant and machinery is recorded in_________________.

  1. purchase day book

  2. purchase ledger

  3. cash book

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

Specialized journals like the Purchase Day Book are only for credit purchases of stock. Credit purchases of assets like plant and machinery must be recorded in the General Journal.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

Purchase of second-hand computer on credit by a cloth merchant will be recorded in ___________.

  1. Journal

  2. Cash book

  3. Purchase book

  4. None of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Purchase Book is only for credit purchases of goods (stock). Credit purchases of assets are recorded in the Journal Proper.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

Accounting entries for the repayment of a loan received from Richard, the owner's friend is _____________________.

  1. Debit Cash account and Credit capital account

  2. Credit cash account and Debit Richard's loan account

  3. Credit cash account and Debit capital account

  4. Debit cash account and Credit Richard's loan account
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Debit - Loan Account

The debit to the Richard's loan account records the reduction in principal of the loan balance which is the cash repayment less the interest expense.
Credit - Cash Account
Cash has been used to make the the annual repayment to the lender on the due date in accordance with the loan agreement.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

Total of sales returns book is posted to the ___________.

  1. debit side of sales returns A/c

  2. credit side of sales returns A/c

  3. debit of sales A/c

  4. the credit of sales A/c
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When the goods sold are return back to the vendor it is recorded in sales return book. buyer may return the goods due to poor quality of goods or inaccurate quantity or other reasons etc. It is also called as return inwards. All returns are primarily recorded in sales return book unless the returns are not the frequent, in which case they are recorded in the Journal. After updating transactions in sales return book, the total of the items is transferred to ledger in an account called the "Sales Returns A/c".

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

When it is necessary to analyse transactions in terms of debit and credit ?

  1. While Journalizing.

  2. While Posting.

  3. At both times.

  4. None of the above.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When the business transactions take place, the first step is to record the same in the books of original entry or subsidiary books or books of prime or journal. Thus, journal is a simple book of accounts in which all the business transactions are originally recorded in chronological order and from which they are posted to the ledger accounts at any convenient time. Journalisisng refers to the act of recording each transaction in the journal and the form in which its is recorded, is known as a journal entry.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

The periodic total of purchase return day book is posted to ______.

  1. Credit side of purchase A/c

  2. Debit side of trading A/c

  3. Credit side of creditors A/c

  4. Credit side of sales A/c
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Purchase return day book is a subsidiary book in which all the credit  purchases returns are recorded. It has 05 columns. At the end of a specific period, the total of purchase return day book is posted to credit side of purchase a/c in ledger.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

A return inwards book is kept to record ______________.

  1. returns of goods sold

  2. returns of anything purchased

  3. returns of goods purchased

  4. returns of anything sold.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When goods are received back from customer which are sold on credit, a note is prepared and the original copy of the same is sent to the party that  returned the goods, i.e. the customer. This note is termed as credit note because the customer from whom the goods are received back, his/her account is credited with the amount written in the note and on the basis of  duplicate copy of credit note the transaction is recorded in the sales return books by the supplier.

Multiple choice book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

The financial statements consist of _______________.

  1. Trial balance

  2. Profit and loss account

  3. Balance sheet

  4. Both (i) and (iii)

  5. Both (ii) and (iii)
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

At the end of every financial year, books of account of the business are closed and financial statements are prepared. Financial statements are prepared to know the profitability of the organization for a particular period and also to know the financial position of the business on a particular date. 


Financial statements consist of:
Profit and Loss Account
Balance Sheet.

Multiple choice book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

Consider the following fundamental assumptions:
1. Prudence       2. Going concern
3. Accrual          4. Consistency
As per Accounting Standard -1, which of these assumptions are taken into consideration while preparing financial statements?

  1. 1 and 4

  2. 2 and 3

  3. 1, 2, 3 and 4

  4. 2, 3 and 4
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

As per Accounting Standard 1 (AS-1), the three fundamental accounting assumptions are Going Concern, Consistency, and Accrual.

Multiple choice book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

The purpose of preparing final accounts is to ascertain ________.

  1. Profit or loss

  2. Capital

  3. The value of assets

  4. Profit or loss and financial position
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The accounts which are prepared at the final stage of the accounting cycle to know the profit or loss and financial position of a business concern are called Final Accounts.Every businessman enters into business activities to earn profit. It is the accounting that shows profit or loss of a business concern. The role of accounting is to compile the financial record of a business in such a manner that yields the profit or loss of the business.

Multiple choice book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

Final accounts include preparation of_______.

  1. Trading A/c

  2. Profit & Loss A/c

  3. Balance Sheet

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

Final accounts consist of the Trading Account, Profit and Loss Account, and the Balance Sheet.