Commerce Accountancy

Accounting Principles and Practices

2,416 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 trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

If a worksheet is prepared, there is no need to separately prepare a(n) _________.

  1. trial balance

  2. balance sheet

  3. income statement

  4. Statement of owner's equity
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

If a worksheet is prepared, there is no need to separately prepare a Trial balance. An accounting worksheet is prepared by the book keepers and accountant to complete the accounting cycle and prepare year-end reports like unadjusted trial balance, adjusting journal entries etc. 

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Which of the following error can be disclosed by trial balance? 

  1. Posting wrong amount on one side

  2. Error in balancing

  3. Wrong totaling of subsidiary books

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

The foremost objective of trial balance is to ascertain accuracy and detection of errors.

  • Posting wrong amount on one side – the trial balance will not tally if the posting in an account is made with incorrect amount. For example if an account is debited with 500 instead of 5000, the trial balance won’t tally.

  • Error in balancing – sometimes due to calculation errors the balance of the ledger accounts can be wrong, and this balance is transferred to the trial balance which will not tally because of the error in calculating the balance.

  • Wrong totaling of subsidiary books - calculation errors may occur in totaling of debit or credit sides of accounts in ledger which leads to error in balancing of the accounts, this balance is transferred to trial balance which will not tally.

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Which of the following errors will affect the trial balance? 

  1. Repairs to building wrongly debited to Building A/c

  2. Total of Purchase Journal by 1,000 short

  3. Freight paid on new machinery debited to Freight A/c

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

When purchase account is short by some amount, the trial balance shows a difference between the debit and the credit balances of the accounts.

In the case of machinery and building, the transactions are related to expenditure which has to be debited because of which the trial balance is not affected.

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Which of the following statements is correct? 

  1. The trial balance is prepared after preparing the profit and loss account

  2. The trial balance shows only balances of assets and liabilities

  3. The trial balance shows only nominal account balances

  4. The trial balance has no statutory importance from the point of view of law
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The purpose of a trial balance is to prove that the value of all the debit value balances equal the total of all the credit value balances. If the total of the debit and the credit columns do not match then there is an error in the ledger accounts. This error must be found before a profit and loss statement and balance sheet can be produced. Apart from this there is no statutory importance of trial balance from the point of view of law. 

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Which of the following errors will not effect the Trial Balance?

  1. Omission of an account from Trial Balance

  2. Entering the balance of an account in the wrong amount column of the Trial Balance

  3. Wrong Totaling of the Trial Balance

  4. Wrong recording in the Journal proper but not posted at all

  5. None of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The trial balance is not affected when a wrong recording is made in the journal but not posted at all. This is because the incorrect entry of the journal has not been posted to the ledger accounts at all. This means the incorrect balance is not transferred to the trial balance, which will not be affected.

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Which of the following errors will not affect the Trial Balance?

  1. Wrong carry-forward of an account

  2. Wrong totaling of an account

  3. Wrong balancing of an account

  4. Omission of an account from Trial Balance

  5. posting a correct amount in the wrong account on correct side.
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

Posting a correct amount in the wrong account on the correct side is the error of posting. This error does not affects the agreement of the trial balance because even though the posting is made to the wrong account but the amount entered is correct and the accounting treatment is same as it would be in the correct account. 

For example, cash sales of 10000, is debited to the debtor's account with 10000 instead of cash account. The credit entry for sales account remains the same. In the case the debtors account balance will increase while cash account balance will be unchanged. The trial balance thus tallies.

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Outstanding wages appearing in Trial Balance are shown:

  1. On the debit side of Profit & Loss Account

  2. On the debit side of Trading Account

  3. On the liabilities side of the Balance Sheet.

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

Outstanding wages are related to the current year but remain unpaid. As they are expenses of the current year, they must be debited and charged from the profit and loss of the current year. The expenses remained unpaid during the current year, so they are liability of the firm. 

If outstanding wages are mentioned in the trial balance, they will be shown at the liabilities side only of the Balance Sheet (accounts appearing in the trial balance are shown only at one place in the final accounts).

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Which of the statements are true.

  1. Trial Balance is prepared after preparing the P& L A/c

  2. Trial Balance is prepared after preparing the Balance Sheet

  3. Trial Balance is prepared before preparing the Balance Sheet

  4. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
A trial balance is prepared to record all the balances of debit and credit of the ledger. A balance sheet is prepared at the end of the year, but a trial balance can be prepared at the end of a month, quarter, etc. 
Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

The preparation of a trial balance helps in locating ______________.

  1. Errors in Principle

  2. Errors of Omission

  3. Clerical Errors

  4. Compensatory Errors
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

While recording the transaction, there is a possibility of having the error. Since accounting is based on double entry system, for every debit there will be a credit. Hence at any point of time, trial balance must be tallied. If trial balance dose not matches, there must be some clerical error.

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

If the trial balance do not agree after transferring the balance of ledger accounts including cash and bank balance and also errors are not located timely, then the trial balance is tallied by transferring the difference of debit and credit side to an account known as - 

  1. Memorandum Account

  2. Capital Account

  3. Suspense Account

  4. Drawing Account
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Trial balance is prepared to check and confirm the posting of all accounting entries. Trial balance is prepared with the help of ledger account. All the balances from each of ledger account is taken in a list in the debit and credit column. Both the sides of trial balance must be equal as accounting is based on the double entry system of accounting. 

If the trial balance do not agree and errors not located before the finalization of accounts, the difference amount has to be transferred to suspense account.

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Closing stock appearing in trial balance will be taken to _____________.

  1. Trading account only

  2. Balance sheet only

  3. Trading account and balance sheet

  4. Profit & loss account only
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

At the end of the financial year, while closing the books of account there are certain adjustment entries need to be passed by debiting/crediting  the trading account or profit & loss account. Entry for closing stock will be passed as: 


Closing Stock A/c                     Dr.
      To Trading Account

In the above situation, closing stock appearing in the trial balance will be taken to balance sheet.
Items that are shown in trial balance are recorded only once.

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Cash account appearing in Trial balance is transferred to __________.

  1. balance sheet asset side

  2. balance sheet liability side

  3. trading account

  4. profit and loss account
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Cash Account is a real account and part of assets. All assets account are shown in the balance sheet. Cash is a current assets and shown in current assets in the balance sheet. 

Multiple choice depreciation and causes of depreciation depreciation, provision and reserve depreciation accountancy

Which of the following is Depleted?

  1. Furniture

  2. Goodwill

  3. Machinery

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

Depreciation and Depletion: In fact, the term 'depletion' is used in respect of the extraction of natural resources like quarries, and mines, that reduces the availability of quantity of the material or asset. Depreciation, as stated earlier, is a loss in value of an asset generally arising on account of wear and tear.

Multiple choice depreciation and causes of depreciation depreciation, provision and reserve depreciation accountancy

ABC Ltd. paid Rs. $24$ lakh for use of copy right purchased. This amount can be written off under _________ method of depreciation.

  1. double declining

  2. sinking fund

  3. amortized

  4. straight line method
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

An Intangible assets is an asset that is not physical in nature.  Amortization is an accounting term that refers to the process of allocating the cost of an intangible asset over the period of years. Copyrights are intangible assets as these are not physical in nature. It is a legal right of owner. So this amount can be written off under amortized method of depreciation. 

Multiple choice depreciation and causes of depreciation depreciation, provision and reserve depreciation accountancy

Depletion method is used in all except __________.

  1. Copper mine

  2. Stone quarry

  3. Plant and machinery

  4. Coal mine
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Depletion is a periodic charge to expense for the use of natural resources. Thus, it is used in situations where a company has recorded an asset for such items as oil reserves, coal deposits, or gravel pits etc. For plant and machinery depletion method is not used.