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 book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

The periodic total of purchase return journal is posted to ______________.

  1. Purchase Account

  2. Profit and loss Account

  3. Purchase return Account

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

Posting from the purchases returns journal requires that the supplier's individual accounts are debited with the amount of returns and the purchases returns account is credited with the periodic total.

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 sales return journal is posted to_________.

  1. Sales Account

  2. Goods Account

  3. Purchase return account

  4. Sales return account
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Posting to the sales return journal requires that the customer's account be credited with the amount of return and the sales return account be debited with the periodic total in the same way as is done in case of posting from purchase 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

Credit purchase of machine is entered in purchase journal.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Accounting and journal entry for credit purchase includes two accounts, Creditor and Purchase.

In case of a journal entry for cash purchase, Cash account and Purchase account are used. 
The person to whom the money is owed is called a “Creditor” and the amount owed is a current liability for the company.

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 following comments below relate to the recording of journal entries. Which statement is true?

  1. For any given journal entry, debits must exceed credits.

  2. It is customary to record credits on the felt and debits on the right

  3. The chart of accounts reveals the amount to debit and credit to the affected accounts

  4. Journalization is the process of converting transactions and events into debit/credit format.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Journalization is indeed the process of converting transactions into debit/credit format for recording. Option A is wrong because debits must equal credits, not exceed them. Option B is incorrect because debits are recorded on the left, not 'felt' (likely a typo for 'left'). Option C is wrong because the chart of accounts only lists account names and numbers, not debit/credit amounts.

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

For every entry in journal the transaction can be ___________.

  1. personal

  2. real

  3. nominal

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

Journal entries can involve personal accounts (individuals/entities), real accounts (assets), and nominal accounts (expenses/incomes/gains/losses).

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 following comments ail relate to the recording process. Which of these statements is correct?

  1. The general ledger is a chronological record of transactions.

  2. The general ledger is posted from transactions recorded In the general journal.

  3. The trial balance provides the primary source document for recording transactions into the general journal.

  4. Transposition is the transfer of information from the general journal to the general ledger.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The general ledger contains all the accounts for recording transactions and is updated (posted) using the entries previously recorded in the general journal. The journal is the chronological record, not the 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

Journal and ledger records transactions in _________________.

  1. A chronological order and analytical order respectively.

  2. An analytical order and chronological order respectively.

  3. A chronological order only

  4. An analytical order only
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The journal records transactions chronologically as they occur, while the ledger organizes them analytically by account type.

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

X Ltd., purchased goods for Rs.5,00,000 and sold 9/$10^{th}$ of the value of goods for Rs. 6,00,000. Net expenses during the year were Rs. 25,000. The company reported its net profit as Rs. 75,000. Which of the following concept is violated by the company?

  1. Realization

  2. Conservation

  3. Matching

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

The matching principle requires that expenses incurred to earn revenue must be recognized in the same period as the revenue. By only accounting for 9/10 of the costs against the revenue from 9/10 of the goods, the company failed to match the full cost of goods sold.

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 businessman purchased goods for Rs.25,00,000 and sold 80% of such goods during the accounting year ended $31^{st}$ March, 2019. the market value of the remaining goods was Rs.4,00,000. He valued the closing stock at cost. He violated the concept of _________________.

  1. Periodicity

  2. Conservatism

  3. Money measurement

  4. Cost
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The principle of conservatism (prudence) dictates that inventory should be valued at the lower of cost or net realizable value. Valuing at cost when market value is lower violates this principle.

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

Mohan purchased a machinery amounting Rs.10,000 on 1.4.2010.
On 31.3.2019, similar machinery could be purchased for Rs.20,000 but the realizable value of the machinery (purchased on 1.4.2010) was estimated at Rs.15,000. The present discounted value of the future net cash inflows that the machinery was expected to generate in the normal course of business, was calculated as Rs 12,000.
The present value of machinery is ______________.

  1. Rs 10,000

  2. Rs 20,000

  3. Rs 15,000

  4. Rs 12,000
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

According to the historical cost concept, fixed assets are recorded at their original cost, and the present value is not adjusted for market fluctuations unless there is an impairment or specific accounting standard requirement.

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

The Bills Receivable Book is a subsidiary book specifically designed to record the details of all bills of exchange received from debtors.

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 particulars of all the bills payable accepted by the business organization for the purpose of paying amounts due to its creditors.

  1. Journal proper

  2. Bills Payable Book

  3. Bills Receivable Book

  4. Sales Book
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The Bills Payable Book is the specialized journal used to record the details of all bills of exchange accepted by a business to pay its creditors.