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 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

All expenses account show ________ balance.

  1. Debit

  2. Credit

  3. Zero

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

Expense account are classified as nominal account. As per the rule of nominal account, all expenses and losses are to be debited. 

Hence all expense account show the debit balance. 

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

All personal accounts show ________ balance.

  1. debit

  2. credit

  3. both

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

Personal Accounts refer to the account of any person which includes artificial person also. Like account of Mr. Shyam, account of ABC & Associates, account of XYZ Pvt Ltd. 


All such personal account are having various business transactions of debit and credit. Hence, all personal account can either show debit or credit balance depend on the transactions. These are also known as sundry debtors and sundry creditors. 

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

Trading & Profit and loss account is also known as __________.

  1. Income Statement

  2. Revenue Account

  3. Fixed Statement

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

The term Trading and  Profit & Loss Account is normally used when the business organization are having the business of trading activity. 


The term Income & expenditure is used when the financial statements are prepared for professionals like, Chartered Accountants, Doctors, Advocates etc. 

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

Financial Statements are the branch of ____________.

  1. Book keeping

  2. Accountancy

  3. Both

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

Financial accounting is a specialized branch of accounting that keeps track of a company's financial transactions.

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

Financial statements are usually prepared at the _______ of financial year.

  1. End

  2. Beginning

  3. Middle

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

To know the financial position of the business, financial statements are prepared. Normally the financial statements are prepared at the end of the financial year. 


Financial statements includes the following:

Trading, Profit & Loss A/c - To know the profitability of the business.
Balance Sheet- To know the position of assets and liabilities of the firm.
Fund Flow Analysis- To know the movement of fund during the year. 

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

If receipt imply an obligation to return money will result in ___________.

  1. Capital Receipts

  2. Revenue Receipt

  3. None

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

Receipts can further be classified as revenue receipt and capital receipt. 


Revenue receipt are those which received against the supply of goods or services. Like receipt on account of professional services rendered by a Chartered Accountant. 

Capital receipt is an obligation to the business and to be return in due course. For example, loan taken from bank. 

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

Name the financial statements prepared by a business ______________.

  1. Trading account

  2. Profit and loss account

  3. Balance sheet

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

Financial statements is a formal record of the financial activities and position of  a business, person or other entity. A business entity uses financial statement to communicate about its financial information with interested parties, includes investors and creditors. The purpose is to reveal the financial position of the enterprise, the result of its recent activities  and an analysis of what has been done with earnings. 

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

Financial statements are prepared on the basis of _________.

  1. actual events which have already happened

  2. anticipated events

  3. future events

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

Accounting is a systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating financial information. transactions and events of financial information. Transaction is prepared on the basis of actual events which have already happened.

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

To ascertain profit and loss on consignment, ___________ is prepared.

  1. trading account

  2. consignment a/c

  3. profit and loss a/c

  4. consignment stock a/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A consignment account is a special ledger account prepared by the consignor to determine the profit or loss specifically arising from consignment transactions.

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

Which of the following statement is false with regard to final accounts of the company?

  1. Balance Sheet is prepared as per Schedule VI (Part - I).

  2. There is no prescribed format for the preparation of financial statements.

  3. Profit and Loss Account is prepared as per prescribed format.

  4. Figures of Previous year are also shown in Profit and Loss Account and Balance Sheet.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Companies are required by law (such as the Companies Act) to prepare financial statements in a prescribed format. Therefore, the statement that there is no prescribed format is false.

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

Manufacturing account is prepared to___________. 

  1. ascertain the profit or loss on the goods produced

  2. ascertain the cost of the goods manufactured

  3. show the sale proceeds from the goods manufactured during the year

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

A manufacturing account is specifically designed to calculate the total cost of producing goods, including raw materials, direct labor, and factory overheads, before they are transferred to the trading account.

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' of a manufacturing company generally include the following types of documents:
1. Balance Sheet
2. Manufacturing Account
3. Profit and Loss Account
4. Trading Account
5. Profit and Loss Appropriation Account
The correct sequence in which these documents are prepared is________. 

  1. $1, 4, 3, 2, 5$
  2. $2, 4, 3, 5, 1$
  3. $1, 2, 4, 3, 5$
  4. $2, 4, 5, 3, 1$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The logical flow for a manufacturing company is: Manufacturing Account (to find production cost), Trading Account (to find gross profit), Profit and Loss Account (to find net profit), Profit and Loss Appropriation Account (to distribute profit), and finally the Balance Sheet (to show financial position).

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 correct sequence in preparation of periodical financial statement would be.
$1$. Preparation of balance sheet
$2$. Preparation of cash flow statement
$3$. Preparation of trial balance
$4$. Preparation of Profit & Loss A/c
Select the correct answer from the options given.

  1. $4, 2, 1, 3$
  2. $3, 4, 1, 2$
  3. $2, 4, 3, 1$
  4. $1, 3, 2, 4$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The standard sequence is: Trial Balance (3), Profit & Loss Account (4), Balance Sheet (1), and Cash Flow Statement (2).

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

For finding out all the expenses and losses of a proprietor ______ is prepared.

  1. Position statement

  2. Balance sheet

  3. Income statement

  4. Both a & b
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The Income Statement (or Profit and Loss Account) is specifically prepared to summarize all revenues, expenses, and the resulting profit or loss for a period.

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

For a proprietor following are not included in final accounts.

  1. Trading account

  2. Profit and loss account

  3. Balance sheet

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

Trading account, P&L account, and Balance Sheet are all standard components of final accounts for a proprietor. Therefore, none of the options listed are excluded.