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

Financial Statements usually consists of _____________.

  1. Trading Account

  2. Profit & loss Account

  3. Balance Sheet

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

Financial statements are prepared at the end of the financial year to know the overall financial performance and financial position of the business. 


Following are the financial statements:
Trading Account is prepared to know the gross profit earned by the business. 
Profit & Loss Account is prepared to find out the net profit after deducting the indirect expenses from the gross profit. 
Balance sheet is prepared to know the financial position of the  business on a particular date including the position of assets and liabilities.  

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 are the basic objectives of preparing Financial Statements?

  1. To view financial performance.

  2. To view financial Position.

  3. Both (A) & (B).

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

Which of the following statement is not correct?

  1. Financial statements do adjust themselves for price level changes

  2. Only business transactions are within the ambit of financial records

  3. Financial statements have evidential value in the court of law

  4. Accounting principles have no universal acceptability
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Financial statements are generally prepared on a historical cost basis and do not automatically adjust for price level changes (inflation). The other statements correctly describe the nature and limitations of accounting.

Multiple choice economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

Balance of unrequited transfers includes all gifts, donations, grants and reparation, receipts and payments to foreign countries (true/false)

  1. True

  2. False

  3. Cant say

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

Unrequited transfers (also known as unilateral transfers) in the balance of payments include gifts, donations, and grants where no good or service is received in return.

Multiple choice economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

Balance of payment on current account covers all receipts on account of earnings, borrowings and all payments on account of spending and lending. (true/false)

  1. True

  2. False

  3. Cant say

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

The current account specifically covers trade in goods, services, and unilateral transfers. Borrowings and lending are recorded in the capital account, not the current account.

Multiple choice civics introduction to gst fundamentals of gst tax journal

Journal entry for purchase of goods on credit within same state is follows:
Purchases A/c                     Dr
Input CGST A/c                   Dr
Input SGST A/c                   Dr
            To Creditor's A/c
State whether above entry is true or false.

  1. True

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

When purchasing goods within the same state, the business pays both CGST and SGST. These are recorded as Input CGST and Input SGST, which are debit entries.

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

At the time of dissolution of the firm; if goodwill appears in the Balance Sheet, it is transferred to ______________ .

  1. Realisation Account.

  2. Partners' Capital Accounts

  3. Revaluation Account

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

Treatment of goodwill is very easy in case of dissolution of a firm. In case, if goodwill is already appearing in the balance sheet, it is treated like any other asset, and is transferred to the realisation account at the value given in balance sheet. Following entry is passed for it.

         Realisation A/c       Dr.
                  To Goodwill A/c

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

Unrecorded liabilities when paid are debited to _________ .

  1. Realistaion Accounts

  2. Partner's Capital Accounts

  3. None of the above

  4. Only option (A)
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Unrecorded liabilities are those liabilities that are not shown in the Balance Sheet but they still exist in the business. Although these liabilities are not shown in the books, they still need to the discharged off at the time of dissolution and hence are debited to the Realisation account. 

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

Unrecorded asset when realised is credited to  ____________ .

  1. Realisation Account

  2. partners' Capital Accounts

  3. None of the above

  4. Only option (A)
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Unrecorded assets are those assets that have been completely written off but are still physically present in the business. There is no requirement to show these assets in the books before they are sold off. Hence, these assets are directly credited to the Realisation account at the time of dissolution of the firm. 

Multiple choice business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

At the time of dissolution of the firm, The assets and liabilities appearing in the Balance sheet transferred to ____________ .

  1. Revaluation Account

  2. Realisation Account

  3. Partner's Capital Accounts

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

At the time of dissolution of the firm, the assets and liabilities appearing on the Balance Sheet are transferred to the Realisation Account. When a firm decides to discontinue its operations, all assets need to be disposed off and all liabilities need to be discharged. For this purpose, a Realisation account is opened where all the assets, excluding cash at hand and bank, are shown on the debit side at their book values and all the external liabilities are shown on the credit side at their book value. Any sale of assets or discharge of liabilities is also shown in this account.

Multiple choice business economics and quantitative methods government budget and economy consumer's budget public finance indifference curve

Balance of current account includes _________.

  1. balance of services

  2. balance of unilateral transfers

  3. balance of trade

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

The current account balance is composed of the balance of trade (goods), the balance of services (invisibles), and net unilateral transfers (remittances, grants).

Multiple choice commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

The process of accounting starts with _______ and ends with_______.

  1. Classifying, Recording

  2. Identifying the transaction, Communicating the information

  3. Financial account, Journal

  4. Recording, Classifying
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

It is clear from the definition that accounting is not only concerned with recording, classifying or summarizing the transactions but it is also plays an important role in providing appropriate information to the business for decision making. 

Hence, the process of accounting starts with identification of transaction  and ends with communication of information.

Multiple choice commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

Balancing of account means ______________.

  1. Cash credit

  2. Total credit

  3. Difference in credit and debit

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

For all business transactions, a ledger account is opened in the ledger to have a summary of each account. Balancing has to be done after a particular period for each of the account to know the final position of account. 


Hence, balancing is the difference between the debit and credit. If credit side exceeds the debit side, the balance is called as credit balance and vice versa. 

Multiple choice commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

Identified and measured economic events should be recorded in _________order.

  1. Chronological order

  2. Valuation order

  3. Relevance order

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

This is very much clear from the definition of accounting that all business transactions must be recorded in books of account in the chronological order. 


As and when an economic event is identified and measured, it has to be recorded in the books. 

So, if a sales is effected on 29th March, it has to be recorded on the same day and if purchase is effected on 31st March, it has to be recorded on 31st March itself.

Multiple choice commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

Which is the last step of accounting as a process of information ? 

  1. Recording of data in the books of accounts.

  2. Preparation of summaries in the form of financial statements.

  3. Communication of information.

  4. Analysis and interpretation of information.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

It is very clear from the definition of accounting that accounting is not only concerned with recording, classifying and summarizing the transactions but it also plays an important role in providing appropriate information to the business for decision making. Communicating the information to all the stakeholders is a last step of accounting.