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 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.

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 one of the following would not be included in a full set of company financial statements?

  1. The cash budget

  2. The statement of financial position

  3. The statement of changes in equity

  4. The income statement
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A full set of financial statements includes the Statement of Financial Position, Income Statement, Statement of Changes in Equity, and Cash Flow Statement. The cash budget is a management accounting tool, not a mandatory financial statement.

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

Net profit is computed in which of the following?

  1. Balance sheet

  2. Income statement

  3. Cash flow statement

  4. Statement of changes in equity
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The income statement (or profit and loss account) is specifically designed to calculate the net profit or loss of a business over 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

Financial statements differ from management account because ___________.

  1. the are mainly prepared for external users of financial information

  2. they are more complex and hard to prepare

  3. the are the summary of accounting data

  4. the are prepared on basis of actual concept
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Financial accounting is primarily aimed at external stakeholders (investors, creditors), whereas management accounting is for internal decision-making.

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

When a consistency is found between financial statements of one entity from period to period.

  1. Conventions of conservatism

  2. Conventions of materiality

  3. Conventions of disclosure

  4. Conventions of horizontal consistency
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The convention of consistency ensures that accounting policies and methods are applied uniformly from one period to the next to allow for comparison.

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 differ from management account because.

  1. They are mainly prepared for external users of financial information

  2. They are more complex and hard to prepare

  3. They are the summary of accounting data

  4. They are prepared on basis of actual concept
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

This is a duplicate of 472122; financial statements are prepared for external users, while management accounts are for internal use.

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

Auditor has to give its opinion whether the financial statement depicts _______________.

  1. True and correct view

  2. Fair and correct view

  3. True and fair view

  4. True and exact view
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The objective of an audit is to check the fairness of financial statements. Auditors accumulate evidence to reach conclusion about the fairness of financial statements. An auditor has  a duty to provide reasonable assurance that material misstatements will be deleted. 

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 Account is also called as ________.

  1. One Account

  2. Two Account

  3. Three Account

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

Final account are represented by below three accounts:


Trading account
Profit & 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

Which of the following is a time span in which the total life of a business is divided for the purpose of preparing financial statements?

  1. Fiscal year

  2. Calendar year

  3. Accounting period

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

According to the going concern concept, it is assume that the life of the business is indefinite. Once the business commenced, it will run forever. There will be no intend to close the business until it goes into liquidation.


As the life of the business is indefinite, the accounting records must be kept for a specific period of time to know the state of affairs of the business. This period is normally of 12 months and called as an accounting 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

Retained earnings statement depicts _________________.

  1. Appropriation of profits

  2. Estimates of profits

  3. Estimates of costs

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

One of the components of financial statements, retained earnings statement depicts the changes in enterprises retained earnings over a period.

The items that form part of the retained earnings statement are the net income for the period and dividends declared during the period.