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

Accounting is BEST described as________.

  1. The use of financial data

  2. The collection of financial data

  3. The collection and use of financial data only

  4. The collection and use of financial and non-financial data
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Modern accounting is not limited to financial data; it involves the collection and analysis of both financial and non-financial information to support decision-making and performance evaluation.

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

______ is used by business entities for keeping records of their monetary or financial transaction.

  1. Accounting

  2. Cost accounting

  3. Costing

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

Accounting is the systematic process of identifying, measuring, recording, classifying, and summarizing financial transactions. It serves as the primary system for maintaining financial records.

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

Accounting records only those transactions and events which are of -
X. Social character
Y. Financial character
Select the correct answer from the options given below:

  1. X only

  2. Y only

  3. Both X and Y

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

Accounting records only those transactions & events in terms of money which are of a financial character. Transactions which are not of a financial character are not recorded in the books of account.

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

________ is the language of business and used to communicate financial and other information to different interested parties like creditors, investors, researchers, governments etc.

  1. Accounting

  2. Cost Accounting

  3. Costing

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

Accounting is widely referred to as the language of business because it provides a standardized way to communicate financial performance and position to various stakeholders.

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

Which of the following account is tangible real account _____________.

  1. Patent

  2. Goodwill

  3. Machinery

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

Real accounts relate to assets. Tangible real accounts represent assets that have a physical existence, such as machinery, cash, or inventory. Patents and goodwill are intangible real accounts.

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

Accounting is a substitute of ________ .

  1. Recording

  2. Book-keeping

  3. Memory

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

During 1500 A.D., accounting was used by business firms for recording transactions related to business.

Substitute of memory− As, it is beyond human capabilities to remember each and every business transaction, so accounting plays an important role in recording these transactions in the book of accounts.

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

The basic function of financial accounting is to ___________.

  1. record all business transactions

  2. interpret the financial data

  3. assist the management in performing functions effectively

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

All business transaction which are in monetary terms are to be recorded in books of account in a chronological order. This function is known as the process of financial accounting.

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

The prime function of accounting is to ____________.

  1. record economic data.

  2. provide the informational basis for action.

  3. classify and record business transactions.

  4. attain non-economic goals.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

As the definition says "accounting is the art of recording, classifying and summarizing all the monetary transactions in a significant manner". The prime function of accounting is recording and classifying  the business transactions.

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

The first step in the accounting process is_______.

  1. Summarizing

  2. Interpreting the results

  3. Recording

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

Maintaining proper and fine accounts has become very essential today, as a result, of increasing competition in the business-world. Every business organization is, therefore, supposed to maintain fine accounts  comprising of all the financial transactions, financial as well as non-financial information. We all know that any accounting involves a fine recording, summarizing, proper classification as well as the interpretation and communication of financial information. Every transaction has to be recorded first so that the other processes can be carried out effectively. Therefore the first step in the accounting process is recording.

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

Summarizing take place in the form of ________.

  1. Trial balance

  2. Trading account and Balance sheet

  3. Profit and loss account

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

The first step in the process of accounting cycle is recording of transactions in journal and ledger. After this process, summarizing takes place. Summarising involves posting from ledger to prepare a trial balance and then the items of trial balance are posted in profit and loss account from which we get the net profit of the firm. After that balance sheet of the company is prepared from which we get the details about the assets and liabilities of the business of the firm. So basically summarizing involves trial balnace,profit and loss account and balancesheet.

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

Which of the following pairs are correctly matched?
I. Business entity - Accounting standard
II. Stock valuation - Consistency
III. Capital - Drawings
IV. Going concern - Assumption
Select the correct answer using the codes given.

  1. I, II and III

  2. I, II and IV

  3. II, III and IV

  4. I, III and IV
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

I) A business is required to maintain separate financial records from its owners and investors. An accounting entity allows for taxing authorities to assess proper levies in accordance with tax rules. Different accounting entities have different financial reporting requirements

II) A stock's value the consistency of a company's ability to pay and raise its dividend shows that it has predictability in its earnings. It also shows that it's financially stable enough to pay that dividend (from current or retained earnings).
III) The going concern principle is the assumption that an entity will remain in business for the foreseeable future. Conversely, this means the entity will not be forced to halt operations and liquidate its assets in the near term at what may be very low fire-sale prices.

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

The prime function of accounting is to _________________.

  1. To record economic data

  2. Provide the information basis of action

  3. Classifying and recording business transaction

  4. Attainment of economic goal
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Accounting is an art of recording, classifying, summarizing and interpreting the data in a significant manner of money's worth business transactions.


The prime function of accounting is to classify and record all such business transaction. It plays an important role in providing appropriate information to the business for decision making. 

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

The second important stage in the accounting process is______.

  1. Journal

  2. Ledger

  3. Account

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

The book of original entry or prime entry is journal in which all day to day transactions are recorded. All the transactions from journal are posted to ledger which consists of different accounts on the basis of transactions recorded in journal. Hence, it is regarded as the second important stage in the accounting process.