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 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 Accounting states the _______ position of a concern.

  1. Financial

  2. Economic

  3. Non-financial

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

Financial accounts state the financial position of the firm. To know the financial position of the company, the financial statement like profit & loss statement and balance sheet are prepared. profit & loss account show the profit or loss of the business for a particular period whereas the balance sheet shows the state of affairs as on date, this includes 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

Read the following statements :
i)Financial statements are only interim reports.
ii)Financial statements are prepared on the basis of realizable values.
iii)The preparation to financial statements is not an ultimate aim.
iv)Certain assumptions are necessary to prepare financial statements.
Which of the following combinations consists of all true statements?

  1. (i), (ii) and (iii)

  2. (ii), (iii) and (iv)

  3. (i), (iii) and (iv)

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

Financial statements are interim reports (covering a specific period), rely on various assumptions (like going concern), are not the ultimate aim of accounting (which is decision-making), and often use realizable or historical values depending on the standard. All statements provided are generally accepted characteristics or limitations of financial reporting.

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 real account can either show ________ balance or nil balance.

  1. Debit

  2. Credit

  3. Zero

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

Real Account refer to the account of thing or asset. All such real account will have either debit balance or nil balance depend on the business transactions. Like if any asset is purchased for the business, the asset account will have a debit balance. If the asset is sold out, than asset account will have nil 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

__________ is prepared to know the financial performance.

  1. Balance Sheet

  2. Trading & Profit and Loss Account

  3. Both

  4. None
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Trading & Profit and Loss account is prepared to know the financial performance of the business for a particular period , usually a year. These statements are prepared at the end of financial year. 
                                              Trading & Profit and Loss Account
Particulars                                Amount               Particulars                 Amount

To Opening Stock                                              By Sales 
To Purchases                                                      By Closing Stock
To Direct Expenses
To Wages 
To Gross Profit
                                               -----------------                                          ----------------
                                              ------------------                                         ----------------- 
To Rent                                                             By Gross Profit b/f
To Salary                                                          By Dividend
To Insurance
To Office Expense
To Depreciation
To Stationery
To Other indirect Expenses
To Net Profit
                                             ------------------                                             -----------------
                                            -------------------                                            ------------------

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

Profit and Loss Account is prepared to know __________.

  1. Net profit

  2. Gross profit

  3. Both A and B

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

Profit and Loss Account is prepared to find out the net profit earned by the business from its operations. This includes a credit of gross profit and other income received and debit of all indirect expenses. 


                                            Profit & Loss Account
Particulars                             Amount                           Particulars              Amount
To Rent                                                                    By Gross Profit c/f
To Electricity                                                           By Dividend received
To Insurance
To Salary
To Interest
To Depreciation
To Employee Welfare
To Indirect exp (Others)
To Net Profit 
                                                 ----------------------                                        --------------
                                                 ----------------------                                        --------------

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 account is prepared to know _________.

  1. Gross profit

  2. Net profit

  3. Both (A) and (B)

  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. 


Trading account includes the items of purchase and sale of trading goods and direct expenses. The overall outcome of trading account is to know the gross profit 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

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.