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

The end result of accounting process is_________.

  1. Accounting equation

  2. Journal book

  3. Balance sheet

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

Accounting process consists of a number of steps which starts from recording of transaction and ends at providing interpretation of data in the form of financial statements. Balance sheet consists of assets on the right hand side and liabilities plus capital on left hand side. It is prepared at the end and shows the amount is tallied or not.

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

Accounting is a process of recording, classifying, summarising, analysing and interpreting the financial transactions and communicating the result thereof to the users of such information. State whether the statement is true or false.

  1. True

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

As per the definition of accounting, it is a process of recording, classifying, summarising, analysing and interpreting the financial transactions and communicating the result thereof to the users of such information.

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

The work of accounting depends upon________. 

  1. Book keeping

  2. Cash book

  3. Subsidiary books

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

Book- keeping is the process of the daily record - keeping of all of a company financial transactions. Book- keepers record the sales, expenses, cash and bank transactions of the business in a general ledger. The first thing you need to do when you start a business is realizing that this ledger and its accuracy are central to your company finances. So the work of accounting depends upon book keeping as the book keeping is the base of recording all the transactions. 

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

Customs and traditions which guide the accounts to prepare accounting statements are called ______________. 

  1. conventions

  2. principles

  3. concepts

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

Conventions are the guidelines that arise from the practical application of accounting principles. It is not legally binding practice rather, it is a generally accepted convention based on customs and designed to help accountants  overcome practical problems that arise out of the preparation of financial statements. 

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

Book- keeping and accounting are one and the same thing. 

  1. True

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

Book - keeping and accounting are not the same thing although they both involve the process of recording the financial transactions  of a business. Book -  keeping  are two different  terms. 

            Book -  keeping is the process of recording in chronological order, the daily  transactions of a  business entity. On the other hand accounting is an information system includes the process of recording, classifying, summarizing, reporting and interpreting the financial condition and performance of a business. Book keeping forms the part of accounting. 

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

_______ defined Accounting as the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least of a financial character, and interpreting the results thereafter.

  1. The American Institute of Certified Public Accounts

  2. Financial Accounting Standard Board

  3. Institute of Certified Accountants of Wales

  4. Institute of Chartered Accountants of India
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In 1941, The american institute of Certified Public Accounts (AICPA) had defined accounting as the art of recording, classifying and summerising in a significant manner and in terms of ,money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof. With greater economic development resulting in changing role of accounting its scope become broader.

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

________ is the last phase of Accounting process.

  1. Classification

  2. Summarizing

  3. Recording

  4. Communication
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Communication is concerned with the transmission of summarized, analysed and interpreted information to the end user to enable them to make rational decision. The accounting information after being meaningfully analysed and interpreted has to be communicated in a proper form and manner to the proper person. Hence, communicating is the last phase of Accounting process.

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

_______ is the first phase of accounting process.

  1. Classification

  2. Summarizing

  3. Recording

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

Recording is the first phase of accounting process. It is essentially concerned with not only ensuring that all business transactions of financial character are, in fact recorded but also that they are recorded in an orderly manner.

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

Which of these statements is true about book keeping?

  1. It is a language of business

  2. It is a process concerned with recording of transactions

  3. It is end result of Accounting process

  4. It is concerned with summarizing of business transactions
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Book keeping is a process of recording an economic event of the business. Once the transaction is done, this has to be recorded immediately in the books of account to have a proper accounting. 

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

Function(s) of Accounting is/are _______ .

  1. to help in decision making

  2. to help in measurement

  3. to help in forecasting

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

Financial accounting information is the accounting information concerned with the summary, analysis and reporting of financial transactions pertaining to a business. This involves the preparation of financial statements available for public consumption. Stockholders, suppliers, banks, employees, governments agencies, business owners, and other stakeholders are examples of people interested in receiving such information for decision making purposes. 

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

Accounting is the process of matching _________.

  1. benefits and costs

  2. revenues and costs

  3. cash inflow and outflows

  4. potential and real performances
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Matching concept of accounting defines that all the expenses need to be recorded in the books of account for the same period against which the revenue is recorded in the books. 


If the revenue is recorded in the books of account for the period 1st April 2017 to 31st March 2018, in such case, expenses pertaining to the same period should be recorded in the books of account irrespective whether these are actually paid or not.

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

Which of the following describes the proper sequence of actions in the accounting cycle?

  1. Post, enter, analyse, prepare, close, adjust

  2. Analyse, enter, post, adjust, prepare, close

  3. Prepare, enter, post, adjust, analyse, close

  4. Enter, post, close, prepare, adjust, analyse
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The accounting cycle is a process designed to make financial accounting of business activities easier for business owners.

These steps are: 
(1) analyzing the transactions as they occur; 
(2) recording them in the journals;
(3) posting debits and credits from journal entries to the general ledger; 
(4) adjusting the assets with a trial balance; 
(5) preparing financial statements, and 
(6) closing the temporary accounts.

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

Accounting is defined as "the __________ of recording, classifying and summarizing in terms of money transactions and events of a financial character and interpreting the results thereof".

  1. art

  2. science

  3. method

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

Definition of accounting is:

" Accounting is an art of recording, classifying and summarizing in terms of money transactions and events of a financial character and interpreting the results thereof" 

Accounting definition specifically defines that only monetary transactions should be 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

Accounting is :
1. An art
2. A science
Select the correct answer from the options given below ___________.

  1. 1 only

  2. 2 only

  3. Partly 1 and Partly 2

  4. 2 but not 1
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Accounting is considered an art because it requires skill and judgment to record and interpret data, and a science because it follows a systematic body of rules and principles.

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

Accounting involves _________.

  1. decision making for the management easy as financial results can be compared.

  2. the records being put is a systematic pattern so that any point of time they can be used.

  3. the financial information being stored in a meaningful way for taxation purpose

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

Accounting plays an important and useful role for the business owner. Main advantages are :

To record all the business transactions in a systematic way so that information can be used as and when required.
Financial statements are prepared on the basis of information recorded in the books of account, so that management can take a decision by comparing the results.
Accounting plays a vital role in giving the information to the taxation authorities to know whether business is following all the rules and laws and paying the tax in timely manner.