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

Most appropriate way of defining accounting will be ___________.

  1. communicating the revenues

  2. communicating the losses of the organization

  3. collection of all the financial data

  4. communicating the financial position of an organization
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The basic function of accounting is to record all the business transactions and classify, summarize and interpret in such a way that financial statements will give the true and fair view of the financial position of the company. 

Financial statements i.e. profit & loss account and balance sheet is the way of communicating the financial position of the organization to all the stake holders. 

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

Amit is recording sales transactions in the accounting system so that they can be summarized in a logical manner for the purpose of providing financial information for decision-making. Amit is doing ___________.

  1. management consulting

  2. review

  3. accounting

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

To review is to check the work already done/performed.

Management consulting refers to the  providing suggestions/ recommendations to the management to perform the business more effectively.
Auditing is examining.
Amit is doing none of the three but a simple accounting exercise. 

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

  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 includes both financial data (monetary transactions) and non-financial data (quantitative and qualitative information). Contemporary accounting practices encompass sustainability reporting, ESG metrics, corporate social responsibility data, key performance indicators, and other non-financial information essential for comprehensive business evaluation.

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

A chronological record of transaction may be found in _______.

  1. Balance Sheet

  2. Trial Balance

  3. Ledger

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

In accounting, a first recording of financial transactions as they occur in time, and  in accounting and bookkeeping called a journal is a record of financial transactions in order by date. A journal is often defined as the book of original entry. Manual systems usually had a variety of journals such as a sales journal, purchases journal, cash receipts journal, cash disbursements journal, and a general journal.so that they can then be used for future reconciling and transfer to other official accounting records such as the general ledger is a journal.

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

The debit side of manufacturing Account __________________.

  1. is always equal to its credit side

  2. is always more than its credit side

  3. is always less than its credit side

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

The manufacturing account is prepared to determine the cost of production. The debit side includes all production costs, while the credit side includes the cost of finished goods transferred to the trading account. Since there is usually work-in-progress inventory at the end, the debit side is typically greater than the credit side.

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

________ is concerned with the recording process of accounting.

  1. Ledger

  2. Preparation of profit and loss a/c

  3. Journalising

  4. Balancing and ledger
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The number and kinds of books of accounts kept by any business depends upon its particular need. But there are two major books which must invariably be maintained by every business i.e. journal and ledger. Every transaction is first recorded in the journal which is considered as subsidiary books of account. Journal merely helps the posting of entries in to ledger, that's why it is called as subsidiary books of account.

Multiple choice elements of book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills advantages of bill of exchange

When a bill is discharged, the acceptor debits __________.

  1. Creditor's account

  2. Cash account

  3. Bills payable account

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

A bill is discharged by payment in due course by or on behalf of the drawee or acceptor.  While preparing the journal entry for discharge of bill Bills payable account is debited and Drawer account is credited.

Multiple choice elements of book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills advantages of bill of exchange

When a bill is drawn by A on B, and before the maturity date, B becomes insolvent then in the books of A it is debited to _____________.

  1. Bills Receivable Account

  2. Bank Account

  3. B's Account

  4. Bank for Collection of Bills
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Insolvent is the person whose assets are not sufficient to pay off his liabilities in full. 

In case of insolvency of the acceptor, the holder would get the proportionate amount of what is due from the bill. 
The journal entry for the transaction should be :-
B's A/c              Dr.

     To Bills receivables A/c 

Multiple choice elements of book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills advantages of bill of exchange

Acceptances received and recorded in bills receivable book are transferred to the ledger ______________.

  1. on the debit side of relevant personal accounts

  2. on the credit side of relevant personal account

  3. either (a) or (b)

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

When a bill is accepted and recorded in the bills receivable book, the acceptor is the person who owes money. In the ledger, the acceptor's personal account must be credited because they are the giver of the bill (a liability or reduction in asset).

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

Closing entries are those which are passed______.

  1. at the end of the year

  2. at the beginning of the year

  3. for rectification of errors

  4. for suppressing profit
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Closing entries are journal entries made at the end of an accounting period to transfer balances from temporary accounts (like revenue and expenses) to permanent accounts (like retained earnings).

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

After all closing entries have been posted, the balance of the P & L Account will be ________________.

  1. A debit if a net income has been earned

  2. A debit if a net loss has been incurred

  3. A credit if a net loss has been incurred

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

After closing entries, the Profit and Loss account balance is transferred to the Capital account. A net loss results in a debit balance in the P&L account before it is closed to Capital, and if the question implies the state before final transfer, a loss represents a debit balance.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

Consider the following statements.
A credit purchase during the accounting year which was not recorded in the books of account but included in the closing stock is to be.
I. Added to the credit purchases account
II. Added to the creditors account
III. Subtracted from the closing stock
IV. Added to the opening stock
Which of the statements given is/are correct?

  1. III only

  2. I and II

  3. II and III

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

Credit purchase during the accounting year which was not recorded in the books of account but included in the closing stock is to be added to the credit purchase A/c and Creditors A/c.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

Outstanding salary is shown as _______________.

  1. An asset in the balance sheet

  2. A liability

  3. By adjusting it in the P & L A/c

  4. Both B and C
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Outstanding expense are those expenses which are due but not paid. These are expenses like salary for the month of March is not paid but the services are already taken.

To find out the correct profitability, all expenses pertaining to the financial year should be debited to profit & loss account. Hence out standing salary to be added in salary expenses in profit & loss account and shown as current liability in the balance sheet.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

Outstanding Expenses is shown on the _______ side of the balance sheet.

  1. Assets

  2. Liabilities

  3. Both

  4. None of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
The above entry opens a new account called Outstanding Expenses which is shown on the liabilities side of the balance sheet. The amount of outstanding expenses is added to the total of expenses under a particular head for the purpose of preparing trading and profit and loss account.
Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

Salaries & wages outstanding will be added to ________ account.

  1. Wages

  2. Assets

  3. Liabilities

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

The entry to bring such expenses into account is:

Concerned Expense A/c 
     To Outstanding Expense A/c
The above entry opens a new account called Outstanding Expenses which is shown on the liabilities side of the balance sheet. The amount of outstanding expenses is added to the total expenses under a particular head for the purpose of preparing trading and profit and loss account. Salaries & wages outstanding will be added to the salaries account.