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

The adjusted purchases shall be debited to the ________.

  1. Profit and loss account

  2. Balance sheet

  3. Trading and profit and loss account

  4. Not recorded
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The closing stock represents the cost of unsold goods lying in the stores at the end of the accounting period. 

The adjustment with regard to the closing stock is done by crediting it to the trading and profit and loss account and by showing it on the asset side of the balance sheet.
 The closing stock of the year becomes the opening stock of the next year and is reflected on the trial balance of the next year. Sometimes, the opening and closing stock are adjusted through purchases account. In that case, the entry recorded as follows:
Closing Stock A/c Dr.

       To Purchases A/c
This entry reduces the amount in the purchases account and is also known as adjusted purchases. Another important point to be noted is that when the opening and closing stocks are adjusted through purchases, the trial balance does not show any opening stock. Instead, the closing stock appears in the trial balance and so also the adjusted purchases. In such a situation, the adjusted purchases should be debited to the 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

Opening and closing stock are adjusted through purchases account. In that case, the entry recorded is ____________________.

  1. Opening Stock A/c Dr.

    To Purchases A/c

  2. Closing Stock A/c Dr.

    To Purchases A/c

  3. Cost of Goods Sold A/c Dr.

    To Closing stock A/c

  4. Purchases A/c Dr.

    To Closing Stock A/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The correct entry is:
Closing Stock A/c.....Dr.
   To Purchases A/c
This entry reduces the amount in the purchases account and is also known as adjusted purchases which is shown on the debit side of the 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

All adjustment  are reflected in final accounts at ____  places to complete double entry.

  1. 2

  2. 3

  3. 4

  4. 5
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Each adjusting entry usually affects one income statement account (a revenue or expense account) and one balance sheet account (an asset or liability account).

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

When ' Adjusted Purchases' appear in the total balance, it indicates that ______________________.

  1. Opening stock has been adjusted in the purchases.

  2. Closing stock has been adjusted in the purchases.

  3. Both opening and closing stocks have been adjusted in the purchases.

  4. expenses relating to purchases like carriage inward, Octroi duty etc. have been adjusted in the purchases.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Adjustment Entries for Closing Stock in Final Accounts! The closing stock is the unsold goods lying in the concern.

The stock is always valued at cost or market price whichever is lower. Generally, the closing stock will not appear in the Trial Balance and it lies in the adjustment.

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

An entry reduces amount in purchase account and is also known as ________.

  1. Adjusted closing stock

  2. Adjusted purchases

  3. Adjusted sales

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

Adjusted purchases means opening stock plus purchases less closing stock. Closing stock has two effects. When one effect is included in trial balance by way of inclusion in adjusted purchases the other should also form part of trial balance.

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

In case of adjusted purchases closing stock will appear in _________.

  1. Trial balance

  2. Trading account

  3. Profit and loss account

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

Adjusted purchases means opening stock plus purchases less closing stock. Closing stock has two effects. When one effect is included in trial balance by way of inclusion in adjusted purchases the other should also form part of trial balance.

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

Expense incurred but not paid is called ____________.

  1. Outstanding expense.

  2. Prepaid expense.

  3. Income Received in Advance.

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

Outstanding expenses are those expenses which have been incurred during the current accounting period and are due to be paid, however, the payment is not made. Such an item is to be treated as a payable for the business. Examples – Outstanding salary, outstanding rent, outstanding subscription, outstanding wages, etc.

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

When outstanding expense is recorded ___________ is credited.

  1. Outstanding Expense account

  2. Prepaid expense

  3. Outstanding income

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

As such, the amount of expenditure outstanding that has not yet been taken into the books is credited to the Expenditure Outstanding a/c. Expenses Outstanding a/c is a personal account with a credit balance. The balance indicates the amount that is owed by the organisation on account of unpaid expenditure.

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

Accounting entries passed in journal proper at the end of the year.

  1. Opening entries

  2. Adjustment entries

  3. Closing entries

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

At the end of the financial year, all nominal accounts are closed by passing the closing entries. Respective expense account will be credited by debiting the trading and profit & loss account and respective income account will be debited by crediting the trading and profit & loss account. 


Example: 

Salary Account Balance Rs.5000

Profit & Loss A/c                          Dr. 5000
        To Salary A/c                                           5000

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

The accounting entries which are passed into the books of account to bring certain items which do not appear in the trial balance, e.g. depreciation, further bad debts, closing stock, incomes receivable, etc. are called adjustment entries.

  1. True

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

The definition provided correctly describes adjustment entries, which are necessary to bring the books up to date for items not yet recorded or requiring allocation at the end of the period.

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

Opening entries 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
B Correct answer
Explanation

At the end of the financial year, all the books of account are closed by passing the closing entries. In such case, all the nominal accounts are transferred to the trading and profit & loss account. All nominal account balances become zero. 


Assets and labilities account are carried over to next year. These are trasferred to the next year books of account by passing an opening entries at the beginning of the year. 

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

Accounting entries passed in journal proper in the beginning of the finance year.

  1. Closing entries

  2. Adjustment entries

  3. Opening entries

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

After closure of the books of the previous financial year, all balances are need to be transferred to the next financial year as opening balances. The balances lying in assets and liabilities need to be transferred to current financial year as opening balance. 

This is done by passing the journal entries in the journal proper by passing opening entries.  

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

Salary outstanding A/c appearing in the trial balance is _____________.

  1. shown on the liability side of balance sheet

  2. shown on the assets side of the balance sheet

  3. shown on debit side of profit and loss A/c

  4. credited to profit and loss A/c
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

If an account appears in the trial balance, it has already been adjusted. Salary outstanding is a liability, so it is reported on the liability side of the balance sheet.

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

For which of the following adjustments would a reversing entry facilitate book-keeping procedures?

  1. Adjustment for depreciation expense

  2. Adjustment to allocate prepaid insurance to the current period

  3. Adjustment made as a result of inventory of supplies

  4. Adjustment for drawing in goods.
Reveal answer Fill a bubble to check yourself
B Correct answer