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 business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

At the time of dissolution of the firm, The assets and liabilities appearing in the Balance sheet transferred to ____________ .

  1. Revaluation Account

  2. Realisation Account

  3. Partner's Capital Accounts

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

At the time of dissolution of the firm, the assets and liabilities appearing on the Balance Sheet are transferred to the Realisation Account. When a firm decides to discontinue its operations, all assets need to be disposed off and all liabilities need to be discharged. For this purpose, a Realisation account is opened where all the assets, excluding cash at hand and bank, are shown on the debit side at their book values and all the external liabilities are shown on the credit side at their book value. Any sale of assets or discharge of liabilities is also shown in this account.

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

The process of accounting starts with _______ and ends with_______.

  1. Classifying, Recording

  2. Identifying the transaction, Communicating the information

  3. Financial account, Journal

  4. Recording, Classifying
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

It is clear from the definition that accounting is not only concerned with recording, classifying or summarizing the transactions but it is also plays an important role in providing appropriate information to the business for decision making. 

Hence, the process of accounting starts with identification of transaction  and ends with communication of information.

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

Balancing of account means ______________.

  1. Cash credit

  2. Total credit

  3. Difference in credit and debit

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

For all business transactions, a ledger account is opened in the ledger to have a summary of each account. Balancing has to be done after a particular period for each of the account to know the final position of account. 


Hence, balancing is the difference between the debit and credit. If credit side exceeds the debit side, the balance is called as credit balance and vice versa. 

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

Identified and measured economic events should be recorded in _________order.

  1. Chronological order

  2. Valuation order

  3. Relevance order

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

This is very much clear from the definition of accounting that all business transactions must be recorded in books of account in the chronological order. 


As and when an economic event is identified and measured, it has to be recorded in the books. 

So, if a sales is effected on 29th March, it has to be recorded on the same day and if purchase is effected on 31st March, it has to be recorded on 31st March itself.

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

Which is the last step of accounting as a process of information ? 

  1. Recording of data in the books of accounts.

  2. Preparation of summaries in the form of financial statements.

  3. Communication of information.

  4. Analysis and interpretation of information.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

It is very clear from the definition of accounting that accounting is not only concerned with recording, classifying and summarizing the transactions but it also plays an important role in providing appropriate information to the business for decision making. Communicating the information to all the stakeholders is a last step of accounting.

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.