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

The first step in the accounting process is_______.

  1. Summarizing

  2. Interpreting the results

  3. Recording

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

Maintaining proper and fine accounts has become very essential today, as a result, of increasing competition in the business-world. Every business organization is, therefore, supposed to maintain fine accounts  comprising of all the financial transactions, financial as well as non-financial information. We all know that any accounting involves a fine recording, summarizing, proper classification as well as the interpretation and communication of financial information. Every transaction has to be recorded first so that the other processes can be carried out effectively. Therefore the first step in the accounting process is recording.

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

Summarizing take place in the form of ________.

  1. Trial balance

  2. Trading account and Balance sheet

  3. Profit and loss account

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

The first step in the process of accounting cycle is recording of transactions in journal and ledger. After this process, summarizing takes place. Summarising involves posting from ledger to prepare a trial balance and then the items of trial balance are posted in profit and loss account from which we get the net profit of the firm. After that balance sheet of the company is prepared from which we get the details about the assets and liabilities of the business of the firm. So basically summarizing involves trial balnace,profit and loss account and balancesheet.

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

Which of the following pairs are correctly matched?
I. Business entity - Accounting standard
II. Stock valuation - Consistency
III. Capital - Drawings
IV. Going concern - Assumption
Select the correct answer using the codes given.

  1. I, II and III

  2. I, II and IV

  3. II, III and IV

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

I) A business is required to maintain separate financial records from its owners and investors. An accounting entity allows for taxing authorities to assess proper levies in accordance with tax rules. Different accounting entities have different financial reporting requirements

II) A stock's value the consistency of a company's ability to pay and raise its dividend shows that it has predictability in its earnings. It also shows that it's financially stable enough to pay that dividend (from current or retained earnings).
III) The going concern principle is the assumption that an entity will remain in business for the foreseeable future. Conversely, this means the entity will not be forced to halt operations and liquidate its assets in the near term at what may be very low fire-sale prices.

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. To record economic data

  2. Provide the information basis of action

  3. Classifying and recording business transaction

  4. Attainment of economic goal
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Accounting is an art of recording, classifying, summarizing and interpreting the data in a significant manner of money's worth business transactions.


The prime function of accounting is to classify and record all such business transaction. It plays an important role in providing appropriate information to the business for decision making. 

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

The second important stage in the accounting process is______.

  1. Journal

  2. Ledger

  3. Account

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

The book of original entry or prime entry is journal in which all day to day transactions are recorded. All the transactions from journal are posted to ledger which consists of different accounts on the basis of transactions recorded in journal. Hence, it is regarded as the second important stage in the accounting process.

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.