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

In a general, the accounts in the income statement are known as ___________.

  1. permanent accounts

  2. temporary accounts

  3. unearned revenue accounts

  4. contra-asset accounts
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Income statement accounts (revenue and expenses) are temporary accounts because their balances are closed to the capital account at the end of each period, resetting them to zero for the next period.

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

In a Trading and Profit and Loss Account the excess of net sales over the cost of goods sold is called _________________.

  1. Operating income

  2. Income from operations

  3. Gross profit

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

Gross profit is defined as the difference between net sales and the cost of goods sold.

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

Which of the following accounts would be closed by transfer to the trading and Profit and Loss account at the end of a period?

  1. Sales

  2. Salary expenses

  3. Both sales and salary expense

  4. Neither sales nor salary expense
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Both revenue accounts (like Sales) and expense accounts (like Salary) are temporary accounts that must be closed to the Trading and Profit and Loss account 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

Which one of the following statements is correct?

  1. Gross profit on trading is entered on the right side of the trading account and carried down to the left side of the profit and loss account

  2. Gross profit on trading is entered on the left side of the trading account and carried down to the right side of the profit and loss account.

  3. Net profit on trading is entered on the right side of the trading account and carried down to the right side of the profit and loss account.

  4. Net profit on trading is entered on the left side of the trading account and carried down to the left side of the profit and loss account.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Gross profit is calculated on the debit (left) side of the Trading Account (as a balancing figure) and then transferred to the credit (right) side of the 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

Adjusting entries are essential to _______________.

  1. Matching rule

  2. Accrual accounting

  3. A proper determination of net income

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

Adjusting entries are necessary to apply the matching principle, implement accrual accounting, and ensure that net income is accurately determined for a specific period.

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

Outstanding salaries are shown as ________________.

  1. An asset in the balance sheet

  2. A liabilty

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

  4. Both (a) and (b)

  5. Both (b) and (c)
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

Outstanding salaries are a liability (shown on the balance sheet) and are also an expense that must be added to the salary expense in the P&L account to correctly reflect the period's costs.