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
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Accounting period concept
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Going concern concept
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Dual concept
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Business entity concept
D
Correct answer
Explanation
According to this concept the business and businessman should be taken as two separarte entities and thus goods withdrawan by proprietor should be recorded as drawings in the books.
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Convention of conservatism
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Convention of consistency
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Convention of disclosure
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Convention of materiality
C
Correct answer
Explanation
Though the contingent liabilities are not due yet but these should appear as a footnote to ensure better disclosure and transparency to outsiders.
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Dual aspect
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matching concept
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Cost concept
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Realisation concept
B
Correct answer
Explanation
It states that the expenses of a particular period should be compared with the revenues of that period to calculate the profits or losses of that period.
D
Correct answer
Explanation
This is the correct answer.
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current year only
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past years only
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future years only
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all current, past and future periods.
D
Correct answer
Explanation
It is correct as all transactions relating to past, present and future period are recorded in this system.
A
Correct answer
Explanation
AS-3 is concerned with cash flow statement.
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Cash system
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Mercantile system
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Both cash and mercantile system
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Accounting period concept
B
Correct answer
Explanation
It considers all cash and acrual transactions and thus, is more accurate.
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Cash system
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Mercantile system
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Both cash and mercantile system
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Accounting period
A
Correct answer
Explanation
It is generally followed by professionals such as doctors, lawyers etc. and not by business houses.
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Current Account and Capital Account
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Visible Account and Invisible Account
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Long-term Capital Account and Short-term Capital Account
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None of the above
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operating profit
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net profit
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cost of goods nanufactured
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gross profit
D
Correct answer
Explanation
The Trading Account is specifically prepared to calculate gross profit, which is the difference between sales revenue and the cost of goods sold. It does not account for operating expenses, which are considered in the Profit & Loss Account to determine net profit.
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on the credit side of Trading Account
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on the assets side of Balance sheets
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on the credit side of Profit & Loss Account
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none of these
B
Correct answer
Explanation
Prepaid insurance represents a payment made in advance for future coverage, which is an asset since the company has not yet received the benefit. Assets are always shown on the assets side of the balance sheet, not in trading or profit and loss accounts. Option B is correct.
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Shown on the credit side of the Profit & Loss a/c
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Shown on the debit side of the Profit & Loss a/c
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Shown on the debit side of the Trading Account
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No entry at all
B
Correct answer
Explanation
Discount allowed is an expense to the business, so it appears on the debit side of the Profit & Loss account. When it appears in the trial balance, it means the expense has already been incurred during the year. The provision for discount on debtors is a separate contra-asset account that's created based on estimates, not directly linked to how discount allowed is treated in the P&L.
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Shown on the Credit side of the Profit & Loss a/c
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Shown on the Credit side of the Reserve for Discount on Creditors a/c
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Shown on the Credit side of the Trading Account
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No entry at all
A
Correct answer
Explanation
Discount received is a gain or income for the business, so it appears on the credit side of the Profit & Loss account. The key phrase 'no reserve for discount on creditors account appears' means there's no separate provision account - we're only treating the discount received itself. Since it's in the trial balance, it's an actual amount received during the year.
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putting together items of a similar nature under a common heading
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two sides of balance sheet - liability side and asset side
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the order in which the various assets and liabilities are arranged
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Both (2) and (3)
C
Correct answer
Explanation
Marshalling in balance sheet context refers to the systematic arrangement of assets and liabilities in a specific order. The two sides of the balance sheet (assets and liabilities) exist regardless of marshalling. Marshalling determines the ORDER in which items are presented - whether by liquidity, permanence, or other classification principles.
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wrong recording in books of original entry
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wrong recording in journal proper but not posted at all
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errors of posting involving the posting to wrong account on correct side with correct amount
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omission of an account from trial balance
D
Correct answer
Explanation
As given in the questioon that the ledger accounts are correct, therefore there is no chance of the first three options to be correct ( because journal and ledger posting is correct) , there must be some omission of an account from trial balance.