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 commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

While preparing the Annual Financial Statements, the balance of Prepaid Rend Account should be treated as the balance of a __________. 

  1. personal Account

  2. real Account

  3. nominal Account

  4. deferred Expenditure Account
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Prepaid Rent is an asset representing a claim on a service. It is a representative personal account because it represents the landlord to whom the payment was made in advance.

Multiple choice commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

An accounting transaction with an individual human being is termed as a ______________.

  1. Artificial or legal person's account

  2. Natural person's personal account

  3. Representative personal account

  4. Any of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Accounts recording transactions with a person or group of persons are known as personal accounts. These accounts are necessary, in particular, to record credit transactions. Personal accounts are of three types: Natural, Artificial and Representative personal accounts.

An account recording transactions with an individual is termed as a natural person's personal account. 
For e.g., Kamal's accounts, Mala's account, Sharma's account. 

Multiple choice commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

Real accounts can be further classified into _____________.

  1. Tangilble

  2. Intangible

  3. (A) or (B)

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

There are mainly three types of accounts: Real, Personal and Nominal accounts. 

Personal accounts are classified into three subcategories: 

Artificial, Natural, and Representative. All assets of a firm, which are tangible or intangible, fall under the category "Real Accounts". 

Tangible real accounts are related to things that can be touched and felt physically.

Intangible real accounts are related to things that can't be touched and felt physically.

The golden rule of real accounts is: Debit what comes in; Credit what goes out.

Multiple choice commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

An account recording financial transactions with an artificial person created by law or otherwise are termed as _______________.

  1. Artificial or legal persons account

  2. Natural persons personal account

  3. Representative personal accounts

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

Artificial or legal persons Account - An account recording financial transactions with an artificial person created by law or otherwise is called as an Artificial personal Account. 

E.g. Co-operative society account.

Multiple choice commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

State with reasons whether the following statement is true or false:
Rent paid account is a Nominal Account whereas, Rent received account is a Real account.

  1. True

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

Both Rent Paid and Rent Received are nominal accounts because they represent expenses and incomes, respectively. Neither is a real account.

Multiple choice commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

Personal accounts is of the various types namely, __________.

  1. Natural, Real, Representative

  2. Artificial, Legal, Nominal

  3. Natural, Artificial, Representative

  4. Any of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Accounts recording transactions with a person or group of persons are known as personal accounts. These accounts are necessary, in particular, to record credit transactions. Personal accounts are of the following types:


1. Natural persons: An account recording transactions with an individual is termed as a natural persons' personal account. For e.g. Kamal's account, Mala's account. Both males and females are included in it.


2. Artificial or legal persons: An account recording transactions with an artificial person created by law or otherwise is termed as an artificial persons' personal account. For e.g. Firms' accounts, limited companies' accounts.

3. Representative personal accounts: An account indirectly representing a person or persons is known as representative personal account. When accounts are of similar nature and their number is large, it is better to group them under one head and open a representative personal account. For e.g. prepaid insurance, outstanding salaries, etc.

Multiple choice commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

State with reasons whether the following statement is true or false.
Outstanding expenditure is a nominal account.

  1. True

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

Outstanding expenditure are those expenses which have been incurred and consumed during an accounting period and are due to be paid but are not paid. 

Examples include outstanding salary, outstanding rent, etc. 

Outstanding expenditure are recorded in the books at the end of an accounting period to show true numbers of a business. 
Outstanding expenses is a personal account and is shown in the liability side of a balance sheet.

Multiple choice commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

All accounts are classified into _______________.

  1. Personal

  2. Real

  3. Nominal accounts

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

Modern approach. According to modern approach, the accounts are classified as asset accounts, liability accounts, capital or owner's equity accounts, withdrawal accounts, revenue/income accounts and expense accounts.

Multiple choice commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

Prepaid insurance, outstanding salaries are example of _____________.

  1. Tangible real accounts

  2. Intangible real accounts

  3. Representative personal accounts

  4. Artificial or legal persons account
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Accounts recording transactions with a person or group of persons are known as personal accounts. These accounts are necessary, in particular, to record credit transactions. Personal accounts are of three types: Natural, Artificial and Representative accounts.

An account indirectly representing a person or persons is known as representative personal account. When accounts are of similar nature and their number is large, it is better to group them under one head and open a  representative personal account. For e.g. prepaid insurance, outstanding salaries, etc.

Multiple choice commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

Goodwill accounts, patents account, trademarks account, copyrights account are examples of _____________.

  1. Tangible real accounts

  2. Intangible real accounts

  3. Representative personal accounts

  4. Artificial or legal persons account
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Accounts relating to properties or assets are known as "Real accounts". A separate account is maintained for each asset e.g. Cash, Machinery, Building, etc. Real accounts can be further classified into tangible and intangible.

Intangible real accounts represent assets and properties which cannot be seen, touched or felt but they can be measured in terms of money. For e.g. Goodwill account, Patent account, Trademark account, Copyright account, etc.

Multiple choice commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

Prepaid salary is ______________.

  1. Real Account

  2. Personal Account

  3. Nominal Account

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

 Prepaid expenses are recorded in the books at the end of an accounting period to show true numbers of a business. Prepaid (Unexpired) expense is a personal account and is shown on the Assets side of a balance sheet. Expenses are amounts paid for goods or services purchased.

Multiple choice commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

Purchase is _______________.

  1. Real Accounts

  2. Personal Accounts

  3. Nominal Accounts

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

Nominal Accounts are accounts related and associated to losses, expenses, income or gains. Examples include purchase account, sales account, salary A/c, commission A/c etc. 

Hence, purchase is nominal account.

Multiple choice commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

______ is an intangible real account.

  1. Land

  2. Building

  3. Goodwill

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

Goodwill in accounting is an intangible asset that arises when a buyer acquires an existing business. Goodwill represents assets that are not separately identifiable. 

It is classified as an intangible asset on the balance sheet, since it can neither be seen nor touched.

Multiple choice commercial applications accounting procedures - rules of debit and credit golden rules of debit and credit (traditional approach) types of account meaning and classification of accounts

The following accounts are never balanced _____________.

  1. Personal Accounts

  2. Real Accounts

  3. Nominal Accounts

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

Nominal accounts are temporary accounts that are closed at the end of the accounting period; therefore, they are not balanced in the traditional sense of carrying a balance forward to the next period.