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 elements of book keeping and accountancy ledger and posting develop the understanding for posting of transactions and balancing of accounts classification of ledger (subdivision of ledger) and balancing of account meaning and importance of ledger

Income Tax Liability of a Proprietor paid should be debited to ________.

  1. Income Ta Account

  2. Drawing Account

  3. Income Tax Payable Account

  4. Business Expenses Account
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Income tax is a personal expense of the proprietor. When paid by the business, it is treated as a drawing.

Multiple choice elements of book keeping and accountancy ledger and posting develop the understanding for posting of transactions and balancing of accounts classification of ledger (subdivision of ledger) and balancing of account meaning and importance of ledger

Which account is the odd one out?

  1. Work-in progress

  2. Capital Work-in progress

  3. Technical know-how

  4. Patents
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Work-in-progress is a current asset (inventory). Capital work-in-progress, technical know-how, and patents are non-current/fixed assets.

Multiple choice elements of book keeping and accountancy ledger and posting develop the understanding for posting of transactions and balancing of accounts classification of ledger (subdivision of ledger) and balancing of account meaning and importance of ledger

Cash Embezzlement Account is _______________.

  1. An Asset Account

  2. A Liability Account

  3. A Revenue Account

  4. An Expense Account
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Cash embezzlement is a loss to the business, which is recorded as an expense.

Multiple choice elements of accounts ledger and posting develop the understanding for posting of transactions and balancing of accounts classification of ledger (subdivision of ledger) and balancing of account meaning and importance of ledger

Which of the following is a book of original entry and also part of the ledger?

  1. The Journal

  2. The Cash Book

  3. The Purchase Book

  4. The Sales Book
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The Cash Book acts as both a book of original entry (journal) and a ledger account (for cash and bank balances).

Multiple choice elements of accounts ledger and posting develop the understanding for posting of transactions and balancing of accounts classification of ledger (subdivision of ledger) and balancing of account meaning and importance of ledger

The 'Statement of Affairs' is prepared on the basis of _______________.

  1. Ledger Accounts.

  2. Ledger Accounts and estimates.

  3. Estimates.

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

A Statement of Affairs is used in incomplete records (single-entry system). It is prepared using available ledger balances and estimates of assets and liabilities.

Multiple choice elements of accounts ledger and posting develop the understanding for posting of transactions and balancing of accounts classification of ledger (subdivision of ledger) and balancing of account meaning and importance of ledger

Which of the following is not opened in the General Ledger ?

  1. Drawing Account

  2. Land Account

  3. Rent Account

  4. Personal Account of a trade creditor
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Personal accounts of trade creditors are typically kept in a Subsidiary Ledger (Creditors Ledger), not the General Ledger.

Multiple choice elements of accounts ledger and posting develop the understanding for posting of transactions and balancing of accounts classification of ledger (subdivision of ledger) and balancing of account meaning and importance of ledger

Bought ledger adjustment account is also termed as _______________.

  1. General ledger Account.

  2. Creditors ledger adjustment Account.

  3. Debtors ledger adjustment Account.

  4. Sold ledger adjustment Account.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Creditors or Purchases or Bought Ledger: It contains personal accounts of trade creditors from whom goods are purchased on credit.

Multiple choice elements of accounts ledger and posting develop the understanding for posting of transactions and balancing of accounts classification of ledger (subdivision of ledger) and balancing of account meaning and importance of ledger

Debtors and Creditors Ledgers are known as __________________.

  1. Bought ledger adjustment Account.

  2. Subsidiary Ledgers.

  3. General Ledgers.

  4. Sold ledgers adjustment Account.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Debtors and Creditors ledgers are maintained separately from the general ledger to keep the main ledger concise. These are collectively referred to as subsidiary ledgers.

Multiple choice elements of accounts ledger and posting develop the understanding for posting of transactions and balancing of accounts classification of ledger (subdivision of ledger) and balancing of account meaning and importance of ledger

Interest A/c will have ________.

  1. Debit balance

  2. Credit balance

  3. Nil

  4. Debit or credit balance
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Interest may have both the accounting treatment. If interest is received , its an income to the business and if interest is paid, its an expenses for the business. 

Hence, interest account may have debit or credit balance.

Multiple choice elements of accounts ledger and posting develop the understanding for posting of transactions and balancing of accounts classification of ledger (subdivision of ledger) and balancing of account meaning and importance of ledger

Commission A/c will have __________.

  1. Debit balance

  2. Credit balance

  3. Nil

  4. Debit or credit balance
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Commission may have both the accounting treatment. 

If commission is received ,its an income to the business and if commission is paid, its an expenses for the business. 
Hence, commission account may have debit or credit balance.

Multiple choice elements of accounts ledger and posting develop the understanding for posting of transactions and balancing of accounts classification of ledger (subdivision of ledger) and balancing of account meaning and importance of ledger

Expenses A/c will always have _______.

  1. debit balance

  2. credit balance

  3. nil

  4. debit or credit balance
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

According to the rules of debit and credit, expenses increase on the debit side. Therefore, expense accounts typically maintain a debit balance.

Multiple choice elements of accounts trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

State whether the following statement is True or False.
In trial balance purchases returns are recorded on Debit side.

  1. True

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

Purchases returns (or return outwards) represent a reduction in purchases. Since purchases are debited, purchases returns are credited in the ledger and thus appear on the credit side of the trial balance.

Multiple choice elements of accounts trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

From the following particulars of Mrs. Dropadi Ltd., 
i) Monthly cash requirements =Rs.60,000
ii) Fixed cost per transaction = Rs.10. 
iii) Interest rate on marketable securities =  $6\%$ p.a.
Calculate the optimum cash balance of the company .

  1. Rs.60,000

  2. Rs.16,000

  3. Rs.15,000

  4. Rs.30,000
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Optimum cash balance
 = $\sqrt\frac{2b \ T}{I}$
 = $\sqrt\frac{2 X 10 X 60,000}{.005}$
= Rs. 15,492 or Rs.15,000
I = $6\%$ p.a. or $0.5\%$ per month or = .005.