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

The basic rule of book-keeping "Debit what comes in and credit what goes out" is applicable to ____________.

  1. Personal account

  2. Real account

  3. Nominal account

  4. None of these
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.


1. Tangible real accounts: These accounts represent assets and properties which can be seen, touched, felt, purchased, measured and sold. For e.g. Machinery account, Cash account.


2. Intangible real accounts: These accounts represent assets and properties which cannot be seen, touched or felt but hey can be measured in terms of money. For e.g. Patent account, Goodwill account.

The rule for 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

Outstanding rent is a_________. 

  1. Personal account

  2. Real account

  3. Nominal account

  4. None of these
Reveal answer Fill a bubble to check yourself
A 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 person: An account recording transactions with an individual ks 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 financial transactions with an artificial person created y 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.

Outstanding rent is the representative personal account because it represents the outstanding expenses to a  person. Hence, it is classified as a personal 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

Wages account, rent account, commission account, interest received account are examples of ___________.

  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

Accounts relating to income, revenue, gain, expenses and losses are termed as nominal accounts. These accounts are also known as fictitious accounts as they do not represent any tangible asset. 

A separate account is maintained for each head or expense or loss and gain or income. Wages account, Rent account, Commission account, Interest received account are some examples of nominal accounts. 
The rule for nominal account is: Debit all expenses and losses; Credit all incomes and gains.

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

Firm's accounts, limited companies accounts, educational institutions accounts, co-operative society are example of _____________.

  1. Artificial or legal persons personal 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

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 recording financial transactions with an artificial person created by law or otherwise is termed as  an artificial persons' personal account. For e.g. Firms' account, limited companies' accounts, educational institutions' accounts, 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

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

There are mainly three types of accounts: Real, Personal and Nominal accounts. Personal accounts are classified into three subcategories: Artificial, Natural and Representative. Personal accounts are related to individuals, firms, companies, etc.  

A few examples of personal accounts include debtors, creditors, banks, outstanding/prepaid accounts, accounts of credit customers, accounts of goods suppliers, capital, drawings, etc. 

Personal accounts which are created artificially by law, such as corporate bodies and institutions, are called Artificial personal accounts. E.g. Pvt Ltd companies, LLCs, LLPs, clubs, schools, 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

Real accounts can be further classified into ____________.

  1. Tangible

  2. Intangible

  3. (A) or (B)

  4. None of the 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.

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 business economics and quantitative methods measurement of national income methods of national income methods of measuring national income national income analysis

Unpaid service should be _____ in the estimate of net income.

  1. excluded

  2. included

  3. nullified

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

Unpaid services, such as household chores performed by family members, are excluded from national income because they are not exchanged in the market and lack a reliable monetary value.

Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

In accordance with IAS 1 Presentation of Financial Statements, which one of the following items must not be separately presented in the statement of financial position? 

  1. Net Assets

  2. Non financial Assets

  3. Asset revaluation surplus

  4. Issued capital and reserves
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

In accordance with IAS 1 Presentation of financial statements, Issued share capital and reserves are not to be separately presented in the statement of financial position. 

Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

The objective of accounting standard is to ___________.

  1. bring uniformity in financial reporting

  2. ensure consistency and comparability of data with earlier years on with similar organizations

  3. both a & b

  4. establishment of law
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Accounting standards are designed to ensure uniformity in financial reporting and to facilitate consistency and comparability across different periods and organizations.

Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

The first account standard (AS-I) issued by the Institute of Chartered Accountants of India is _________________.

  1. Valuation of Inventories

  2. Revenue Recognition

  3. Change in Financial Position

  4. Disclosure of Accounting Policies
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation


To ensure proper understanding of financial statements, it is necessary that all significant accounting policies adopted in the preparation and presentation of financial statements must be disclosed.
Such disclosure should form part of the financial statements.
It would be helpful to the reader of financial statements if they are all disclosed in one place instead of being scattered over several statements, schedules and notes.

Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

Accounting standards are issued for the purpose of :
(a) Improving dependability of financial statements
(b) Auditing work becomes easy task for the auditor
(c) Elimination of non-comparability between financial statements 
The correct answer is :-

  1. (a) only

  2. (b) only

  3. (c) only

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

Accounting standards are primarily aimed at eliminating non-comparability between financial statements by providing a common framework for reporting.

Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

The ICAI so far has issued ______ accounting standards.

  1. 29

  2. 30

  3. 32

  4. 35
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Accounting Standards (i.e. AS 1~32) have been issued/ amended by the Accounting Standards Board of ICAI from time to time, to establish uniform standards for preparation of financial statements, in accordance with generally accepted accounting practices (GAAP) in India and for better understanding of the users.

Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

According to _____ Dictionary for Accountants, an account has been defined as a formal record of a particular type of transactions expressed in money. 

  1. Kohler's

  2. Oxfords

  3. Chate

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

Kohler's Dictionary for Accountants is a standard reference that defines an account as a formal record of transactions expressed in money.

Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

It is essential to standardize the accounting principles and policies in order to ensure _______________.

  1. Transparency

  2. Profitability

  3. Reputation

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

Standardizing accounting principles ensures that financial information is reported in a clear, consistent manner, which directly enhances the transparency of financial statements.

Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

Accounting standards cover the aspects of ________ of accounting transactions in the financial statements.  

  1. Recognition

  2. Measurements

  3. Presentation and disclosure

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

Accounting standards provide guidelines for the recognition, measurement, presentation, and disclosure of accounting transactions to ensure uniformity.