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 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

Credit balance of a personal account indicates ________________.

  1. Cash balance

  2. Amount payable

  3. Amount receivable

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

The debit balance of a personal account indicated debt owing by the person and credit balance indicates debts owing to the person concerned. For the business, the first one is account receivable or asset, while the second is accounts payable or liability. Every personal account showing debit balance (i.e. excess of debit side over credit side) will reveal the amount by which the debit side is more than the credit side. Debit balance is recoverable from the person whose account shows a debit balance. A debit balance to a personal account is an asset and therefore the more debit balance to a personal account is an asset and therefore the more debit balances to personal accounts, more the assets are in the form of outstanding recoverables. The debit balance of a personal account shows the amount receivable.

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

Which one of the following is a personal account?

  1. Bills Receivable Account

  2. Livestock Account

  3. Goodwill Account

  4. Outstanding Salaries A/c
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Outstanding Salary A/c is a Representative Personal Account as it represents a group of people to whom some amount of salary is payable. Similarly other outstanding and prepaid expenses also fall under the category of representative personal 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

Normally, the following accounts are balanced _________________.

  1. Personal accounts and nominal accounts.

  2. Real accounts and nominal accounts.

  3. Personal accounts and real accounts.

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

Normally the Personal account and Real account are balanced. Only accounts relating to assets and liabilities ,that is real account and personal accounts are balanced periodically.

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

Ram's account is related to ___________.

  1. Personal account

  2. Nominal account

  3. Real account

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

A personal account is an account for use by an individual for that person's own needs. It is a relative term to differentiate them from those accounts for business or corporate use.

Ram's A/c is a personal A/c.

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 all expenses and losses and credit all gains and incomes" is applicable to _________.

  1. Personal account

  2. Real account

  3. Nominal account

  4. None of these
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 accounts are some examples of nominal account. 

The rule for Nominal accounts 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

At the end of the accounting year all the nominal accounts of the ledger book are _________________________.

  1. Balanced but not transferred to profit and loss account

  2. Not balanced and also the balance is not transferred to the profit and loss account

  3. Balanced and the balance is transferred to the balance sheet

  4. Not balanced and transferred to the profit and loss account.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Nominal accounts represent expenses, losses, incomes, and gains. At the end of the accounting year, these are closed by transferring their balances to the Profit and Loss 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

Outstanding wages is an example of __________.

  1. Personal A/c

  2. Real A/c

  3. Nominal A/c

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

Examples of nominal accounts are Purchase A/c, Sales A/c, Salary A/c etc. 

Outstanding wages is classified as a personal account and not a nominal account. This account represents the accounts of all those persons to whom wages have not been paid and hence, are outstanding.

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.