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 bases of accounting cash and mercantile system basis of accounting basis of accounting system

If an amount paid for servicing vehicles has been posted in error to Motor Vehicles account the journal entry necessary to correct this error should require which of the following _________________.

  1. Debit Vehicle Maintenance A/c and credit Motor Vehicles A/c

  2. Debit Cash A/c and credit Motor Vehicles A/c

  3. Debit Motor Vehicles A/c and credit Vehicle Maintenance A/c

  4. Debit Vehicle Maintenance A/c and credit Cash A/c
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Servicing vehicles is a revenue expenditure (maintenance), not a capital expenditure. It should be debited to Vehicle Maintenance A/c. Since it was wrongly debited to Motor Vehicles A/c, we must credit Motor Vehicles A/c to remove the error and debit Vehicle Maintenance A/c to record the expense.

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

When a change in accounting policy is justified?

  1. To comply with accounting standard

  2. To ensure more appropriate presentation of the financial statement of the enterprise

  3. to comply with law

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

Accounting policies are changed only when required by law, accounting standards, or when the change results in a more appropriate presentation of financial statements. All these options represent valid justifications.

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

In the comparative financial statement, comparison of financial data is done in the form of ___________ .

  1. Absolute data of each year in terms of Rupees of the same firm

  2. Increase or decrease in data over the years of the same firm

  3. Increase or decrease in data of different firms

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

Comparative financial statements analyze changes in financial data over time for the same firm or between different firms, allowing for both absolute and percentage comparisons.

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

Which of the following statements is 'True'?

  1. Building Account is a nominal account

  2. Outstanding rent account is a non-personal account

  3. Every debit has a corresponding credit

  4. Income is debited
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The fundamental principle of double-entry bookkeeping is that every debit must have a corresponding credit, ensuring the accounting equation remains balanced.

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

Double entry system is used in which type of accounting ___________.

  1. Cost

  2. Financial

  3. Management

  4. All of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Financial accounting is based on dual concept. On the basis of dual concept, all business transactions are recorded in the books of accounts. This signifies that, every business transaction will affect two accounts while making an accounting entry. Its basically a double entry system of accounting. For every debit, there will be a credit and vice versa.

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

The accrual cost is the basis for ____________.

  1. Management system of accounting

  2. Mercantile system of accounting

  3. Internal system of accounting

  4. External system of accounting
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Accrual Accounting is the base of present accounting. It is also known as the mercantile system of accounting, wherein the transactions are recognised, as and when, they take place. 

Under this method, the revenue is recorded when it is earned, and the expenses are reported when they are incurred.

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

The system of recording transaction based on dual aspect concept is called ________________.

  1. Double account system

  2. Double entry system

  3. Single entry system

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

Dual aspect accounting is a concept which assumes that every business transaction will give two effects, i.e. debit and credit. For every debit there will be a credit, and vice versa. Double entry system of accounting is commonly used by all the organizations. Small concerns who are not well versed with double entry system are following the single entry system, in which they maintained only account of debtors and creditors and bank account. 

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

The basis for the accounting equation is the principle of _________.

  1. Rights

  2. Rules

  3. Procedures

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

Accounting equation is the foundation of double entry system of book-keeping. It displays that all the assets are either financed by borrowing money or paying from the shareholder's equity. The balance sheet being the complex version shows explain the equation very clearly and it shows that total assets is equal to total liability plus shareholder's equity. The basis for this equation is the principle of rights.

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

The system of recording based on dual aspect concept is called _______.

  1. Double account system

  2. Double entry system

  3. Single entry system

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

Dual aspect is the foundation or basic principle of accounting. It provides the very basis for recording business transactions into the book of accounts. This concept states that every transaction has a dual or two-fold effect and should therefore be recorded at two places. In other words, at least two accounts will be involved in recording a transaction.

The double-entry system also requires that for all transactions, the amounts entered as debits must be equal to the amounts entered as credits.