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

Reserve for Discount on Account is _____________.

  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

Reserve for discount on debtors is a contra-asset account related to debtors. Because it is tied to debtors (persons), 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

Accounts Payable Account is ______________.

  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

Accounts payable (AP) is an account within the general ledger that represents a company's obligation to pay off a short-term debt to its creditors or suppliers.

In the context of personal finance and small business accounting, bills payable are liabilities such as utility bills. They are recorded as accounts payable and listed as current liabilities on 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

Share allotment account is a ______________.

  1. Real account

  2. Nominal account

  3. Personal account

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

Share allotment account represents the amount due from shareholders. Since it represents a group of persons, it is 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

The effect opening entry is the opening of _______________.

  1. Personal Accounts and Real Accounts

  2. Real Accounts and Nominal Accounts

  3. Personal Account and Nominal Accounts

  4. Personal Account, Real Account and Nominal Accounts.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The effect of opening entries is opening of real and personal accounts as these are the types of account which are left with closing balance at the end of the year. 

The closing balance of previous year is transferred to the next year as opening balance. 

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

Rent paid in advance is a ____________.

  1. Personal account

  2. Real account

  3. Nominal account

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

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. 

Prepaid expenses are those expenses which have been paid in advance and related benefits are not consumed within the same accounting period. The benefits of expenses incurred are carried to the next accounting period. Examples - prepaid salary, prepaid rent, etc 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.

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 expenses is a _________ account.

  1. Real

  2. Personal

  3. Nominal

  4. None of them
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 the following types:


1. Natural persons: An account recording transactions with an individual is termed as a natural persons' personal account.


2. Artificial or legal persons: An account recording financial transactions with an artificial person created by law or otherwise is termed as an artificial persons' personal account. 

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.

Outstanding expenses is the representative personal account because it represents the outstanding expenses to a group pf people. Hence, it can be 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

Real accounts can take the form of ___________.

  1. Tangible real account like land account, building account, furniture account, cash account

  2. Intangible real account like goodwill account, trade marks account, patent rights account

  3. Natural person's accounts like proprietor's account, suppliers account, receiver's account

  4. Either (a) or (b)
Reveal answer Fill a bubble to check yourself
D 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 or intangible.

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

Which of the following types of accounts represent assets and properties which can be seen, touched, felt, measured, purchased and sold?

  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
A 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 or intangible.


Tangible real accounts are those accounts which represent assets and properties which can be seen, touched, felt, measured, purchased or sold. For e.g. Cash account, Machinery account, Furniture 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

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.