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

Accounting Standards Board of India was established in the year ______.

  1. $1970$
  2. $1972$
  3. $1973$
  4. $1977$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Indian accounting standards is the accounting standard adopted by companies in India and issued under the supervision of accounting standard board (ASB) which was constituted as a body in the year 1977. 

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

Revenue from service transactions, is usually recognized by a method known as__________.

  1. Accrued method.

  2. Proportionate completion method.

  3. Consistency method.

  4. Matching principle.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Revenues from service transactions, is usually recognised by a method known as proportionate completion method. Proportionate completion method is a method where the revenues or costs of service are recorded as a percentage of work completed. 

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

Revenue arising from the use by others of enterprise resources yielding interest should be recognized on_____________.

  1. Time proportion basis.

  2. Accrual basis.

  3. Actual receipt basis.

  4. When right to receive payment is established.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Interest revenue is recognized on a time proportion basis, reflecting the passage of time during which the resource is used by others.

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

In case of service transactions, when performance consists of the execution of a single act, revenue recognition takes place by____________.

  1. Accrued method.

  2. Proportionate completion method.

  3. Completed service contract method.

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

When a service transaction consists of a single act, revenue is recognized only when that act is completed, known as the completed service contract method.

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

All are the limitations of accounting standards except _________.

  1. it is difficult to choose the different alternatives between different accounting treatments

  2. they may lead to the rigidity

  3. they cannot override the statute

  4. difference in accounting standards are bound to be there due to difference in tradition and legal system in different countries
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The limitations of accounting standards are that they may lead to rigidity, they cannot override the statute and difference is accounting standards are bound to be there due to difference in tradition and legal system in different countries. 

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

The disadvantage of accounting standard is _________.

  1. It facilitates the comparison of non-comparable accounts

  2. Sometime the principles of AS are against the tradition

  3. It leads to rigidity and eliminates flexibility

  4. It flouts the law of the land.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The disadvantage of accounting standard involves the inflexible framework the firm must comply with. Each firm face different experience while preparing financial statement. It facilitate the comparison of non comparable accounts.

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

Which of the following statement is true?

  1. So far 28 Accounting standards have been issued in India

  2. Non-compliance of accounting standards is a criminal offence

  3. Accounting Standards are issued by CBDT

  4. Accounting Standard Board (ASB) was set up in 1977
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Recognizing the need to have a common platform for diversified accounting policies and practices in India and keeping in view the International development, the Institute of Chartered Accountants of India has set up a governing body i.e. Accounting Standard Board in 1977. 

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

Generally Accepted accounting principles can be applied to the financial statements in which of the following ________.

  1. Sole proprietor

  2. Partnership firm

  3. Corporate body

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

Accounting is based on the certain principles which are known as Generally Accepted Accounting Principles. These are applicable to all kind of ownership.

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

Select the correct statement.

  1. Representative of political parties also is a member of ASB in India

  2. Accounting standards issued by ICAI are mandatory in India

  3. Accounting Standards are true copy of International Accounting Standards.

  4. Accounting standard once issued cannot be withdrawn
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Indian Accounting Standards issued by the the Institute of Chartered Accountants of India are followed by the Indian companies. This is governed by Accounting Standard Board which was set up in 1977.

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

The Accounting standards are mandatory for _________.

  1. Charitable organization

  2. Government departments

  3. Companies

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

The Institute of Chartered Accountants of India has issued various accounting standards. It is mandatory for all the companies to follow these.

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

Changes in accounting policies can be made only _________.

  1. To comply with accounting standards

  2. To ensure better presentation of the financial statement

  3. To comply with law

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

Consistency is the basic assumption and it is assumed that various policies or methods adopted by the firm while preparing the financial statement are consistent from one period to another. 

However, changes in the policies can be made if this is required to comply with law, to comply with the accounting standards or to ensure better presentation. In case of changes, a disclosure has to be given with the financial statement.

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

As per AS-1 significant accounting policies may not be ________.

  1. Disclosed at all

  2. Omitted from financial disclosure

  3. Selected on random basis

  4. Changed from time to time
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Financial statement must be prepared with a true and fair view. All the relevant information which is of the interest of the owner, investors, creditors should be fully disclosed. All the significant policies should also be disclosed.  

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

AS-2 requires that the financial statements should disclose________.

  1. The accounting policies adopted in measuring inventories, including the cost formula

  2. The total carrying amount of inventories and classification appropriate to the enterprise

  3. Both (a) & (b)

  4. Either (a) or (b)
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

According to AS - 2 financial statements should disclose the accounting policies adopted in measuring inventories, including the cost formula and the total carrying amount of inventories and classification appropriate to the enterprise.

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 refer to specific accounting _________.

  1. principles

  2. methods of applying those principles

  3. both (A) and (B)

  4. none of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Accounting Standards define both the underlying principles and the specific methods for applying those principles to ensure consistency in financial reporting.

Multiple choice elements of accounts accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

Which of the following items is not a fundamental accounting assumption?

  1. Consistency

  2. Business entity

  3. Going concern

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

The three fundamental accounting assumptions are Going Concern, Consistency, and Accrual. The Business Entity concept is a basic accounting principle, but it is not classified as a fundamental accounting assumption under AS-1.