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 elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

Cash book does not record _______________.

  1. Credit Purchases

  2. Credit Sales

  3. Outstanding Expenses

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

The Cash Book is strictly reserved for recording cash and bank transactions. Credit purchases, credit sales, and outstanding expenses do not involve immediate cash flow and are therefore not recorded in the Cash Book.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

Accounting for partial recovery from Mr. Ram of an amount earlier written off as bad debt will be recorded in _________.

  1. journal proper (General Journal)

  2. sales book

  3. purchase book

  4. cash book
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Even a partial recovery of a previously written-off bad debt involves receiving cash. Because it is a cash receipt, it must be recorded in the Cash Book.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

An allowance was offered for an early payment of cash will be recorded in the ___________.

  1. sales book

  2. cash book

  3. journal proper (General Journal)

  4. purchase book
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

An allowance offered for the early payment of cash is a cash discount. This transaction is recorded in the cash book, specifically in the discount column of a multi-column cash book alongside the cash receipt or payment.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

Cash sales are recorded in ____________.

  1. Sales Book

  2. Cash Book

  3. Journal

  4. Purchase Book.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

All cash transactions, including cash sales, are recorded in the Cash Book. The Sales Book is reserved exclusively for recording credit sales of goods.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

When a firm maintains a simple Cash Book, it need not maintain ____________.

  1. sales journal

  2. purchases journal

  3. general journal

  4. cash account in the ledger
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Because the Cash Book itself serves as the cash account, there is no need to maintain a separate cash account in the ledger. Other journals, such as the sales and purchases journals, must still be maintained.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

_______ is book in which all transactions concerning cash receipts and cash payments are recorded.

  1. Journal proper

  2. Cash book

  3. Sales Book

  4. none of above.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The Cash Book is a subsidiary book specifically designed to record all cash receipts and cash payments chronologically.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

Cash sales are recorded in _______________.

  1. Journal proper

  2. Sales Book

  3. Cash Book

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

Cash sales involve the receipt of cash, so they are recorded in the Cash Book. The Sales Book is reserved only for credit sales of goods.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

Cash purchases are recorded in ______________.

  1. Purchases Book

  2. Cash Book

  3. Purchases Returns Book

  4. Partly in Cash Book and partly in Journal Proper
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Any purchase made for cash is recorded in the Cash Book because it involves an immediate cash outflow. The Purchases Book is only used for credit purchases of goods.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

Which of the following books is used to record purchase of machinery by cash?

  1. Cash book

  2. Purchases book

  3. Journal proper

  4. Purchases returns book
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Any transaction involving cash payment, including the purchase of an asset like machinery for cash, must be recorded in the Cash Book.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

Cash Book is in the form of _____________.

  1. Journal

  2. An account

  3. Statement

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

The Cash Book is prepared in the form of a ledger account, with debit (receipts) and credit (payments) sides, even though it also serves as a book of original entry.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

State with reasons whether the following statement is true or false:
The balance in the Cash Book shows net income.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The balance in the Cash Book represents the cash and bank balances available at hand and in the bank at a specific point in time (assets). Net income is calculated in the Profit and Loss Account by comparing revenues and expenses, not by looking at the cash balance.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

State with reasons whether the following statement is true or false:
Discount account should be balanced in the Cash Book.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The discount columns in a three-column cash book are not balanced. Instead, the total of the discount allowed column is debited to the Discount Allowed Account in the ledger, and the total of the discount received column is credited to the Discount Received Account in the ledger.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

In which book does the cash sales will be recorded?

  1. Cash Book

  2. Purchase Book

  3. General Journal

  4. Sales Book
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
Cash book is a journal in which all cash receipts and payments (including bank deposits and withdrawals) are recorded first, in chronological order, for posting to general ledger. Cash book is regularly reconciled with the bank statements as an internal auditing measure. It  is used to record all the receipts and payments of cash.
Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

A General Cash book acts as a __________.

  1. Journal

  2. Ledger

  3. Both

  4. None
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A cashbook is a book of prime entry in which cash and bank transactions of business are recorded. It acts as a book of original entry and a ledger. Hence, it is both Journal and Ledger.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

Goods returned by customer should be debited to which of the following accounts?

  1. Sales income account

  2. Sales account

  3. Return inward account

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

When customers return goods, it is recorded as a sales return, which is also known as return inward. Since sales have a credit balance, the return of those sales must be debited to reduce the net sales revenue. Therefore, the Return Inward Account is debited.