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

At the end of the accounting year, ______are to be passed for outstanding/prepaid expenses, accrued income/income received in advance etc. 

  1. Transfer Entries

  2. Adjustment Entries

  3. Closing Entries

  4. Opening Entries
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Adjustment entries are made at the end of the accounting period to ensure that revenues and expenses are recorded in the correct period, including items like outstanding expenses and accrued income.

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

Which of the following is/are the essential features of accrual basis of accounting?

  1. Revenue is recognized when cash is received

  2. Costs are matched against revenues on the basis of relevant time period to determine periodic income.

  3. Costs which are not charged to income are carried forward and are kept under continuous review.

  4. Both (B) & (C)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Accrual accounting involves matching costs against revenues for the relevant period and carrying forward uncharged costs, as stated in options B and C.

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

Non-monetary events like, death, dispute, sentiments, efficiency etc. are _______ in the books, even though these may have a great effect. 

  1. Not recorded

  2. Recorded

  3. Recorded if suggested by external auditors

  4. Recorded if suggested by internal auditors
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Accounting only records events that can be expressed in monetary terms. Non-monetary events, despite their impact, are not recorded in the books.

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

In accrual system of accounting ______________________.

  1. Revenues are taken care of irrespective whether cash is received or not

  2. Cost incurred during the period is taken care of

  3. Both a & b

  4. Cost of last financial period is only taken care of
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Accrual accounting recognizes revenues when earned and costs when incurred, regardless of the timing of cash payments or receipts.

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

The total amount column of the purchases return book is _______________.

  1. Credited to purchases returns account

  2. Debited to sales return account

  3. Credited to sales return account

  4. Debited to purchases returns account
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The total of the purchases return book represents goods returned to suppliers. Since purchases have a debit balance, returns have a credit balance.

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

Which one of the following is not an accounting convention?

  1. Consistency

  2. Full disclosure

  3. Materiality

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

Accounting conventions are common practices that guide the preparation of financial statements. Consistency, full disclosure, and materiality are standard widely accepted accounting conventions, whereas secrecy is not a recognized convention and contradicts transparency.