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

In case of three columnar cash book, contra entry is used for ____________.

  1. Bank account only

  2. Cash and discount account

  3. Cash account only

  4. Cash and bank account
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

In case of Contra Entry of cash book when a transaction involves both cash and bank accounts, it is entered on both sides of the cash book, one in the cash column and other in the bank column, though on opposite sides.

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 cash purchase of goods for proprietor's personal use should be credited to __________________.

  1. Purchases Account

  2. Sales Account

  3. Drawings Account

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

When goods are purchased for the proprietor's personal use using business cash, it is treated as drawings. The journal entry to record this transaction is to debit the Drawings Account and credit the Cash Account. Therefore, the Cash Account is credited because cash is leaving the business.

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

Entry for trade discount always appears in the books of account.

  1. True

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

The discount allowed by a seller to its customers at a fixed percentage on the listed price of goods is termed as Trade discount. 

No separate entry is passed for the Trade discount, as it is deducted from the cash memo or invoice of the goods. 
If the goods sold at trade discount are returned by the customer, the amount of trade discount is again deducted from the list price of the returned goods. Generally, it is allowed to the retailers to enable them to sell the goods to their customers at list price. 
The purpose is also to increase the sales. 
It is not recorded in the books of accounts.

Multiple choice

A document giving details of a company's expected sales, costs and future financial planning

  1. Business plan

  2. Block booking

  3. Bookkeeping

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

A business plan is a formal document outlining a company's goals, target market, and financial forecasts, including expected sales and costs. A balance sheet (misspelled as balance shet) shows a company's assets, liabilities, and equity at a specific point in time, rather than future planning.

Multiple choice

For what reason would an accountant hold a client's money?

  1. To keep to pay a tax bill

  2. To keep in case they don't pay their invoice

  3. To hide from HMRC

  4. To keep to avoid paying VAT
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Accountants may hold client money in a client account to facilitate the payment of tax bills or other professional fees on behalf of the client, provided it is done transparently and legally.

Multiple choice

An income statement is also called a:

  1. Balance Sheet

  2. Profit & Loss Statement

  3. Bank Statement

  4. Profitable Loan Statement
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

An income statement summarizes a company's revenues and expenses over a specific period. It is frequently referred to as a Profit and Loss (P&L) statement.

Multiple choice

Which account is a liability?

  1. Accounts Receivable

  2. Accounts Payable

  3. Equipment

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

Accounts Payable represents money that a business owes to its suppliers or creditors for goods or services received. Therefore, it is a liability.

Multiple choice

Which one is NOT an example of an internal user of accounting information?

  1. Marketing Managers

  2. Production Supervisors

  3. Creditors

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

Internal users are those within the organization who use accounting information to make decisions, such as managers and officers. Creditors are external users who use the information to assess creditworthiness.

Multiple choice

When cash is paid on account, the amount is recorded in the

  1. Accounts Payable Debit column and Cash Credit column

  2. Sales Credit column and Cash Debit column

  3. General Debit column and Cash Credit column

  4. Cash Debit column and General Credit column
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Paying on account reduces a liability (Accounts Payable) and reduces an asset (Cash). In accounting journals, this is recorded by debiting the liability and crediting cash.

Multiple choice

When services are sold on account, the amount is recorded in the

  1. Accounts Receivable Debit column and Cash Credit column.

  2. General Credit column and Cash Debit column

  3. Accounts Receivable Debit column and Sales Credit column

  4. General Debit column and Accounts Payable Debit column.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Selling services on account increases an asset (Accounts Receivable) and increases revenue (Sales). This is recorded by debiting Accounts Receivable and crediting Sales.

Multiple choice

When cash is received from sales, the amount is recorded in the

  1. Sales Credit column and Cash Debit column

  2. Sales Debit column and Cash Credit column

  3. General Credit column and Cash Debit column

  4. General Debit column and Cash Credit column
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Receiving cash from sales increases an asset (Cash) and increases revenue (Sales). This is recorded by debiting Cash and crediting Sales.