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
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at the end of each month
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when the final payment is made
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at the time of the sale
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at the end of the fiscal period
C
Correct answer
Explanation
Under the accrual basis of accounting, revenue is recognized and recorded at the time the sale is made, regardless of when the cash is actually received.
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drawing
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capital
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owner's equity
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equity
B
Correct answer
Explanation
The Capital account is used to summarize the owner's equity in the business, reflecting investments and earnings.
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recorded directly in owner's capital
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recorded on the debit side
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recorded in a separate revenue account
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recorded as interest revenue
C
Correct answer
Explanation
When cash is received from sales, the revenue is recorded in a separate revenue account, which eventually increases owner's equity through the closing process.
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adequate disclosure
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going concern
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business entity
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objective evidence
A
Correct answer
Explanation
The Adequate Disclosure concept requires that financial statements contain all information necessary for a reader to understand the financial condition of the business.
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general amount column
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special amount column
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general debit column
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special credit column
B
Correct answer
Explanation
A special amount column is a journal column headed with an account title. It is used to record frequently occurring transactions for a specific account.
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objective evidence
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going concern
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accounting period cycle
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adequate disclosure
C
Correct answer
Explanation
The accounting period cycle concept dictates that financial statements should be prepared at regular intervals, such as monthly, to provide timely information.
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component percentage
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adjustment
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change
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endorsement
A
Correct answer
Explanation
A component percentage shows the relationship between a specific item on a financial statement and a total, such as net sales, expressed as a percentage.
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going concern
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matching expenses with revenue
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consistent reporting
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adequate disclosure
C
Correct answer
Explanation
Consistent reporting ensures that accounting methods remain the same from period to period, allowing for meaningful comparison of financial data over time.
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unit of measurement
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business entity
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adequate disclosure
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separation of records
A
Correct answer
Explanation
The unit of measurement concept requires that all business transactions be recorded in a common monetary unit, such as dollars, to ensure consistency.
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rent expense
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miscellaneous expense
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supplies
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cash
A
Correct answer
Explanation
Rent is an expense incurred by the business. According to accounting rules, expenses are recorded as debits to increase their balance.
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unit of measurement
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business entity
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source documents
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objective evidence
D
Correct answer
Explanation
The objective evidence concept requires that every transaction be supported by a source document, such as a receipt or invoice, to verify the transaction's validity.
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business entity
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going concern
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unit of measurement
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adequate disclosure
A
Correct answer
Explanation
The business entity concept states that the financial records of a business must be kept separate from the personal financial records of the owner.
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Business Entity
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Matching Expenses with Revenue
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Consistent Reporting
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Objective Evidence
B
Correct answer
Explanation
The matching principle requires that expenses incurred to generate revenue be reported in the same accounting period as the revenue itself.
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asset
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owner's equity
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liability
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revenue
C
Correct answer
Explanation
In standard accounting chart of accounts numbering, the 100s are assets, 200s are liabilities, 300s are owner's equity, 400s are revenue, and 500s are expenses.
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journalizing
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posting
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journaling
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updating
B
Correct answer
Explanation
Posting is the process of transferring information from the journal to the general ledger to update account balances.