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

Purpose of ac an accounting system include all the following except _______________________.

  1. Interpret and record the effects of business transaction

  2. Classify the effects of transactions to facilitate the preparation of reports

  3. Summarize and communicate information to decision makers

  4. Dictate the specific types of business enterprise transactions that the enterprises may engage in.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Accounting systems are designed to record, classify, and summarize financial data to provide useful information. They do not have the authority to dictate or restrict the types of business transactions an enterprise chooses to engage in.

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

______ is incompatible with the matching principle of income determination.

  1. Accrual system of accounting.

  2. Cash basis of accounting

  3. Hybrid system of accounting

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

The matching principle requires that expenses be recognized in the same period as the revenues they help generate. The cash basis violates this because it records expenses only when paid, which may be in a different period than the associated revenue.

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

Materiality in accounting is decided __________________.

  1. By the size of an item

  2. By the knowledge as to whether an individual item is having a significant influence on financial statement

  3. Solely by the discretion of the accountant

  4. By the physical volume of the transaction
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Materiality is a qualitative characteristic; an item is material if its omission or misstatement could influence the economic decisions of users of the financial statements.

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

It SA/cs is done and by mistake A's account is transferred to Purchase No in such a case which accounts are affected? 

  1. Purchase a/c

  2. A's a/c

  3. Both (a) and (b)

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

When a personal account like A's account is incorrectly transferred to a nominal account like Purchase account, both accounts are affected. A's account shows an incorrect debit balance, while Purchase account is overstated. Both need correction entries to reverse the error and record the proper transaction.

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

Social obligation of accounting refers to ________________.

  1. The completion of journal entries

  2. The preparation of final accounts

  3. Cost recording

  4. Servicing the needs of various stakeholders
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The social obligation of accounting refers to the responsibility of the accounting function to provide relevant and transparent information to all stakeholders, including employees, creditors, government, and the public.

Multiple choice book keeping and accountancy bases of accounting cash and mercantile system basis of accounting basis of accounting system

Under cash basis of accounting, revenue is recognized when _____________.

  1. Sale is made

  2. Cash is received

  3. Goods are delivered

  4. Services are rendered
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Cash basis accounting recognizes revenue only when cash is actually received, regardless of when the sale occurred or services were rendered.

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 a _______( journal).

  1. Subsidiary

  2. Purchase

  3. Sales

  4. Purchase and Sales Return
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A cash book is a subsidiary to the general ledger in which all cash transactions during a period are recorded.

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 the particulars account the name of the account to be credited is entered at ___________ place with a prefix 'To'.

  1. in confirmation of the name of the account to be debited

  2. next line to the account name that is to debited

  3. anywhere in the journal

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

In standard journal entry bookkeeping, when recording a transaction, the account title to be credited is written on the line immediately following the debited account name, typically indented and prefixed with the word 'To'.

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 will disturb the balancing of the trial balance?

  1. Error in adding up a book of prime entry

  2. Entering an acquisition of an asset, on credit terms, in the Purchases Day Book

  3. Posting to an asset account instead of an expenditure account

  4. Entering a wrong amount in a book of prime entry
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

An error in casting (adding up) a book of prime entry will result in an incorrect total being posted to the corresponding ledger account (e.g., Purchases Account), while the individual ledger accounts of suppliers are posted with correct individual amounts. This creates a one-sided error that prevents the trial balance from balancing.

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

Location of the debit column is ____________.

  1. in contravention with particulars

  2. in front of the particulars column where the amount is debited

  3. in front of the particulars column where the amount is credited

  4. not present anywhere in the journal
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In a standard journal format, the debit column is located directly to the right of (in front of) the particulars column, aligning with the row where the debited account name is written.

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

Book keeping is meant to show all the transactions.

  1. Of the whole year

  2. Of the accounting period

  3. Of half year

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

Bookkeeping is designed to systematically record all financial transactions that occur within a defined accounting period, which could be a month, quarter, or financial year.

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

The total of the purchases day book is posted periodically to the debit of ________________.

  1. Purchases account

  2. Cash book

  3. Journal proper

  4. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Purchases Day Book records all credit purchases of goods. Periodically, the total of this book is posted to the debit side of the Purchases Account in the general ledger to reflect the total increase in purchases.

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

Purchases day book records ________________.

  1. All cash purchases

  2. All credit purchases

  3. Credit purchases of trading goods

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

The Purchases Day Book is a subsidiary book used exclusively to record credit purchases of trading goods (inventory intended for resale). Cash purchases are recorded in the Cash Book, and credit purchases of assets like machinery are recorded in the Journal Proper.

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

All transactions involving the immediate receipt or payment of cash, including cash sales, must be recorded in the Cash Book. The Sales Book is reserved solely for credit sales of goods.