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 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

Which of the following technique is used to ascertain the correctness of debtors balance in books?

  1. Observation

  2. Enquiry

  3. Computation

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

Confirmation is a technique to obtain audit evidences.
External confirmation - obtaining a written confirmation directly from a third party, such as bank or debtor.

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

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.