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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Income Statement
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Statement of Owner's Equity
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Balance Sheet
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Statement of Cash Flows
D
Correct answer
Explanation
The Statement of Cash Flows is prepared using information from various sources, including the Income Statement and changes in Balance Sheet accounts, but it is not directly derived from the Trial Balance in the same way the other three statements are.
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Income Statement
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Balance Sheet Liabilities
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Balance Sheet Assets
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Balance Sheet Equity
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Generally accepted accounting principles
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Generally acknowledged accounting principles
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Generic Advice on Accounting Principles
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Grand Accounting Affects People
A
Correct answer
Explanation
GAAP stands for Generally Accepted Accounting Principles, which are the standard framework of guidelines for financial accounting used in the United States.
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Debits > Credits
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Debits = Credits
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Debits < Credits
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Debits zero out
B
Correct answer
Explanation
The fundamental rule of double-entry accounting is that for every transaction, the total debits must equal the total credits to keep the accounting equation in balance.
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Assets
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Revenues
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Liabilities
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Owner's Equity
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Revenues
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Owner's Equity
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Liabilities
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Assets
D
Correct answer
Explanation
Account numbers starting with 1 are reserved for assets. These are the most liquid accounts and are listed first in the chart of accounts.
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Revenues
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Expenses
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Assets
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Liabilities
C
Correct answer
Explanation
A trial balance follows the order of the chart of accounts. Assets are listed first, followed by liabilities, equity, revenues, and expenses.
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Debit to Accounts Payable
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Debit to Accounts Receivable
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Debit to Cash
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Debit to Service Revenue
B
Correct answer
Explanation
When a customer buys on account, the business gains an asset called Accounts Receivable. Increases in assets are recorded as debits.
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Chart of accounts
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Account balances
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Journal
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Trial balance
D
Correct answer
Explanation
A trial balance is a report that lists all ledger accounts and their current debit or credit balances to ensure total debits equal total credits.
A
Correct answer
Explanation
Accounts Receivable is an asset. Assets have a normal debit balance.
B
Correct answer
Explanation
Revenue increases owner's equity. Increases in equity are recorded as credits.
A
Correct answer
Explanation
Expenses decrease owner's equity. Since equity normally has a credit balance, expenses have a normal debit balance.
B
Correct answer
Explanation
Accounts Payable is a liability. Liabilities have a normal credit balance.
B
Correct answer
Explanation
Capital represents the owner's claim on the business assets. Equity accounts have a normal credit balance.
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Assets and liabilities
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Liabilities and Withdrawals
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Revenues and Capital
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Capital and expenses
C
Correct answer
Explanation
Revenues and Capital are both equity-related accounts that increase equity, thus they carry a normal credit balance.