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

Total amount of money owed to a business.

  1. Accounting

  2. Accounts Receivable

  3. Assets

  4. Break-even Point
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Accounts receivable represents money owed to a business by customers for goods or services provided on credit.

Multiple choice book keeping and accountancy statement of changes in financial position meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement budgeting

Cash Flow Statement explains the reason on surplus or deficit of cash.

  1. True

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

A Cash Flow Statement provides a detailed breakdown of the sources and uses of cash, explaining why the cash balance increased or decreased over a period.

Multiple choice commercial studies budgeting meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement statement of changes in financial position

Which Accounting Standard is applicable for preparation of Cash Flow Statement?

  1. Accounting Standard - 6

  2. Accounting Standard - 3

  3. Accounting Standard - 2

  4. Accounting Standard - 13
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Accounting Standard 3 (AS-3) is the standard specifically mandated for the preparation and presentation of Cash Flow Statements. AS-6 relates to depreciation, AS-2 to inventory valuation, and AS-13 to accounting for investments.

Multiple choice commercial studies budgeting meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement statement of changes in financial position

Cash flow statement is also termed as ___________________.

  1. Statement of changes in Financial Position (working capital basis)

  2. Statement of changes in Financial Position (cash basis)

  3. Appropriate statement for short range planning

  4. Statement showing cash receipts and payments
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The statement of changes in financial position (sometimes called a “cash flow statement”) shows a company's net cash flow in a given period of time. Because it also indicates where the cash flowed from or to, it is often referred to as the “sources and uses of cash statement.”

Multiple choice commercial studies budgeting meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement statement of changes in financial position

Which of the following statement are false?
a. Old furniture written off doesn't affect cash flow.
b. Cash flow statement is a substitute for cash account.
c. Appropriation of retained earnings is not shown in cash flow statement.
d. Net cash flow during a period can never be negative.

  1. A, B and C

  2. B, C and D

  3. C, D and A

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

Statement of cash flows, is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, financing activities. 

Multiple choice commercial studies budgeting meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement statement of changes in financial position

Cash flow statement is based upon ______________.

  1. Cash basis of accounting.

  2. Accrual basis of accounting.

  3. Credit basis of accounting.

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

Cash flow is calculated by making certain adjustments to net income by adding or subtracting differences in revenue, expenses and credit transactions resulting from transactions that occur from one period to the next.  These adjustments are made because non-cash items are calculated into net income and total assets and liabilities. 

So, because not all transactions involve actual cash items, many items have to be reevaluated when calculating cash flow from operations.  

Multiple choice commercial studies budgeting meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement statement of changes in financial position

____________ shows the details of cash generating and utilization activities of a company during a given period of time.

  1. Cash flow statement

  2. Profit and Loss A/c

  3. Balance sheet

  4. Segment reports
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Cash flow statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing and financing activities. It shows the details of cash generating and utilization activities of a company during a given period of time. 

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

Give journal entries:
Depreciation debited to profit and loss account

  1. Machine A/c Dr.

    To Bank A/c

  2. Profit and Loss A/c Dr.

    To Depreciation A/c

  3. Depreciation A/c Dr.

    To Profit and Loss A/c

  4. Depreciation A/c Dr

    To Machine A/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

As per the golden rules of accounting for nominal account all expenses and losses are debited and all income and gains are credited and for rael account, what comes in debit and what goes out is credit.

In the light of above rule, journal entry for providing depreciation and charging it to profit and losss A/c is -
1. Depreciation A/c     Dr.
        To Asset A/c 
(Being depreciation chargedd to asset)
2. Profit and loss A/c  Dr.
         To Depreciation A/c 
(Being depreciation expense transferred to P&L A/c)

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

Machinery Account is debited by _________.

  1. Bank account

  2. Depreciation account

  3. Provision account

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

Machinery purchased against the payment through bank is an transaction of purchase of fixed asset. Following entry will be passed in the books of account:


Machinery A/c                             Dr.
        To Bank A/c 

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

Give journal entries:
For recording purchase of asset.

  1. Asset A/c Dr.

    To Bank A/c

  2. Asset A/c Dr.

    To Vendor A/c

  3. Asset A/c Dr.

    To Buyer A/c

  4. Both (a) and (b)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

As per the golden rules of accounting for real account, what comes in debit and what goes out is credit.

In light of above rule, journal entry for purchase of asset should be:
1. Asset A/c     Dr.
        To Bank A/c
(Being asset purchased for cash)
2. Asset A/c    Dr.
        To Vendor/ creditor A/c
(Being Asset purchased on credit)

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

Which of the following is a double entry for depreciation expenses?

  1. Accumulated depreciation debit and depreciation expenses credit.

  2. Depreciation expenses debit and accumulated depreciation credit.

  3. Cash debit and depreciation expenses credit.

  4. Depreciation expenses debit and cash credit.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The standard journal entry for depreciation is to debit the depreciation expense account (to record the cost) and credit the accumulated depreciation account (to increase the contra-asset).