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 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 the normal balance of an accumulated depreciation account?

  1. Debit balance.

  2. Credit balance.

  3. Nil balance.

  4. (A) or (B).
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Accumulated depreciation is a contra-asset account. Since asset accounts have debit balances, their contra-accounts have credit balances.

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

Accumulated Depreciation account has a _____________.

  1. credit balance only

  2. debit balance only

  3. credit or debit balance

  4. all of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
Accumulated depreciation is a contra asset. Since assets have a normal debit balance, this would make accumulated depreciation have a normal credit balance. This account should be a credit balance as it is a contra-asset account.
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 the normal balance of an accumulated depreciation account?

  1. Debit balance

  2. Credit balance

  3. Nil balance

  4. (A) or (B)
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Credit balance is the normal balance of an accumulated depreciation account.Accumulated depreciation has a credit balance, because it aggregates the amount of depreciation expense charged against a fixed asset.

Multiple choice book keeping and accountancy accounting procedures - rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

Firm's accounts, limited companies accounts, educational institutions accounts, co-operative society account are example of ________________.

  1. Artificial or legal persons personal account

  2. Natural persons personal account

  3. Representative personal accounts

  4. Any of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Artificial or legal persons are entities created by law, such as companies and institutions, which can own property or enter into contracts. They are distinct from natural persons (human beings) and representative accounts.

Multiple choice book keeping and accountancy accounting procedures - rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

The words 'To Balance b/f' or By Balance b/f' are recorded in the Particulars column of an account at the time of posting of ________________.

  1. All compound entries.

  2. An opening entry.

  3. A closing entry.

  4. An adjusting entry.

  5. A transfer entry
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

At the beginning of a new journal page, the opening balance is quoted from the previous page, this balance pulled forward from the previous page to the current page is termed as “Balance B/F” or “Total B/F” (Brought Forward).

Multiple choice book keeping and accountancy accounting procedures - rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

Which is the most conventional system of accounting?

  1. Indian system

  2. Mahajani system

  3. Deshi Nama system

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

Indian, Mahajani, and Deshi Nama are all names for the same traditional, indigenous system of accounting used in India. Therefore, all these terms refer to the same conventional system.

Multiple choice book keeping and accountancy accounting procedures - rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

An entry which has more than one debit and or credit is called ________.

  1. single

  2. multiple

  3. compound

  4. none of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A compound entry is an accounting entry that involves more than one debit or more than one credit. It is used to record multiple transactions or complex events in a single journal entry.

Multiple choice book keeping and accountancy accounting procedures - rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

The books to be compulsorily maintained by a company are ______________.

  1. Cash book and ledger

  2. Sales and purchase book

  3. Journal

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

All business transactions are recorded in the books of account depending on the nature of transaction. There are certain books which are compulsorily maintained by the business. 


Below are the books which are mandatory to maintained to record all the transactions:

1) Cash Book- It records all the cash transactions.

2) Sales & Purchase book- It records all credit sales and credit purchases.
3) Journal- It records those transactions which are not recorded in specific books. Purchase of assets etc.
4) Ledger- All above set of entries are to be posted in ledger to find out the balance of each account.

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

Nature of Revaluation Account is ___________.

  1. Real

  2. Personal

  3. Nominal

  4. None
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
The term revaluation is simply means "to determine the value of assets and liabilities again". Revaluation account is prepared either at the time of retirement of a partner or admitting a partner. All the assets and liabilities are revalued and the differential amount is to be debited or credited in Revaluation Account.
Revaluation Account is Nominal In nature. If the liabilities increases and assets are decreasing, the difference amount to be debited to revaluation account as it is a loss for the firm.
If there is an Increase in Assets and Decrease in the value of Liabilities, the differential amount to be credited to revaluation account as it is a Profit for the firm.

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

In the Realisation Account prepared on the dissolution of a firm, debit side is more than the credit side. It indicates ____________.

  1. there is a profit

  2. there is a loss

  3. liabilities are more then assets

  4. assets are more than liabilities
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The main purpose to open Realisation Account is to ascertain the profit or loss due to the realisation of assets and liabilities at the time of dissolution of firm. Realisation profit (if credit side > debit side) or realisation loss (if debit side > credit side) are transferred to the Partner's Capital Accountin their profit sharing ratio.

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

The interest on partners capital accounts is to be credited to _______________.

  1. Interest Account

  2. Profit and Loss Account

  3. Drawing Account

  4. Partner's Capital Account
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Interest on partner's capital is an amount at an agreed rate of interest which is credited to a partner based on the amount of capital contributed by him/her.

Interest on partner's capital is an expense to the firm and hence debited to profit and loss appropriation A/c. On the other hand it is an income for partners and hence credited to partner's capital A/c.

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

When the Interest on drawings is charged to partners, Interest on Drawing Account is credited, and Partner's Capital Account is debited. It is called __________. 

  1. an opening entry

  2. a closing entry

  3. an adjusting entry

  4. an transfer entry
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When the Interest on drawings is charged to partners, Interest on Drawing Account is credited, and Partner's Capital Account is debited. It is called as an adjusting entry. Adjusting entries are usually done at the end of the year for incomes and expenses. 

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

When the Interest on capital is allowed to partners, Interest on Capital Account is debited and Partner's Capital Account is credited. It is called _____________. 

  1. an opening entry

  2. a closing entry

  3. an adjusting entry

  4. an transfer entry
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When the interest on capital is allowed to partners, interest on capital Account is debited and partner's capital Account is credited. It is called as an adjusting entry. Adjusting entries are usually done at the end of the year for incomes and expenses.