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 company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

What journal entry is passed, when the interest on debentures is due?

  1. Debentures Interest A/c To Debentureholder's A/c Dr.
  2. Debentures Interest A/c To Debentureholder's A/c To Tax deducted at source A/c Dr.
  3. Debentureholder's A/cTax deducted at source A/c To Debenture Interest A/c Dr. Dr.

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

When interest is due, the company records the expense, the tax deduction (TDS), and the net amount payable to the debenture holder.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

Loss on issue of debentures account is a:

  1. Personal account

  2. Real account

  3. Nominal account

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

Loss on issue of debentures represents an expense or loss to the company, which falls under the category of nominal accounts.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

What journal entry is passed to write off discount on issue of debentures?

  1. Discount on issue of debentures A/c To Profit and Loss A/c Dr.
  2. To Profit and Loss A/c To Discount on issue of debenture A/c Dr.
  3. Bank A/c To Profit and Loss A/c Dr.

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

Writing off the discount involves transferring the amount from the Discount on Issue account to the Profit and Loss account (as an expense).

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

In the Balance Sheet of a company, Debenture Redemption Premium Account appears under the head:

  1. Share Capital

  2. Reserves & Surplus

  3. Non-Current Liabilities

  4. Current Liabilities
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The premium payable on redemption is a long-term liability that the company is obligated to pay in the future, thus it is classified under Non-Current Liabilities.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) discount/loss on issue of debenture written off issue of debentures procedure for issue of debentures

If the whole amount of debenture is received in one installment, then the journal entry for making the allotment is:

  1. Debit Debenture a/c. and Credit Debenture application & allotment a/c.

  2. Debit Debenture application & allotment a/c. and credit Debenture a/c

  3. Both (A) and (B)

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

Debentures may be issued at par, premium, or at discount. They can also be issued for consideration other than cash or as collateral security. Debentures are said to be issue at par when face value equals the issue price of the debenture, the journal entry for such issue is as follows:

 If whole amount is received in one installment:
Bank A/c                         Dr.
     To Debenture application and allotment A/c

Debenture application and allotment A/c             Dr.
      To Debentures A/c

Multiple choice organisation of commerce and management specialised financial institutions institutional sources long term sources of finance sources of business finance - 2

The depository receipts issued by a company in the USA are known as____________.

  1. Global Depository Receipts

  2. American Depository Receipts

  3. Foreign Currency Convertible Bonds

  4. All of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
The depository receipts issued by a company in the USA are known as American Depository Receipts. ADRs are bought and sold in American markets like regular stocks. It is similar to Global Depository Reciepts. 
Multiple choice organisation of commerce and management specialised financial institutions institutional sources long term sources of finance sources of business finance - 2

The depository receipts denominated in US dollars are known as ______________.

  1. Global Depository Receipts

  2. American Depository Receipts

  3. Foreign Currency Convertible Bonds

  4. None of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
The local currency shares of a company are delivered to the depository bank. The depository bank issues depository receipts against these shares. Such depository receipts denominated in US dollars are known as Global Depository Receipts.
Multiple choice

How does a zero balance account impact a company's financial statements?

  1. Increases assets

  2. Decreases liabilities

  3. Increases equity

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

A zero balance account does not impact a company's financial statements as it has no balance and does not affect the company's assets, liabilities, or equity.

Multiple choice

How does a zero-balance account impact a company's cash flow statement?

  1. Increases cash flow from operations

  2. Decreases cash flow from operations

  3. Has no impact on cash flow from operations

  4. Depends on the company's industry
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A zero-balance account does not impact a company's cash flow from operations as it does not involve any actual cash transactions.

Multiple choice

What are the consequences of failing to keep proper financial records?

  1. The church may be fined.

  2. The church may be sued.

  3. The church may lose its tax-exempt status.

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

The consequences of failing to keep proper financial records include being fined, being sued, and losing tax-exempt status.

Multiple choice

Which of the following is not a key financial statement for a startup?

  1. Income Statement

  2. Balance Sheet

  3. Cash Flow Statement

  4. Profit and Loss Statement
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Profit and Loss Statement is not a key financial statement for a startup, as it is a summary of the revenues and expenses of a company over a period of time.

Multiple choice

What is the purpose of a cash flow statement?

  1. To show the movement of cash in and out of a company

  2. To show the profitability of a company

  3. To show the assets and liabilities of a company

  4. To show the revenues and expenses of a company
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The purpose of a cash flow statement is to show the movement of cash in and out of a company over a period of time.

Multiple choice

What is the purpose of a balance sheet?

  1. To show the assets, liabilities, and equity of a company

  2. To show the profitability of a company

  3. To show the cash flow of a company

  4. To show the revenues and expenses of a company
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The purpose of a balance sheet is to show the assets, liabilities, and equity of a company at a specific point in time.

Multiple choice

What are the three main types of financial statements?

  1. Balance sheet, income statement, and statement of cash flows.

  2. Balance sheet, income statement, and statement of retained earnings.

  3. Balance sheet, income statement, and statement of changes in equity.

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

The three main types of financial statements are the balance sheet, the income statement, and the statement of cash flows.

Multiple choice

What is the balance of payments?

  1. A record of all economic transactions between a country and the rest of the world.

  2. A record of all financial transactions between a country and the rest of the world.

  3. A record of all trade transactions between a country and the rest of the world.

  4. A record of all investment transactions between a country and the rest of the world.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The balance of payments is a record of all economic transactions between a country and the rest of the world. It includes trade in goods and services, investment income, and transfers.