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

The objective of Cash Flow Statement are:
a. Analysis of cash position;
b. Short-term cash planning;

c. Evaluation of liquidity;
d. Comparison of operating performance;

  1. Both (a) and (b)

  2. Both (a) and (c)

  3. Both (b) and (d)

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

A cash flow statement shows inflow and outflow of cash and cash equivalents from various activities of a company during a specific period. 


The primary objective of cash flow statement is to provide useful information about cash flows of an enterprise during a particular period under various heads, i.e. operating, investing and 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

As per AS-3, Cash flow statement is mandatory for:
a. All enterprises.
b. Companies listed on stock exchange.
c. Companies with turnover of more than Rs. 50 crores.

  1. Both (a) and (b)

  2. Both (a) and (c)

  3. Both (c) and (b)

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

A private limited company with paid up share capital of less than 50 lakh rupees or such higher amount as may be prescribed (not exceeding 5 crore rupees) or with a turnover of less than 2 crore rupees or such higher amount as may be prescribed (not exceeding 20 crore rupees) is not required to prepare cash flow statements while preparing financial statements at the end of the financial year.


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

___________ is a charge against profit.

  1. Liability

  2. Bad debts

  3. Provision

  4. Reserve
Reveal answer Fill a bubble to check yourself
C,D Correct answer
Explanation

Depreciation fund is a reserve, but is a charge against profit since it is created for replacement of an asset. 

Hence, both reserves and provisions can arise as a charge against profits or as an appropriation out of profit, depending upon the nature of provision or reserve.

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

Provision is created for ________.

  1. known liabilities

  2. unknown liabilities

  3. strengthening financial position

  4. distribution of dividend
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

b"A provision is an amount set aside from a company's profit to cover an expected liability  or a decrease in the value of an asset,even though the specific amount might be unknown. A provision  is not a form of saving: instead, it is a recognition of an upcoming liability."

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).

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.