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

What is the Federal Reserve's balance sheet?

  1. A statement of the Federal Reserve's assets and liabilities

  2. A statement of the Federal Reserve's income and expenses

  3. A statement of the Federal Reserve's cash flow

  4. A statement of the Federal Reserve's net worth
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Federal Reserve's balance sheet is a statement of the Federal Reserve's assets and liabilities.

Multiple choice

Which of the following is an example of a control activity related to accounts payable?

  1. Matching invoices to purchase orders and receiving reports

  2. Investigating and approving all vendor invoices

  3. Periodic review of accounts payable balances

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

Matching invoices to purchase orders and receiving reports, investigating and approving all vendor invoices, and periodic review of accounts payable balances are all examples of control activities related to accounts payable.

Multiple choice

Which of the following is an example of a control activity related to payroll?

  1. Review of time cards and payroll records

  2. Authorization of all payroll disbursements

  3. Reconciliation of payroll expenses to the general ledger

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

Review of time cards and payroll records, authorization of all payroll disbursements, and reconciliation of payroll expenses to the general ledger are all examples of control activities related to payroll.

Multiple choice

What is the purpose of a balance sheet in financial accounting?

  1. To show the company's financial position at a specific point in time

  2. To record the company's revenues and expenses over a period of time

  3. To calculate the company's profit or loss for a period of time

  4. To project the company's future financial performance
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A balance sheet provides a snapshot of a company's financial position at a specific point in time.

Multiple choice

Which of the following is a type of financial statement that summarizes a company's financial performance over a period of time?

  1. Income statement

  2. Balance sheet

  3. Cash flow statement

  4. Statement of retained earnings
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

An income statement summarizes a company's financial performance over a period of time.

Multiple choice

What is the duty to account?

  1. The duty to act in the best interests of the beneficiaries

  2. The duty to avoid conflicts of interest

  3. The duty to comply with the terms of the trust document

  4. The duty to provide the beneficiaries with information about the trust
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The duty to account is the duty of a trustee to provide the beneficiaries with information about the trust. This includes information about the trust assets, the trust income, and the trust expenses. The trustee must also provide the beneficiaries with an accounting of the trust assets and the trust income and expenses.

Multiple choice

Which of the following is not a financial statement?

  1. Balance sheet

  2. Income statement

  3. Statement of cash flows

  4. Statement of retained earnings
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The statement of retained earnings is not a financial statement. It is a statement that shows the changes in a company's retained earnings over a period of time.

Multiple choice

What is the purpose of the income statement?

  1. To show the company's profits and losses over a period of time

  2. To show the company's assets and liabilities at a specific point in time

  3. To show the company's cash flows over a period of time

  4. To show the company's retained earnings over a period of time
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The purpose of the income statement is to show the company's profits and losses over a period of time.

Multiple choice

What is the purpose of the statement of cash flows?

  1. To show the company's profits and losses over a period of time

  2. To show the company's assets and liabilities at a specific point in time

  3. To show the company's cash flows over a period of time

  4. To show the company's retained earnings over a period of time
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The purpose of the statement of cash flows is to show the company's cash flows over a period of time.

Multiple choice

The balance of payments is a record of a country's:

  1. Imports and exports of goods and services

  2. Receipts and payments of investment income

  3. Transfers of money between individuals and businesses

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

The balance of payments is a record of all economic transactions between a country and the rest of the world.

Multiple choice

When is TCS collected?

  1. At the time of payment

  2. At the time of credit

  3. At the time of both payment and credit

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

TCS is collected at the time of payment.

Multiple choice

Which of the following is NOT a component of the Capital Account in the Balance of Payments?

  1. Foreign Direct Investment (FDI)

  2. Portfolio Investment

  3. Official Reserve Transactions

  4. Current Account Balance
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Current Account Balance is not a component of the Capital Account. It is a separate section of the Balance of Payments that records transactions related to goods, services, and income.

Multiple choice

What is the relationship between the Capital Account and the Current Account in the Balance of Payments?

  1. They are always in equilibrium.

  2. They are always in deficit.

  3. They are always in surplus.

  4. They can be in equilibrium, deficit, or surplus, depending on the economic conditions.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The relationship between the Capital Account and the Current Account can vary depending on the economic conditions. When there is a trade deficit, the Current Account is in deficit, and the Capital Account is typically in surplus to finance the deficit. Conversely, when there is a trade surplus, the Current Account is in surplus, and the Capital Account is typically in deficit.

Multiple choice

What is the Current Account?

  1. A record of all economic transactions between residents of a country and residents of other countries.

  2. A record of all financial transactions between residents of a country and residents of other countries.

  3. A record of all trade transactions between residents of a country and residents of other countries.

  4. A record of all investment transactions between residents of a country and residents of other countries.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Current Account is a record of all economic transactions between residents of a country and residents of other countries. It includes trade in goods and services, investment income, and current transfers.

Multiple choice

What are the components of the Current Account?

  1. Trade in goods, trade in services, investment income, and current transfers.

  2. Trade in goods, trade in services, and investment income.

  3. Trade in goods, trade in services, and current transfers.

  4. Trade in goods and investment income.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The components of the Current Account are trade in goods, trade in services, investment income, and current transfers.