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

According to which concept are shareholders treated as creditors, for the amount they paid on shares, of which they are subscribed to?

  1. Cost concept

  2. Duality concept

  3. Business Entity concept

  4. Going Concern Concept

  5. Since shareholders are owner of the business they cannot be treated as creditors of the business
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Under Business Entity concept shareholders are treated as creditors of the business. It is also known as separate entity concept.

Multiple choice

Current ratio is a ratio!

  1. Trading account

  2. P&L Account

  3. Profitability

  4. Balance sheet

  5. None of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Current Ratio is calculated by dividing currentLiabilities by Current Assets on the Balance Sheet

Multiple choice

Which of the following is an important reason for studying accounting?

Directions: Read the following passage and answer the given question.

Accounting is the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by the users of the information, It primarily focusses on measurement, analysis, interpretation and use of information, As an information system, accounting links an information source, a channel of communication and set of receivers. Accounting system should be designed to classify financial information on a basis suitable for decision-making purposes and to process the tremendous quantities of data efficiently and accurately. Financial accounting is concerned with providing information to external users and it is oriented towards the preparation of final statements which summarises the results of operations for selected periods of time and show the financial position of business at particular date. Management accounting is concerned with providing information to managers to carry out their responsibilities and functions such as planning, execution, control and decision- making. The end product of the financial accounting process is a set of reports called financial statement, such as, profit and loss account, balance-sheet and statement of changes in financial position. Profit & loss account shows the results of operations for a period of time, balance-sheet shows financial position on certain date and statement of changes in financial position shows where the financial resources have come and where they have gone.

  1. The information provided by accounting is useful in making many economic decisions.

  2. Accounting plays an important role in Society.

  3. The study of accounting could lead to a challenging career.

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

Accounting information directly supports economic decision-making by providing financial data for analysis. The accounting profession serves a crucial social function by ensuring transparent financial reporting. Studying accounting opens pathways to diverse challenging careers in auditing, taxation, financial analysis, and management. All three statements represent valid, significant reasons for studying accounting.

Multiple choice

The Balance sheet of a business reveals ____

  1. Financial position of a business on a particular day

  2. Financial position of the business for a particular period

  3. Both of the above

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

A Balance Sheet is a POSITION statement showing the financial position of a business ON A PARTICULAR DAY (usually the year-end). It is not a flow statement - Profit & Loss Account shows position 'for a period'. Key distinction: Balance Sheet = snapshot (point of time), P&L = video (period of time).

Multiple choice

Which of the following is not an Accounting concept?

  1. Matching concept

  2. Dual Aspect concept

  3. True and Fair concept

  4. Going concern concept
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The question asks which is NOT an accounting concept. 'True and Fair' is a presentation standard or requirement for financial statements, not a fundamental accounting concept. The others (Matching, Dual Aspect, Going Concern) are core accounting principles/concepts. So True and Fair is the correct answer because it's not a concept.

Multiple choice

Statement of changes in financial position shows:

Directions: Read the following passage and answer the given question.

Accounting is the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by the users of the information, It primarily focusses on measurement, analysis, interpretation and use of information, As an information system, accounting links an information source, a channel of communication and set of receivers. Accounting system should be designed to classify financial information on a basis suitable for decision-making purposes and to process the tremendous quantities of data efficiently and accurately. Financial accounting is concerned with providing information to external users and it is oriented towards the preparation of final statements which summarises the results of operations for selected periods of time and show the financial position of business at particular date. Management accounting is concerned with providing information to managers to carry out their responsibilities and functions such as planning, execution, control and decision- making. The end product of the financial accounting process is a set of reports called financial statement, such as, profit and loss account, balance-sheet and statement of changes in financial position. Profit & loss account shows the results of operations for a period of time, balance-sheet shows financial position on certain date and statement of changes in financial position shows where the financial resources have come and where they have gone.

  1. Sources and uses of funds

  2. Assets and Liabilities

  3. income and Expenses

  4. Losses and Gains
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The passage explicitly states that 'statement of changes in financial position shows where the financial resources have come and where they have gone.' This is a funds flow statement showing sources (inflows) and uses (outflows) of funds. It tracks changes in working capital and cash flows over a period.

Multiple choice

Accounting concepts are based on

  1. Certain assumptions

  2. Certain facts and figures

  3. Certain accounting records

  4. Government guidelines
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Accounting concepts are built on fundamental assumptions like business entity, going concern, money measurement, and accounting period. These basic assumptions provide the foundation for consistent financial recording and reporting.

Multiple choice

The balance-sheet is related to the income statement in the same way that:

Directions: Read the following passage and answer the given question.

Accounting is the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by the users of the information, It primarily focusses on measurement, analysis, interpretation and use of information, As an information system, accounting links an information source, a channel of communication and set of receivers. Accounting system should be designed to classify financial information on a basis suitable for decision-making purposes and to process the tremendous quantities of data efficiently and accurately. Financial accounting is concerned with providing information to external users and it is oriented towards the preparation of final statements which summarises the results of operations for selected periods of time and show the financial position of business at particular date. Management accounting is concerned with providing information to managers to carry out their responsibilities and functions such as planning, execution, control and decision- making. The end product of the financial accounting process is a set of reports called financial statement, such as, profit and loss account, balance-sheet and statement of changes in financial position. Profit & loss account shows the results of operations for a period of time, balance-sheet shows financial position on certain date and statement of changes in financial position shows where the financial resources have come and where they have gone.

  1. A point in time is related to a period of time

  2. A period of time is related to a point in time

  3. A point in time is related to another point

  4. A period of time period of time is related to another
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

As stated in the passage, the balance-sheet shows financial position at a particular date (point in time), while the profit & loss account shows results of operations for a period of time. Therefore, a balance-sheet (point in time) is related to an income statement (period of time).

Multiple choice

The properties own by a business enterprise are called:

Directions: Read the following passage and answer the given question.

Accounting is the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by the users of the information, It primarily focusses on measurement, analysis, interpretation and use of information, As an information system, accounting links an information source, a channel of communication and set of receivers. Accounting system should be designed to classify financial information on a basis suitable for decision-making purposes and to process the tremendous quantities of data efficiently and accurately. Financial accounting is concerned with providing information to external users and it is oriented towards the preparation of final statements which summarises the results of operations for selected periods of time and show the financial position of business at particular date. Management accounting is concerned with providing information to managers to carry out their responsibilities and functions such as planning, execution, control and decision- making. The end product of the financial accounting process is a set of reports called financial statement, such as, profit and loss account, balance-sheet and statement of changes in financial position. Profit & loss account shows the results of operations for a period of time, balance-sheet shows financial position on certain date and statement of changes in financial position shows where the financial resources have come and where they have gone.

  1. Assets

  2. Liabilities

  3. Capital

  4. Owner's Equity
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Assets are economic resources owned by a business enterprise that have future economic value. The passage defines balance-sheet as showing financial position, which includes assets, liabilities, and equity. Properties owned by the business are its assets.