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

Cash flow statement is based on

  1. cash basis of accounting

  2. accrual basis of accounting

  3. both cash basis and accrual basis of accounting

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

It is based on cash basis. In cash flow statement, only cash inflow and cash outflow are recorded. It is based on cash basis of accounting.

Multiple choice

Which of the following activities is clerical in nature?

  1. Book keeping

  2. Accounting

  3. Auditing

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

Book keeping refers to recording an entry in the books of accounts. It is clerical in nature. Accounting is summarising, analysing and interpreting the transactions recorded in the books. Auditing means verifying the accountancy records of an enterprise. Interpreting requires specialised skills and is not clerical in nature.

Multiple choice

Financial statements in India refer to

  1. cash flow statements only

  2. profit and loss account only

  3. balance sheet

  4. both profit and loss account, and balance sheet
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

'All of the above' option is true, as all are called financial staements of a company. 

Multiple choice

Which of the following statements is/are true?

(i) A parent AIFI presenting CFS shall consolidate all subsidiaries, domestic as well as foreign. (ii) The AIFIs shall not use the same format for CPRs purposes as their solo balance sheet. (iii) In addition to solo level financial statements, the AIFIs shall also prepare and disclose consolidated financial statements. (iv) The AIFIs need not to follow the guidance on specific issues with respect to certain accounting standards.

  1. (i)

  2. (ii)

  3. (i) and (iii)

  4. (ii) and (iv)
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Correct statements are

(i) A parent AIFI presenting CFS shall consolidate all subsidiaries, domestic as well as foreign

(ii) The AIFIs shall use the same format for CPRs purposes as their solo balance sheet prescribed under the respective Acts with appropriate modifications/notes.

(iii) In addition to solo level financial statements, the AIFIs shall also prepare and disclose consolidated financial statements.

(iv) The AIFIs shall follow the guidance on specific issues with respect to certain accounting standards.

Thus, only (i) and (iii) are correct.

Multiple choice

Receipt and payment account is ______ in nature.

  1. real account

  2. personal account

  3. representative personal account

  4. nominal account

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

Receipt and payment account is real account because the receipts are debited and payments are credited.

Multiple choice

The donations received by non-profit organisations for a specific purpose are

  1. revenue receipts and thus, shown on credit side of income and expenditure account

  2. revenue receipts and thus, shown on debit side of income and expenditure account

  3. capital receipts and thus, shown on credit side of income and expenditure account

  4. capital receipts and thus, shown on liabilities side of the balance sheet

  5. capital receipts and thus, shown on assets side of the balance sheet
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

It is correct. These are capital receipts and are shown on liabilities side.

Multiple choice

An annual affiliation fee of Rs. 25,000 has been paid by a club for the affiliation it made with an organisation. The fee was paid on 30th June, 2014. How will it be shown in the accounts of the club in the income statement and balance sheet for the year ending 31st March, 2015?

  1. Rs. 25,000 paid will be shown on the assets side of the balance sheet.

  2. Rs. 25,000 paid will be shown on the expenditure side of the income and expenditure account.

  3. Rs. 12,500 paid will be shown on the expenditure side of the income and expenditure account and Rs. 12,500 will be shown on the assets side of the balance sheet.

  4. Rs. 18,750 paid will be shown on the expenditure side of the income and expenditure account and Rs. 6250 will be shown on assets side of the balance sheet.

  5. Rs. 18,750 paid will be shown on the expenditure side of the income and expenditure account and Rs. 6250 will be shown on the liabilities side of the balance sheet.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The fees up till 31st March stands for 9 months, which is 25,000 * 9/12, i.e. Rs. 18,750 and the rest of Rs. 6250 paid in advance is an asset.

Multiple choice

_______ copies of balance sheet and profit and loss account, prepared by banks, are to be submitted to RBI within ______ months. Banking companies are also to submit three copies to

  1. 2 copies, 2 months, SEBI

  2. 3 copies, 3 months, SEBI

  3. 2 copies, 3 months, Registrar of Companies

  4. 3 copies, 4 months, Registrar of Companies
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Two copies of balance sheet and profit and loss account, prepared by banks, are to be submitted to RBI within three months. Banking companies are also to submit three copies to Company Law Board. Every miscellaneous non-banking company shall deliver to the Reserve Bank, unless it has done so already, an audited balance sheet as on the last date of each financial year and an audited profit and loss account in respect of that year as passed by the company in general meeting together with a copy of the report of the Board of Directors laid before the company in such meeting in terms of Section 217(1) of the Companies Act, 1956 (1 of 1956) within fifteen days of such meeting.

Multiple choice

Anticipated losses are recorded in the books of accounts as per

  1. Matching of cost & revenue

  2. Accrual concept

  3. Convention of conservatism

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

The Convention of Conservatism (or Prudence Concept) in accounting requires anticipating potential losses but not anticipating gains. This means creating provisions for doubtful debts, depreciating assets quickly, and valuing inventory at lower of cost or market. The matching concept relates to expense recognition, accrual to timing, and going concern assumes business continuity.