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

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

In balance of payment accounts, all goods exported and imported are recorded in _____.

  1. Capital Account

  2. Visible Account

  3. Invisihic Account

  4. Merchandise Account
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In Balance of Payments accounting, all visible (tangible) goods traded internationally - exports and imports of physical merchandise - are recorded in the Visible Account, also called the Merchandise Account or Current Account - Trade Balance. The Capital Account records financial capital flows, while the Invisible Account records services, transfers, and other intangible transactions.

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.

Multiple choice

'Sans Frais' words are added at the end of the endorsement to indicate that

  1. no expenses should be incurred on account of the bill

  2. expenses should be incurred on account bill

  3. expenses should be incurred on account of the bill only to the extent of 5% of the bill amount

  4. expenses should be incurred on account of the bill only to the extent of 10% of the bill amount
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Where the endorser does not want the endorsee or any subsequent holder to incur any expense on his account on the instrument, the endorsement is ‘sans frais’.

Multiple choice

What is the nature of goodwill account?

  1. It is a revenue expenditure.

  2. It is a current asset.

  3. It is a liability.

  4. It is a fixed asset.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Goodwill is an intangible fixed asset. So, this is the correct answer.