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

Which of the following is a legal compulsion?

  1. Management accounting

  2. Financial accounting

  3. Human resources accounting

  4. Social accounting
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

It is a legal compulsion as it is required to calculate profits or loss.

Multiple choice

The capital expenditure should be shown in the financial accounts in

  1. asset side of balance sheet

  2. liability side of balance sheet

  3. debit side of profit and loss account

  4. debit side of trading account
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

It is the correct option. These are the payments made for the purchase of items like machinery, furniture, building etc. and are thus an asset.

Multiple choice

The amount debited to purchase account consists of

  1. purchase of goods and assets

  2. purchase of goods on credit only

  3. purchase of goods for cash only

  4. purchase of goods on cash as well as on credit basis
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

It is the correct answer. Both types of purchases are debited to purchase account.

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.