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

When a balance sheet does not tally the experienced accounts put the difference in suspense account.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Explanation: When a Balance sheet does not tally, the accountant makes all out efforts to locate the errors and correct the same. If the difference could not be located after all the efforts are made, then the accountant takes permission of the decision making authority and transfers the difference to the suspense account which has to be wiped by locating the difference or as a business loss.

Multiple choice

The profit & loss account is also known as “Income Statement”, “Statement of Earnings”, or “Statement of Operations”.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Explanation: These are different names, Income and expenditure is used in non-profit organizations ( or non-trading organisations). The net income or profit is shown in this account. Hence the name is Income statement. The account reflects the company's operations and hence the phrase “statement of operations”

Multiple choice

All direct and indirect expenditures are charged to the P & L account.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Explanation: All direct expenses are debited to the Trading or manufacturing account. All indirect expenses are debited to the P & L Account. (here direct expenses means the expenditure directly connected with the purchase or manufacture of the goods like carriage inwards, Fuel, etc)

Multiple choice

Contingent liabilities are to be shown inside the balance sheet.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Explanation: Balance Sheet show the true and fair view of the statement of liabilities and assets as on a given date. Any liability which may arise on the happening of an event or contingent upon something is not a liability on that date. Hence the contingent liability is not to be shown inside the balance sheet.

Multiple choice

Financial accounting does not recognize non-financial parameters implying that the qualitative aspects are also converted to a financial indicator.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Explanation: Financial accounting measures only quantitative (monetary) terms. Qualitative terms like quality of employees, honesty of the employees cannot be depicted by the financial accounting. However, HR accounting has been the practice among leading companies where HR are considered as Assets.

Multiple choice

Balance sheet is also a ledger account.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Explanation: Balance sheet is a statement of account as on a particular date (it is a position as on a given date). A Ledger account shows transactions over a period of time.

Multiple choice

The Balance of Payments statement is divided into two major accounts. They are

  1. Saving Account and Current Account

  2. Recurring Deposit Account and Current Account

  3. Current Account and Capital Account

  4. Saving Account and Recurring Deposit Account
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Balance of Payments (BoP) is divided into Current Account and Capital Account. The Current Account records trade in goods/services and income flows, while the Capital Account records capital transfers and investments. It is not about bank savings or recurring deposits.