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

Which of the following is an operating revenue?

  1. Sale of merchandise

  2. Sale of old machinery

  3. Interest income on investments

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

Operating revenue is generated from the primary business activities. For a business, selling its merchandise is the core activity, whereas selling old machinery or receiving interest/dividends are non-operating activities.

Multiple choice

Which of the following are current liabilities?

  1. Outstanding wages

  2. Redeemable preference share

  3. Share premium

  4. Provision for depreciation on machinery
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Outstanding wages represent an obligation that must be paid within the short term, making it a current liability. Share premium is part of equity, and provision for depreciation is a contra-asset.

Multiple choice

Which of the following is a non-operating income?

  1. Profit on sale of used plant in manufacturing company

  2. Revenue from sales in a trading concern

  3. Dividends received by an investment company

  4. Premium received by an insurance company
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Non-operating income is derived from activities outside the core business. Profit from the sale of a used plant is incidental and not part of the manufacturing company's primary operations.

Multiple choice

Good will is a

  1. washing asset

  2. intangible asset

  3. fictitious asset

  4. current asset
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Goodwill is an intangible asset because it represents the reputation and brand value of a business, which cannot be physically touched or seen. It is recorded on the balance sheet when a company is acquired.

Multiple choice

Which of the following items would not appear in a company's balance sheet?

  1. Total issued capital

  2. Cash held at the bank

  3. Value of raw material stock

  4. Revenue from sales
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Revenue from sales is an income statement item representing the total amount of money brought in by company operations over a period, rather than a balance sheet item which records assets, liabilities, and equity at a specific point in time.

Multiple choice

Directions: Choose the correct option and complete the sentence.

______ represents diminution in the ownership equity other than from withdrawal of capital for which no compensating value has been received.

  1. Expense

  2. Cost

  3. Loss

  4. Profit

  5. Income
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A loss is a decrease in ownership equity that arises from peripheral or incidental transactions, or from other events and circumstances affecting the entity, for which no compensating value is received.

Multiple choice

Current assets should be ______ .

  1. twice the current liability

  2. equal to current liability

  3. less than current liability

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

If the current assets are twice the current liability, it indicates that the company is in a sound financial position and can easily pay it's debts.

Multiple choice

Fixed Assets to Net Worth ratio is calculated as

  1. Fixed Assets / Net Worth

  2. Net Worth / Fixed Assets

  3. Current Assets / Net Worth

  4. Current Assets / Fixed Assets
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Right answer.  Because We can find fixed assets to net worth only by using this method.

Multiple choice

Balance Sheet is used to analyse

  1. Fixed Assets

  2. Current Assets

  3. Current assets and Fixed assets

  4. Overall financial position for a fixed period at a given point of time
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Right answer the Balance Sheet shows the  position of all financial aspects at a given point in time.

Multiple choice

Accounting is used in a company

  1. to record financial activity

  2. to keep creditor records only

  3. to keep debtors records only

  4. to keep cash records only

Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Right answer because Accounting is used to record all financial activities and it is the basic concept of accounting. 

Multiple choice

Sale Ratio is calculated as

  1. Sale to Current Assets = Sales : Fixed Assets.

  2. Sale to Fixed Assets = Sale : Fixed Assets.

  3. Sale to Liquid Assets = Sale : Fixed Assets.

  4. Sale to Fixed Assets = Sale : Current Assets.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Right answer because we can measure it only by this method  and it plays an important part in financial analysis. 

Multiple choice

In the accounting system, B/S is also known as

  1. Broker Stock

  2. Best System

  3. Balance Sheet

  4. Before System
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Right answer because B/S is also very famous name for Balance Sheet and it is an important part of our financial statements.