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 is incorrect?

  1. Dr. the receiver, Cr. the giver

  2. Dr. what comes in, Cr. what goes out

  3. Dr all the income, Cr. all expenses/losses

  4. All the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The golden rules of accounting state that for nominal accounts, you must debit all expenses and losses and credit all incomes and gains. Option C is incorrect because it suggests the exact opposite: debiting income and crediting expenses.

Multiple choice

Process of recording in the ledger is known as

  1. recording

  2. posting

  3. journalising

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

Posting is the technical term for transferring the entries recorded in the journal to the specific accounts in the ledger. This process helps in summarizing all transactions related to a particular account in one place.

Multiple choice

Which of the following answers properly classifies these commonly used accounts?(1 ) Building (2) Machinery (3) Credit purchases (4) Drawings (5) Rent paid (6) Interest earned (7) Prepaid insurance charges (8)Discount allowed (9) Fresh capital introduced (10) Outstanding electricity charges

ASSETS LIABILITIES REVENUE EXPENSES CAPITAL (a) 5,4 3 8,7 1, 9 2,6,10 (b) 1,3,9 2,7 4,8 5 6,10 (c) 1,2,7 3,10 6 5,8 4,9 (d) 3,9 1,4,7 2 5,8 6,10

  1. (a)

  2. (b)

  3. (c)

  4. (d)
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Building, machinery, and prepaid insurance are assets. Credit purchases and outstanding charges are liabilities. Interest earned is revenue, rent and discounts are expenses, and drawings and fresh capital relate to the capital account. Option C correctly groups these items.

Multiple choice

The balance of payment comprises

  1. a current account of goods and services only

  2. a capital account of financial assets only

  3. official settlement accounts only

  4. all of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Balance of Payments (BoP) is a comprehensive record of all economic transactions between residents of a country and the rest of the world, including the current account, capital account, and financial account.

Multiple choice

Commission paid to a partner is shown in Profit and Loss Appropriation Account, but commission paid to manager is shown in Profit and Loss Account. What is the reason behind it?

  1. It is an Appropriation.

  2. Commission to manager is not compulsory.

  3. It is paid after the appropriations.

  4. It is a charge against the Profit.

  5. It is a Capital expenditure.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
  1. Commission payable to manager is a charge against the profit. It means commission will be paid whether there is profit or loss.
    1. In case of loss no commission (appropriation) will be given to partners.
       
Multiple choice

The current account of a partner __________________.

  1. will always show a debit balance

  2. will never show a debit balance

  3. will show a credit balance

  4. will never show a credit balance

  5. may have a debit or a credit balance
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

Current account can show a debit or a credit balance. Debit balance is shown on the assets side and credit balance is shown on the liabilities side of the balance sheet.

Multiple choice

What journal entry will take place when interest on a partner's loan is closed?

  1. Profit and Loss A/c Dr. To Interest on Partner's Loan A/c

  2. Interest on Partner's Loan A/c Dr. To Profit and Loss A/c

  3. Interest on Partner's Loan A/c Dr. To Partner's Loan A/c

  4. Partner's Loan A/c Dr. To Interest on Partner's Loan A/c

  5. Profit and Loss A/c Dr. To Partner's Loan A/c
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Yes, it is correct. When interest on partner's loan is closed, the journal entry will be - Profit and Loss A/c Dr. To Interest on Partner's Loan A/c.