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

Cost accountancy is the science, art and _____ of cost accountant.

  1. profession

  2. management

  3. administration

  4. practice

  5. all of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Cost accountancy is defined as the application of costing and cost accounting principles, methods, and techniques to the science, art, and practice of cost control and the ascertainment of profitability.

Multiple choice

Stores ledger is maintained in the _____ department.

  1. cost accounting

  2. stores

  3. purchase

  4. production

  5. none of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The stores ledger is a formal accounting record maintained by the cost accounting department. It tracks both the quantity and the monetary value of the materials.

Multiple choice

Compulsory regulatory audits have revealed that PhoneTel, a mobile services provider, has erred in generating the bills it presents to its customers. But PhoneTel’s chairman asserted that the profits of his company would not be affected by a revision of its customers’ billing statements, since just as many customers had been overcharged as undercharged.

Which of the following is a reasoning error that the chairman makes in concluding that correcting the customers’ billing statements would leave Phone Tel’s profits unaffected?

  1. Depending on the standing of Phone Tel as a trusted name in the mobile services domain to retain the company’s customers after its billing error becomes widely known.

  2. Inability to establish that Phone Ttel imposes on all its customers the same charges for similar services.

  3. Ignoring the chance that the amount by which Phone Tel’s customers had been overcharged might be greater than the amount by which they had been undercharged.

  4. Hoping that the customers who had been overcharged by Phone Tel had not noticed the error in their billing statements.

  5. Assuming that each one of Phone Tel’s customers had either been overcharged or undercharged in the billing error.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The chairman asserts that the profits of his company would not be affected as the number of customers overcharged equals the number of customers undercharged. But what he fails to see clearly is the fact that the quantum of overcharging or undercharging might not be same something stated clearly in option (3). Hence (3)

Multiple choice

Source documents

  1. are statements of equality between debit and credit.

  2. refer to a special journal in which the the credit sales are recorded.

  3. refer to a book in which cash receipts and payments are recorded.

  4. are basis and evidence of a business transaction recorded in the accounts book.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Source documents are the basis for recording a transaction in a books of account, which is a proof that a transaction has taken place. For ex- vouchers, invoices, cash memos etc.

Multiple choice

Folioing in accounts is used for

  1. maintaining the accounts correctly

  2. ready reference

  3. tallying the balance of cash book with the pass book

  4. none of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Folioing is used for ready reference. It is for seeing the ledger page in the ledger folio column and the page of the journal in the journal folio column of ledger, so that we can see the transaction recorded quickly.

Multiple choice

Special purpose books are meant for

  1. making the correct entry

  2. saving time and efforts

  3. making the trial balance

  4. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Special purpose books are meant for direct posting into the ledger, rather than to prepare the journal first. For ex- cash book, purchase, sales etc are maintained to record the transactions directly into them. This saves a lot of time and efforts and each entry is also recorded separately.

Multiple choice

A suspense account is created when

  1. profit and loss account is not correct

  2. the trial balance does not tally

  3. bank reconciliation statement

  4. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

It takes time to locate the errors, so in order to prepare the final accounts in time 'suspense account' is put in the trial balance, temporarily. When all the errors are rectified, suspense account is closed automatically.