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

Under which of the following, goods issued for the production represent the current market value?

  1. FIFO

  2. LIFO

  3. Average price

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

As goods purchased in the last are issued first in LIFO method, thus issues represent the current prices. In FIFO method, goods purchased first are issued first and thus issue represents historic price while stock in hand is valued at current prices. In average method, average price is the basis of issue while in weighted average method, weights are also considered.

Multiple choice

If the revaluation reveals the overvaluation of a liability existing in the books, the entry will be to

  1. credit the liability and debit the revaluation account

  2. debit the liability and credit the revaluation account

  3. credit the liability and debit the partner capital account

  4. credit the liability and debit the profit and loss account
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The liability should be debited and revaluation should be credited because it is a profit.

Multiple choice

The debit balance of profit and loss account should be

  1. debited to old and new partners in the profit sharing ratio

  2. debited to new partner only

  3. credited to old partners in old profit sharing ratio

  4. debited to old partners in the old profit sharing ratio
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The P and L account should be debited to old partners in old ratio. 

Multiple choice

If the revaluation reveals the overvaluation of a liability existing in the books, the entry will be to

  1. credit the liability and debit the revaluation account

  2. debit the liability and credit the revaluation account

  3. credit the liability and debit the partner capital account

  4. credit the liability and debit the profit and loss account
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The liability should be debited and revaluation should be credited because it is a profit.

Multiple choice

Which category of accounts is Rotary Club classified under?

  1. Real account

  2. Natural personal account

  3. Representative personal account

  4. Artificial personal account
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Any non trading organisations, companies, government organisations are all examples of artificial personal accounts. Real accounts are concerned with tangible/intangible items such as furniture, machinery, goodwill etc. Natural personal accounts are Madhav's, Divesh's and Radha's account etc. Representative personal accounts include outstanding expenses, capital account etc.

Multiple choice

The journal entry with two or more debits or credits is known as 

  1. rectified entry

  2. opening entry

  3. closing entry

  4. compound entry
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The entry with two or more debits/credits is a compound entry. Opening entry is one which is passed to carry forward the previous year's balances to current year. Closing entry is one which is passed to carry forward the current year's balances to next year. Rectified entry is meant for making rectification of the errors made in account books.

Multiple choice

Which of the following accounts always shows debit balance?

  1. Real account

  2. Personal account

  3. Nominal account

  4. Natural personal account
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Real accounts such as machinery, furniture, cash always show debit balance. Personal accounts, Nominal accounts, Natural personal accounts may show both debit and credit balance.

Multiple choice

The rectification entries are recorded in

  1. invoice book

  2. journal proper

  3. subsidiary book

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

Adjustment, opening, closing and rectification entries are passed in journal proper. Invoice book is prepared for recording invoice sent/received. Subsidiary books are prepared to record entries of specific nature such as sales book, purchase book etc. Ledger is required for posting entries from journal.

Multiple choice

Sales book records

  1. cash sales of goods.

  2. credit sales of goods.

  3. both cash and credit sales of goods.

  4. credit sales of goods and assets.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Only credit sales of goods are recorded in sales book. Cash sales are recorded in cash book. Credit sales of assets are not recorded in sales book.