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

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.

Multiple choice

Capital expenditures are shown on

  1. debit side of profit and loss account

  2. credit side of profit and loss account

  3. assets side of balance sheet

  4. liabilities side of balance sheet
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Capital expenditures are made on assets. So, they are shown accordingly in balance sheet. Revenue expenses are shown on the debit side and revenue income on the credit side of profit and loss account. Capital receipts are shown on the liabilities side of balance sheet.

Multiple choice

The deferred revenue expenses are shown on

  1. debit side of profit and loss account.

  2. credit side of profit and loss account.

  3. assets side of balance sheet.

  4. liabilities side of balance sheet.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

These are shown under the heading 'miscellaneous expenditure.' Revenue expenses are shown on debit side and revenue income on credit side of profit and loss account. Capital receipts are shown on the liabilities side of balance sheet.

Multiple choice

Which of the following is a revenue receipt?        

  1. Cash received from the sale of assets.

  2. Loan taken from a bank.

  3. Cash received from the sale of scrap.

  4. Issue of shares/debentures.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Revenue receipts are the receipts from the operating activities. All others are capital receipts.

Multiple choice

An entry of revenue nature is posted as capital item. It is an example of

  1. error of omission

  2. error of commission

  3. error of principle

  4. compensating error
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The entries made in contravention of accounting principles are errors of principle. Error of omission refers to complete/partial omission of transaction from the books of account. When an entry is posted with wrong amount or on wrong side, it is error of commission. Compensating errors are those which compensate the effect of another error.

Multiple choice

Which of the following is/are not true?

  1. Suspense account is a temporary account.

  2. It is placed on the side of trial balance having short balance.

  3. It is tallied when the errors are rectified.

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

All of above are the features of suspense account.

Multiple choice

Which of the following is/are the reason of difference in trial balance?

  1. Error of omission

  2. Error of principle

  3. Compensating error

  4. Error of commission
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Error of commission affects the trial balance . Error of principle and omission , and compensatory errors does not affect the trial balance but error of commission does. Error of commission means putting wrong entry with wrong amount or in wrong account which adversly affects the balances of trial balances. 

Multiple choice

Consignment is a __________ account.

  1. real

  2. personal

  3. nominal

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

Consignment account is debited with all expenses and credited with revenues. Thus it is a nominal account. Consignee is a personal account.

Multiple choice

The venturer records the transactions of his own only, when

  1. separate sets of books are maintained

  2. books are maintained by one of the venturers

  3. books are maintained by all the venturers

  4. memorandum venture account is prepared
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When the venturer records his own transaction only, memorandum account is prepared. When separate set of books are maintained, only one set is maintained separately. In some cases, any one venturer maintains the whole books and in others, the books are maintained by each venturer.

Multiple choice

Which of the following is true about B.R.S.?

  1. It is a part of financial statements.

  2. It is prepared by the bank.

  3. It is prepared by the account holder (business).

  4. It is never required at all.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

(A)       Financial statements are final accounts and balance sheet. (B)       B.R.S. is not required by the bank. (C)       B.R.S. is prepared by the business. (D)       BRS is required to ensure the accuracy and detection of frauds, if any.

Multiple choice

Photograph of the introducer is necessary to open an account.

  1. True

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

While 'introduction' was a traditional requirement, modern KYC (Know Your Customer) norms rely on officially valid documents (OVDs) for identity and address proof, not necessarily a photograph of an introducer.