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 among the following statements is not correct?

  1. In India, the accounting standards are issued by Accounting Standards Board under ICAI.

  2. Compliance with accounting standards is the duty of Auditor.

  3. Single entry system is a scientific method of accounting.

  4. Accounting standard 6 relates to depreciation accounting.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Correct Answer: Single entry system is a scientific method of accounting.

Multiple choice

Under the head Operating Expenses, printing and stationery include

  1. books, forms and stationery used by the bank

  2. other printing charges which are not incurred by way to publicity expenditure

  3. Both (1) and (2)

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

For banks, printing and stationery expenses include the cost of stationery items which are used daily in offices and the printed material for correspondence purposes. For example: business letter heads, business cards, envelopes etc.

Multiple choice

“The process of identifying, measuring and communicating economic information to permit informed judgments and decisions by the users of accounts” has been given by

  1. American Institute of Certified Public Accountants (AICPA)

  2. American Accounting Association

  3. Prof R. J. Chambers

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

The American Accounting Association defines accounting as “the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information.”

Multiple choice

Accounting standards are written policy documents issued by

  1. SEBI

  2. Body of Individuals

  3. FEMA

  4. Expert Accounting Body
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Accounting Standards are written policy documents issued by expert accounting body or by government or regulatory body covering the aspects of recognition, treatment, measurement, presentation and disclosure of accounting transaction and events in the financial statements.

Multiple choice

The disadvantage of accounting standards is that they

  1. facilitate the comparison of non-comparable accounts

  2. set the trend towards rigidity and eliminate flexibility

  3. override the law of the land

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

Accounting standards set the trend towards rigidity and eliminate flexibility which can prove a disadvantage sometimes. 

Multiple choice

Accounting Standards (ASs) provide

  1. framework

  2. standard accounting policies

  3. Both (1) and (2)

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Accounting Standards provide an essential supporting structure and standard accounting policies. So, both the options are correct. 

Multiple choice

Cash book records

  1. only cash sales

  2. all types of cash receipts and payments

  3. only revenue receipts

  4. only capital receipts
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A cash book is a financial journal that contains all cash receipts and payments, including bank deposits and withdrawals.

Multiple choice

A ledger contains various ______________ in it.

  1. transactions

  2. entries

  3. accounts

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

A ledger holds account information that is needed to prepare financial statements, and includes accounts for assets, liabilities, owners' equity, revenues and expenses.

Multiple choice

A journal is also known as

  1. memorandum account

  2. kaccha book

  3. book of original entry

  4. proper book

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

A journal (daybook, book of original entry) is a place for recording transactions as they occur. Journal entries are the first step in the accounting cycle.

Multiple choice

Which of the following statements is/are true?

(i) Drawings account is a nominal account. (ii) Capital account is a real account. (iii) Sales account is a nominal account. (iv) Outstanding salaries account is a nominal account. (v) Patents account is a personal account.

  1. Only (i)

  2. Only (iii)

  3. Both (ii) and (iv)

  4. (ii), (iv) and (v)

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

Purchases and Sales can be treated as either nominal accounts or real accounts. GOLDEN RULE: "Debit all expenses and losses; Credit all incomes and gains."

Multiple choice

Nominal accounts are related to

  1. expenses, losses and incomes

  2. debtors and creditors

  3. assets and liabilities

  4. contingent liabilities
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Nominal accounts in accounting are the temporary accounts, such as the income statement accounts. In other words, nominal accounts are the accounts that report revenues, expenses, gains and losses.