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 commercial applications financial accounting and reporting balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations special issues associated with accounts of non-trading concerns accounting procedure for not-for-profit organisations prepration of income and expenditure account

Surplus revealed by income and expenditure account ___________________.

  1. is shown as deduction in accumulated fund at the balance sheet

  2. is transferred to an account called capital fund

  3. distrusted among the members of the non-profit organization

  4. must be donated to other non-profit organization.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
The following are the features of income and expenditure account:
It is prepared on an accrual basis.
It records all cash and non-cash expenses and incomes, which are revenue nature.
It is debited with the expenses and losses and credited with incomes and gains.
The closing balance of income and expenditure account either surplus or deficit is transferred to the capital fund in the balance sheet
Multiple choice commercial applications financial accounting and reporting balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations special issues associated with accounts of non-trading concerns accounting procedure for not-for-profit organisations prepration of income and expenditure account

The balance sheet of a non-profit organization such as a charitable hospital doesn't contain the _____________.

  1. Assets

  2. Building

  3. Debts

  4. Owner's equity
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When the balance sheet is prepared for any company set up to earn profit, the owner's equity is mentioned because it is funded by the owner to start the business.

Similarly, a non-profit organisation is not there for any kind of business and thus it doesn't require funds and hence, owner's equity is not mentioned while preparing balance sheet.

Multiple choice elements of accounts accounting for not-for-profit organisation balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations financial accounting and reporting

If a small amount is received as specific donation the __________.

  1. it is shown on the liabilities side of the balance sheet

  2. it is shown by way of deduction in capital fund in liability side of the balance sheet

  3. it is treated as income and credited to income and expenditure account

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

b"Donation received for specific purpose is capital receipt. Specific donation can't be used for any other purpose than the purpose for which it is given. It creates a liability for Not for Profit Organisation. That's why It is shown on the liabilities side of the balance sheet. "

Multiple choice elements of accounts accounting for not-for-profit organisation balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations financial accounting and reporting

Outstanding subscription for a non-profit organization is considered as a/an ____________.

  1. Expenses

  2. Liability

  3. Equity

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

Subscription is a annual charge paid by the members of the organisation to receive or avail service or information. It is an income for the organisation and if income is outstanding or say yet to be received it will be an asset for the company hence, will be shown under the head current assets.

Multiple choice book keeping and accountancy admission of a new partner accounting treatment of admission of a partner partnership accounts: admission of a new partner reconstitution of partnership

If, at the time of admission, some profit and loss account balance appears in the books, it will be transferred to _______________.

  1. Profit and Loss Adjustment Account

  2. All partners' Capital Account

  3. Old partner's Capital Account

  4. Revaluation Account
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Accumulated profits or losses existing in the books at the time of admission belong to the old partners. Therefore, these balances are transferred to the old partners' capital accounts in their old profit sharing ratio.

Multiple choice book keeping and accountancy accounts of 'not for profit' concerns prepration of income and expenditure account accounting treatment for npo's special issues associated with accounts of non-trading concerns receipts and payments receipts and payments account financial accounting and reporting accounting procedure for not-for-profit organisations balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations prepration of income and expenditure account and balance sheet

Income and Expenditure account is ______ to account like Profit and Loss account.

  1. real

  2. personal

  3. nominal

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

Income and Expenditure account is prepared by non-trading concern to reveal the surplus or deficit arising out of the operating activities during the accounting period. It is one of the final accounts of non-trading concern like the profit and loss account of the trading concern,

Multiple choice book keeping and accountancy accounts of 'not for profit' concerns prepration of income and expenditure account accounting treatment for npo's special issues associated with accounts of non-trading concerns receipts and payments receipts and payments account financial accounting and reporting accounting procedure for not-for-profit organisations balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations prepration of income and expenditure account and balance sheet

In Income and Expenditure account all Expenditure are recorded on ______________.

  1. Debit side

  2. Credit side

  3. Income side

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

In income and Expenditure account all expenditure are recorded on the debit side whereas all incomes are recorded on credit side of Income and Expenditure account.

Multiple choice book keeping and accountancy accounts of 'not for profit' concerns prepration of income and expenditure account accounting treatment for npo's special issues associated with accounts of non-trading concerns receipts and payments receipts and payments account financial accounting and reporting accounting procedure for not-for-profit organisations balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations prepration of income and expenditure account and balance sheet

Non-trading institutions prepare ___________.

  1. profit and loss account

  2. trading account

  3. manufacturing account

  4. income and expenditure account
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Non trading organizations like professionals i.e doctors, chartered accountants, lawyers are preparing the income and expenditure account.

Multiple choice book keeping and accountancy accounts of 'not for profit' concerns prepration of income and expenditure account accounting treatment for npo's special issues associated with accounts of non-trading concerns receipts and payments receipts and payments account financial accounting and reporting accounting procedure for not-for-profit organisations balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations prepration of income and expenditure account and balance sheet

The revenue receipts are to be shown on ______side.

  1. credit side of income & expenditure

  2. debit side of income & expenditure

  3. asset side of balance sheet

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

Receipts may be classified as revenue receipts and capital receipts. 

Receipts which are received in the normal course of business are treated as revenue receipts.
Receipts which are received with a specific object is considered as capital receipts.
Revenue receipts are credited to income account and shown in the credit side of  Income & Expenditure account.


Multiple choice book keeping and accountancy accounts of 'not for profit' concerns prepration of income and expenditure account accounting treatment for npo's special issues associated with accounts of non-trading concerns receipts and payments receipts and payments account financial accounting and reporting accounting procedure for not-for-profit organisations balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations prepration of income and expenditure account and balance sheet

Income and Expenditure Account belongs to ______ account.

  1. Real account

  2. Personal account

  3. Nominal accounts

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

Every business have to make its financial statement at the end of every year which includes profit & loss account and balance sheet.


All expenses and Income accounts are transferred to profit & loss account/ Income & Expenditure account to know the Profit & Loss of the business.

All expense and Income accounts are classified as nominal accounts hence Income and Expenditure account belongs to nominal account.

Multiple choice book keeping and accountancy accounts of 'not for profit' concerns prepration of income and expenditure account accounting treatment for npo's special issues associated with accounts of non-trading concerns receipts and payments receipts and payments account financial accounting and reporting accounting procedure for not-for-profit organisations balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations prepration of income and expenditure account and balance sheet

Income and Expenditure accounts shows a balance of ________________.

  1. Surplus or Deficit

  2. Cash in hand at the end

  3. Net Profit/Loss

  4. Capital Fund
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Income and expenditure account is prepared by a non-trading concern to reveal the surplus or deficit arising out of the operating activities during the accounting period.

Multiple choice book keeping and accountancy accounts of 'not for profit' concerns prepration of income and expenditure account accounting treatment for npo's special issues associated with accounts of non-trading concerns receipts and payments receipts and payments account financial accounting and reporting accounting procedure for not-for-profit organisations balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations prepration of income and expenditure account and balance sheet

Income and Expenditure account is ________ by balance sheet whereas Receipt and Payment account is __________by balance sheet

  1. not accompanied, not accompanied

  2. accompanied, not accompanied

  3. not accompained, accompanied

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

Receipt and Payment is summarized statement of cash transactions during an accounting year hence it is not accompanied by balance sheet. The account through which surplus or deficit of a non-profit-seeking concern is ascertained is called Income and Expenditure account.

Multiple choice book keeping and accountancy accounts of 'not for profit' concerns prepration of income and expenditure account accounting treatment for npo's special issues associated with accounts of non-trading concerns receipts and payments receipts and payments account financial accounting and reporting accounting procedure for not-for-profit organisations balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations prepration of income and expenditure account and balance sheet

The balance of Income and Expenditure account represents:

  1. The balance of cash on that date.

  2. The total cash receipts during the period.

  3. The total cash payments during the period.

  4. The excess of expenditure over income and vice-versa.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Income and expenditure is a nominal account, It is similar to profit and loss account. It either represents deficit or surplus at the end of the year. Therefore, it either shows surplus that is excess of income over expenditure or deficit which is excess of expenditure over income.

Multiple choice book keeping and accountancy accounts of 'not for profit' concerns prepration of income and expenditure account accounting treatment for npo's special issues associated with accounts of non-trading concerns receipts and payments receipts and payments account financial accounting and reporting accounting procedure for not-for-profit organisations balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations prepration of income and expenditure account and balance sheet

Income & Expenditure A/c is prepared by transfer of :
(I) Nominal accounts
(II) Real accounts
(III) Personal accounts
The correct answer is ___________________.

  1. (II) and (III) only

  2. (I) and (II) only

  3. All (I), (II) and (III)

  4. (I) only
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Option D is correct. Nominal account is related to expenses or losses and incomes or gains. Income and Expenditure account is an account prepared by non trading concerns to ascertain surplus or deficit of income over expenditure for a particular period. So Income and Expenditure account is a Nominal account.

Multiple choice book keeping and accountancy accounts of 'not for profit' concerns prepration of income and expenditure account accounting treatment for npo's special issues associated with accounts of non-trading concerns receipts and payments receipts and payments account financial accounting and reporting accounting procedure for not-for-profit organisations balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations prepration of income and expenditure account and balance sheet

Specific donations received will appear on ____________.

  1. Debit side of Receipt & Payment A/c

  2. Asset side of the Balance Sheet

  3. Debit side of Income & Expenditure A/c

  4. Liabilities side of the Balance Sheet
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Specific donations are the amount received by organisaton as funding. The amount is not received for any work and hence has to be considered as a liability and to be recorded under liabilities head in the balance sheet.