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 studies finance and accounts meaning and functions of finance and accounts department nature, need and significance of business finance introduction to business capital/finance

Which of the following is the external user of financial statements?

  1. Manager of the business

  2. CEO of the business

  3. Creditor of the business

  4. Controller of the business
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

External users are those outside the organization who use financial statements to make decisions. Creditors use these statements to assess the creditworthiness of the business, unlike managers, CEOs, or controllers who are internal.

Multiple choice commercial applications financial accounting and reporting balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations accounting procedure for not-for-profit organisations prepration of income and expenditure account and balance sheet income and expenditure account prepration of income and expenditure account accounting treatment for npo's

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. is 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

b'Income and expenditure account can be defined as an account that reveals surplus or deficit of a non-trading concern by matching incomes and expenses of a specified accounting period. The balance of income and expenditure account is transferred to the balance sheet. Surplus balance is added to the capital fund in balance sheet. '

Multiple choice commercial applications financial accounting and reporting balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations accounting procedure for not-for-profit organisations prepration of income and expenditure account and balance sheet income and expenditure account prepration of income and expenditure account accounting treatment for npo's

Income and Expenditure Account is prepared on ____________.

  1. Cash basis

  2. Accrual basis

  3. Hybrid basis

  4. Either (A) or (B)
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Income and expenditure account is prepared on Accrual basis. Accrual basis of accounting is wherein all the expenses that are actually incurred and incomes actually earned are recorded. Its recorded when its realised and not when received.

Multiple choice commercial applications financial accounting and reporting balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations accounting procedure for not-for-profit organisations prepration of income and expenditure account and balance sheet income and expenditure account prepration of income and expenditure account accounting treatment for npo's

Professional people like solicitors, doctors, company secretary, cost accountant, chartered accountants etc., prepare for themselves ___________ which is a modified form of Income & Expenditure A/c prepared by non-trading concerns. 

  1. Receipt & Expenditure A/c

  2. Income & Payment A/c

  3. Profit & Loss A/c

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

Income and Expenditure account prepared by non-trading concerns is very much like the profit and loss account prepared by trading concerns. Both accounts show the expenditure incurred and income earned during the year. In the end balance is calculated. In Income and Expenditure account balance is termed surplus or deficit and in Profit and loss account it is termed "Net Profit" or "Net Loss".

Multiple choice commercial applications financial accounting and reporting balance sheet, classification of assets and liabilities accounting records of not-for-profit organisations accounting procedure for not-for-profit organisations prepration of income and expenditure account and balance sheet income and expenditure account prepration of income and expenditure account accounting treatment for npo's

Income and Expenditure Account is equivalent to ____________.

  1. Profit and Loss Account

  2. Receipts and Payments Account

  3. Balance Sheet

  4. Receipts and Expenditure Account
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Income and Expenditure account prepared by non trading concerns is very much like the profit and loss account prepared by trading concerns. Both account shows the expenditure incurred and income earned during the year. In the end balance is calculated. In Income and Expenditure account balance is termed surplus or deficit and in Profit and loss account it is termed "Net Profit" or "Net Loss".

Multiple choice business organisation and correspondence functions of commerical banks other services and modern trends in banking sector types of banks diversified banking functions
_________ account is suitable for salaried people.

  1. Current

  2. Saving

  3. Over draft

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

Salary Account opened with a bank is a form of savings account. It is generally as 'Zero balance' account. It encourages savings among salaried people.

Current account is opened by business entities who have numerous transactions.
Overdraft is a facility given by the bank to the account-holders (basically current account holders).

Multiple choice commercial studies computerised accounting system accounting systems - manual and computerized difference between manual and computerised accounting meaning and importance of computerised accounting system

The preparation of financial statements pre-supposes the availability of trial balance in ________ system of accounting.

  1. computerised

  2. manual

  3. both manual and computerised

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

In a manual system of accounting, the preparation of financial statements pre-supposes the availability of trial balance. However, in computerised accounting, there is no such requirement.

Multiple choice commercial studies computerised accounting system accounting systems - manual and computerized difference between manual and computerised accounting meaning and importance of computerised accounting system

Transactions lead to data duplication in __________ accounting system.

  1. computerised

  2. manual

  3. both manual and computerised

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

In a manual accounting system, transactions recorded in the books of original entry are further classified by posting into ledger accounts. This results in transaction data duplicity. In computerised accounting, no such data duplication is made to cause classification of transactions.

Multiple choice commercial studies computerised accounting system accounting systems - manual and computerized difference between manual and computerised accounting meaning and importance of computerised accounting system

A computerised accounting system is an accounting information system that processes the ______ to produce reports as per user requirements.

  1. financial transactions and events

  2. cost transactions and events

  3. management transactions and events

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

A computerised accounting system is an accounting information system that processes the financial transactions and events as per Generally Accepted Accounting Principles (GAAP) to produce reports as per user requirements. Every accounting system, manual or computerised, has two aspects.

Multiple choice commercial studies computerised accounting system accounting systems - manual and computerized difference between manual and computerised accounting meaning and importance of computerised accounting system

In a manual accounting system, ___________ are made to adhere to the principle of cost matching revenue, whereas in computerised accounting system _________ are prepared and stored to follow the principle of cost matching revenue.

  1. adjusting entries, journal vouchers

  2. journal entries, journal vouchers

  3. adjusting entries, journal entries

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

In a manual accounting system Adjusting entries are recorded to match the expenses of the accounting period with the revenues generated by them.

In computerized accounting, Journal vouchers are prepared and stored to follow the principle of cost matching revenue.

Multiple choice elements of book keeping and accountancy accounting from incomplete records ascertaining profit or loss from incomplete records meaning and preparation of statement of profit meaning of incomplete records, reasons for incompleteness and its limitations preparation of final accounts from incomplete records preparation of statement of affairs introduction to single entry system and difference between single entry and double entry system meaning and featuresof incomplete records

Kumar and Shanu-entered into a joint venture to purchase and sell new year gifts. They agreed to share the profit and losses equally. Kumar purchased goods worth Rs. 1,00,000 and spent' Rs. 10,000 in sending the goods to Shanu. He also paid Rs. 5,000 for insurance. Shanu spent Rs. 10,000 as selling expenses and sold goods for 2,00,000. Remaining goods Were taken over by him at Rs. 5,000. What will be the amount to be remitted by Shanu to Kumar as final settlement?

  1. Rs. 1,55,000

  2. Rs. 1,50,000

  3. Rs. 1,15,000

  4. Rs. 80,000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Kumar's total investment: 1,00,000 + 10,000 + 5,000 = 1,15,000. Shanu's sales: 2,00,000 + 5,000 = 2,05,000. Total profit: 2,05,000 - 1,15,000 - 10,000 (Shanu's expenses) = 80,000. Profit share: 40,000 each. Shanu owes Kumar: 1,15,000 (Kumar's cost) + 40,000 (Kumar's profit) - 0 (Kumar's share of sales) = 1,55,000.

Multiple choice elements of book keeping and accountancy accounting from incomplete records ascertaining profit or loss from incomplete records meaning and preparation of statement of profit meaning of incomplete records, reasons for incompleteness and its limitations preparation of final accounts from incomplete records preparation of statement of affairs introduction to single entry system and difference between single entry and double entry system meaning and featuresof incomplete records

Profit under single entry system of Book Keeping means ______________.

  1. The difference between opening and closing cash balances and reduced by fresh capital introduced.

  2. The difference between opening net assets and closing net assets as increased by drawings and reduced by new capital introduced.

  3. Profit shown by Trading and Profit and Loss Account and Balance sheet.

  4. The amount of closing cash balance as reduced by expenses.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When there is no double entry system of accounting is followed, the profits are calculated on the basis of comparing the opening and closing of capital/assets by giving the effect of drawings.

This can be represented as:

Closing Capital                 xxxxx
Add: Drawings                  xxxxx
Less: Fresh capital            xxxxx 
Less: Opening Capital      xxxxx
Balance will be Profit       xxxxx

Multiple choice elements of book keeping and accountancy accounting from incomplete records ascertaining profit or loss from incomplete records meaning and preparation of statement of profit meaning of incomplete records, reasons for incompleteness and its limitations preparation of final accounts from incomplete records preparation of statement of affairs introduction to single entry system and difference between single entry and double entry system meaning and featuresof incomplete records

Profit can be ascertained from the incomplete records under single entry by using  ________.

  1. Statement of affairs

  2. Conversion method

  3. Either A or B

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

The Statement of Affairs Method: takes the difference of opening and closing capitals for calculation of profit or loss under Single Entry System
The Conversion Method of single entry system: tries to convert the records from single entry to double entry system to find the Profit or loss earned by the business.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions understand the method of recording cash transactions simple cash boook meaning, features and types of cash book

Rent for the month of April paid in advance in the month of March will be shown_____.

  1. payment side (credit) of cash book

  2. receipt (debit) side of cash book

  3. no entry

  4. trial balance
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Paying rent in advance is a cash outflow. Cash outflows are recorded on the payment (credit) side of the cash book.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions understand the method of recording cash transactions simple cash boook meaning, features and types of cash book

_________ is shown in trial balance.

  1. Balance as per cash book

  2. As per book pass book

  3. As certified by St. Auditor

  4. As per bank statement
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The business firm prepares a trial balance on the basis of the balances shown in its books of accounts. The balance as shown in bank pass book and as shown in the Bank column of cash book may differ due to time differences. 

Also, the balance as certified by statutory auditor is not the actual balance of the cash. A bank statement is also not an account and is prepared by the bank.
The balance as shown in the Cash book is actually arrived at by the means of double entry system in the books. Thus, we show the balance as per Cash book in the trial balance.
Hence, the correct option is A.