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 elements of book keeping and accountancy accounting in business develop the understanding of recording of transactions in journal illustrations on journal entries types of journal entries meaning and classification of business transactions

The amount brought in by the proprietor in the business should be credited to ____________.

  1. Cash Account

  2. Capital Account

  3. Drawing Account

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

Business entity or separate entity concepts defines that the owner and the business are to be treated separately. 

If any amount is contributed by the owner should be treated as liability and to be credited in capital account. 
Journal Entry:-
Cash A/c Dr.
To Capital A/c.

Multiple choice elements of book keeping and accountancy accounting in business develop the understanding of recording of transactions in journal illustrations on journal entries types of journal entries meaning and classification of business transactions

A sale of goods of vidhya for cash should be debited to ______________.

  1. Vidhya's account

  2. Cash account

  3. Sale of goods account

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

Sales of goods on cash involves cash and goods account. Both cash and goods are real account. Rule for real account says" debit what comes in". Against sale of goods cash is coming in the system, hence cash account should be debited.

Multiple choice elements of book keeping and accountancy accounting in business develop the understanding of recording of transactions in journal illustrations on journal entries types of journal entries meaning and classification of business transactions

The accounting entries which appear on both the sides of cash book are called journal entries.

  1. True

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

A contra entry is the entry that involves both the accounts, i/e/ Cash and Bank. When cash is deposited in a bank or withdrawn from the bank for office use, such transactions will be recorded on both sides of the cash book. Thus, it affects both the columns of the cash book, i.e. the cash column as well as the bank column. Thus, an entry recorded on both sides of the cash book is known as contra entry.

Multiple choice elements of book keeping and accountancy accounting in business develop the understanding of recording of transactions in journal illustrations on journal entries types of journal entries meaning and classification of business transactions

A closing entry of sales account, which appears on the credit side of trial balance is as under _________________.

  1. Sales A/c Dr.

    To P and L A/c

  2. Sales A/c Dr.

    To Trading A/c

  3. Trading A/c Dr.

    To Sales A/c

  4. P and L A/c Dr.

    To Sales A/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

To close the Sales account, which has a credit balance, it must be debited. The balance is transferred to the Trading account to determine gross profit.

Multiple choice elements of book keeping and accountancy accounting in business develop the understanding of recording of transactions in journal illustrations on journal entries types of journal entries meaning and classification of business transactions

Which of the following specialized journals will record "goods returned by the business"?

  1. Purchase journal

  2. Sales journal

  3. Purchases return journal

  4. Sales return journal
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Goods returned by the business to the supplier are recorded in the Purchases Return Journal (also known as the Returns Outward Journal).

Multiple choice elements of book keeping and accountancy accounting in business develop the understanding of recording of transactions in journal illustrations on journal entries types of journal entries meaning and classification of business transactions

A Company makes a purchase on $10^{th}$ may some office equipment . The correct journal entry will be

Debit Credit
1 Office equipment Supplies 
2 Purchases  Office equipment
3 Accounts payable Office equipments
4 Office equipment Accounts payable

  1. 1

  2. 2

  3. 3

  4. 4
Reveal answer Fill a bubble to check yourself
A Correct answer
Multiple choice elements of book keeping and accountancy accounting in business develop the understanding of recording of transactions in journal illustrations on journal entries types of journal entries meaning and classification of business transactions

If salary is given to proprietor ______________________.

  1. Proprietors salary account is debited

  2. Capital account is credited

  3. Both a & b

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

Salary to proprietor can't be paid and it is not permissible expenditure under income tax act,1961. 

Proprietor is owner of the business and he enjoys gain of the business and hence he is not entitle for separate salary.

Multiple choice elements of book keeping and accountancy accounting in business develop the understanding of recording of transactions in journal illustrations on journal entries types of journal entries meaning and classification of business transactions

Which of the following should be entered in the Journal?
(i) Payment for purchases
(ii) Fixtures bought on credit
(iii) Credit sale of goods
(iv) Sale of surplus machinery.

  1. (i) and (iii)

  2. (i) and (iv)

  3. (ii) and (iv)

  4. (iii) and (iv)
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In accounting and bookkeeping, a journal is a record of financial transactions in order by date. Traditionally, a journal has been defined as the book of original entry.

Credit transactions are recorded in sales book and purchase book.

Multiple choice elements of book keeping and accountancy accounting in business develop the understanding of recording of transactions in journal illustrations on journal entries types of journal entries meaning and classification of business transactions

Which of the following item is found in a Journal entry?
$1$. Date of each transaction
$2$. Rupee amount of each debit and credit
$3$. Explanation of each transaction.

  1. $1$ only
  2. $1$ & $2$ only
  3. $2$ & $3$ only

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

The essential elements of the journal entry format are as follows:

  • A header line may include a journal entry number and entry date. The number is used to index the journal entry, so that it can be properly stored and retrieved from storage.
  • The first column includes the account number and account name into which the entry is recorded. This field is indented if it is for the account being credited.
  • The second column contains the debit amount to be entered.
  • The third column contains the credit amount to be entered.
  • A footer line may also include a brief description of the reason for the entry. An entry in the footer line is highly recommended, since there are so many journal entries that it is easy to forget why each entry was made.

Multiple choice elements of accounts origin of transactions - source documents and preparation of vouchers business transactions and source document source documents voucher and transactions

Source document are useful to record business transactions in the books of accounts.

  1. True

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

The source document is essential to the bookkeeping and accounting process as it provides evidence that a financial transaction has occurred. During an accounting or tax audit, source documents back up the accounting journals and general ledger as an indisputable transaction trail.

Multiple choice elements of accounts origin of transactions - source documents and preparation of vouchers business transactions and source document source documents voucher and transactions

Trade discount allowed on the sales, if appearing in the trial balance, is shown in the final accounts ____________.

  1. on the debit side of trading account

  2. on the debit side of the profit and loss account

  3. by way of deduction from the sales in the trading account

  4. credit of profit & loss Account
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Trade discount is a reduction from the list price. When it appears in the trial balance, it is deducted directly from sales in the trading account to arrive at net sales.

Multiple choice elements of accounts origin of transactions - source documents and preparation of vouchers business transactions and source document source documents voucher and transactions

When does a entry termed as a combined entry ____________________.

  1. If two transactions of one company are involved

  2. If there is debit and credit both

  3. Transactions are of the same nature and they take place on the same day.

  4. An the accounts are debited the very same day
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A combined entry (or compound entry) is used when multiple accounts are affected by transactions of the same nature occurring on the same day.

Multiple choice elements of book keeping and accountancy accounting equation explain the concept of accounting equation usefulness of an accounting equation accounting equations and transactions

The accounting equation is based on __________.

  1. Going concern concept

  2. Dual aspect concept

  3. Money measurement concept

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

Dual aspect concept is the basic concept of accounting, According to which every business transactions has a dual effect. As the name implies , the entry made for each transaction is composed of two parts- one for the debit and the other for the credit. Every debit has an equal amount of credit. So, the total of all debits equal to the total of all credits. This gives basic accounting equation:

Assets = Liabilities + Capital.

Multiple choice elements of book keeping and accountancy accounting equation explain the concept of accounting equation usefulness of an accounting equation accounting equations and transactions

The accounting equation is based on _________________.

  1. Going concern concept

  2. Dual aspect concept

  3. Money measurement concept

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

Dual aspect is the foundation or basic principle of accounting. This concept states that every transaction has a dual or two-fold effect and should therefore be recorded at two places.

The duality principle is commonly expressed in terms of fundamental Accounting Equation, which is as follows :

Assets = Liabilities + Capital

In other words, the equation states that the assets of a business are always equal to the claims of owners and the outsiders. The claims also called equity of owners is termed as Capital(owners’ equity) and that of outsiders, as Liabilities(creditors equity).

Multiple choice commercial studies sources of business finance - 2 preference shares equity and preference shares equity shares and preference shares

Securities premium account must be shown separately on the liabilities side of the balance sheet under  _______ with the account name  _________. 

  1. Share Capital; Shareholders Funds

  2. Reserves & Surplus; Shareholders Funds

  3. Secured Loan; Reserves & Surplus

  4. Unsecured Loan; Profit or Loss
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Reserve and Surplus:-
Reserve means a provision for a specific purpose. There are lots of unknown expenditures which can occur in current year or in future. To meet such type of expenses the business firm has to make the reserves. 
By maintaining the reserves, actual position of the profit and loss of any accounting year does not disturb. For example:- share premium account, provision for bad debts or capital redemption reserves. Capital redemption reserve can be used as bonus shares and converted into share capital. Reserves are also the part of capital of company other than share capital. These reserves can not be distributed among the shareholders as dividend.

Surplus is the credit balance of the Profit and Loss Account after providing for dividends, bonus, provision for taxation and general reserves etc.  Surplus profit may also be earmarked for special purposes such as reserves for obsolescence of plant and machinery. Balance of profit is carried forward in next year as retained earning. General reserve can be used for distribution of dividend among shareholders when profit is insufficient.
Reserves and surpluses are shown in liabilities side of balance sheet.