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 book keeping and accountancy accounts of 'not for profit' concerns financial accounting and reporting prepration of income and expenditure account and balance sheet accounting procedure for not-for-profit organisations receipts and payments receipts and payments account

In case a sports fund is kept, expenses on account of sports events should be ____________.

  1. charged to sports fund

  2. charged to the income and expenditure account

  3. taken to the balance sheet on the asset side

  4. taken to the balance sheet on the liability side
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Specific funds are utilized for the specific activities only. If any sports events is organized, all expenses pertains to such event should be debited to sports fund account.

Multiple choice book keeping and accountancy accounts of 'not for profit' concerns financial accounting and reporting prepration of income and expenditure account and balance sheet accounting procedure for not-for-profit organisations receipts and payments receipts and payments account

Which of the following consisting  the final account of a non-profit organization_____________.

  1. Trading and Profit & Loss A/c and Balance Sheet

  2. Income Statement and Statement of Financial Position

  3. Receipts & Payments A/c and Income & Expenditure A/c

  4. Receipts & Payments A/c Income & Expenditure A/c and Balance Sheet
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
The statements prepared by Non-for-profit organisations are:-
1) Receipt and payments account - It is a real account just like cash account. Its prepared at the end of the year. All receipts are recorded on the debit side and expenses on the credit side. 
2) Income and expenditure account - Its a nominal account and is just like a profit and loss account. All the expenses are recorded on the debit and side and incomes on the credit side. 
3) Balance sheet - Balance sheet is prepared normally. The difference between assets and liabilities is shown as capital fund or general fund. 
Multiple choice book keeping and accountancy accounts of 'not for profit' concerns financial accounting and reporting prepration of income and expenditure account and balance sheet accounting procedure for not-for-profit organisations receipts and payments receipts and payments account

Statement I: Receipt & Payment A/c starts with the opening balance of cash in hand and at bank.
Statement II: Income & Expenditure A/c have no opening balance.
Select the correct answer the options given below.

  1. Statement I is Correct while statement II is Incorrect.

  2. Both Statement I and II are incorrect

  3. Statement II is Correct while statement I is incorrect.

  4. Both Statement I and II are correct
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Receipt and Payment account is a summary of cash transactions and starts with an opening cash/bank balance. Income and Expenditure account is like a Profit and Loss account, which is prepared for a specific period and does not carry forward an opening balance.

Multiple choice book keeping and accountancy accounts of 'not for profit' concerns financial accounting and reporting prepration of income and expenditure account and balance sheet accounting procedure for not-for-profit organisations receipts and payments receipts and payments account

An advance receipt of subscription from a member of the non profit organization is considered as a/an _______________.

  1. Expense

  2. Liability

  3. Equity

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

Subscription is the amount that is paid by members of NPO every year. It is the primary source of income of NPO. It is generally paid every month. It is the amount paid by members to keep their membership alive. An advance receipt of subscription from a member is an income received in advance. So it is treated as liability. 

Multiple choice book keeping and accountancy accounts of 'not for profit' concerns financial accounting and reporting prepration of income and expenditure account and balance sheet accounting procedure for not-for-profit organisations receipts and payments receipts and payments account

The ______________ is the summary of cash and bank transactions which helps the preparation of Income and Expenditure account and Balance Sheet.

  1. income and expenditure account

  2. balance sheet

  3. receipts and payments account

  4. both a and b
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The Not-for-Profit Organisations are required to prepare financial statements at the end of the each accounting period and the general principles of accounting  are fully applicable in their preparation. The final accounts of a not-for-profit organisations consist of the following:

(i) Receipt and Payment Account
(ii) Income and Expenditure Account
(iii) Balance Sheet
The Receipt and Payment account is the summary of cash and bank transactions which helps in the preparation of Income and Expenditure Account and the Balance Sheet. Besides, it is a legal requirement as the Receipts and Payments Account has also to be submitted to the Registrar of Societies along with the Income and Expenditure Account, and the Balance Sheet.

Multiple choice adjustment of partners capital and death of a partner retirement/ death of a partner elements of accounts

On the death of a partner, credit balance of Profit and Loss Account appearing in, the Balance sheet, should be credited to the Capital Accounts of ______________ .

  1. all partners including the deceased partner in their profit-sharing ratio

  2. the remaining partners in the new profit-sharing ratio

  3. neither the deceased partner nor the remaining partners.

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

When a partner dies, the accumulated profits in the Profit and Loss Account belong to all partners based on their profit-sharing ratio, as it was earned during their tenure.

Multiple choice adjustment of partners capital and death of a partner retirement/ death of a partner elements of accounts

What balance does a Partners Current Account has?

  1. Debit balance.

  2. Credit balance.

  3. Either (a) or (b).

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

The partnership capital account is an equity account in the accounting records of a partnership. It

contains the following types of transactions:

1.  Initial and subsequent contributions by partners to the partnership, in the form of either cash or the market value of other types of assets.

2. Profits and losses earned by the business, and allocated to the partners based on the provisions of the partnership agreement.

3. Distributions to the partners.

The ending balance in the account is the undistributed balance to the partners as of the current date.   

Partner's capital account can either have a credit balance or debit balance.

A capital account having a credit balance means business owes partners that much amount, while if a capital account has a debit balance it means partners owe business that much amount or we can also say that partners have overdrawn their capital account.

Multiple choice adjustment of partners capital and death of a partner retirement/ death of a partner elements of accounts

What is the journal entry for excess capital withdrawn by the partner?

  1. Cash/Bank A/c Dr.

    To Partners' Capital A/c

  2. Partners' Capital A/c Dr.

    To Cash/Bank A/c

  3. Partners' Capital A/c Dr.

    T\o Partners' Current A/c

  4. Partners' Current A/c Dr.

    To Partners' Capital A/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
  • When a partner enter into partnership he/she is required to bring his share of capital in the firm. 

  • Capital account of each partner represents his equity in the partnership.

    Capital account of a partner is increased in the following situations:

    • The owner made additional investments during the year.
    • The owner made guaranteed payments to the firm.
    • Partnership earned profits, and a share of profits was allocated to the partner.

    The increase in the capital will record in credit side of the capital account.

    Salary and interest allowances are guaranteed payments, discussed later.

    Capital account of a partner is decreased when the owner makes withdrawals of cash or property

  • Journal entry for excess capital withdrawn by the partner is

  •      Partner's Capital A/c                Dr. 

      To Cash/Bank A/c

Multiple choice book keeping and accountancy accounts of 'not for profit' concerns receipts and payments receipts and payments account prepration of income and expenditure account prepration of income and expenditure account and balance sheet

Receipts and payment account shows ___________.

  1. income and expenditure

  2. cash receipts and payments

  3. assets and liabilities

  4. profit on sale
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Receipts and payments account is prepared by taking the information from cash book. It records all the cash receipts and payments including revenue and capital.

Multiple choice book keeping and accountancy accounts of 'not for profit' concerns receipts and payments receipts and payments account prepration of income and expenditure account prepration of income and expenditure account and balance sheet

Which of the following accounts mostly begins with an opening balance?

  1. Receipts and payments account

  2. Income and expenditure

  3. Both of the above

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

Receipts and payments account mostly begin with an opening balance as it is nothing but cash account. A receipts and payment account is just like a cash account hence it begins with opening balance and ends with closing balance of cash.

Multiple choice book keeping and accountancy accounts of 'not for profit' concerns receipts and payments receipts and payments account prepration of income and expenditure account prepration of income and expenditure account and balance sheet

The total of all payments irrespective of their nature (whether capital or revenue) and whether they pertain to past, current and future periods are to be shown on its credit side is step ____ in preparation of Receipt and Payment Account.

  1. 1

  2. 2

  3. 3

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

The third step in preparation of Receipt and Payment account is showing the total amounts of all payments on credit side whether of capital or revenue nature and whether pertaining to past, current and future periods.

Multiple choice book keeping and accountancy accounts of 'not for profit' concerns receipts and payments receipts and payments account prepration of income and expenditure account prepration of income and expenditure account and balance sheet

________ is/are a capital receipt.

  1. Money raised through issue of shares

  2. Bank loan

  3. Sale of investments

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

b'Option D is correct. Capital receipts refer to those receipts which either create a liability or cause a reduction in the assets of the firm. They are non-recurring or non-routine in nature. Sale of investments leads to reduction in assets. Bank loan and money raised through issue of shares create liability for firm. All are capital receipts. '

Multiple choice business organisation mercantile agents and account sales course of business transaction in home trade documents and procedure used in home trade home trade: agents and procedures

_________ is neither entered into book of accounts nor charged to the account of the recipients.

  1. Delivery Challan

  2. Invoice

  3. Credit/ Debit Note

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

An abridged or estimated invoice sent by a seller to a buyer in advance of a shipment or delivery of goods. It notes the kind and quantity of goods, their value, and other important information such as weight and transportation charges. Proforma invoices are commonly used as preliminary invoices with a quotation, or for customs purposes in import. They differ from a normal invoice in not being a demand or request for payment.

Hence transaction merely with the proforma invoice as supporting document is neither entered into book of accounts nor will any charge be made to the account of the recipients.

Multiple choice business organisation mercantile agents and account sales course of business transaction in home trade documents and procedure used in home trade home trade: agents and procedures

________ is sent to the other party periodically showing the opening balance, details of transactions and the closing balance.

  1. Proforma Invoice

  2. Statement of Account

  3. Invoice

  4. Credit/Debit Notes
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A statement of account is a detailed report of the contents of an account. An example is a statement sent to a customer, showing billings to and payments from the customer during a specific time period, resulting in an ending balance. 

The net remaining balance of all transactions listed. A bank statement or account statement is a summary of financial transactions which have occurred over a given period on a bank account held by a person or business with a financial institution.

Multiple choice business organisation mercantile agents and account sales course of business transaction in home trade documents and procedure used in home trade home trade: agents and procedures

It is advisable to send a copy of the statement of account showing arrears of payment to the companies before sending the collection letter.

  1. True

  2. False

  3. Partly true

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

Written notification of the pending amounts, meant to prod past-due customers to make a payment. Collection letters are sent usually one after another, with the tone and language getting more direct with each successive letter, until at least some payment is received. Also called dunning letter.