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 from incomplete records preparation of final accounts from incomplete records preparation of statement of affairs ascertaining profit or loss from incomplete records introduction to single entry system and difference between single entry and double entry system

A statement of affairs is a summarised statement of an estimated _____________.

  1. Financial position

  2. Profit

  3. Income

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

To ascertain the Capital, Statements of affairs are prepared.
Capital = Assets - Liabilities
The above equation under which statement of affairs are prepared reflects the financial position of the business.

Multiple choice elements of book keeping and accountancy accounting from incomplete records preparation of final accounts from incomplete records preparation of statement of affairs ascertaining profit or loss from incomplete records introduction to single entry system and difference between single entry and double entry system

The capital at the end of the accounting year is ascertained by preparing _______.

  1. Cash Account

  2. Closing statement of affairs

  3. Total debtors account

  4. Opening statement of affairs
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Statement of Affairs is Based under Accounting Equation " Assets = Capital + Liabilities"
thus to ascertain the Closing Capital at the end of the year  Closing Liabilities are deducted from closing assets.

Multiple choice elements of book keeping and accountancy commission,brokerage and discount advantages of bill of exchange definition, characteristics and parties of bills of exchange simple transactions related to bills of exchange

Bills receivable discounted but not done till the date of final accounts is shown in ___________.

  1. profit & loss account

  2. assets

  3. liabilities

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

A discounted bill is a contingent liability for the drawer until the date of maturity. Since it is not yet matured, it is disclosed as a note to the accounts rather than a direct entry in the balance sheet assets or liabilities.

Multiple choice elements of book keeping and accountancy commission,brokerage and discount advantages of bill of exchange definition, characteristics and parties of bills of exchange simple transactions related to bills of exchange

Which of these accounts is debited by a drawee of a bill of exchange on its discounting?

  1. Bills Receivable

  2. Cash

  3. Discount

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

The drawee of a bill of exchange is the person who accepts the bill (the debtor). When the drawer discounts the bill, the drawee is not involved in that transaction and does not record any entry for the discounting.

Multiple choice accountancy tools of financial statement analysis - comparative and common-size statements preparation of common size statements comparative statements and common-size statements preparation of comparative statements

______________ a snapshot of the financial condition of the firm at a particular time.

  1. The balance sheet provides

  2. The income statement provides

  3. The cash flow statement provides

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

The balance sheet provides a snapshot of the financial condition of the firm at a particular time. It shows the balance of assets, equities and liabilities at a single moment of time. 


The Income Statement is one of a company's core financial statements that shows their profit and loss. The P&L statement shows a company's ability to generate sales, manage expenses, and create profits. over a period of time.

Cash flow statement is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities.

Multiple choice accountancy tools of financial statement analysis - comparative and common-size statements preparation of common size statements comparative statements and common-size statements preparation of comparative statements

Comparative Statements is prepared to check _______.

  1. increase or decrease as on different dates

  2. balances of account as on different dates

  3. summaries of different operational activities of different periods

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

Comparative analysis is comparison of various ratios balances of different years. It is basically done to understand the trend off the company. Comparative statements is prepared to check increase or decrease as on different dates, balances of accounts as on different dates and summaries of different operational activities of different periods. 

Multiple choice accountancy tools of financial statement analysis - comparative and common-size statements preparation of common size statements comparative statements and common-size statements preparation of comparative statements

Comparative Financial Statements mean comparative study of items or components of financial statements for two or more years or with that of other enterprises.

  1. True

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

True. Comparative Financial statements mean comparative study of items or components of financial statements of two or more years with that of the same or other company. It is comparison of various ratios, balances, statements of different years of the company. It is basically done to understand the trend off the company.

Multiple choice accountancy tools of financial statement analysis - comparative and common-size statements preparation of common size statements comparative statements and common-size statements preparation of comparative statements

Comparative financial statements are prepared for ____________ comparison.

  1. inter-firm

  2. intra-firm

  3. both (a) and (b)

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

Comparative financial statements are used to compare the performance of the same firm over different periods (intra-firm) or to compare different firms within the same industry (inter-firm).

Multiple choice accountancy tools of financial statement analysis - comparative and common-size statements preparation of common size statements comparative statements and common-size statements preparation of comparative statements

____________ statements refer to the Profit and Loss Account and Balance Sheet prepared by providing columns for the figures for both the current year as well as for the previous year and for the changes during the year.

  1. Common size

  2. Comparative

  3. Income

  4. Both A and C
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Comparative statements refers to the profit and loss account and balance sheet prepared by providing columns for the figures for both current year as well as for the previous year for the changes during the year. Comparative statements are prepared basically to understand the trend of the company. Hence, its also known as trend analysis. 

Multiple choice book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

A financial statement that shows both rupees and percentages in the report is referred to as ______________.

  1. A Balance sheet

  2. A Common size statement

  3. A Proportional financial statement

  4. A Relative statement of equity
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A common size statement expresses each item in the financial statement as a percentage of a base figure (like total assets or total revenue), allowing for easier comparison.

Multiple choice book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

Common-size Balance Sheet shows _______________.

  1. Assets, Equity and Liabilities in absolute values.

  2. Assets and Liabilities as percentage of total assets or total equity and liabilities.

  3. Both (a) and (b)

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

A common-size balance sheet expresses all items as a percentage of a common base, typically total assets or total equity and liabilities. This allows for easier comparison between companies of different sizes or over different time periods.

Multiple choice book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

Common-size Income Statement is the vertical analysis of Income Statement.

  1. True

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

True. Common-size Income statement is the vertical analysis of Income Statement. A vertical analysis is shows all items as percentages and not in absolute figures which provides better comparison. Each line item is expressed as a percentage figure of the base figure within the statement. 

Multiple choice book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

Objectives of common-size income statement is/are ________________.

  1. To analyse change in individual items of statement of profit and loss.

  2. To study the trend in different items of revenues and expenses.

  3. To assess the efficiency.

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

Objectives of common-size income statement are to analyse change in individual items of statement of profit and loss, to study the trend in different items of revenues and expenses and to assess the efficiency of the enterprise. 

Multiple choice book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

Which of the following statements are true?
a. Common size balance sheet shows relative value of the various items.
b. In the common size income statement, each product is represented as a percentage of the net sales figure.
c. Common size income statements represents the various element as a percentage of the gross profit.

  1. Both (a) and (b)

  2. Both (a) and (c)

  3. Both (b) and (c)

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

Common size statement, also known as component percentage statement, is a financial tool for studying the key changes and trends in the financial position and operational result of a company. Common size balance sheet shows relative value of the various items. In common size income statement, the item of expenditure are shown as percentage of the net sales. 

Multiple choice book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

Choosing a common base (as 100), for example, sales revenue total may be taken as base (100) in case of income statement, and total assets or total liabilities (100) in case of balance sheet, is step ____ in the procedure adopted for preparing common size income statements.

  1. 1

  2. 2

  3. 3

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

Choosing a common base for example sales revenue total may ne taken as base (100) in case of income statement, and total assets or total liabilities in case of balance sheet, in step 2 in the procedure adopted for preparing common size income statements. Common-size Income statement is the vertical analysis of Income Statement. 

A vertical analysis is shows all items as percentages and not in absolute figures which provides better comparison. Each line item is expressed as a percentage figure of the base figure within the statement. The base is always shown as 100.