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 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. 

Multiple choice 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

Most common approach for analysing the capital structure of a firm is_______.

  1. Ration Analysis

  2. Cash Flow Analysis

  3. Comparative Analysis

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

The most common approach for analyzing the capital structure of a firm is Comparative analysis. Comparative analysis is comparison of various ratios, balances, statements of different years of the company. 

It is basically done to understand the trend off the company. Hence, its also known as trend analysis.  

Multiple choice commerce business finance financial planning financing financial management

Plans made for a period of _____ year or less is termed as budget.

  1. one

  2. two

  3. three

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

A budget is a financial plan for a defined period of time, usually a year.

A budget is the sum of money allocated for a particular purpose and the summary of intended expenditures along with proposals for how to meet them. It may include a budget surplus, providing money for use at a future time, or a deficit in which expenses exceed income.

Multiple choice elements of accounts ancient indian accounting meaning of accounting introduction to book-keeping and accounting book-keeping - ledger

What is done as per the basic concepts of accounts?

  1. Book keeping

  2. Accounting

  3. Preparation of balance sheet

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

Book-keeping is the basis for accounting. It is because it is responsible for the proper recording of financial transactions.

Accounting begins with book keeping and ends with preparation of financial accounts.

Multiple choice elements of accounts ancient indian accounting meaning of accounting introduction to book-keeping and accounting book-keeping - ledger

Which of the following highlights the correct order of the stages in the accounting cycle?

  1. Journalizing, final accounts, posting to the ledger and trial balance

  2. Journalizing, posting to the ledger, trial balance and final accounts

  3. Posting to the ledge, trial balance, final accounts and journalizing

  4. Posting to the ledger, journalizing, final accounts and trial balance
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The accounting cycle begins with journalizing transactions, followed by posting them to the ledger, preparing a trial balance, and finally generating financial statements (final accounts). This sequence ensures data is captured, organized, and verified before reporting.

Multiple choice elements of accounts ancient indian accounting meaning of accounting introduction to book-keeping and accounting book-keeping - ledger

______ refers to the specific accounting principles and the methods of applying those principles adopted by the enterprise in the preparation and presentation of financial statements.

  1. Accounting methods

  2. Accounting policies

  3. Accounting concepts

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

Accounting policies represent the specific principles and methods chosen by an entity to prepare and present its financial statements. These choices are necessary when accounting standards allow for different approaches.

Multiple choice elements of accounts ancient indian accounting meaning of accounting introduction to book-keeping and accounting book-keeping - ledger

Modern Method of Accounting was introduced by _____________.

  1. M. S. Gosav

  2. Wheldon

  3. Luca Pacioli

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

The first book on double entry system was written by an Italian mathematician Fra Luca Pacioli and his close friend Leonardo da Vinci. The book was entitled as “Summa de arithmetica, geometria, proportioni et proportionalita” and was first published in Venice in 1494.

Multiple choice elements of accounts ancient indian accounting meaning of accounting introduction to book-keeping and accounting book-keeping - ledger

Book-keeping is often confused with _____________.

  1. Algebra

  2. Statistics

  3. Cashier

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

Book Keeping and Accountancy are often used interchangeably, but it is not true. These two terms are not identical. Book Keeping is an art but the accountancy is a science. Book keeping is usually done by the junior employees of the organization where he records the transactions in books of accounts i.e. journal and ledger. But information recorded in books does not give any idea about the financial position of the company. 


Hence in order to make a judgement regarding the financial position of the concern, the recorded information has to be analysed and interpreted where accountancy comes in the picture.

 

Therefore, this can be said that where book keeping ends, accountancy starts.

Multiple choice elements of accounts ancient indian accounting meaning of accounting introduction to book-keeping and accounting book-keeping - ledger

The statistical yardstick that provides a measure of the relationship between two accounting figures is _____________.

  1. The accounting ratio

  2. Capital output ratio

  3. A current ratio

  4. Pay out ratio
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A Ratio is a statistical Yardstick to measure relationship between two accounting figures.It is very useful for the investors, suppliers, creditors. It is used as a mirror to reflect financial status of a particular company or group of company, firms, business houses.

Multiple choice elements of accounts ancient indian accounting meaning of accounting introduction to book-keeping and accounting book-keeping - ledger

"Book-keeping is the science and art of correctly recording in the books of accounts, all those business transactions that result in transfer of money or money's worth" is the definition given by ___________.

  1. Northcott

  2. R.N.Carter

  3. Spicer and Peglar

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

Book-keeping is an art and science of recording business transactions in the appropriate books of accounts in accordance with the principles of accountancy for the purpose of ascertaining the profits or losses and the financial position of the business. Every businessman wants to know the profits of his business for a certain period. In order to ascertain the profits and loss of the business, he has to remember all the transactions of his business for a defined period of time. The system which is derived to record all the business transactions is known as book-keeping. According to R.N.Carter, "Book-keeping is the science and art of correctly recording in the books of accounts of all those business transactions that result in the transfer of money or money's worth".

Multiple choice elements of accounts ancient indian accounting meaning of accounting introduction to book-keeping and accounting book-keeping - ledger

The language of a business is ________.

  1. accounting

  2. book-keeping

  3. golden rule of debit and credit

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

A business itself can not depict anything until is has an accounting base. Any analysis is possible for the business only when it has proper accounting of the business. Hence accounting is always considered a back bone of any business. All interpretations are based on the accounting.