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

______ is the summarizing phase of accounting system.

  1. Book keeping

  2. Ledger posting

  3. Balancing

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

Accounting is the systematic and comprehensive recording of financial transactions pertaining to a business, and it also refers to the process of summarizing, analyzing and reporting these transactions to oversight agencies and tax collection entities. 

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

Accounting in modern age is regarded as ___________.

  1. the art of recording, classifying and summarizing the business transactions in monetary units

  2. the languages of business

  3. the source of business information

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

Accounting is an art of recording, classifying and summarizing the monetary business transactions. Accounting provides detailed information to the respective stake holders. Interested stake holders are creditors, lenders, customers, present and potential investors. Accounting is a language of business. Financial Statements provides the necessary business information to the management and other stake holders. 

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

Accounting is "the are of recording, classifying and summarizing in  a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character and interpreting the results thereof". This definition is given by ______________.

  1. The Institute of Chartered Accountant of India (ICAI)

  2. The Institute of Chartered Accountant of England

  3. American Institute of Certified Public Accountants

  4. The Institute of Chartered Accountant of Pakistan
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The definition of accounting as the art of recording, classifying, and summarizing transactions in a significant manner is the classic definition provided by the American Institute of Certified Public Accountants (AICPA).

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

Accounting makes _____________________.

  1. Decision making for the management easy as financial results can be compared

  2. The records being put is a systematic pattern so that any point of time they can be used

  3. The financial information being stored in a meaningful way for taxation purpose

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

Accounting serves multiple purposes, including facilitating management decision-making, maintaining systematic records for future reference, and organizing information for taxation purposes. All these are valid functions of an accounting system.

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

_________ is an art of recording, classifying, summarising transactions and events which are of financial character in terms of money and interpreting the result thereof.

  1. Accountancy

  2. Accounting

  3. Book-Keeping

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

Accounting is defined by the American Institute of Certified Public Accountants(AICPA) as "the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof."

Multiple choice book keeping and accountancy accounting procedures - rules of debit and credit modern approach of rules of accounts meaning and classification of accounts classification of accounts

Single entry system is known as incomplete system of recording accounting information.

  1. True

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

The single entry system is considered incomplete because it does not record both aspects (debit and credit) of every transaction, unlike the double entry system.

Multiple choice book keeping and accountancy accounting procedures - rules of debit and credit modern approach of rules of accounts meaning and classification of accounts classification of accounts

Double Entry System of Book-keeping is the most ______________ system of recording business transaction.

  1. perfect

  2. scientific

  3. complete

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

The Double Entry System is widely regarded as the most complete, scientific, and perfect system for recording business transactions because it captures every aspect of a transaction.

Multiple choice commercial studies accounting procedures - rules of debit and credit modern approach of rules of accounts meaning and classification of accounts classification of accounts

Conventional system of accounting is recognised by law.

  1. True

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

The conventional system of accounting (often based on informal practices) is generally not recognized by law for formal financial reporting; the Double Entry System is the standard.

Multiple choice book keeping and accountancy accounting procedures - rules of debit and credit modern approach of rules of accounts meaning and classification of accounts classification of accounts

Single entry system is suitable to _________ firms.

  1. small

  2. big

  3. medium

  4. all of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Single entry system is an incomplete and informal accounting method. It is primarily suitable for small businesses that do not require complex financial reporting.

Multiple choice book keeping and accountancy accounting procedures - rules of debit and credit modern approach of rules of accounts meaning and classification of accounts classification of accounts

Only cash book and personal accounts are maintained under which system of recording accounting information?

  1. Mahajani system

  2. Single entry system

  3. Double entry system

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

The single entry system is characterized by maintaining only a cash book and personal accounts, rather than a complete set of nominal and real accounts. It is an informal system often used by small traders.

Multiple choice commercial studies accounting procedures - rules of debit and credit modern approach of rules of accounts meaning and classification of accounts classification of accounts

What is the assumption of Double entry system of recording accounting information?

  1. Every transaction has one effect.

  2. Every transaction has two effect.

  3. Every transaction has multiple effect.

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

The fundamental principle of the double entry system is that every financial transaction affects at least two accounts: one is debited and the other is credited.

Multiple choice commercial studies accounting procedures - rules of debit and credit modern approach of rules of accounts meaning and classification of accounts classification of accounts

Accounts other than the impersonal account is _________.

  1. Personal account

  2. Real account

  3. Nominal account

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

IMPERSONAL ACCOUNT:In the accounts of the nominal ledger, we have different types of expenses for different purposes like rent, insurance, telephone and others. As these expenses are related NOT to the person to whom the money is paid and more concerned towards the reason for payment these are known as IMPERSONAL accounts.


Impersonal accounts are all accounts other than the personal accounts. They can further be categorized into Real Accounts and Nominal Accounts.

Multiple choice commercial studies accounting procedures - rules of debit and credit modern approach of rules of accounts meaning and classification of accounts classification of accounts

The accounts of expenses and losses is _________.

  1. Real

  2. Personal

  3. Nominal

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

Accounts which are related to expenses, losses, incomes or gains are called Nominal accounts. 

The dictionary meaning of the word "nominal" is "existing in name only" and the meaning remains absolutely true in accounting sense too, because nominal accounts do not really exist in physical form, but behind every nominal account money is involved.
E.g. Purchase A/c, Salary A/c, Sales A/c, Commission Received A/c, etc.

Multiple choice commercial studies accounting procedures - rules of debit and credit modern approach of rules of accounts meaning and classification of accounts classification of accounts

Outstanding Wages A/c is Nominal A/c.

  1. True

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

Accounts which are related to expenses, losses, incomes and gains are called nominal accounts. Examples of nominal accounts are Purchase A/c, Sales A.c, Salary A/c etc.

The final result of all nominal accounts is either profit or loss which is the transferred to the capital account. The golden rule for nominal accounts is: Debit all expenses and losses; Credit all incomes and gains.

Outstanding wages is classified as a personal account and not a nominal account. This account represents the accounts of all those persons to whom wages have not been paid and hence, are outstanding. Therefore, it is termed as  "Representative Personal Account" or simply personal account.

Multiple choice commercial studies accounting procedures - rules of debit and credit modern approach of rules of accounts meaning and classification of accounts classification of accounts

Commission received is Nominal Account.

  1. True

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

Nominal accounts are the temporary accounts, such as the income statement accounts. In other words, nominal accounts are the accounts that report revenues, expenses, gains, and losses. 

Nominal or temporary accounts are closed at the end of each accounting year. This means that their account balances are transferred to a permanent account. This closing process allows the nominal accounts to start the next accounting year with zero balances.
Nominal accounts consist of the following types of accounts:
a. Insurance account
b. Wages account
c. Interest paid or received account
d. Commission paid or received account
e. Telephone expense account
f. Salary account.
Hence, commission received is a nominal account.