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 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

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

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.

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 cannot give a complete picture of all transactions.

  1. True

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

Under conventional system of Accounting  :-

  • Since only one cash book is kept, personal and business transactions will be recorded together.
  • Real and Nominal accounts will be ignored by this system.
  • Profit or Loss can be ascertained but we cannot represent the financial position of the organization
  • No trial balance is prepared, so arithmetical accuracy of accounts cannot be verified
  • So, conventional or single entry system of accounting cannot give a complete picture of all transactions. 

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

Examples of real account.

  1. Creditor account

  2. Goodwill account

  3. Capital account

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

All assets of a firm, which are tangible or intangible, fall under the category "Real Accounts".

Tangible real accounts are related to things that can be touched and felt physically. Few examples of tangible real accounts are building, machinery, stock, land, etc.
Intangible real accounts are related to things that can't be touched and felt physically. Few examples of such real accounts are goodwill, patents, trademarks, etc.
Golden rule for real accounts are: Debit what comes in; Credit what goes out.
Hence, of all the options above, goodwill account is a real 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

M/s Ram & Sons Ltd's Account is ________________.

  1. Natural Personal Account

  2. Artificial Personal Account

  3. Representative Personal Account

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

M/s Ram & Sons Ltd is a business entity created by law, making it an artificial person. Therefore, it is classified as an artificial 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

Ram's Capital Account is _______________.

  1. Natural Personal Account

  2. Artificial Personal Account

  3. Representative Personal Account

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

A capital account represents the owner's equity in the business. Since it represents the person (Ram) in the books, it is a representative 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

Advance Salary to Shyam Account is _______________.

  1. Natural Personal Account

  2. Artificial Personal Account

  3. Representative Personal Account

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

Advance Salary to Shyam is an asset account that represents a future claim on an individual. It is a representative personal account because it represents the salary paid to Shyam in advance.

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

Salary Payable to Shyam Account is _____________.

  1. Natural Personal Account

  2. Artificial Personal Account

  3. Representative Personal Account

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

Salary Payable is a liability account representing an amount owed to an employee. It is a representative personal account as it represents the liability towards Shyam.

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

Ram's Drawings Account is _________________.

  1. Natural Personal Account

  2. Artificial Personal Account

  3. Representative Personal Account

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

Drawings account is a representative personal account. A representative personal account represents a person/persons. Some examples of representative personal account are capital, outstanding wages, prepaid salaries.

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

Purposes of an accounting system includes all of the following except _____________.

  1. interpret and record the effect of business transactions

  2. classify the effects of transactions to facilitate the preparation of reports

  3. summarize and communicate information to decision makers

  4. deciding the line of business for an entity
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Accounting systems are designed to record, classify, and summarize financial data to assist in decision-making. Deciding the line of business is a strategic management function, not a function of the accounting system itself.