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 commercial studies budgeting distinction between funds flow and cash flow statements preparation of cash flow statement statement of changes in financial position

Cash Flow Statement ignores fundamental accounting __________ .

  1. concept

  2. principle

  3. policy

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

Cash flow statements are based on the cash basis of accounting, whereas the fundamental accounting concept (accrual basis) is ignored in favor of tracking actual cash movements.

Multiple choice commercial studies budgeting distinction between funds flow and cash flow statements preparation of cash flow statement statement of changes in financial position

Which of the following items appears first on the statements of cash flows prepared using direct method?

  1. Retained earnings

  2. Cash received from customers

  3. Net income

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

Under direct method of statement of cash flow, major heads of cash inflows and outflows are considered. 

Certain items are recorded on accrual basis in profit and loss account.
Hence, certain adjustments are made to convert them into cash basis such as cash receipt from customers, cash payments to suppliers, Purchases etc.

Multiple choice commercial studies budgeting distinction between funds flow and cash flow statements preparation of cash flow statement statement of changes in financial position

On the statement of cash flows prepared by the indirect method, the cash flows from operating activities section would include ______________________.

  1. Receipt from sale of investments

  2. Amortization of premium on bonds payable

  3. Payment of cash dividends

  4. Receipt from issuance of capital stock
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Indirect method of ascertaining cash flow from operating activities begins with the amount of net profit/loss. Income statement is prepared on accrual basis it also include certain non-operating items such as interest paid and non cash items. 

Therefore, it becomes necessary to adjust the amount of net profit/loss as shown by profit and loss account for arriving at cash flows from operating activities. 
Examples of such transactions are - cash receipt from royalties, fees, commissions and other revenues, cash payments for premium and claims, annuities, and other policy benefits, cash payments to suppliers for goods and services etc. 

Multiple choice commercial studies budgeting distinction between funds flow and cash flow statements preparation of cash flow statement statement of changes in financial position

Under the direct method, which of the following items must be added to operating expenses reported on the income statement to determine cash payments for operating expenses?

  1. Increase in accrued expenses

  2. Decrease in prepaid expenses

  3. Increase in income taxes payable

  4. Increases in prepaid expenses
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Under direct method of statement of cash flow, major heads of cash inflows and outflows are considered. Certain items are recorded on accrual basis in profit and loss account.

Hence, certain adjustments are made to convert them into cash basis such as cash receipt from customers, cash payments to supplies, purchases, prepaid expenses etc. 

Multiple choice commercial applications generally accepted accounting principles (gaap) distinction between accounting and book-keeping distinction between book-keeping and accounting meaning and objectives of accounting

Book-keeping is an ________ of correctly recording of business transaction.

  1. Art and science

  2. Art

  3. Science

  4. Art or Science
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Book-keeping is that branch of knowledge which tells us how to keep a record of financial transaction. Book - keeping may be defined as the science and art of recording transactions in books so accurately and systematically that the true state of a business can be correctly ascertained. 

Multiple choice commercial applications generally accepted accounting principles (gaap) distinction between accounting and book-keeping distinction between book-keeping and accounting meaning and objectives of accounting

Importance and utility of Book-keeping is _________ .

  1. Help in future reference

  2. Knowledge about Financial status

  3. Help in comparison

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

Bookkeeping is the organization of financial information. Keeping your financial records organized makes it easier to locate and provide to appropriate parties. Bookkeeping is important because it helps with business analysis. It is a tool used by management to analyze business performance. It helps in taking the financial decision and comparison between the two firm also.

Multiple choice commercial applications generally accepted accounting principles (gaap) distinction between accounting and book-keeping distinction between book-keeping and accounting meaning and objectives of accounting

______ is an activity concerned with the recording of financial data relating to business operations in significant and orderly manner.

  1. Accounting

  2. Book keeping

  3. Auditing

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

Book keeping is the recording of financial transactions, and is part of the process of accounting in business. It is a process concerned with recording of transactions. Book keeping is mainly concerned with financial data recording. Book keeping refers mainly to the record keeping aspects of accounting. book keeping involves preparing source documents for all transactions, operations, and other events of the business.

Multiple choice commercial applications generally accepted accounting principles (gaap) distinction between accounting and book-keeping distinction between book-keeping and accounting meaning and objectives of accounting

________ is the recording phase of Accounting system.

  1. Book keeping

  2. Ledger posting

  3. Balancing

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

All financial transactions must be recording in the books of accounts of the business. Recording of transaction is the first steps in the accounting system. If any expense is incurred, this has to be recorded first to initiate the accounting process.

Multiple choice commercial applications generally accepted accounting principles (gaap) distinction between accounting and book-keeping distinction between book-keeping and accounting meaning and objectives of accounting

Which of the following is not dependent on accounting?

  1. Management accounting

  2. Cost accounting

  3. Financial accounting

  4. Book-keeping
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Book Keeping and Accounting are two different terms which are often used interchangeably. 

Book keeping is a method of recording all the business transactions. This work is normally performed by the junior executive. 
Accounting is a term which analyze and interpret the data which are recorded in the books of accounts through book keeping. 

Accounting starts when book keeping ends hence book keeping is not dependent on accounting. 

Multiple choice commercial applications generally accepted accounting principles (gaap) distinction between accounting and book-keeping distinction between book-keeping and accounting meaning and objectives of accounting

Financial statements are a part of ___________.

  1. accounting

  2. book-keeping

  3. all of the above

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

Financial Accounting is a process of classifying, summarizing and interpreting the financial information recorded in the books of account. Financial statements are prepared to know the financial position of the organization. 

Its part of accounting. 

Multiple choice commercial applications generally accepted accounting principles (gaap) distinction between accounting and book-keeping distinction between book-keeping and accounting meaning and objectives of accounting

Which of the following is not a sub-field of accounting?

  1. Management accounting.

  2. Cost accounting.

  3. Financial accounting.

  4. Book-keeping.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
The Main Branches or Types or Sub-fields of Accounting include inflation accounting, financial accounting, Human resource accounting, managerial accounting, Social Responsibility Accounting, cost accounting, Tax or value-added accounting. 
Book-keeping is the recording of financial transactions and is part of process of accounting, not a sub field of accounting.

Multiple choice commercial applications generally accepted accounting principles (gaap) distinction between accounting and book-keeping distinction between book-keeping and accounting meaning and objectives of accounting

Which among the following constitutes the base of accounting?

  1. Book-keeping

  2. Posting

  3. Analyzing

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

Book Keeping is the primary function of accounting. More often, the term book keeping and accountancy are used interchangeably but that is not correct. Book keeping and accountancy are two different terms. 


Book Keeping is generally mean recording of all business transactions. This task is performed by the junior staff of the organization. 
Accounting starts only when the book keeping is done. This task is performed by the senior accountants. Book keeping is the base of accounting. 

Multiple choice commercial applications generally accepted accounting principles (gaap) distinction between accounting and book-keeping distinction between book-keeping and accounting meaning and objectives of accounting

What is done as per the basic concepts of accounts?

  1. Book keeping

  2. Balancing

  3. Casting

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

There are various accounting concept on which the whole accounting system is based. These are known as accounting concepts and conventions. Book keeping is done on the basis of these accounting concept. Main concepts are:

1) Separate Entity Concept
2) Going Concern Concept
3) Periodicity Concept
4) Cost Concept
5) Matching Concept
6) Revenue Recognition Concept
7) Money Measurement Concept
8) Dual Aspect Concept.

Multiple choice commercial applications generally accepted accounting principles (gaap) distinction between accounting and book-keeping distinction between book-keeping and accounting meaning and objectives of accounting

Which is NOT a part of financial statements?

  1. Balance sheet

  2. Book keeping

  3. Profit and loss account

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

Financial statements consist of Profit & Loss Account and Balance Sheet. 


Book Keeping is a process of recording of business transactions in chronological order. 

Multiple choice commercial applications generally accepted accounting principles (gaap) distinction between accounting and book-keeping distinction between book-keeping and accounting meaning and objectives of accounting

The recording of financial transactions and events manually or electronically is called _______.

  1. bookkeeping

  2. information technology

  3. reporting

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

Book Keeping is that branch of knowledge which tells how to keep a record of financial transactions. Definition of book keeping says that "Book Keeping is the art of recording business transactions in a systematic manner."