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 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

Book keeping is mainly concerned with which of the following features?

  1. It is concerned with financial data recording.

  2. It is concerned with designing the systems of recording, classifying and summarizing the recorded data.

  3. It is concerned with data interpreting for internal and external users.

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

Book keeping and accounting terms are normally used as interchangeably but actually this is not the case. Book keeping is basically concerned with recording of a transaction in books of account of any business. It is to be noted that only financial data are to be recorded.

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."

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

A company draws cash from United Bank. The entries in the Company's accounts should be:

Debit Credit
1 United bank account Cash account
2 Purchases Cash Account
3 Income Bank Account
4 Cash account United bank account

  1. 1

  2. 2

  3. 3

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

Cash withdrawal from United Bank. This transaction effects two account i.e. Cash and Bank. Cash and Bank, both are real account. 

Following the rule of real account, following entry will be passed:

Cash A/c                               Dr.
      To United Bank A/c.

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

An account used for carrying temporarily doubtful receipts or disbursements and discrepancies is ____________.

  1. Suspense account

  2. Debit balance

  3. Bank overdraft

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

As such there should not be any suspense account but some time there are few items which are doubtful or accountant needs some clarity in these items. Hence, till than all such receipts and payments are parked in a temporary account called "Suspense" A/c. 

Balance is suspense account has to be zero before finalization of financial statement of the organization.  

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 rule 'every transaction affects two or more ledger accounts' is based or the concept of ___________.

  1. Going concern

  2. Double entry system of book-keeping

  3. Money measurement

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

Double entry system is based 'on scientific principles therefore, it is used by most of the business houses. This system recognizes the fact that every transaction has two aspects and records both aspects of each and every transaction. For every debit there will be a credit and vice a versa.


For example, goods worth Rs.10000 purchased on cash. It affects two account i.e. goods and cash. Following the rule of real account, the below entry will be passed:

Purchase/Goods A/c                     Dr.
                To Cash A/c 

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 correct about 'Accounting Concept'.

  1. Accounting concepts are based on accounting conventions.

  2. Accounting concepts are established by common accounting practices.

  3. Accounting concepts are methods or procedures accepted by general agreement.

  4. Personal judgement has no role in the adoption of accounting concepts.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Accounting Concepts are the necessary assumptions, conditions or postulates upon which the accounting is based. They are developed to help in the preparation of accounting statements so that the financial information provided to all the readers is such that all readers interpret the statements in the same meaning and context. Example entity concept, dual entry concept etc.
In brief we can say that personal judgement has no role in the adoption of accounting concepts.

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 basic objective of the book-keeping is _______________.

  1. to maintain systematic records of financial transactions

  2. to ascertain financial performance

  3. to ascertain financial position

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

Book keeping is a part of accounting. The process of recording financial transaction in a systematic manner and classifying them into ledgers is termed as book keeping.

Basic objective of book keeping is to keep records of financial transaction in the books of prime entry in chronological order for future reference.