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

Which of the following is not a sub-field/Branch of Accounting?

  1. Cost Accounting.

  2. Management Accounting.

  3. Social Responsibility Accounting.

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

The process of recording financial transactions in a systematic manner and classifying them into ledgers is termed as book keeping. It is a part of accounting. It is the basis for accounting. Whereas, information relating to the cost have specialized branch named as cost accounting and the information relating to the funds and its cost and profit have a branch called management accounting. A new dimension to accounting is the social responsibility accounting which looks after the entity's responsibility towards the society. Automated accounting is no branch or field to 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

Book-keeping is mainly concerned with ___________________.

  1. Recording of financial data

  2. Designing the systems in recording, classifying and summarising the recorded data.

  3. Interpreting the data for internal and external users.

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

Book keeping is an art of 'recording' the financial data whereas 'Accountancy' deals with classification. interpretation, reporting of the financial data.

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 related to _________.

  1. recording of financial data

  2. designing the systems in recording, classifying and summarizing the recorded data

  3. interpreting the data for internal and external users

  4. all of the above
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 transactions. The need for recording such transactions arises because it is difficult to remember the various financial transactions. 

Book  Keeping is mainly related to recording of financial data.

Multiple choice commercial applications fundamental concepts of cost meaning, elements and classification of cost methods of costing cost accounting: an introduction

When factory overhead control account has an ending debit balance, factory overhead was ___________.

  1. Over applied

  2. Under applied

  3. Both A and B

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

This is the situation in which the overheads applied to a product is less than the actual overhead incurred. This results in the overheads having a debit balance.

Multiple choice commercial applications fundamental concepts of cost meaning, elements and classification of cost methods of costing cost accounting: an introduction

Preliminaries to setting of standards:
I. Establishment of cost centres
II. Classification and Codification of accounts
III. Period of use
IV. Reasonable or desirable level of attainment
Of these

  1. I and II are correct

  2. II and IV are correct

  3. I and IV are correct

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

The following preliminaries are to be carefully considered before introducing standard costing system in any firm:

A. Setting up or Establishment of Cost Centres;

B. Classification and Coding of Accounts;

C. Types of Standards; and

D. Setting up or Establishment of Standards.

Multiple choice elements of accounts accounting equation explain the concept of accounting equation usefulness of an accounting equation accounting equations and transactions

Which financial statement represents the accounting equation, Assets=Liabilities+Owner's equity.

  1. Income statement

  2. Statement of cash flows

  3. Balance sheet

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

The Balance Sheet is the financial statement that displays the accounting equation (Assets = Liabilities + Owner's Equity) at a specific point in time.

Multiple choice elements of accounts accounting equation explain the concept of accounting equation usefulness of an accounting equation accounting equations and transactions

Which of the financial statement represents the accounting equation?

  1. Manufacturing account

  2. Cash flow statement

  3. Balance sheet

  4. Profit and loss account
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The Balance Sheet is the financial statement that is structured directly based on the accounting equation (Assets = Liabilities + Equity).

Multiple choice elements of accounts accounting equation explain the concept of accounting equation usefulness of an accounting equation accounting equations and transactions

American accountants have derived the rules of debit and credit through ________.

  1. Accounting equation

  2. Convention of conservation

  3. Accounting conventions

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

Accounting equation is the foundation of double entry system of book-keeping. It displays that all the assets are either financed by borrowing money or paying from the shareholder's equity. The balance sheet being the complex version shows explain the equation very clearly and it shows that total assets is equal to total liability plus shareholder's equity. Debit and credit are similar to accounting equation. Hence, american accountants have derived the rules of debit and credit through accounting equation.

Multiple choice elements of accounts accounting equation explain the concept of accounting equation usefulness of an accounting equation accounting equations and transactions

According to accounting equation concept, every business transaction recorded in accounts has two aspects. Which are these two aspects?

  1. Capital and liabilities

  2. Giving of benefit and receiving of benefit

  3. Liabilities and assets

  4. Giving of profit and receiving of profit
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Dual aspect is the foundation or basic principle of accounting. It provides the very basis for recording business transactions into the book of accounts. This concept states that every transaction has a dual or two-fold effect and should therefore be recorded at two places. In other words, at least two accounts will be involved in recording a transaction.

The double-entry system also requires that for all transactions, the amounts entered as debits must be equal to the amounts entered as credits.

Hence, the two aspects are giving and receiving of benefits.

Multiple choice book keeping and accountancy adjustments drawing account of partners interest on drawings interest on partner's drawings and capital

Which of the following statements is true ?

  1. When separate set of books is maintained, expenses paid by venturer will be credited to joint bank account.

  2. When separate set of books is maintained, expenses paid by venturer will be credited to venturer's capital account.

  3. When separate set of books is maintained, expenses paid by venturer will be credited to Jt. Venture account.

  4. When separate set of book is maintained, expenses paid by venturer will be credited to Outstanding Expenses Account.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When a separate set of books is maintained for a joint venture, any expenses paid by a venturer are treated as a liability to that venturer, thus being credited to their respective personal capital account.

Multiple choice book keeping and accountancy adjustments drawing account of partners interest on drawings interest on partner's drawings and capital

How would you close the Partner's Drawing Account?

  1. By transfer to the debit of Capital or Current Account

  2. By transfer to the credit of Capital Account

  3. By transfer to the credit of Current Account

  4. Either b or c
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A partner's drawing account represents withdrawals made by the partner. At the end of the accounting period, this balance is transferred to the debit side of the partner's capital or current account to close it.

Multiple choice book keeping and accountancy adjustments drawing account of partners interest on drawings interest on partner's drawings and capital

Interest on Drawings is:

  1. Debited to P/L A/C

  2. Credited to P/L A/C

  3. Debited to capital A/C

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

Interest on Drawings will be debited to capital account. Interest on drawing is an income for the firm and is payable by the partners to the firm hence, is deducted/debited. Interest is charge on the money/goods taken by the partners for their personal use during the year. 

Multiple choice book keeping and accountancy adjustments drawing account of partners interest on drawings interest on partner's drawings and capital

Where will you record interest on drawings? 

  1. Debit side of Profit & Loss Appropriation Account.

  2. Credit side of Profit & Loss Appropriation Account.

  3. Credit side of Profit & Loss Account.

  4. Debit side of Capital/Current Account only.

Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Interest on drawings will be shown on the credit side of the profit and loss appropriation account. Interest on drawings is the interest charged by the firm on the drawings made by the partners. It is a source of income for the firm and hence, it is to be credited to profit and loss appropriation account. 

Multiple choice elements of accounts journal proper balancing of accounts balancing the accounts introduction to journal proper

The debit balance of a cash account shows ______________.

  1. Amount receivable

  2. Amount payable

  3. Cash in hand

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

Cash on Hand is an asset account, and this means that debits increase its balance, and credits decrease that total. This account, therefore, is said to carry a debit (DR) balance.

Multiple choice elements of accounts journal proper balancing of accounts balancing the accounts introduction to journal proper

When Accounts in the ledger are balanced ?

  1. Daily

  2. Weekly

  3. Monthly

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

The ledger account are periodically balanced at the end of the accounting period, with the object of ascertaining the net position of each amount. Balancing of an account means  that two sides are totalled and the difference between them is shown on the side, which is shorter in order to make their totals equal.