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 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

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.

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

Purchases accounts always shows __________ balance.

  1. debit

  2. credit

  3. negative

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

Purchase account is a part of trading A/c and shows the amount of goods purchased for a business by a trader for resale. 


Hence, Purchases account always show debit balance. when the debit side of the ledger account exceeds the credit side, the balancing figure is termed as Debit balance. 
All the assets expenses and losses show Debit balance.

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

Sales account always shows _________ balance.

  1. debit

  2. credit

  3. positive

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

Sales account reflects the amount of revenue earned by the sale of goods/services of a business. Thus, it is an income for the business and according to the rule of accounting, all incomes are to be credited and all expenses are to be debited. Thus, a sale account always show credit balance.

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

Total of all debit balance must be _____________ to the total of all credit balances.

  1. different

  2. equal

  3. more

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

Under the double entry system of accounting, every transaction has dual aspects  i.e. debit and credit. Thus, the total of debit balances must equal to the total of credit balances of the Trial balance to ensure the arithmetical accuracy of accounts.

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

Excess of debit side total of an account over its credit side total is called _____.

  1. debit balance

  2. credit balance

  3. equal balance

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

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

The words 'balance c/d' are written against the amount of the difference between the two sides. The amount of balance is brought (b/d) down in the next accounting period indicating that it is a continuing account, till finally settled or closed. 
In case, the debit side exceeds the credit side, the difference is written on the credit side and is called as debit balance. 
If the credit side exceeds the debit side, the difference between the two appears on the debit side and is called credit balance.

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

An account has a debit balance if the total of credit side is greater than the total of debit side.

  1. True

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

Balancing of an account means ascertaining the net effect of the transaction, i.e. the difference between the debit and credit side of the ledger account. 


Thus, when the debit side of the ledger account exceeds the credit side, the balancing figure is termed as Debit balance. 
All the assets expenses and losses show Debit balance.

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

State whether the following statements are True or False.
Capital Account rarely shows debit balance. 

  1. True

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

A capital account shows credit balance. It represents the amount owed by a business to the owner of the business. Thus, it is a liability for  the business. All the liabilities represents the credit balance. Hence, Capital A/c represents the credit balance.