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

The process of equalizing the two sides of an account by putting the difference on the side where amount is short is known as _____________.

  1. Balancing

  2. Posting

  3. Journalizing

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

Balancing is the process of finding the difference between the two sides of an account and placing it on the shorter side to make the totals equal.

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

State the reasons whether the following statement is true or false.
nominal accounts are balanced in the end of the accounting year.

  1. True

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

Nominal accounts (expenses, losses, incomes, gains) are closed at the end of the year by transferring them to the Trading and Profit & Loss Account, not balanced.

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

The process of balancing of an account involves equalization of both sides of the account. If the debt side of an account exceeds the credit side, the difference is put on the credit side. The said balance is -
(i) A debit balance
(ii) A credit balance
(iii) An expenditure or an asset
(iv) An income or a liability
Select the correct answer from the options given below -

  1. Only (ii) above

  2. Only (iv) above

  3. Both (i) and (iii) above

  4. Both (ii) and (iii) above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

If the debit side exceeds the credit side, it is a debit balance. Debit balances in ledger accounts typically represent assets or expenses.

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

The words 'To Balance b/f' or 'By Balance b/f' are recorded in the 'Particular Column' at the time of posting of _________________.

  1. all compound entries

  2. an opening entry

  3. a closing entry

  4. an adjusting entry

  5. a transfer entry.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When opening books for a new year, the balances from the previous year are brought forward using an opening entry.

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

The balance of an account is always known by the side which is _______________.

  1. Shorter

  2. Higher

  3. Equal

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

The balance of an account is determined by which side has the higher total. The higher side shows whether it is a debit balance (debit side higher) or credit balance (credit side higher).

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

The words 'To Balance b/f' or 'By Balance b/f' are recorded in the particulars column at the time of _________________.

  1. Journalising

  2. Posting of an entry other than opening entry

  3. Balancing

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

The terms 'Balance b/f' (brought forward) are used when carrying balances from one page or period to another.

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

Normally, the following accounts are balanced ____________________.

  1. Personal Accounts and Nominal Accounts

  2. Real Accounts and Nominal Accounts

  3. Personal Accounts and Real Accounts

  4. Personal, Real and Nominal Accounts
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Personal and Real accounts are permanent accounts that are balanced and carried forward to the next accounting period, whereas Nominal accounts are closed.

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

While balancing an account in case of a debit balance, the Words By Balance c/d are recorded in the particulars column of an account _________________.

  1. on the debit side

  2. on the credit side

  3. on the both side

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

If an account has a debit balance, the total of the debit side is higher. To balance it, 'By Balance c/d' is written on the credit side.

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

Balance of personal account is brought down for the next year.

  1. True

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

Personal accounts are accounts related to individuals, firms, companies, etc. A few examples of personal accounts include debtors, creditors, banks, outstanding/prepaid accounts, accounts of credit customers, accounts of goods suppliers, capital, drawings, etc.

The balance of personal account is brought down for the next year. Every year, the balance of the previous accounting period is brought down for the next year. Debit balance will be shown in the debit column and credit balance will be shown in the credit column. Thus, the balance of personal account is brought down for the next year.

Multiple choice book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

 Expenses which are paid in advance is termed as _____.

  1. Prepaid expense

  2. Outstanding expense

  3. Unpaid expense

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

There are several items of expense which are paid in advance in normal course of business operations. At the end of the accounting year, it is found that the benefits of such expenses have not been fully received; a portion of its benefit would be received in the next accounting year. This portion of expense, is carried forward to the next year and is termed as prepaid expenses. The necessary adjustment in respect of prepaid expenses is made by recording the following entry:

Prepaid Expense A/c Dr.
       To Concerned Expense A/c
The effect of the above adjustment entry is that amount of prepaid part is deducted from the total of the particular expense, and the prepaid account is shown on the assets side of the balance sheet.

Multiple choice book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

'Subscriptions collected in advance by a publisher' should be classified as _________________.

  1. Accrued asset

  2. Accrues liability

  3. Unearned revenue

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

 Deferred revenue is common with subscription-based products or services that require prepayments. Examples of unearned revenue are rent payments received in advance, prepayment received for newspaper subscriptions, annual prepayment received for the use of software, and prepaid insurance.

Multiple choice book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

Outstanding and prepaid expenses and incomes are taken into account in determining profit or loss under _________________.

  1. Cash system of accounting.

  2. Mercantile system of accounting.

  3. Both (A) and (B).

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

Accrual system of Accounting is also known as the mercantile system of accounting wherein the transactions are recognized and recorded as and when they take place. 

Under the accrual accounting method, the revenue is recorded when it is actually earned, and the expenses are reported when they are incurred.
Hence,Outstanding and prepaid expenses and incomes are taken into account in determining profit or loss under mercantile /Accrual system of accounting.

Multiple choice book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

When item is shown on the debit side of a trial balance?

  1. Purchase returns

  2. Rent Outstanding

  3. Prepaid Expenses

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

A trial balance is the accounting equation of our business laid out in detail. It has our assets, expenses and drawings on the left (the debit side) and our liabilities, revenue and owner's equity on the right (the credit side)

Hence , Prepaid expense is an expense which is shown in Dr. side.