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 elements of accounts ledger and posting meaning of bill of exchange index of ledger, forms of ledger and process of posting posting of entries in ledger

Consider the following statement, while preparing annual financial statements, the balance of bills receivable account can be treated as.
I. An accrued income
II. An item of assets
III. A "personal account" balance
Of these statement.

  1. II and III are correct

  2. I and III are correct

  3. I and II are correct

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


  • Accounts receivable represents revenue that has been both earned and billed but not yet received.
  • Accounts receivable is recorded as an asset on the balance sheet.
  • These B/R and B/P are not assets because they are not yet acquired as like Plant, building etc. 
  • They are yet to be encashed. Asset means which has been acquired and has some value. Hence, Bills Receivable and Bills Payable are Representative Personal A/cs.


Multiple choice elements of accounts ledger and posting meaning of bill of exchange index of ledger, forms of ledger and process of posting posting of entries in ledger

While preparing the Annual Financial Statement, the balance of Bills Receivable Account can be treated as a(n) 
1. Accrued Income
2. Item of Asset
3. Personal Account Balance
of these statements

  1. 2 and 3 are correct

  2. 1 and 3 are correct

  3. 1 and 2 are correct

  4. None is correct
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Bills Receivable represents a claim against a person (the drawee), making it a personal account. It is also an asset for the business as it represents a future cash inflow.

Multiple choice elements of accounts ledger and posting meaning of bill of exchange index of ledger, forms of ledger and process of posting posting of entries in ledger

Bills receivable account is _____________.

  1. an expense account

  2. an assets account

  3. a liability account

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

A Bills Receivable is a written promise to receive money, which constitutes a current asset for the holder. Therefore, it is classified as an asset account.

Multiple choice elements of accounts ledger and posting meaning of bill of exchange index of ledger, forms of ledger and process of posting posting of entries in ledger

Bills receivable account is a __________.

  1. nominal account

  2. personal account

  3. real account

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

While Bills Receivable is a personal account (representing the debtor), it is often categorized as a real account in some traditional accounting classifications because it represents a tangible legal document/asset.

Multiple choice elements of accounts ledger and posting meaning of bill of exchange index of ledger, forms of ledger and process of posting posting of entries in ledger

Bills payable book is a ____________.

  1. subsidiary book

  2. principal book

  3. ledger

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

There are various subsidiary books which are used to record the specific transaction pertaining to the specific activity. 

Credit sales are recorded in sales book while bills payable are recorded in bills payable book which is a subsidiary book.

Multiple choice trend analysis tools for financial analysis analysis of financial statements financial statement analysis accountancy

Financial statement analysis helps to identify the areas where the managers have been efficient and the areas where they have been lacking behind.

  1. True

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

True. Financial statements helps to understand the financial position of the company. It helps to understand the deviation between the actual position and the position that the company had planned. By looking at the deviation the company can understand how efficiently the managers have worked. 

Multiple choice trend analysis tools for financial analysis analysis of financial statements financial statement analysis accountancy

A company discloses the following information in relation to its receivables in the notes to its financial statements.
Gross amount receivable - Rs. 4,800
Provision for doubtful debts - Rs. 360
Net Carrying amount of receivable - Rs. 4,400
Which one of the following is the maximum credit risk that it must also disclose in the notes to comply with IFRS 7?

  1. Rs. 360

  2. Rs. 4,400

  3. Rs. 4,800

  4. No disclosure is required
Reveal answer Fill a bubble to check yourself
D Correct answer
Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

Where will you record interest on drawings in the final accounts of the firm ? 

  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 is an income for the firm, so it is credited to the Profit and Loss Appropriation Account.

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

Which of the following does not appear in the Profit & Loss Appropriation Account? 

  1. Salary/Commission to a partner.

  2. Salary/Commission to a manager.

  3. Interest on capital of a partner.

  4. Interest on loan of a partner.

  5. (a) & (c).

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

A Profit and loss Appropriation account is an account which is prepared after profit and loss account and is usually prepared by partnership firms for distribution/allocation of profit earned by the firm to partners. Salary/commission to manager is an item of Profit and loss account. Only items relating to partners will be entered in Profit and loss Appropriation like interest on capital, profit, interest on drawings, salary/commission to partners. 

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

Which of the following appear in the Profit & Loss Appropriation Account? 

  1. Salary/Commission to a partner.

  2. Salary/Commission to a manager.

  3. Interest on capital of a partner.

  4. Interest on loan of a partner.

  5. (a) & (c).

Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation
A AND C.
A Profit and loss Appropriation account is an account which is prepared after profit and loss account and is usually prepared by partnership firms for distribution/allocation of profit earned by the firm to partners. Only items relating to partners will be entered in Profit and loss Appropriation like interest on capital, profit, interest on drawings, salary/commission to partners. 
Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

When Profit & Loss Appropriation Account is prepared? 

  1. For Proprietorship.

  2. For Partnership firm.

  3. Both (a) and (b).

  4. None of the above.

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

Profit and loss Appropriation account is prepared for partnership firm. It is an extension of profit and loss account. It is used for allocation and distribution of Net profit among partners, reserves and dividends. It Is usually prepared after preparing Profit and loss account. 

Multiple choice civics scope and significance of political science introduction to political science meaning and importance of political science study of political science

'Budget' is known as _________________.

  1. Annual financial statement

  2. Annual Budget

  3. Financial statement of the year

  4. It has no other name
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Article 112 of the Indian Constitution refers to the 'Annual Financial Statement' as the document commonly known as the Budget.

Multiple choice elements of book keeping and accountancy ledger and posting explain the concept of ledger and its importance in accounting process. introduction to ledgers ledgers

It is a check on the accuracy of posting. If the trial balance agrees it proves that - 
1. The books are arithmetically accurate 
2. Both the aspects of the transactions have correctly recorded in the books of original entry as well as in the ledger. 
The correct answer is ___________________.

  1. $1$ but not $2$
  2. $2$ but not $1$
  3. Both $1$ & $2$
  4. Either $1$ or $2$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A trial balance only checks the arithmetic accuracy of the ledger balances. It does not guarantee that transactions were recorded in the correct accounts or that the original entries were conceptually correct.

Multiple choice elements of book keeping and accountancy ledger and posting explain the concept of ledger and its importance in accounting process. introduction to ledgers ledgers

Which of the following involves the preparation of reports and statements from the classified data (ledger) understandable and useful to management and other interested parties? 

  1. Classifying

  2. Recording

  3. Summarizing

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

Summarizing is the stage in the accounting cycle where ledger balances are used to prepare financial statements and reports for management. Recording is the initial entry, and classifying involves posting to the ledger.

Multiple choice elements of book keeping and accountancy ledger and posting explain the concept of ledger and its importance in accounting process. introduction to ledgers ledgers

Ledger book is popularly known as ____________.

  1. Secondary book of accounts

  2. Principal book of accounts

  3. Subsidiary book of accounts

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

The ledger is referred to as the principal book of accounts because it contains all the final accounts of a business, whereas the journal is the book of original entry.