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 book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

All external liability accounts including provisions, if any, are closed by transferring them to the credit of _________ account.

  1. Bank

  2. Realisation

  3. Partner's Capital

  4. Assets (Individually)
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The total amount of debts payable by a business to the outsiders (other than the owners) are called external liabilities. All external liability accounts including provisions, if any, are closed by transferring them to the credit of Realisation account. The journal entry for transfer of liabilities is :

Liabilities A/c Dr.
            To Realisation A/c

Multiple choice book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

Select the most appropriate alternative from those given below:
Drawing account is closed by transferring the balance to the ______ account.

  1. Drawing

  2. Liabilities

  3. Assets

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

Drawing means the goods or money withdrawn from business concern for personal use. It has two aspects : 1.  It reduces the assets of business. 2. It reduces capital of partner. So it is closed by deducting from capital account.

Multiple choice book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

The journal entry for transfer of assets is ______________________.

  1. Realisation A/c Dr.

    To Assets (Individually) A/c

  2. Assets (Individually) A/c Dr.

    To Realisation A/c

  3. Bank A/c Dr.

    To Realisation A/c

  4. Realisation A/c Dr.

    To Revaluation A/c
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

All asset accounts excluding cash, bank and the fictitious assets, if any are closed by transfer to the debit of Realisation account at their book values. It may be noted that sundry debtors are transferred at gross value and the provision for doubtful accounts is transferred to the credit side of Realisation account along with liabilities. The same is applied for fixed assets, if provision for depreciation account is maintained. The general entry passed for the transfer of will be: 

Realisation Account  Dr. 
        To Assets (Individually) Account 

Multiple choice book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

It is uncommon to find for realization account :

  1. Prepared at the time of dissolution of firm.

  2. Contains generally all assets and liabilities.

  3. Records the sale of various assets and payment of liabilities.

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

Dissolution of partnership firm means that the firm closes down its business and comes to an end. A realization account is opened. In this all the assets and liabilities are transferred. It records the sale of assets and payment of liabilities because the main object of this account is to calculate the profit or loss on sale of such assets and payment of liabilities.  

Multiple choice book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

When balance sheet prepared after the new partnership assets and liabilities are recorded at :

  1. Original value

  2. Revalued figure

  3. At current cost

  4. As realizable value
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

New partnership means reconstruction of the firm due to admission, retirement and death. When partnership is reconstructed, new balance sheet at revalued figure is prepared. Because old balance sheet is related to old partners and profit or loss on revaluation is distributed among old partners. A new balance sheet with new figures is prepared for new partners. 

Multiple choice book keeping and accountancy conceptual framework of accounting distinction between accounting and book-keeping distinction between book-keeping and accounting meaning and objectives of accounting

Commercial accounting is based on ________________.

  1. Single entry book keeping

  2. Double entry book keeping

  3. Both single and double entry book keeping

  4. Cash basis of book keeping
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Commercial accounting relies on the double-entry bookkeeping system, where every transaction affects at least two accounts, ensuring the accounting equation remains balanced.

Multiple choice book keeping and accountancy conceptual framework of accounting distinction between accounting and book-keeping distinction between book-keeping and accounting meaning and objectives of accounting

______ covers procedural aspects of accounting work and includes record keeping function.

  1. Accounting

  2. Book-keeping

  3. Posting

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

Bookkeeping is primarily concerned with the routine, procedural task of recording financial transactions. Accounting is a broader field that includes the analysis and interpretation of those records.

Multiple choice book keeping and accountancy conceptual framework of accounting distinction between accounting and book-keeping distinction between book-keeping and accounting meaning and objectives of accounting

Book-keeping is concerned with the ______ of transactions while Accounting is concerned with the _______ of the recorded transactions. 

  1. Recording, Summarizing

  2. Summarizing, Recording

  3. Posting, Recording

  4. Summarizing, Posting
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Bookkeeping focuses on the systematic recording of daily transactions. Accounting takes those recorded transactions and performs higher-level tasks like summarizing, analyzing, and reporting.

Multiple choice book keeping and accountancy conceptual framework of accounting distinction between accounting and book-keeping distinction between book-keeping and accounting meaning and objectives of accounting

Financial statement do not form part of book-keeping.

  1. True

  2. False

  3. Partly true

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

Bookkeeping is limited to the recording and maintenance of financial data. The preparation of financial statements is an analytical process that falls under the scope of accounting, not bookkeeping.

Multiple choice commercial studies conceptual framework of accounting distinction between accounting and book-keeping distinction between book-keeping and accounting meaning and objectives of accounting

The balances of all assets accounts, expenses accounts, losses, drawings are placed in the _______of the trial balance.

  1. Credit column

  2. Debit column

  3. Ledger folio

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

According to the rules of debit and credit, assets, expenses, and losses have debit balances. Therefore, these are recorded in the debit column of the trial balance.

Multiple choice commercial studies conceptual framework of accounting distinction between accounting and book-keeping distinction between book-keeping and accounting meaning and objectives of accounting

In double entry system of book-keeping every business transaction effects ________________.

  1. Two accounts with equal but opposite effect.

  2. Two sides of the same account.

  3. The same account on two different dates.

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

Because every business transaction affects at least two accounts, our accounting system is known as a double-entry system.

Multiple choice commercial studies conceptual framework of accounting 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 relating to business operations.

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

  3. Interpreting the data for internal and external end-users.

  4. Both (a) and (b)
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Book keeping is mainly concerned with recording of day to day transactions. Book keeping is more of a clerical job and is related to recording whereas accounting is concerned with interpreting and analysis of transactions. 

Multiple choice commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

Budget is a projection of ________________.

  1. Cost accounts

  2. Financial accounts

  3. Management accounts

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

Financial Projections – “A forecast of future revenues and expenses for a business, organization, or country. 

Budget – “An estimate of costs, revenues, and resources over a specified period, reflecting a reading of future financial conditions and goals.”

Multiple choice commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

a) There is no difference between a forecast and a budget
b) Sales budget is the most important budget among all budgets.
Of these

  1. Both (a) and (b) are true

  2. (a) is false, but (b) is true

  3. (a) is true, but (b) is false

  4. Both (A) and (B) are false
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Forecasting is a technique that uses historical data as inputs to make informed estimates that are predictive in determining the direction of future trends.

A budget is a financial plan for a defined period, often one year. It may also include planned sales volumes and revenues, resource quantities, costs and expenses, assets, liabilities and cash flows.
A sales budget is only an estimate of anticipated revenues, it is a vital means of projecting income based on factors such as economic conditions, competition, production resources and expenses.

Multiple choice commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

The essential of budget.

  1. Prepared in advance

  2. Relates to a future period

  3. Statement expressed in monetary or physical units

  4. All the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
  1. It is an estimate of the economic activities of an entity which related to a specified future period.
  2. It must be written and approved by the appropriate authority.
  3. It should be modified or corrected, whenever, there is a change in circumstances.
  4. Statement expressed in monetary or physical units
  5. It is prepared on the basis of past experiences and trends in the business.
  6. It is a business practice, which is used to forecast the operating activities and financial position of the business.
  7. Prepared in advance