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

A cash budget can be prepared by ______________.

  1. Receipts and Payments Method

  2. The Adjusted Profit and Loss Account Method

  3. The Balance Sheet Method

  4. Any of the above methods
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The following are three methods of preparing cash budget:

(i) Receipt and Payment Method
(ii) Adjusted Project and Loss Method
(iii) Balance Sheet Method

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 budget prepared on the basis of a standard or a fixed level of activity is called a ____________.

  1. Fixed budget

  2. Flexible budget

  3. Sales budget

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

 A fixed budget is a budget that does not change or flex for increases or decreases in volume. ("Volume" could be sales, units produced, or some other activity.) A fixed budget is also known as a static budget.

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

__________ shows the anticipated sources and utilisation of cash.

  1. Master budget

  2. Cash budget

  3. Sales budget

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

 A cash budget itemizes the projected sources and uses of cash in a future period. 

The Sources of Cash section contains the beginning cash balance, as well as cash receipts from cash sales, accounts receivable collections, and the sale of assets.

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

Which of the following is not considered while preparing cash budget?

  1. Accrual Principle

  2. Difference in Capital and Revenue items

  3. Conservation Principle

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

A cash budget is an estimation of the cash inflows and outflows for business over a specific period of time. The budget is used to assess whether the entity has sufficient cash to operate. Companies use sales and production forecasts to create a cash budget, along with assumptions about necessary spending and accounts receivable. If a company does not have enough liquidity to operate, it must raise capital by issuing stock or by taking a debt.

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 budget is frequently prepared to combine all other budgets in a summary form. It is known as _____________.

  1. Sales Budget

  2. Purchase Budget

  3. Cash Budget

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

The master budget is the sum total of all the divisional budgets that is prepared by all the divisions. Further, it also includes the financial planning, cash-flow forecast and budgeted profit and loss account and balance sheet of the organization. 


Master Budget is the summary of the divisional budget.

Multiple choice elements of accounts accounting in business journal - book of original entry purchases and sales book meaning and importance of journal

When a firm maintains a cash book, it need not maintain _______________.

  1. Journal Proper

  2. Purchase(journal)book

  3. Sales(journal)book

  4. Bank and cash account in the ledger
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When a firm maintains a cashbook,  it does not need to maintain Separate Bank and cash account in the ledger.

Multiple choice elements of accounts accounting in business journal - book of original entry purchases and sales book meaning and importance of journal

The prime entry for the acquisition of a cash book, ledgers and a journal for Rs 240 from X Ltd. on credit would be in the:

  1. Journal

  2. purchases Day Book

  3. Cash Book

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

Transactions that do not fit into specialized journals (like cash books or purchase day books) are recorded in the Journal Proper. Since this involves multiple items (cash book, ledgers, journal) being acquired on credit, it is a non-routine transaction recorded in the general journal.

Multiple choice elements of accounts accounting in business journal - book of original entry purchases and sales book meaning and importance of journal

The journal entry to account for the acquisition on credit of factory machinery from Millet plc should require which of the following:

  1. Debit Factory account and credit Millet plc account

  2. Debit Machinery account and credit Millet plc account

  3. Debit Millet plc account and credit Machinery account

  4. Debit Machinery account and credit Cash account
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When purchasing machinery on credit, the asset (Machinery) is debited to increase it, and the liability (Millet plc) is credited to record the amount owed.

Multiple choice elements of accounts accounting in business journal - book of original entry purchases and sales book meaning and importance of journal

An office equipment bought on credit would first be entered by the purchaser in the ________________.

  1. Returns Outward Book.

  2. Purchase Day Book.

  3. Journal Proper.

  4. Sales Day Book returns Inward Book.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The Purchase Day Book is only for credit purchases of inventory (goods for resale). Office equipment is a fixed asset, so its credit purchase is recorded in the Journal Proper.

Multiple choice elements of accounts accounting in business journal - book of original entry purchases and sales book meaning and importance of journal

_______ is a book of account, in which all types of accounts relating to assets, liabilities, capital, expenses and revenues are maintained. 

  1. Ledger

  2. Journal

  3. Primary entry book

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

A ledger is the principal book of account in accounting where all individual accounts relating to assets, liabilities, capital, expenses, and revenues are compiled and maintained from the journal.

Multiple choice elements of accounts accounting in business journal - book of original entry purchases and sales book meaning and importance of journal

Credit sale of various assets or investments will be recorded in ____________.

  1. General Jounal

  2. Sales Book

  3. Cash Book

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

The Sales Book is reserved for credit sales of inventory (goods). Credit sales of assets or investments are recorded in the General Journal (Journal Proper).

Multiple choice elements of accounts accounting in business journal - book of original entry purchases and sales book meaning and importance of journal

_______ is a book in which all the business transactions are originally recorded in chronological order and from which then are posted to the ledger accounts at any convenient time. 

  1. Ledger

  2. Journal

  3. Purchases return books

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

The journal is the book of original entry where transactions are recorded in chronological order before being posted to the ledger.