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 applications meaning and fundamentals of double entry book-keeping double entry system meaning, definition, and advantages of double entry book-keeping meaning, definition, need, objectives and limitations of double entry system introduction to single entry system and difference between single entry and double entry system meaning and featuresof incomplete records

When a liability is reduced or decreased, it is recorded on the ______________.

  1. left or credit side of the liability account

  2. right or debit side of the liability account

  3. right or credit side of the liability account

  4. left or debit side of the liability account
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Since the Liability shows credit balance as per the accounting equation. When a liability is reduced or decreased, it is recorded on the debit side of the liability account.

Multiple choice book keeping and accountancy reserve and fund kinds of reserves secret reserve reserves

Under purchase method of amalgamation, _______ of the transferor company continues to appear in the balance sheet of the transferee company. 

  1. Capital reserve

  2. General reserve

  3. Statutory reserve

  4. Specific reserve
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
Ans:
Amalgamation in the nature of Purchase -
It is done as follows :- 
Amalgamation Adjustment A/c Dr. 
Statutory Reserve A/c Cr

Multiple choice book keeping and accountancy reserve and fund kinds of reserves secret reserve reserves

Which of the following cannot be used for the purpose of creation of capital redemption reserve account?

  1. Profit and loss account (credit balance).

  2. General reserve account.

  3. Dividend equalisation reserve account.

  4. Unclaimed dividends account.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

As per the Companies Act 2013, CRR is created from the Profits of the company which only includes the Free Reserves.

Hence, Free Reserve includes following items:

1. Profit and loss accounts

2. General Reserve funds

3. Contingency reserve

4. Dividend equalisation reserve

5. Workmen compensation fund

6.  Workmen accident fund

Therefore, CRR can be created from the above mentioned accounts in the same order of preference.

Multiple choice book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

Recording of all business transactions is based on ________.

  1. Sales journal

  2. Accounting equation

  3. Formula

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

Accounting equation is the foundation of double entry system of book-keeping. It displays that all the assets are either financed by borrowing money or paying from the shareholder's equity. The balance sheet being the complex version shows explain the equation very clearly and it shows that total assets is equal to total liability plus shareholder's equity. Hence, recording of all business transactions is based on accounting equation.

Multiple choice book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

Accounting equation is a _______.

  1. Formula

  2. Theory

  3. Rule

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

Accounting equation states that assets is equal to equity. Equity consists of liabilities and shareholder's capital. Hence, it is a formula .i.e. Assets = Equity.

Multiple choice book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

A scale of typewriter that as been used in the office should be credited to ______________.

  1. Cash Account.

  2. Sales Account.

  3. Office Equipment Account.

  4. Bank Account.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A typewriter is a fixed asset (office equipment). When an office asset is sold, the credit should be made to the asset account (Office Equipment) to remove its value from the books, not to a sales account which is reserved for inventory.

Multiple choice book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

Accounts which relates to assets tangible or intangible are called ________ .

  1. Personal a/c

  2. Real a/c

  3. Nominal a/c

  4. Impersonal a/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

There are mainly three types of accounts: Real, Personal and Nominal accounts. Personal accounts are classified into three subcategories: Artificial, Natural and Representative. All assets of a firm, which are tangible or intangible, fall under the category "Real Accounts". Tangible real accounts are related to things that can b touched and felt physically, e.g., building, machinery, stock, land, etc. Intangible real accounts are related to things that can't be touched and felt physically, e.g., goodwill, patents, trademarks, etc.

Multiple choice book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

In case of unexpired entry following entry should be made _________________.

  1. It should be shown as an asset in the balance sheet

  2. It is shown as a expense in profit and loss account

  3. Both A & B

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

An unexpired expense (prepaid expense) represents a benefit to be received in the future, so it is recorded as an asset. The portion that has expired is recorded as an expense in the Profit and Loss account.

Multiple choice book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

Stimulus: I have finish the report tonight as it is due tomorrow.
Response: You always leave things to the last minutes
How will you classify the above transaction as per concept of transactional analysis ___________.

  1. Adult - Adult

  2. Parent - Adult

  3. Adult - Parent

  4. Child - Adult
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The stimulus is a factual statement about a deadline (Adult ego state). The response is a critical, blaming remark (Parent ego state). Thus, it is an Adult-Parent transaction.

Multiple choice book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

Stimulus: You have presented a good report.
Response: Thank you.
How will you classify the above transaction as per concept of transactional analysis ________________.

  1. Adult - Child

  2. Adult - Adult

  3. Parent - Parent

  4. Child - Adult
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Both the stimulus and the response are objective, factual, and polite exchanges of information, which is characteristic of the Adult ego state.

Multiple choice elements of accounts sub-division of journal - 2 (subsidiary books) sales book or sales journal introduction, meaning, types and advantages of subsidiary books meaning and types of subsidiary books

Journal proper is used for recording only those transactions as cannot be recorded in any of the other __________ books.

  1. ledger

  2. journal proper

  3. trial balance

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

Journal proper is the book of original entry used for transactions that do not fit into specialized subsidiary books like the cash book, sales book, or purchase book.

Multiple choice elements of accounts sub-division of journal - 2 (subsidiary books) sales book or sales journal introduction, meaning, types and advantages of subsidiary books meaning and types of subsidiary books

A subsidiary record is a book ________________.

  1. of subsidiary entry.

  2. containing the final account.

  3. of final entry.

  4. of original entry.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Subsidiary books are books of original entry where transactions are recorded for the first time before being posted to the ledger.

Multiple choice elements of accounts sub-division of journal - 2 (subsidiary books) sales book or sales journal introduction, meaning, types and advantages of subsidiary books meaning and types of subsidiary books

Which of the following is/are not subsidiary books ? 

  1. Purchases Returns Book

  2. Cash Book

  3. Journal proper

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

The Cash Book, Purchases Returns Book, and Journal Proper are all considered subsidiary books in accounting systems.