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 applications of computers in accounting introduction to computer and accounting information system meaning of computerised accounting system application of computerised accounting system

Which of the following are features of computerised accounting system?

  1. Online input and storage of accounting data.

  2. Printout of purchase and sales invoice.

  3. Grouping of accounts is done from the very beginning.

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

Computerized accounting systems automate data entry, storage, and reporting. They allow for efficient invoice generation and structured account grouping from the start, making all listed options correct.

Multiple choice elements of accounts applications of computers in accounting introduction to computer and accounting information system meaning of computerised accounting system application of computerised accounting system

Which equation does the chart of accounts tie-in with?

  1. Accounting equation

  2. Wave equation

  3. The origin of complex numbers

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

A chart of accounts (COA) is a financial organizational tool that provides a complete listing of every account in an accounting system. An account is a unique record for each type of asset, liability, equity, revenue and expense.

Multiple choice elements of accounts applications of computers in accounting introduction to computer and accounting information system meaning of computerised accounting system application of computerised accounting system

Name the five main categories that the ledger accounts are grouped under:

  1. Assets, credit cards, liabilities, money, contact cards

  2. Assets, production, bank register, purchases, sales

  3. Assets, liabilities, equity, income, expenses

  4. Assets, credit cards, purchases, money, bank register
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The fundamental accounting equation and the structure of the general ledger are based on five core categories: Assets, Liabilities, Equity, Income (Revenue), and Expenses.

Multiple choice elements of accounts applications of computers in accounting introduction to computer and accounting information system meaning of computerised accounting system application of computerised accounting system

In addition to the standard chart of accounts for a specific industry, you will likely want to expand and/or modify the chart of accounts to fit your business. One tool that would be helpful in determining the accounts for your company would be your company's ___________ chart.

  1. profit

  2. loss

  3. cash

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

An organization chart provides a clear view of the business structure, departments, and reporting lines, which helps in determining how accounts should be categorized to reflect the business's operational structure.

Multiple choice accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

When scrap is sold ________ account is credited.

  1. Asset A/c

  2. Bank A/c

  3. Scrap A/c

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

Scrap value is the estimated cost that a fixed asset can be sold for after providing in for full depreciation.  When an asset is purchased, asset account is debited as assets have debit balance. So when scrap is sold, asset account is credited with the amount received on sale. 

Multiple choice accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

Give journal entries for:
Transfer of balance in asset account in case of loss.

  1. Profit and Loss A/c Dr.

    To Asset A/c

  2. Asset A/c Dr.

    To Profit and Loss A/c

  3. Bank A/c Dr.

    To Asset A/c

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

If the asset is disposed off, the profit or loss generated on account of sale has to be transferred to the respective asset a/c. If the sale proceed is more than the written down value of the asset, there will be profit and if the sale proceed is lower than the written down value, there will be loss on sale of asset. 


For example , WDV of the machine is Rs.5000 which is sold for Rs.4500. There is a loss of Rs.500 on sale of asset. Following entry will be passed in the books of account for loss:

Profit & Loss A/c                            Dr.   500
Bank A/c                                         Dr. 4500
       To Asset A/c                                                5000

Multiple choice accountancy depreciation accounting asset disposal account disposal of asset disposal of asset and any addition or extension to the existing asset

___________ is designed to provide a complete and clear view of all the transactions involved in the sale of asset under one account head.

  1. Asset sale A/c

  2. Asset Clear A/c

  3. Asset Disposal A/c

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

Asset Disposal A/c.

Asset Disposal A/c is designed to provide a complete and clear view of all the transaction involved in gthe sale of asset unfer one acount head. The original cost of asset being sold is debited to the asset disposal account and accumulated depreciation amount appearing in provision for depreciation account relating to that asset till the date of disposal is credited to the asset disposal account. The net amount realised from the sale of the asset is also crerdited to this account. The balance of asset disposal account shows profit or loss which is transferred to profit and loss account. The advantage of this method is that it gives full picture of all the transactions related to asset disposal at one place.

Multiple choice elements of business purchasing and stores definition and functions of purchasing and storage department product life cycle e-marketing

______ is the process of recording details of stock movements and balances in terms of financial value.

  1. Book-keeping

  2. Financial accounting

  3. Stores accounting

  4. Management accounting
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Stores accounting specifically deals with recording the financial value of stock movements and current inventory balances.

Multiple choice commercial applications basic accounting principles and concepts meaning and purposes of accounting need and basic principles of accounting generally accepted accounting principles

Accounting Principle is general law or rule followed in the preparation of financial statements.

  1. True

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

Accounting principles are the fundamental rules and guidelines that provide a framework for consistent financial reporting and preparation of financial statements.

Multiple choice commercial applications basic accounting principles and concepts meaning and purposes of accounting need and basic principles of accounting generally accepted accounting principles

In cash accounting system __________________________.

  1. Revenues of assets are shown only when cash is received irrespective of the period

  2. Revenues of assets are shown only of the cash received for the transactions of the financial year

  3. Revenues of assets are shown only of the cash received for the current year

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

The cash basis of accounting records transactions only when cash is actually received or paid, regardless of the accounting period to which they relate.

Multiple choice commercial applications basic accounting principles and concepts meaning and purposes of accounting need and basic principles of accounting generally accepted accounting principles

The characteristic feature of dual aspect concept of accounting is?

  1. The total amount debited is always equal to total amount credited

  2. All the transactions are settled in cash

  3. Cost of the various asset is taken on the basis of actual amount spent on it

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

The dual aspect concept states that every financial transaction has two sides, meaning that for every debit entry, there must be a corresponding credit entry of equal value.

Multiple choice commercial applications basic accounting principles and concepts meaning and purposes of accounting need and basic principles of accounting generally accepted accounting principles

Which of the following statements is correct?

  1. Accounting profit is the difference between cash receipts and cash paid in a period

  2. Accounting profit is the total of cash sales in the year less the expenses for the period

  3. Accounting profit is the difference between revenue income and expenses for the period

  4. Accounting profit is the difference between revenue income and cash payments for the period
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Accounting profit is defined as the difference between total revenue earned and the total expenses incurred during a specific accounting period.

Multiple choice commercial applications basic accounting principles and concepts meaning and purposes of accounting need and basic principles of accounting generally accepted accounting principles

Accounts which represent a certain person or group of persons are termed as ___________________.

  1. Artificial or legal persons account

  2. Natural persons personal account

  3. Representative personal accounts

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

Representative Personal Accounts are accounts which represent a certain person or group of people. Accounts relating to outstanding and prepaid items are called representative personal accounts. For example, prepaid insurance, outstanding rent, outstanding wages/salaries etc. Outstanding salaries is one such account.

Multiple choice commercial applications basic accounting principles and concepts meaning and purposes of accounting need and basic principles of accounting generally accepted accounting principles

A change in accounting policy is justified ______________________.

  1. To comply with accounting standard

  2. To ensure more appropriate presentation of the financial statement of the enterprise.

  3. To comply with law

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

Accounting policies can be changed if required by new accounting standards, by law, or to provide a more accurate and fair presentation of the financial position of the enterprise.

Multiple choice commercial applications basic accounting principles and concepts meaning and purposes of accounting need and basic principles of accounting generally accepted accounting principles

All of the following are limitations of Accounting Standards except ______________________.

  1. The choice between different alternative accounting treatments is difficult.

  2. There may be trend towards rigidity.

  3. Accounting Standards cannot override the statute.

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