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 bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

When bill is cancelled Drawee passes Following Entry ______________.

  1. Bill Payable A/c Dr

    To Drawer A/c

  2. Bill Payable A/c Dr

    To Cash A/c

  3. Drawer A/c Dr

    To Bill Payable A/c

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

When a bill is cancelled, the liability for the bill is removed from the books. The drawee debits the Bills Payable account to close the liability and credits the Drawer's account to reinstate the debt.

Multiple choice book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

At the time of renewal of a bill, interest account is in the books of the drawer. 

  1. Credited

  2. Debited

  3. None of these

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

When a bill is renewed, interest is charged to the drawee. For the drawer, this interest is income, and income accounts are credited in the books.

Multiple choice book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

When bill is retired , What will be the entry in the books of Drawee ?

  1. Bill payable A/c Dr

    To Cash A/c

    To Discount A/c

  2. Bill payable A/c Dr

    To Cash A/c

    To Rebate A/c

  3. No Entry

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

When a bill is retired, the drawee pays the cash and receives a rebate (discount). The entry is: Bills Payable Dr, To Cash, To Rebate.

Multiple choice book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

__________________ means cancellation of old bill and drawing a new bill.

  1. Dishonour of bill

  2. Honouring of bill

  3. Retirement of bill

  4. Renewal of bill
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When on or before due date drawee finds himself unable to make the payment of the bill, he may request the drawer to cancel the old bill and accept a new one, this process is called renewal of the bill.

Multiple choice book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

Which of the following is not correct ?

  1. A joint venture business has a definite life.

  2. No cancellation entry is required when a bill is renewed.

  3. The gain from side of capital assets need not be added to revenue to ascertain the net profit of a business.

  4. If the amount is posted in the wrong account or it is written on the wrong side of an account, it is called error of commission.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When a bill is renewed, the old bill is cancelled and a new one is drawn. Therefore, a cancellation entry is indeed required in the books of both parties.

Multiple choice book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

Only ________ can retire the bill before due date.

  1. drawer

  2. bank

  3. drawee

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

Retirement of a bill occurs when the drawee pays the bill amount to the drawer before the due date. The drawee is the party liable to pay, so they are the one who initiates the early settlement.

Multiple choice book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

When part payment is received drawer debits ________ account.

  1. drawee

  2. cash

  3. bill receivable

  4. none
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When a drawee makes a part payment, the drawer receives cash. According to the rules of accounting, the drawer debits the cash account because cash is an asset coming into the business.

Multiple choice book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

When a bill is discharged, the receiver debits ___________.

  1. creditor's A/c

  2. cash A/c

  3. bills payable A/c

  4. drawer's A/c
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The bill is discharged by the receiver ( drawee) , means that the he has paid his liability towards the drawer which was outstanding in his books. Now we know that a liability account would show a credit balance so, if we were to clear the same we would have to debit it. The entry for the same in his books of accounts would be as follows :

Bills payable A/c. -----------------Dr.
To Cash/Bank A/c.

Multiple choice book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

No cancellation entry is required when a bill is renewed.

  1. True

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

In this case, a new bill will be for the remaining amount. Interest will then be charged on the remaining amount for the extended period of credit.

First main entry is made to cancel the old bill.

Multiple choice book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

At the time of retirement of a bill, the receiver debits ___________.

  1. bills payable account

  2. discount account

  3. bills receivable account

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

When a bill is retired, the drawee (the person who owes the money) pays the bill. They debit their liability, which is the bills payable account, to close it out.

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

Accounting software is used to perform the function of ________.

  1. auditing

  2. accounting

  3. taxation

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

Accounting software is specifically designed to automate and manage the recording, processing, and reporting of accounting transactions.

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

Accounting is concerned with recording of ____________ transactions and events.

  1. social

  2. legal

  3. financial

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

Accounting is defined as the process of identifying, measuring, and communicating financial information about an economic entity.

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

Broadly, the components of Computerised Accounting System are :

  1. Computer Hardware

  2. Software

  3. Financial Data

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

A computerized accounting system requires hardware to run, software to process data, and the financial data itself to be effective.

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

What is a computerized accounting system?

  1. It's a system that teaches accounting courses.

  2. It is a program that counts the currency that comes into a business.

  3. It's a computer that is dedicated to accounting entries.

  4. A software package that manages the financial activities and records of a business.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A computerized accounting system refers to software and programs that automate and manage financial transactions, records, and reporting for a business. It is distinct from teaching tools or mere currency counters.