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

A general law adopted as a guide is called _____________ .

  1. Accounting System

  2. Accounting Principles

  3. Accounting Process

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

Accounting principles are the fundamental truths or general laws that serve as the foundation for accounting systems and processes.

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 other name of merchantile system of accounting is _________.

  1. cash system of accounting

  2. receipts & expenditure accounts

  3. accrual system of accounting

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

The mercantile system of accounting is the same as the accrual system, where transactions are recorded when they occur, regardless of when cash is received or paid.

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

GAAP tells _________.

  1. Accounting policies

  2. Accounting procedures

  3. Accounting statements

  4. Both a & b
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

GAAP provides the framework for both accounting policies (the specific principles chosen) and accounting procedures (the methods used to implement those principles).

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

Comparative financial statements are prepared at the end of __________ .

  1. Each financial year

  2. Every six months

  3. Every quarter of a year

  4. At the will of management
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Comparative financial statements are the complete set of financial statements that an entity issues, revealing information for more than one reporting period. The financial statements that may be included in this package are: The income statement (showing results for multiple periods)


These statements can be prepared anytime at the will of management.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

The closing balance of the petty cash book is_______.

  1. Expense/expenditure

  2. Profit/ gain

  3. Assets

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

The closing balance of petty cash book is considered as Asset. 

Petty Cash is a current asset account; it is part of a company's cash.

Petty cash Book is just like a cash book , its just that this book maintains petty cash expenses separately as against the normal cash book . 
Therefore, balance of petty cash book is an asset & an not income. Its used for paying out petty expenses.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

American companies prepare their financial statement in Dollars whereas Japanese companies produce financial statement in Yen. This is an example of:

  1. Stable monetary unit concept

  2. Unit of measurement concept

  3. Money value concept

  4. Current swap concept
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The unit of measure concept is a standard convention used in accounting, under which all transactions must be consistently recorded using the same currency. 

Without a common unit of measure, it would be impossible to produce financial statements.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

The post closing trial balance shows __________________.

  1. The accounts of only incomes and expenses.

  2. The accounts of only assets and liabilities.

  3. All incomes, expenses, assets and liabilities.

  4. All incomes, expenses, assets and liabilities after all adjustments have been made.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A post closing trial balance is a trial balance which is prepared after all the temporary accounts in the general ledger have been closed. The post closing trial balance shows the total balance of permanent accounts at thee end of the reporting period. Permanent accounts are the account type found in a balance sheet, i.e., assets and liabilities such as inventories, unearned salaries, notes payable, retained earnings etc.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

User of financial statement includes ___________.

  1. Management

  2. Creditors

  3. Bankers

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

Financial statements are reports prepared by a company's management to present the financial performance and position at a point of time. A general purpose set of financial statements usually includes a balance sheet, income statement, statement of owner's equity and statement of cash flows. 

There are various different users of financial statements, each with different information needs. Users of financial statements are management, creditors, bankers, suppliers, investors etc.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

The purpose of financial accounts is reporting to _________.

  1. Management

  2. Government

  3. Investor

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

Financial accounting is a technique of recording all the business transactions in chronological order. The recorded transactions are further classified and summarized to give a true and fair view of the financial position to all the interested parties which are management, government and investors.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

What is the correct sequence?

  1. a) Transaction b) Journal c) Ledger d) Trial Balance

  2. a) Transaction b) Trial Balance c) Ledger d) Ledger

  3. a) Journal b) Ledger c) Transaction d) Trial Balance

  4. a) Transaction b) Ledger c) Journal d) Trial Balance
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Transactions are first Recorded in Journal, than Journal entries are posted to Ledger and than ledger balances are used in preparing a List called Trial Balance.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

Identify the external user of financial information or financial statements.

  1. Management of the business

  2. CFO of the business

  3. Employees of the business

  4. Investors of the business
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
Financial accounting information is used for decision making by external users. External users, are not involved in the operations of the company but hold some financial interest.  External users are people outside the business entity (organization) who use accounting information. Examples of external users are suppliers, banks, customers, investors, potential investors, and tax authorities.