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 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

Users of accounting information include ____________.

  1. Tax authorities

  2. Investors

  3. Creditors

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

The objective of accounting is to provide information to users for decision-making. 

The users of accounting information include: the owners and investors, management, suppliers, lenders, employees, customers, the government, and the general public.

The users may be classified into internal and external users.

Internal users refer to managers who use accounting information in making decisions related to the company's operations.

External users, on the other hand, are not involved in the operations of the company but hold some financial interest. The external users may be classified further into users with direct financial interest – owners, investors, creditors; and users with indirect financial interest – government, employees, customers and the others.

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

_________ helps in preparation of final accounts.

  1. Journal

  2. Ledger

  3. Trial Balance

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

A trial balance is a bookkeeping or accounting report that lists the balances in each of an organization's general ledger accounts at the year end (Accounts with zero balances will likely be omitted). 

The debit balance amounts are listed in a column with the heading "Debit balances" and the credit balance amounts are listed in another column with the heading "Credit balances." The total of each of these two columns should be identical. 
With the help of trial balance final accounts i.e., Trading A/c, Profit & loss A/c and Balance Sheet is prepared.

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

_______ consists of a list of all the ledger balances on a particular date.

  1. Trial Balance

  2. Balance Sheet

  3. Cash Flow Statement

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

Trial Balance consists of a list of all the ledger balances on a particular date.

A trial balance is a bookkeeping or accounting report that lists the balances in each of an organization's general ledger accounts at the year end (Accounts with zero balances will likely be omitted). The debit balance amounts are listed in a column with the heading "Debit balances" and the credit balance amounts are listed in another column with the heading "Credit balances." The total of each of these two columns should be identical.

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

After the preparation of ledgers, the next step is the preparation of _____________.

  1. Trading accounts

  2. Trial balance

  3. Profit and loss amount

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

In the accounting cycle, transactions are recorded in journals, then posted to ledgers. The next step is to summarize the ledger balances in a trial balance to ensure the books are balanced before preparing final accounts.

Multiple choice accountancy provisions and reserves reserves provisions provision and reserves

Provision for income tax is shown in bank's Balance Sheet as _______.

  1. Contingent liability

  2. Contingent asset

  3. Borrowings

  4. Other liabilities and provisions
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The provision for income taxes on an income statement is the amount of income taxes a company estimates it will pay in a given year.In the Balance sheet of bank it shown under the head other Liabilities and Provission.

Multiple choice accountancy provisions and reserves reserves provisions provision and reserves

Give journal entry for:

Bad debts debited to profit and loss account.

  1. Profit & Loss A/c Dr.

    To Bad debts A/c

  2. Profit and Loss A/c Dr.

    To Provision for doubtful debts A/c

  3. Bad debts A/c Dr.

    To Sundry debtors A/c

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

Amount which is not recoverable from the debtors is called bad debts. Bad debts is a loss for the organization and should be debited to profit & loss account. Following journal entry will be passed:


Profit & Loss A/c                                Dr.
            To Bad Debts A/c

Multiple choice accountancy provisions and reserves reserves provisions provision and reserves

_________ is made to know liability or expense pertaining to current accounting period.

  1. Provision

  2. Reserve

  3. Appropriation

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

The term provision refers to any of the following amounts :

1. The amount written off or retained by way of providing for depreciation, renewals or diminution in value of assets; or
2. The amount retained by way of providing for any known liability of which the amount cannot be determined with substantial accuracy.

Provision is created to cover a loss in the value of assets, or a loss or expenses, the amount of which cannot be determined with substantial accuracy.

Multiple choice accountancy provisions and reserves reserves provisions provision and reserves

Give journal entry for:
Bad debts written off.

  1. Bad debts A/c Dr.

    To Profit & loss A/c

  2. Profit & Loss A/c Dr.

    To Provision for doubtful debts A/c

  3. Profit & loss A/c Dr.

    To Sundry debtors A/c

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

Amount which is not recoverable from the debtors is called bad debts. Bad debts has to be debited as an expense/loss and credited to sundry debtors account. 


1. Bad Debts A/c                                 Dr.
      To Sundry Debtors A/c 

Bad debts is a loss for the organization and should be debited to profit & loss account. 

2. Profit & Loss A/c                                Dr.
          To Bad Debts a/c


Instead of passing 2 separate entries, only 1 comprehensive entry can be passed:
Profit & loss A/c   Dr.
      To Sundry Debtors A/c

Multiple choice book keeping and accountancy accounting for not-for-profit organisation accounting record of non-trading organisations features of not-for-profit organisation meaning and characteristics of not-for-profit organisation

Receipt and Payments Account is summary of all capital receipts and payments.

  1. True

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

False. Receipts and payment account records the receipts and payments of all nature. Receipts and payments account records all the cash transactions of the business. It is basically a summary of cash transactions all incomes are recorded on the credit side and expenses are shown on the debit side.  

Multiple choice book keeping and accountancy accounting for not-for-profit organisation accounting record of non-trading organisations features of not-for-profit organisation meaning and characteristics of not-for-profit organisation

Receipts and Payment Account does not differ between capital and revenue receipts.

  1. True

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

True. Receipts and payments Account does not differ between capital and revenues receipts. Receipts and payment account records the receipts and payments of all nature. It records all the cash transactions of the business and is basically a summary of cash transactions. All incomes are recorded on the credit side and expenses are shown on the debit side.  

Multiple choice book keeping and accountancy accounting for not-for-profit organisation accounting record of non-trading organisations features of not-for-profit organisation meaning and characteristics of not-for-profit organisation

State True or False:
Receipt and Payment Account records the receipts and payments of revenue nature only.

  1. True

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

This statement is false. A receipt and payment account is a summarized cash book. It records all cash transactions whether it is revenue nature or capital nature. The Receipt and Payment account has debit side to record all receipts and credit side to record all payments made by not for profit organisation during a year. It records all the receipts and payments during a year whether related to current year, previous year or next year. 

Multiple choice book keeping and accountancy accounting for not-for-profit organisation accounting record of non-trading organisations features of not-for-profit organisation meaning and characteristics of not-for-profit organisation

Receipt and payment Account is equivalent to profit and loss account. 

  1. True

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

False. Receipts and payments accounts is equivalent to cash account. Receipts and payment account records the receipts and payments of all nature. It records all the cash transactions of the business. It is basically a summary of cash transactions all incomes are recorded on the credit side and expenses are shown on the debit side

Multiple choice book keeping and accountancy accounting for not-for-profit organisation accounting record of non-trading organisations features of not-for-profit organisation meaning and characteristics of not-for-profit organisation

The Receipt and Payment account starts with the opening balance of ______ and _____.

  1. cash, bank

  2. bank, bills receivable

  3. bills receivable, bills payable

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

Receipt and Payment is a summarized statement of all cash transactions during an accounting year. Only cash transactions are recorded in Receipt and Payment accounts. 

Multiple choice book keeping and accountancy accounting for not-for-profit organisation accounting record of non-trading organisations features of not-for-profit organisation meaning and characteristics of not-for-profit organisation

In the Receipt and Payment account both capital and revenue transactions are recorded, whereas in Income and Expenditure account ________ transactions are recorded.

  1. Capital

  2. Deferred

  3. Revenue

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

Receipt and Payment account is a summarized statement of all cash transactions during an accounting year. The account through which surplus or deficit of a non-profit-seeking concern is ascertained is called Income and Expenditure account. 

Multiple choice book keeping and accountancy accounting for not-for-profit organisation accounting record of non-trading organisations features of not-for-profit organisation meaning and characteristics of not-for-profit organisation

Which of the following items are not considered in Receipt & Payment A / c but are considered Income & Expenditure A / c?

  1. Outstanding and prepaid

  2. Capital & revenue

  3. Both (A) and (B)

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

The item to be mentioned in income & expenditure account is outstanding or prepaid expenses. But it is not recorded in receipt & payments account because such type of entries are of revenue nature and revenue nature entries cannot be recorded in receipt & payments account.