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

Accounting principles are__________________.

  1. As definite as principles of physics and chemistry

  2. Unlike principles of physical sciences.

  3. Verifiable through observations and records

  4. Thoughts of accountant
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Accounting principles are the rules and guidelines that companies must follow at the time of preparation of financial reporting statement.

These principles followed by accountants universally.
Generally Accepted Accounting Principles (GAAP) refers to the rules or guidelines adopted for recording and reporting of business transactions, in order to bring uniformity in the preparation and the presentation 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

Accounting principles represent_____________________________.

  1. A consensus at a particular time to the recording of accounting transactions.

  2. Inviolable laws fixed by the legal boards.

  3. Laws fixed by accounting experts.

  4. Laws fixed by the respective governments.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Accounting principles represent a consensus at a particular time to the recording of accounting transactions. Accounting principles are the rules and guidelines that companies must follow when reporting financial data. 

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

Rules of conduct accepted universally to record business transactions are known as ___________.

  1. Accounting Principle

  2. Accounting Standards

  3. Accounting Concepts

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

In order to maintain uniformity and consistency in accounting records, certain rules or principles have been developed which are generally accepted by the accounting profession. These rules are called by different names such as principles, concepts, conventions, postulates, assumptions and modifying principles. The term 'principle' has been defined by AICPA as 'A general law or rule adopted or professed as a guide to action, a settled ground or basis of conduct or practice'. The word 'generally' means 'in a general manner', i.e. pertaining to many persons or cases or occasions. Thus, Generally Accepted Accounting principles (GAAP) refers to the rules or guidelines adopted for recording and reporting of business transactions, in order to bring uniformity in the preparation and the presentation 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

The general acceptance of an accounting principle usually depends on how well it meets the criteria of _________.

  1. Relevance

  2. Feasibility

  3. Objectivity

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

Accounting is based on certain principle which are collectively known as GAAP. 

While adopting any principle, objective must be defined, need to ensure that it has some relevance along with the feasibility.

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 principles and policies are to be standardised to achieve __________.

  1. Transparency

  2. Consistency

  3. Comparability

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

Accounting principles and policies are to be standardised to achieve transparency, consistency and comparability. 

Transparency means, the extent to which the financial users of statement have access to the financial statements. 
Consistency is a quality that enables the comparison of financial statements from one accounting period to another by using the same accounting treatments for similar transactions. 

Comparability means financial statements that help in easy inter-firm and intra-firm comparison.

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

Generally accepted accounting principles ___________.

  1. define accounting practice at a point in time

  2. are similar in nature to the principles of chemistry or physics

  3. are rarely changed

  4. are not affected by changes in the way business operates
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting. The acronym is pronounced "gap." GAAP specifications include definitions of concepts and principles, as well as industry-specific rules.

These "principles" are not like the unchangeable laws of nature in chemistry or physics.
They encompass conventions ,rules,and procedures,necessary to define accepted accounting practice at a particular time.

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

It is essential to standardize the accounting principles and policies in order to ensure _____________.

  1. Transparency

  2. Consistency

  3. Comparability

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

Standardizing accounting principles ensures that financial statements are transparent, consistent over time, and comparable between different entities. All these attributes are essential for reliable financial reporting.

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 describes GAAP properly?

  1. Generally accepted accounting principles (GAAP) compries a set of rules, concepts and guidelines used in preparing financial accounting reports

  2. Generally accepted accounting principles (GAAP) incorporate the consensus at any time as to which economic resources and obligations should be recorded as assets and liabilities

  3. What information should be disclosed and how it should be disclosed, and which financial statements should be prepared

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

GAAP refers to the collection of rules, procedures, and guidelines that accountants must follow when preparing financial statements to ensure uniformity and reliability.

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

According to which of the following conventions, secret reserves are not permitted?

  1. Consistency

  2. Disclosure

  3. Conservatism

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

According to the full disclosure convention, financial statements must report all relevant and material information clearly. Secret reserves violate this principle because they obscure the true financial position of an 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

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 amount paid to the petty cashier at the beginning of a period is known as __________ amount.

  1. Imprest

  2. Credit

  3. Idle

  4. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
Imprest - It is a fund used by a business for small items of expenditure, and restored to a fixed amount periodically.
Hence, a petty cash book is kept on the imprest amount.
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

Which of the following statements is/are true ? 
(i) Cash book records all cash receipts and cash payments
(ii) Cash book records all sale and purchase transactions of goods both in cash and on credit.
(iii) Cash book records discount on cash payments
Select the correct answer from the options given below :-

  1. Only (i) of the above

  2. Only (ii) of the above

  3. Only (iii) of the above

  4. Both (i) and (iii) of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A cash book records all cash receipts and payments (i). It does not record credit transactions (ii). It records cash discounts, but usually in a separate column, not as a general rule for all cash payments (iii). Thus (i) and (iii) are generally accepted in accounting contexts.