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 book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

Which of the following is not a book of original entry?

  1. The Journal

  2. The Ledger

  3. The Cash Book

  4. The Bill Receivable Book
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Books of original entry refers to the accounting journals in which business transactions are initially recorded. The information in these books is then summarized and posted into a general ledger, from which financial statements are produced.

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

Insurance unexpired account is a __________.

  1. Real account

  2. Personal account

  3. Nominal account

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

Unexpired insurance is an another term which is used for prepaid insurance. Prepaid insurance is deducted from the insurance premium expenses account in profit & loss account and shown in balance sheet as current assets.  These accounts are not in the name of a specific person but are represented as personal account.

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

L.F. (i.e., Ledger Folio) column in the journal is filled at the time of _________.

  1. journalising

  2. balancing

  3. posting

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

 Ledger Folio , abbreviated as L.F., is a column in the journal where in the page number of the ledger book on which the relevant account appears is recorded. In the journal, this column is filled up at the time of posting and not at the time of making journal entry.

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

The total of the amount of the bills receivable book is posted to the ______ in the ledger.

  1. Dr. of bills payable account

  2. Cr. of bills payable account

  3. Dr. of bills receivable account

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

The total of the bills receivable book represents the total value of bills received. This total is posted to the debit side of the Bills Receivable account in the ledger to increase the asset balance.

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

Cash account is ______________.

  1. Personal account

  2. Real account

  3. Nominal account

  4. Valuation account
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

It's the real accounts that show the assets, liabilities and owner's equity in a company. 

Cash, accounts receivable, accounts payable, notes payable and owner's equity are all real accounts that are found on the balance sheet.

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

Journal is the book of _______ in which every transaction is recorded before being posted into the ledger.

  1. Primary entry

  2. Secondary entry

  3. Third entry

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

Books of original entry refers to the accounting journals in which business transactions are initially recorded. The information in these books is then summarized and posted into a general ledger, from which financial statements are produced.

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

_______ is a book in which all the business transactions are originally recorded in chronological order and from which they are posted to the ledger accounts at any convenient time.

  1. Ledger

  2. Journal

  3. Purchases returns books

  4. Sales book
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Journal is a book of accounts in which all day to day business transactions are recorded in a chronological order i.e. in the order of their occurence. 

Transactions when recorded in a Journal are known as entries.It is the book in which transactions are recorded for the first time.

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

Accounts relating to properties or assets are known as ______________.

  1. Real Accounts

  2. Personal Accounts

  3. Nominal Accounts

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

Accounts relating to properties or assets are known as "Real accounts". A separate account is maintained for each asset e.g. Cash, Machinery, Building, etc. Real accounts can be further classified into tangible and intangible.


1. Tangible real accounts: These accounts represent assets and properties which can be seen, touched, felt, measured, purchased and sold. For e.g. Machinery account, Cash account, Furniture account.


2. Intangible real account: These accounts represent assets and properties which cannot be seen, touched and felt but can be measured in terms of money. For e.g, Goodwill account, Patents account, etc.

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

Outstanding wages is a ______________.

  1. Real Account

  2. Personal Account

  3. Nominal Account

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

 Outstanding Salary A/c is a Representative Personal Account as it represents a group of people to whom some amount of salary is payable. 

Similarly other outstanding and prepaid expenses also fall under the category of representative personal accounts.

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

Provision for doubtful debts account, stock reserve account etc. are ________________.

  1. Valuation (Personal) accounts

  2. Artificial or legal persons personal account

  3. Tangible real accounts

  4. Nominal Accounts
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Provisions and reserves are created against specific assets or liabilities. In accounting classification, they are often treated as valuation accounts that reduce the book value of an asset, which is a form of personal or representative personal account logic.

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

Proprietor's account is _____________.

  1. Real Accounts

  2. Personal Accounts

  3. Nominal Accounts

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

Personal accounts are related to individuals, firms, companies, etc. A few examples of personal accounts include debtors, creditors, banks, outstanding/prepaid accounts, accounts of credit customers, accounts of goods suppliers, capital, drawings, etc.

Personal accounts are classified into three subcategories: Artificial, Natural, Representative accounts.
Natural personal accounts: This type of personal accounts is the simplest to understand out of all and includes all God's creations who have ability to deal, who, in most cases, are people.
Artificial personal accounts: Personal accounts which are created artificially by law, such as corporate bodies and institutions, are called Artificial personal accounts.
Representative personal accounts: Accounts which represent a certain person or group directly or indirectly.
Proprietor's account is related to individuals, and  hence, it is classified as a personal account

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

An account recording transaction with an individual human being is termed as a ___________.

  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
B Correct answer
Explanation

There are mainly three types of accounts: Real, Personal and Nominal accounts. Personal accounts are classified into three subcategories: Artificial, Natural, and Representative. 

Personal accounts are related to individuals, firms, companies, etc. A few examples of personal accounts include debtors, creditors, banks, outstanding/prepaid accounts, accounts of credit customers, accounts of goods suppliers, capital, drawings, etc. 
Natural personal accounts are the simplest to understand out of all and includes all God's creations who have ability to deal, who, in most cases, are people. E.g. Kumar's A/C, Adam's A/C, etc.

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

Which of the following books should be used to record purchase of a typewriter on account ?

  1. Cash book

  2. Purchase book

  3. Sales book

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

Journal book is meant for recording all such transactions for which no special journal has been maintained in the business. Therefore, in this journal, all such transactions are recorded which do not occur frequently and for these transactions no special journal  is required. For example, if Machinery is purchases on credit, it will be recorded in the journal book, because in the cash book only cash purchases of machinery is recorded. Similarly, many other transactions, which do not find their place in the special journals will be recorded in the General Journal such as:

(i) Outstanding expenses - Salaries outstanding, rent outstanding, etc.
(ii) Prepaid expenses - Prepaid rent, salaries paid in advance, etc.
(iii) Income received in advance - Rent received in advance, interest received in  advance, etc.
(iv) Accrued incomes - Commission yet to be received, interest yet to be received
(v) Interest on capital
Hence, recording purchase of a typewriter on account is recorded in journal book.

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

To determine the details of a specific transaction, one should refer to ____________.

  1. Ledger

  2. Book of original entry

  3. Relevant vouchers

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

Books of original entry refers to the accounting journals in which business transactions are initially recorded. The information in these books is then summarized and posted into a general ledger, from which financial statements are produced. Each accounting journal contains detailed records for the types of accounting transactions pertaining to a specific area. Examples of these accounting journals are:

(i) Cash journal
(ii) General journal
(iii) Purchase journal
()iv Sales journal
Books of original entry are extremely useful for investigating individual accounting transactions, and ate commonly accesses by auditors, who verify a selection of business transactions to ensure that they were recorded correctly.