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 elements of accounts accounts from incomplete records - single entry system 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

The net profit or loss for a particular period of time is reported on the____________ .

  1. Income Statement

  2. Balance Sheet

  3. Trial Balance

  4. Statement of Changes in Owner's Equity
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The net profit or loss for a particular period of time is reported on the Income statement or profit and loss account.

A profit and loss account shows a company’s revenue and expenses over a particular period of time, typically either one month or consolidated months over a year. These figures show whether your business has made a profit or a loss over that time period.

Profit and loss accounts show your total income and expenses, and also shows whether your business has earned more income than it has spent on its running costs. If that is the case, then your business has made a profit.

Multiple choice elements of accounts accounts from incomplete records - single entry system 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
Particulars Rs.
Opening capital $16,000$
Investment by proprietor Nil
Drawings $3,000$
Capital at the end $13,500$
Net Profit/(Loss) ?

If in the given information, Net Loss is Rs. $1,000$, then the investment made by the proprietor during the year will be _______________.

  1. Rs. $1,500$
  2. Rs. $2,000$
  3. Rs. $1,200$
  4. Rs. $1,700$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Solution to the given problem can be presented as:


Opening Capital+Profit+Invested by proprietor-Drawings $=$ Closing Capital
Rs.16000+(-1000) +Invested by proprietor -Rs.3000=Rs.13500 
$Rs.12000+Investment =Rs.13500$
Investment $= Rs.13500-12000$
Investment made by proprietor  $ = Rs.1500$

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

Loss on Issue of Debentures Account is a -

  1. Personal Account

  2. Real Account

  3. Nominal Account

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

Loss on issue of debentures is an expense account. According to the rules of accounting, all expenses and losses are classified as nominal accounts.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

In the Balance Sheet of a company Debentures account appears under the head:

  1. Share Capital

  2. Reserves & Surplus

  3. Secured Loans

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

In the balance sheet, debentures are long-term borrowings and are traditionally shown under the head of Secured Loans (or Long-term Borrowings in modern formats).

Multiple choice elements of accounts ledger and posting three column cash book three columnar cash book triple column cash book

Ledger book is popularly known as ______________.

  1. Secondary book of accounts

  2. Principal book of accounts

  3. Subsidiary book of accounts

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

The ledger is referred to as the principal book of accounts because it contains all the accounts (real, personal, and nominal) where transactions from the journal are summarized.

Multiple choice concept of social responsibility organization of commerce and management industrial pollution and degradation of environment environmental values and ethics industrial pollution accelerated with the start of industrial revolution social responsibility towards the environment

Which of the following Acts made code of ethics mandatory for companies listed on the stock exchange?

  1. Companies Act, $2006$
  2. Sarbanes- Oxley Act, $2002$
  3. Limited Liability Partnership Act, '$2008$

  4. None of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Section 302 of Sarbanes Oxley Act of 2002, an Act enacted by U.S. congress to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes contains following provisions for whistle-blowers:
• Make it illegal to “discharge, demote, suspend, threaten, harass or in any manner discriminate against” whistle-blowers.
• Establish criminal penalties of up to 10 years for executives who retaliate against whistle-blowers.
• Require board audit committees to establish procedures for hearing whistle-blower complaints.
• Allow the secretary of labor to order a company to rehire a terminated employee with no court hearing.
• Give a whistle-blower the right to a jury trial, bypassing months or years of administrative hearings.
Multiple choice concept of social responsibility organization of commerce and management industrial pollution and degradation of environment environmental values and ethics industrial pollution accelerated with the start of industrial revolution social responsibility towards the environment

The Sarbanes-Oxley Act, $2002$ was enacted and passed in USA to _________.

  1. punish those who committed accounting frauds in the late $1990s$

  2. improve corporate profits

  3. help laid-off employees get their jobs back

  4. help restore confidence in corporate America
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
The U.S. Congress passed the Sarbanes-Oxley Act $2002$, also known as the Corporate Responsibility Act of $2002$, mandated strict reforms to improve financial disclosures from corporations and prevent accounting fraud.
$SOX$ protects employees that report fraud and testify in court against their employers. Companies are not allowed to change the terms and conditions of their employment. They can't reprimand, fire, or blacklist the employee. $SOX$ also protects contractors. Whistle blowers can report any corporate retaliation to the $SEC.$
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

Small firms may adopt _________.

  1. The subsidiary book system

  2. Journal system

  3. Ledger

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

Recording of transactions helps to make the financial statement accurate. Recording of transaction in journal helps small firms to keep their track of transactions upto date. Hence small firms may adopt the journal system.

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 following comments each relate to the recording of journal entries. Which statement is true?

  1. For any given journal entry. debits must exceed credits

  2. It is customary to record credits on the left and debits on the right

  3. The chart of accounts reveals the amount to debit and credit to the affected accounts

  4. Journalization is the process of converting transactions and events into debit/credit format
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

All business transaction which are of monetary value need to be recorded in journal in chronological order.The process of making the journal entries is called as journalization. All the transactions are having two affects i.e. debit and credit.

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 following comments all relate to the recording process. Which of these statements is correct?

  1. The general ledger is a chronological record of transactions

  2. The general ledger is posted from transactions recorded in the general journal

  3. The trial balance provides the primary source document for recording transactions into the general journal

  4. Transposition is the transfer of information from the general journal to the general ledger
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Journal is a book in which all the business transactions are recorded in chronological order. All entries from journal are transferred to the ledger account. The process of transferring the entries from journal to ledger is called posting.

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 means _______________.

  1. A daily record of business transactions

  2. Book of original entry

  3. Both (A) and (B)

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

Journal has been derived from the french word 'jour' which means day. Journal is a book of original entry which records day to day transactons of a firm. It is the book where transactions are recorded for the first time. Hence, it is called book of original 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

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

  1. Cash book

  2. Ledger

  3. Sales journal

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

Books of original entry refers to the accounting journal in which business transactions are initially recorded. The information in these books is the summarized 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 book
(iv) Sales book
(v) Cash book
The general ledger is not considered a book of original entry, if it contains summarized entries posted to it from one of the underlying accounting journals. However, if transactions are recorded directly into the general ledger, it can be considered one of the books of original entry. Books of original entry are extremely useful for investigating individual accounting transactions, and are commonly accesses by auditors, who verify a selection of business transactions to ensure that they were recorded correctly.

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 followings shows the chronological record of transactions ?

  1. Journal

  2. Ledger

  3. Trial balance

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

After analyzing and preparing business documents, the transactions are then recorded in the books of the company. A journal entry is the recording of a business transaction in the journal. A journal entry shows all the effects of a business transaction as expressed in debit(s) and credit(s) and may include an explanation of the transaction. A transaction is entered in a journal and before it is entered in ledger accounts. In double-entry accounting transactions are recorded in the journal through journal entries. A journal, also known as Books of Original Entry, keeps records of business transactions in a systematic order. Transactions are recorded in the journal in chronological order, i.e. as they occur; one after the other.

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

Computer Account is _________.

  1. Nominal

  2. Real

  3. Personal

  4. None of the above
Reveal answer Fill a bubble to check yourself
B 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: Theses accounts represent assets and properties which can be seen, touched, felt, measured, purchased and sold. For e.g. Machinery account, Cash account, Furniture account, etc.
2. Intangible Real Accounts: These accounts represent assets and properties which cannot be seen, touched or felt but they can be measured in terms of money. For e.g., Goodwill accounts, Patents accounts, etc.
Patent account is anaccount whose value can be  measured in terms of money and treated as an asset of the business, hence, is classified as a real account.