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 methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Which of the following is not classified as inventory in the financial statements?

  1. Finished goods

  2. Work-in-progress

  3. Stored and spares

  4. Advance payments made to suppliers for raw materials
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Advance payments to suppliers are classified as current assets (prepayments or advances), not as inventory, because the goods have not yet been received or controlled by the entity.

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Closing stock appearing in the Trial Balance is shown in_____________.

  1. The Balance Sheet only

  2. Both Trading Account and Balance Sheet

  3. Trading Account only

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

Closing stock usually doesn't appear in the trail balance, if it does it will appear only in balance sheet on the assets side and not in trading account. It is the stock left in business at the end of the year.

 It is basically the inventory the company has hands on at the end of the year or is unsold. It includes work-in-progress, raw materials, finished goods etc. 

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

The balances of all liabilities accounts, income accounts, profits, capital are placed in the ______of trial balance. 

  1. Credit Column

  2. Debit Column

  3. Ledger Folio

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

Liabilities, income, profits, and capital have credit balances. Therefore, they appear in the credit column of the trial balance.

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

If there is a non agreement of trial balance the possible reasons could be__________________.

  1. Complete omission of the posting

  2. Due to transposition of the posting

  3. There has been a wrong posting either on debit side or credit side

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

If there is a non agreement of trial balance the possible reasons could be complete omission of posting, due to transposition of the posting or there has been a wrong posting either on debit or credit side. 

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Which item is shown on the debit side of a trial balance?

  1. Rent outstanding.

  2. Prepaid expenses.

  3. Purchases returns.

  4. Excess of income over expenses.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Prepaid expenses means the expense which are already paid but the services against which are yet to receive. While passing the closing entry, expenses account will be credited by debiting the prepaid expense.

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

All expense and _______accounts appearing in the trial balance are transferred to the trading and profit and loss account.

  1. Loss

  2. Asset

  3. Liability

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

All expense and Revenue accounts appearing in the trial balance are transferred to the trading and profit and loss account. All the direct expenses and revenues will be transferred to the trading account whereas all the indirect expenses and revenues will be transferred to profit and loss account. 

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Most widely used method in preparation of trial balance is __________.

  1. Balances method

  2. Totals method

  3. Totals-cum-balances method

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

Trial balance can be prepared in three ways:


1) Total cum balance method- In this method, total and balances both are captured in tabular form. 
2) Total Method- In this method, total of debit and credit are incorporated in the tabular form.
3) Balance method- In this method, only balances are taken in the trial balance.  This method is most widely used for preparation of trial balance.

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Name the methods in which trial balance can be prepared.

  1. Totals-cum-balances Method.

  2. Totals Method.

  3. Balances Method.

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

Trial balance can be prepared in three ways:


1) Total cum balance method- In this method, total and balances both are captured in tabular form. 
2) Total Method- In this method, total of debit and credit are incorporated in the tabular form.
3) Balance method- In this method, only balances are taken in the trial balance. 

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Totals method does not help in assuming _________of balances of various accounts.

  1. Total of each side in the ledger

  2. Application of double entry system

  3. Accuracy

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

Totals method is not in use widely as it does not determines the accurate balances of the accounts and thus, also does not help in the preparation of the Financial statements or final accounts.

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Goodwill account appears on _____________ side of Trial Balance.

  1. debit

  2. credit

  3. both sides

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

Fixed assets are classified as tangible and intangible assets. All the assets will always show a debit balance.
Goodwill is a type of an intangible fixed asset which is shown in the balance sheet under the fixed assets. Such an item will always show a debit balance as it is an asset for the business entity.

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Income Tax appears in trial balance ____________ column.

  1. debit balance

  2. credit balance

  3. L.F.

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

Income tax is a payment and expenses. Expense are always debited. Hence Income tax appears in trial balance debit column. 

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Drawing account appears in ________ column of the trial balance.

  1. L.F

  2. debit balance

  3. credit balance

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

Drawing is a personal withdrawal done by the proprietor. All personal drawings are debited to the drawing account. 

Drawing account will always have a debit balance. Drawing account must be shown in the debit side of trial balance. 

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

State whether the following statements are True or False.
In Trial balance Opening Stock is recorded in credit balance column.

  1. True

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

Opening stock is an asset and represents a debit balance. Therefore, it is recorded in the debit column of the trial balance.

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Which of these is an indicator of arithmetic discrepancies in books of account?

  1. Agreement of trial balance.

  2. Disagreement of trial balance.

  3. Non-balancing of cash book.

  4. Non-balancing of personal account.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Trial balance is prepared by taking the individual ledger balances. If the trial balance agrees, it proves that the books of arithmetical correct. If trial balance is not tallied i.e. debit and credit are not agrees, that means the books of account are not arithmetically correct. 


Disagreement of trial balance is an indicator of arithmetic discrepancies in books of account.