Test / Exam Name: Ch 1 Standard: 11th Commerce Subject: Accountancy

Student Name: Section: Roll No.:

Questions: 320 Time: 03:00 hh:mm Marks: 543

Q1. Which of the following will not be recorded in the books of account? 1 Mark
A Sales of goods. B Payment of salary. C Quality of staff. D Purchase of Goods.
Ans: C Quality of staff.
Q2. Which of the following is capital expenditure? 1 Mark
A Wages. B Wages paid for building construction.
C Repair expenses of building. D Advertisement Expenses.
Ans: B Wages paid for building construction.
Q3. Purposes of an accounting system include ________. 1 Mark
A Interpret and record the effects of transactions. B Classifying the effect of transaction to facilitate report preparations.
C Summarize and communicate information to decision makers. D All of the above.
Ans: D All of the above.
Explanation:
Accounting is the systematic and comprehensive recording of financial data related to business operations in significant and orderly manner.
It is a process of summerising, analyzing and reporting the transactions, interpretation and recording effect of transaction, classifying transaction etc.
Q4. Which of the following is not an internal user of financial statements? 1 Mark
A Board of Directors. B Managers. C Employees. D Lenders.

Ans: D Lenders.
Q5. Sale of goods to Ram for cash Rs.1000 is a ___________. 1 Mark
A Cash Transaction B Credit Transaction C Barter System D Internal Event
Ans: A Cash Transaction
Explanation:
The transaction which involves immediate payment of cash is known as cash transaction.
For e.g., Sale of goods to Ram for cash Rs. 1,000. In this transaction, goods are sold to Ram when he paid Rs. 1,000 cash.
Q6. Which of the following transactions is not of financial character? 1 Mark
A Purchase of asset on credit. B Purchase of asset for cash.
C Withdrawing of money by proprietor from business. D Strike by Employees.
Ans: D Strike by Employees.
Q7. A person to whom amount is payable is known as ___________. 1 Mark
A Creditor B Debtor C Bad debt D None of the above
Ans: A Creditor
Explanation:
Creditors are persons and /or other entities who have been to be paid by an enterprise an amount for providing the enterprise goods and services on
credit.
The total amount standing to the favour of such persons and/or entities on the closing date, is shown on the Balance Sheet as sundry creditors on the
liabilities sideIf company X borrowed money from its bank,
Company X is the debtor and the bank is the creditor. If Supplier A sold merchandise to Retailer B, then Supplier A is the creditor and Retailer B is the
debtor
Q8. A_______ would most likely use an entity's financial report to determine whether or not the business entity is eligible for a loan. 1 Mark
A Creditor B Emplyoee C Mangement D None of the Above
Ans: A Creditor
Explanation:
There are two types of creditors. Short term creditors are those who are providing goods or services on credit by analyzing the short-term financial
position of the company.
Long term creditors are basically lenders who are providing loans to the business for long term purposes.
These creditors uses the financial statements and reports to determine the financial worth and see the repayment capabilities of the firm before
lending any amount.
Q9. Use of common unit of measurement and common format of reporting promotes________. 1 Mark
A Comparability B Understandability C Relevance D Reliability
Ans: A Comparability
Explanation:
'Comparability' characteristic of accounting information requires the use of common units and common format of reporting.
It is the most important quality of accounting information. Comparability means accounting information of a current year can be comparable with that
of the previous years.
Q10. ________ can be considered as the last stage of accounting process. 1 Mark
A Summarizing B Analysis C Classifying D Interpreting
Ans: D Interpreting
Explanation:
Interpretation of accounting data is considered as the last leg of process, on the basis of which owner, investors and government authorities may
proceed to take a course of action.
Owner may decide to shut down a line of business activity if it is not generating profits, investors may suggest the management to initiate the other line
of activity are the examples.
Q11. Which of the following show the basic sequence of the accounting process? 1 Mark
 A Transaction, journal entry, source document, ledger account, trial B Source document, transaction, ledger account, journal entry, trial
balance. balance.
C Transaction, source document, journal entry, trial balance, ledger D Transaction, source document, journal entry, ledger account, trial
account. balance.
Ans: D Transaction, source document, journal entry, ledger account, trial balance.
Explanation:
Every business transaction is to be recorded in the journal in chronological order. The sequence of any business transaction can be defined as:
Q12. The branch of accounts that deals with the calculation of unit cost of services is called. 1 Mark
A Cost Accounting B Management accounting C Financial Accounting D All of the above
Ans: A Cost Accounting
Explanation:
The branch of accounts that deals with the calculation of the unit cost of services are called Cost Accounting.
Financial Accounting deals with recording, summarizing and reporting a company's business transactions through financial statements.
Management accounting is the process of preparing reports about business operations that help managers make short-term and long-term decisions.
Q13. Systematically writing down the transactions and events in account books soon after their occurrence is known as _________. 1 Mark
A Classifying B Recording C Summarizing D Numbering
Ans: B Recording
Explanation:
The recording is a function of bookkeeping. All the business transaction which are of monetary value need to be recorded in the books of account in
a chronological manner soon after its occurrence.
Generally, these transactions are recorded in the journal or subsidiary books
Q14. Which of the following is not a limitation of accounting? 1 Mark
A Based on accounting conventions. B Evidence in Legal Matters.
C Incomplete Information. D Omission of Qualitative Informations.
Ans: B Evidence in Legal Matters.
Q15. ________ is used to mean a happening as a consequence of transaction(s). 1 Mark
A Event B Transaction C Dealing D Operations
Ans: A Event
Explanation:
A transaction cannot be completed if it is not performed by the two different parties. Any business transaction is considered as business event once it
is dealt by the two different parties.
Once the transaction is complete, it is converted in to an event.
Q16. Which of the following transactions will not be recorded in the books of account? 1 Mark
A Purchased a LCD for personal use, paying the amount from personal B Purchased machinery for manufacture.
bank account.
C Purchased machinery for resale. D Paid salaries and wages.
Ans: A Purchased a LCD for personal use, paying the amount from personal bank account.
Q17. In order to enable retailer earn profit and still sell goods at the list price, the manufacturers frequently grant them substantial reduction from the list 1 Mark
price. Such a reduction in price is called ________.
A Trade Discount B Cash Discount C Price Reduction D Subsidies
Ans: A Trade Discount
Explanation:
Trade discount is allowed to the customer to promote the sales.
Trade discount is allowed on the list price. It reduces the price for the customer.
Trade discount is not recorded in the books of account. Only net value is recorded in books of account.
Q18. The withdrawal of goods from the business by the proprietor should be recorded in the __________. 1 Mark
A Drawing Account B Purchase Account C Capital Account D Profit and Loss Account
Ans: A Drawing Account
Explanation:
An account is set up in the balance sheet to record the transactions taken place of money removed from the company by the owners.
This is known as the 'drawing account'. In the drawing account, the amount withdrawn by the owner is recorded as a debit. If goods are withdrawn, the
amount recorded is at cost value.
Q19. In general the financial year from shall be from ___________. 1 Mark
A 1st April of any year B 31st March of any year C All of them are true D None of these
Ans: A 1st April of any year
Explanation:
The financial year starts from 1st April of every year and ends on 31 March of the next calendar year.
The business prepares its financial statement for each financial year.
However, this is not mandatory, there are many business organisations where financial year starts from 1st January and ends on 31 December of the
same year.
Some business organisations also follow the period of 18 months as the financial year.
Q20. Which of the following are internal users of accounting information? 1 Mark
A Board of directors B Partners C Managers D All of the above
Ans: D All of the above
Explanation:
There are various agencies or stake holders interested to know about the accounting information. These stakeholders may be internal and external.
Accounts are prepared by the organization by following the compliance of various acts.
Various agencies are interested to know about the accounts to ensure that organization is following the various laws applicable.
Board of directors, Partners and Mangers are considered as internal users.
Q21. Two primary qualitative characteristics of financial statements are _________. 1 Mark
A Understandability and Materiality B Relevance and Reliability
C Relevance and Understandability D Materiality and Reliability
Ans: B Relevance and Reliability
Explanation:
The two primary qualitative characteristics of financial statements are relevance and reliability.
Q22. Management accounting involves _____________. 1 Mark
A Preparation of financial statements B Analysis and interpretation of data
C Recording of transactions D Preparation of cost statements
Ans: B Analysis and interpretation of data
Explanation:
Management Accounting is one of the branch of accountancy which helps management to make useful decisions.
Therefore, Analysis and interpretation of data is done in the management Accounting.
This helps management to know about the profitability and solvency of the business.
Q23. Which of the following will be treated as drawings: 1 Mark
A Withdrawing money for payment of salary to employees. B Withdrawing money for payment to creditors.
C Withdrawing money from business for private expenses. D Withdrawing money for purchase of asset.
Ans: C Withdrawing money from business for private expenses.
Q24. Who is the father of Double entry- Book Keeping? 1 Mark
A F.W. Taylor B Henry Fayol C Lucas Pacioli D None of the above
Ans: C Lucas Pacioli
Explanation:
Luca Pacioli was an Italian mathematician and is famously known as The Father of Accounting and Bookkeeping due to his tremendous contributions in
the field of accounting.
Q25. ______ users are groups outside the business entity, who uses the information to make decisions about the business entity. 1 Mark
A Mangement B Emplyoee C Owner D External
Ans: D External
Explanation:
There are various stakeholder in the business who want to know about the business performance of the organization. These are internal and external
users.
Internal users are management, employees and accountants who wants to analyze the business performance based on various financial reports.
External users are lenders, creditors, investors which are more interested to know about the financial strength to take a decision about the business
entity in terms of security of their money.
Q26. Which external user of accounting information is most interested in knowing the long-term solvency position of the firm? 1 Mark
A Employees. B Management.
C Bank and Financial Institutions. D Researchers.
Ans: B Management.
Q27. Which of the following would be considered as an internal user of the financial statements? 1 Mark
A Shareholder B Credotor C Debtor D Finance Manager
Ans: D Finance Manager
Explanation:
Financial statements record and outline the financial activities of a business, an individual or any other entity.
Financial statements are meant to present the financial information of the entity in equation as clearly and concise as possible for both the entity and
for readers.
Internal users refers to mangers who use accounting information in making decision related to the company's operation.
Q28. In accounts recording is made of: 1 Mark
A Only Financial Transactions. B Only Non-financial transactions.
C Financial as well as non-financial transactions. D Personal transactions of the Proprietor.
Ans: A Only Financial Transactions.
Q29. Qualitative characteristic of Accounting includes: 1 Mark
A Reliability and Relevance. B Understandability and Comparability.
C Both (a) and (b). D None of the above.
Ans: C Both (a) and (b).
Q30. _____________ is a post mortem of past costs. 1 Mark
A Financial accounting B Cost accounting C Both A and B D None of these
Ans: A Financial accounting
Explanation:
Financial Accounting also has its limitation. It records all the transaction on its historical cost and does not consider the changes happen in future.
Financial Accounting does not consider the effect of inflation and change in the price level.
Therefore, it is a post mortem of the cost recorded in books of account.
Q31. _____________ is a deduction from the list or catalogue price allowed by the wholesalers to the retailers for various reasons. 1 Mark
A Trade discount B Special discount C Cash discount D None of the above
Ans: A Trade discount
Explanation:
Discount are of two kinds: Trade discount and cash discount.
Trade discount is allowed to promote the sales and given as a general practice.
Trade discount is allowed on the list price or catalogue price.
Trade discount is not recorded in books of account.
Net price i.e. List price minus trade discount is considered as sale value.
Q32. Which of the following is the example of external users of accounting information ______________. 1 Mark
A Government B Owners C Managemen D Employee
Ans: A Government
Explanation:
Government is an external user of the accounting information as it is not part of the business.
There are two types of users of the financial statements
Q33. Accounts that are prepared in order to comply with statutory requirement and to cater the information requirement of external users are known as: 1 Mark
A Management Accounts B Financial Accounts
C Management information systems D Cost accounts
Ans: B Financial Accounts
Explanation:
Accounts that are prepared in order to comply with statutory requirement and to cater for the information requirement of external users are known
as Financial Accounts.
Management accounts are prepared for the internal purpose it is not distributed to people from the outer world.
Q34. Ghanshyam is a furniture dealer. Which one of the following will not be recorded in his books? 1 Mark
A Purchase of Timber for ₹ 350,000. B Sofa set worth 40,000 taken to his home.
C Sale of household furniture for ₹ 5,000. D Dining table of ₹ 30,000. given to his friend as gift.
Ans: C Sale of household furniture for ₹ 5,000.
Q35. Accounting is defined as "the __________ of recording, classifying and summarizing in terms of money transactions and events of a financial character 1 Mark
and interpreting the results thereof".
A Art B Science C Method D None of these
Ans: A Art
Explanation:
Definition of accounting is:
"Accounting is an art of recording, classifying and summarizing in terms of money transactions and events of a financial character and interpreting the
results thereof"
Accounting definition specifically defines that only monetary transactions should be recorded in the books of account.
Q36. Identify the external users of financial information or financial statements __________. 1 Mark
A Management of the business. B CFO of the business.
C Employees of the business. D Investors of the business.
Ans: D Investors of the business.
Explanation:
Investors of the business are considered as the external users of financial information or financial statements.
As they are not directly involved in working of organization like CFO, Employee or management.
Q37. Which of these processes are the function of book keeping? 1 Mark
A Summarising B Interpreting C Classifying D Communicating
Ans: C Classifying
Explanation:
Book keeping is an activity concerned with the recording and classification of financial data relating to business operations in significant and orderly
manner. It is a process concerned with financial data recording.
Q38. The Double Entry System of accounting originated in _________. 1 Mark
A America B Russia C Italy D England
Ans: C Italy
Explanation:
Double entry accounting system first invented in Italy by a church father who's named Luca Bartolomes Pacioli.
He was the mathematician and contemporary of Leonardo Da Vinci.
Q39. When a proprietor withdraw cash from the firm for self use, this is treated as ______. 1 Mark
A Loss B Drawing C Depreciation D Expenses
Ans: B Drawing
Explanation:
When the owner of the business withdraws some amount from the business for personal use then it is known as drawings.
Capital is the amount that is invested by the owner in the business.
Drawings are the decrease in the Capital of the business.
Q40. __________ includes identifying, recording, classifying and summarizing the transactions. 1 Mark
A Accounting posting B Accounting cycle C Tally of accounts D All of the above
Ans: B Accounting cycle
Explanation:
Accounting cycle is a step-by-step process of recording, classification and summarization of economic transactions of a business.
It generates useful information in the form of financial statements including income statement, balance sheet, cash flow statement and statement of
changes in equity.
The time period principle requires that a business should prepare its financial statements on periodic basis.
Therefore, cycle is followed once during each accounting period.
Accounting cycle starts from the recording of individual transactions and ends on the preparation of financial statements and closing entries.
Q41. Commodities bought for resale are treated as _________. 1 Mark
A Expenses B Stock C Goods D Assets
Ans: C Goods
Explanation:
Goods means those commodities which are bought for resale.
The amount receives by selling goods is known as Sales.
Purchase of goods is termed as Purchases. If goods remain unsold at the end of the financial year then it termed as Closing Stock.
Q42. A person who owes money to the firm is called: 1 Mark
A Debtor. B Creditor. C Supplier. D None of these.
Ans: A Debtor.
Q43. A person or entity to whom money is owned is known as ________. 1 Mark
A Creditor B Claimant C Bailee D Debtor
Ans: A Creditor
Eplanation:
 A creditor is a party (for example, person, organisation, company, or government) that has a claim on the services of a second party. It is a person or
instruction to whom money is owed.
A creditor may be a bank, supplier, or person that has provided credit to a company.
Q44. ____________is a reduction from the list price of goods and services on account of immediate or payment within a stipulated period. 1 Mark
A Trade discount B Cash discount C Festival discount D Inaugural discount
Ans: B Cash discount
Explanation:
Discount are categorized as Trade discount and Cash discount.
Trade discount are general discount allowed to every customer to promote the sales.
Cash discount is method of speedy collection of money from the customers to whom goods were sold on credit.
Cash discount is allowed to the existing customer with a condition that if the amount is paid on immediate basis or within a stipulated period, a certain
percentage will be allowed as discount.
Q45. Sale or purchase of goods or services for immediate cash payment is known as ____________ . 1 Mark
A Cash transaction B Credit transaction
C Non-monetary transaction D All of the above
Ans: A Cash transaction
Explanation:
The term "transaction" refers to any business dealing or event which has a value measurable in terms of money and which involves transfer of money
or money's worth between the business and others.
The capital introduced by the proprietor, the amount withdrawn by the proprietor, purchase of goods on cash or credit, selling of goods for cash or
credit, receipt of money from a debtor, payment to a creditor, borrowing of loan from the bank or payment of a loan, payment of salaries, rent,
telephone charges, and receipt of incomes such as discount, rent and interest are examples of transactions.
Cash transactions refer to any transaction which involves immediate payment or receipt of cash, e.g. purchase of goods for cash, sale of goods for
cash, and payment of expenses or receipt of incomes
Q46. The users of financial statements include _______. 1 Mark
A Shareholders B Government C Lenders D All of the above
Ans: D All of the above
Explanation:
The users of financial statement may be classified into internal external users.
Internal users refers to mangers 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.
Q47. Cash Discount is: 1 Mark
A Which is received at the time of making the payment. B Which is allowed at the time of sale of goods.
C Which is received at the time of purchase of goods. D Which is received both at the time of making payment and purchase of
goods.
Ans: A Which is received at the time of making the payment.
Q48. Which of the following is not a business transaction? 1 Mark
A Purchase of goods for resale amounted to ₹ 50,000. B Paid salaries and wages amounted to ₹ 10,000.
C Paid rent for office premises ₹ 5,000. D Purchased a LCD for personal use.
Ans: D Purchased a LCD for personal use.
Q49. Stock should include _________. 1 Mark
A Goods held as security. B Goods held by the business as consignee.
C Goods with customers for approval on sale or return basis. D Goods sold but not yet delivered.
Ans: C Goods with customers for approval on sale or return basis.
Explanation:
Goods sold on approval on sale or return basis is a stock that might get returned if it is not approved by the customer.
Till the time the sale is confirmed by the customer, the ownership of stock is with the business.
Hence, while calculating the inventory of the company, physical stock available with the company and stock with the customer on sale or approval will
be considered.
Q50. _________is a reducing from the list price of goods and services on business consideration other than prompt payment. 1 Mark
A Trade discount B Cash discount C Festival discount D Inaugural discount
Ans: A Trade discount
Explanation:
Discount are categorized as Trade discount and Cash discount.
Trade discount are general discount allowed to every customer to promote the sales.
Its a reduction to the published price of a product.
Cash discount is method of speedy collection of money from the customers to whom goods were sold on credit.
Q51. A business transaction in which money comes into the business immediately after the goods are delivered or services are rendered is called 1 Mark
____________.
A Cash Transaction B Credit Transaction C Black Money Transaction D Hawala Transaction
Ans: A Cash Transaction
Explanation:
There are two kinds of business transaction, i.e. cash or credit.
If anything is sold to the third party against which money will be received in future is called a credit transaction.
If the transaction is effected by cash on an immediate basis, it's called a cash transaction.
Q52. Accounting gives the true picture of the organization's financial position. 1 Mark
A True B False C Irrelevant D Partiality false
Ans: D Partiality false
Explanation:
A True and fair view in accounting means that a financial statement is free from material misstatements and faithfully represents
the financial performance and positioning of an entity.
As the change in the value of money due to inflation is not reflected in the book of accounts, the accounting data does not reflect the true and fair view
of the affairs of an enterprise.
Q53. Which of the following statements about differences between financial and managerial accounting is incorrect? 1 Mark
A Managerial accounting information is prepared primarily for martial B Financial accounting is aggregated; managerial accounting is focused
parties such as stockholders and creditors; financial accounting is on products and departments.
directed at internal users.
C Managerial accounting pertains to both past and future items; financial D Financial accounting is based on generally accepted accounting
accounting focuses primarily on past transactions and events. practices; managerial accounting faces no similar constraining factors.
Ans:
A Managerial accounting information is prepared primarily for martial parties such as stockholders and creditors; financial accounting is directed at internal
users.
Explanation:
Managerial accounting is for internal users like the owner, director whereas
Financial accounting is for external users like shareholders, creditors, bank etc.
Therefore, Only Option A is incorrect and the remaining are correct.Managerial accounting is for internal users like the owner, directors whereas
Financial accounting is for external users like shareholders, creditors, bank etc.
Therefore, Only Option A is incorrect and the remaining are correct.
Q54. Book Keeping is concerned with: 1 Mark
A Recording financial data relating to business operations. B Designing for systems recording, classifying and summarising
recorded data.
C Interpreting data for internal and external users. D All of the above.
Ans: A Recording financial data relating to business operations.
Q55. At the end of financial year, during which sale of goods was worth ₹ 35,00,000, the closing stock is valued at ₹ 40,000. This is ...... 1 Mark
A An event. B A transaction.
C Both an event as well as transaction. D None of (A) and (B).
Ans: C Both an event as well as transaction.
Q56. __________ is the interest of the owners in a business. 1 Mark
A Capital B Assets C Liability D Income
Ans: A Capital
Explanation:
Capital is the contribution made by the owner. Based on the concept of separate entity concept, contribution made by owner will be treated as liability
in the business books.
Q57. Which definition of accounting is most appropriate now-a-days? 1 Mark
A Accounting involves only the recording of those business transactions B Accounting is the recording, classifying, summarising, analysing and
which are of financial character. interpreting the business transactions which are of general character.
C Accounting is the process of identifying, measuring and D Accounting is basically a scientific approach.
communicating economic information to permit informed judgments
and decisions by the users of accounts.
Ans:
C Accounting is the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by the users
of accounts.
Explanation:
Accounting is the systematic process of recording, classifying, summarizing, interpreting and communicating financial information to its users.
It reveals profit and loss for a given period and the values and nature of firm's assets, liabilities and owner's equity.
Q58. Which of the following statements is not an objective of financial reporting? 1 Mark
A Provide information that is useful in investment and credit decisions. B Provide information regarding policy of organisation.
C Provide information that is useful in assessing cash flow prospective. D None of these.
Ans: B Provide information regarding policy of organisation.
Explanation:
They depict not only profits and losses, but even assets and liabilities.
Let's take a look at the objectives of financial statements along with their features.
They even help readers of these statements know the accounting policies used in them.
These statements also provide information relating to the company's cash flows .
Q59. An economic event that involves transfer of money or money's worth is a/are __________. 1 Mark
A Financial Transactions B Barter System C Settlements D Receipts/Payments
Ans: A Financial Transactions
Explanation:
Any event which involves transfer of money or money's worth is known as financial transaction.
It is an agreement, or communication, carried out between a buyer and a seller to exchange an asset for payment. It is still a transaction if the goods
are exchanged at one time, and the money at other.
Q60. Dealings between two persons is a __________. 1 Mark
A Narration B Entry C Transaction D None of the above
Ans: C Transaction
Explanation:
An event involving some value between two or more entities. It can be purchase of goods, receipt of money, payment of creditor, incurring expenses,
etc.
It can be a cash transaction or a credit transaction. A transaction is a business event that has a monetary impact on an entity's financial statements,
and is recorded as an entry in its accounting records.
A high-volume transaction, such as billing to a customer, may be recorded in a specialized journal, which is then summarized and posted to the general
ledger. Alternatively, lower-volume transactions are posted directly to the general ledger.
Q61. Tangible Assets do not include: 1 Mark
A Goodwill. B Furniture. C Stock. D Cash.
Ans: A Goodwill.
Q62. Financial accounting use ________. 1 Mark
A Projected data B External data only C Historical data D Manager data only
Ans: C Historical data
Explanation:
Financial accounting consider only those transactions which are of historic nature, i.e. the transactions which have already taken place.
Q63. Which of the following transaction is of a financial character and will be recorded in the business? 1 Mark
A Goods taken from the business by the proprietor for her personal use. B Interviewing the candidates for employment.
C Sale of Household furniture ₹ 5,000. D Received an order for sales of goods.
Ans: A Goods taken from the business by the proprietor for her personal use.
Q64. Commodity purchased or produced for sale is known as ____________. 1 Mark
A Goods B Machinery C Land D None of the above
Ans: A Goods
Explanation:
Goods refer to the products in which the business units is dealing, i.e in terms of which it is buying and selling or producing and selling.
The items that are purchased for use in the business are not called goods.
For example, for a furniture dealer purchase of chairs and tables is termed as goods, while for other it is furniture and is treated as an asset.
Similarly, for stationary merchant, stationary is goods, whereas for others it is an item of expense (not purchases).
Q65. Which of the following is/are not the branch of accounting? 1 Mark
A Cost Accounting B Financial Accounting
C Human Resources Accounting D All of the above
Ans: C Human Resources Accounting
Explanation:
There are various branches of accounting:
Financial Accounting: This branch deal with the recording of all business transactions, classifying, summarizing and interpreting the financial data to
provide the logical information to the management in the form of financial statement.
Cost Accounting: It seeks to ascertain the cost of each product or job produced or undertaken by the business.
Management Accounting:
It has the objective of collecting systematically and regularly all such information as will help the management in discharging functions in managerial
decision making.
Human Resource Accounting is not a branch of accounting.
Q66. Purchases refers to the buying of: 1 Mark
A Stationery for office use. B Assets for the factory.
C Goods of resale. D Investment.
Ans: C Goods of resale.
Q67. Which qualitative characteristic of accounting information is reflected when accounting information is clearly presented? 1 Mark
A Reliability. B Relevance. C Comparability. D Understandability.
Ans: D Understandability.
Q68. Which of the following is one of the major professional accountancy bodies in the is__________. 1 Mark
A Institute of Chartered Accountants of India. B Chartered Association of Accountants.
C Indian Institute of Chartered Accounts. D Institute of Company Accountants.
Ans: A Institute of Chartered Accountants of India.
Explanation:
The Institute of Chartered Accountants of India is one of the major professional accountancy bodies in India.
The ICAI is the second largest professional body of Chartered Accountants in the world.
There is no institute named as Chartered Association of Accountants, Indian Institute of Chartered Account, or Institute of Company Accountants
Q69. Which of the following is the Capital expenditure? 1 Mark
A Wages paid for repair of building. B Wages paid for white washing of building.
C Wages paid for construction of building. D Wages paid for cleaning of building.
Ans: C Wages paid for construction of building.
Q70. Amit is recording sales transactions in the accounting system so that they can be summarized in a logical manner for the purpose of providing financial 1 Mark
information for decision-making. Amit is doing ___________.
A Management Consulting B Review C Accounting D Auditing
Ans: C Accounting
Explanation:
To review is to check the work already done/performed.
Management consulting refers to providing suggestions/ recommendations to the management to perform the business more effectively.
Auditing is examining. Amit is doing none of the three but a simple accounting exercise.
Q71. Accounting: 1 Mark
A Includes Book Keeping. B Does not include Book Keeping.
C May or may not include Book Keeping. D None of these.
Ans: A Includes Book Keeping.
Q72. The Branch of Accounting which is concerned with the processing and presenting data for decision making is known as- 1 Mark
A Common Dollar Accounting B Social Accounting
C Cost Accounting D Management Accounting
Ans: D Management Accounting
Explanation:
The Branch of Accounting which is concerned with the processing and presenting data for decision making is known as Management Accounting.
Management accounting is the process of preparing reports about business operations that help managers make short-term and long-term decisions.
There are three branches of accounting and management accounting is one of them.
Q73. ________ is the language of business and used to communicate financial and other information to different interested parties like creditors, investors, 1 Mark
researchers, governments etc.
A Accounting B Cost Accounting C Costing D Management Accounting
Ans: A Accounting
Explanation:
 Accounting is known as the language of the business as it communicates that how the business is operating, whether it is making profit or loss etc.
Accounting is used to communicate financial and other information to different interested parties like creditors, investors, researchers, governments
etc.
Q74. Which of the following groups/ parties are interested in the accounting information of the business? 1 Mark
A Proprietors or owners B Creditors C Tax authorities D All of these
Ans: D All of these
Explanation:
There are various stakeholders in the business who want to know about the business progress and financial position of the business.
Owner of the business is interested to know the profitability and business growth.
Creditors are more interested to know the financial position of the concern. Whether the firm will be able to repay their debt on time.
Tax Authorities are interested to know that the concern is maintaining the books of account properly and due taxes are paid on time.
Q75. The work of book-keeping is of __________ nature. 1 Mark
A Competitive B Primary/ basic C Secondary D None of these
Ans: B Primary/ basic
Explanation:
There are two parts of Accountancy
Q76. Cost of Goods Manufactured is determined by: 1 Mark
A Financial Accounting. B Cost Accounting.
C Management Accounting. D Human Resource Accounting
Ans: B Cost Accounting.
Q77. Financial accounting information is characterized by all of the following except ___________. 1 Mark
A It is historical in nature. B It is factual, so it does not require judgement to prepare.
C It results from appropriate measures. D It is enhanced by managements explanation.
Ans: B It is factual, so it does not require judgement to prepare.
Explanation:
'Professional judgement' is required to prepare accounting information since it is based on various accounting assumptions, policies, principles and
standards.
Therefore, financial accounting information involves professional judgement which cannot be ignored and hence, the statement that the judgement is
not required is not correct.
Q78. ________ is the last phase of Accounting process. 1 Mark
A Classification B Summarizing C Recording D Communication
Ans: D Communication
Explanation:
After completing the recording, classifying, summarising and interpretation of the financial transactions, all the relevant information is communicated to
users of the financial statement.
There are mainly two types of users of the financial statements
Hence, Communication is considered the last phase of the accounting process.
Q79. Which of the following involves the preparation of reports and statements from the classified data (ledger) understandable and useful to management 1 Mark
and other interested parties?
A Classifying B Recording C Summarizing D All of the above
Ans: C Summarizing
Explanation:
Summarizing involves the preparation and presentation of reports and statements from the classified data (ledger) to make it understandable and
useful to management and other interested parties.
The data is summarized to help users of financial statements to make meaningful and informed decisions.
There are mainly two types of users of financial statements.
Q80. Financial accounting is concerned with recording of _______________. 1 Mark
A Business expenses and revenue. B Costs of products and services.
C Day to day business transactions. D None of the above.
Ans: C Day to day business transactions.
Explanation:
Accounting is the art of recording, classifying and summarizing all the transactions of monetary value in a significant manner to identify the end result.
In the recording step, day to day transactions is recorded in chronological order.
Firstly, the transactions are recorded in the journal. Journal is also known as the book of primary entry.
Q81. Which of the following is not a sub-field/Branch of Accounting? 1 Mark
A Cost Accounting. B Management Accounting.
C Social Responsibility Accounting. D Automated Accounting.
Ans: D Automated Accounting.
Explanation:
The process of recording financial transactions in a systematic manner and classifying them into ledgers is termed as book keeping. It is a part of
accounting. It is the basis for accounting.
Whereas, information relating to the cost have specialized branch named as cost accounting and the information relating to the funds and its cost and
profit have a branch called management accounting.
A new dimension to accounting is the social responsibility accounting which looks after the entity's responsibility towards the society. Automated
accounting is no branch or field to accounting.
Q82. Purpose of accounting is to provide financial information to _________. 1 Mark
A Shareholders B Tax authorities C Investors D All of these
Ans: D All of these
Explanation:
There are various stakeholders who are interested in the financial position of the company.
Shareholders and investors are the people who have provided the capital in the organization, hence want to know the financial position of the
organization and more interested to know about the utilization of their money.
 Tax Authorities are more interested to know about the overall financial position of the business to check and ensure that the company is paying the tax
obligations on timely basis.
Q83. Which of the following limitations of accounting states that accounts may be manipulated to conceal vital facts: 1 Mark
A Accounting is not fully exact. B Accounting may lead to window dressing.
C Accounting ignores price level changes. D Accounting ignores qualitative elements.
Ans: B Accounting may lead to window dressing.
Q84. Internal user is ________of the business entity. 1 Mark
A Bank B Compititors C Customer D Management

Ans: D Management
Explanation:
Management and cost accountants are good examples of internal users.
They are managers inside the organization who have knowledge about the inner workings of the company and can use this knowledge to improve
the business' performance.
Q85. The primary qualities that make accounting information useful for decision making are_________. 1 Mark
A Relevance and freedom from bias. B Reliability and Relevance.
C Comparability and consistency. D None of these.
Ans: B Reliability and Relevance.
Explanation:
The primary qualities that make accounting information useful for decision making are reliability and comparability.
Reliability means that the statement of accounts/accounting information is reliable for the users of the financial statements.
Comparability means that the accounting information should be presented in such a way that it is comparable and it facilitates inter and intra-firm
comparison.
Q86. Current Liabilities do not include: 1 Mark
A Bills Payable. B Creditors. C Outstanding Exp. D Debentures.
Ans: D Debentures.
Q87. Drawing are deducted from ___________. 1 Mark
A Sales B Purchases C Returns outward D Capital.
Ans: D Capital.
Explanation:
Drawings is the money that is withdrawn by the owner for personal use and is an asset for the company.
Capital is money brought by the owner in the business and is liability for the company.
Drawings are deducted from the capital to reduce the liability of the company and not shown on the assets side.
Q88. Which of these process is/are not the function of Book Keeping? 1 Mark
A Summarising B Interpreting C Communicating D All the three
Ans: D All the three
Explanation:
Bookkeeping and accounting is not to be considered identical terms.
Book keeping is defined as recording and classifying the transaction whereas summarizing, interpreting and communicating the financial data is part of
accounting.
Q89. Book Keeping and Accounting: 1 Mark
A Means same and are used interchangeably. B Does not mean same and are not used interchangeably.
C Means both (a) and (b). D None of the above.
Ans: B Does not mean same and are not used interchangeably.
Q90. Which of the following is the most relevant accounting information for taxation authorities? 1 Mark
A Cash Balance of the firm. B Book Value of the Fixed Assets.
C Credit Sales of the year. D Profit generated during the year.
Ans: D Profit generated during the year.
Q91. When information about two different enterprises have been prepared presented in a similar manner, the information exhibits the characteristics 1 Mark
of______________.
A Verifiability B Relevance C Reliability D None of these
Ans: D None of these
Explanation:
When information about two different enterprises have been prepared presented in a similar manner, the information exhibits the characteristics of
comparability.
It means that the books of accounts should be prepared in such a way that they facilitate easy comparison, intra firm or inter firm.
Q92. Accounting involves _________. 1 Mark
A Decision making for the management easy as financial results can be B The records being put is a systematic pattern so that any point of time
compared. they can be used.
C The financial information being stored in a meaningful way for taxation D All of the above.
purpose.
Ans: D All of the above.
Explanation:
Accounting plays an important and useful role for the business owner. Main advantages are:
To record all the business transactions in a systematic way so that information can be used as and when required.
Financial statements are prepared on the basis of information recorded in the books of account, so that management can take a decision by comparing
the results.
Accounting plays a vital role in giving the information to the taxation authorities to know whether business is following all the rules and laws and paying
the tax in timely manner.
Q93. The person to whom goods are sold on credit is known as _____________. 1 Mark
A Creditor B Debtor C Borrower D None of these
Ans: B Debtor
 Explanation:
A debtor is a person, company, or other entity that owes money.
In other words, the debtor has a debt or legal obligation to pay the amount owed for the goods sold to him on credit.
Q94. Amount received after selling of goods or services is known as _________. 1 Mark
A Revenue B Cost C Income D None of the Above
Ans: A Revenue
Explanation:
Revenue is a receipt normally received against the sale of goods or services.
It is not necessary that amount is received immediately at the time of sale of goods or services.
Revenue is recognized once the legal title of goods is transferred. The amount may be received later on.
Q95. A commodity in which a trader deals is known as ______. 1 Mark
A Property B Goods C Expenditure D Income
Ans: B Goods
Explanation:
Goods means those commodities which are bought for resale.
The amount receives by selling goods is known as Sales.
Purchase of goods is termed as Purchases. If goods remain unsold at the end of the financial year then it termed as Closing Stock.
Q96. Information is said to be relevant if it is _______. 1 Mark
A Free from bias B Shows profit C Not consistent D All of the above
Ans: A Free from bias
Explanation:
The information must be relevant to the needs of the users, which is the case when the information influences the economic decisions of users.
This may involve reporting particularly relevant information, or information whose omission or misstatement could influence the economic decisions of
users.
Q97. Business transaction in which cash is not paid or received immediately is known as ______________. 1 Mark
A Cash transaction B Non monetary transaction
C Credit transaction D Transaction in kind
Ans: C Credit transaction
Explanation:
Transactions are the building blocks of accounts. Any transaction that occur within the business should be present in the accounting records.
Credit transaction means any transaction by the terms of which the repayment of money loaned or loan commitment made, payment for goods,
services or properties sold or leased is to made at a future date or dates.
Credit transactions are paid at a later date than when the exchange of goods or services take place and almost at the time when the invoice for the
transaction is issued.
Q98. Which of the following is not a sub-field of accounting? 1 Mark
A Financial accounting. B Book Keeping. C Management accounting. D Cost Accounting.
Ans: B Book Keeping.
Q99. Regulatory Agencies, interested as users of accounting information's includes __________. 1 Mark
A Various Government departments. B Agencies such as Company Law Board (CLB).
C Registrar of Companies (ROC). D All of the above.
Ans: D All of the above.
Explanation:
Regulatory Agencies, interested as users of accounting information's includes
Q100. Out of the following assets which one is NOT an intangible asset? 1 Mark
A Patents. B Investments. C Goodwill. D Trademark.
Ans: B Investments.
Q101. Which of the following is a limitation of accounting? 1 Mark
A Assistance to Management. B Replaces Memory.
C Unrealistic Information. D Evidence in Court.
Ans: C Unrealistic Information.
Q102. _______ defined Accounting as the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events 1 Mark
which are, in part at least of a financial character, and interpreting the results thereafter.
A The American Institute of Certified Public Accounts. B Financial Accounting Standard Board.
C Institute of Certified Accountants of Wales. D Institute of Chartered Accountants of India.
Ans: A The American Institute of Certified Public Accounts.
Explanation:
In 1941, The american institute of Certified Public Accounts (AICPA) had defined accounting as the art of recording, classifying and summerising in a
significant manner and in terms of, money, transactions and events which are, in part at least, of financial character, and interpreting the results
thereof. With greater economic development resulting in changing role of accounting its scope become broader.
Q103. _______ is used to an economic event in accounting. 1 Mark
A Event B Transaction C Dealing D Operations
Ans: B Transaction
Explanation:
Every economic activity is performed through transactions and events.
A transaction may be a business, performance of an act or an agreement.
Transaction is used to an economic event in accounting.
Q104. The basic objective of accounting is _______________. 1 Mark
A To maintain systematic records of financial transactions. B To ascertain financial performance.
C To ascertain financial position. D All of Above.
Ans: D All of Above.
Explanation:
Basic objective of accounting is-
Q105. All are false except _________. 1 Mark
A Cash withdrawal by the proprietor for self-use need not be accounted B Cash withdrawal by the proprietor for self-use is a revenue expenses.
for in books of account.
C Cash withdrawal by the proprietor for self-use is a capital expenditure D Cash withdrawal by the proprietor for self-use is a drawing.
expenses.
Ans: D Cash withdrawal by the proprietor for self-use is a drawing.
Explanation:
Any investment or contribution done by the owner in business is treated as capital and should be shown as liability.
On the similar line, cash withdrawn by the proprietor for personal use is treated as drawings and to be recorded in books of account as drawing.
Drawing should be deducted from capital of the owner.
Q106. Accounting is a language of _________. 1 Mark
A Business B Commerce C Economics D None of these
Ans: A Business
Explanation:
Accounting is known as the language of the business as it communicates that how the business is operating, whether it is making profit or loss etc.
Accounting is used to communicate financial and other information to different interested parties like creditors, investors, researchers, governments
etc.
Q107. Which is the last step of accounting as a process of information? 1 Mark
A Recording the transaction. B Preparation of financial statements.
C Communication of information. D Analysis and interpretation of information.
Ans: C Communication of information.
Q108. A person who owes money to the firm is ____________. 1 Mark
A A creditor B A debtor C An investor D A lender
Ans: B A debtor
Explanation:
A debtor is the one who owes money to the firm i.e the firm has an amount receivable from debtor, which is an asset of the firm.
Q109. Goods that will be used in production are considered as___________. 1 Mark
A Raw Materials B Work in Progress C Finished Goods D Inventory
Ans: A Raw Materials
Explanation:
Inventory may be classified as:
Inventory of Raw Material
Inventory of Finished Goods
Work In Progress
The raw material is converted into finished goods by spending conversion cost.
Q110. The sale of merchandise to the customers is an: 1 Mark
A External event B Internal event C Social event D None of the above
Ans: A External event
Explanation:
There are mainly Two Types of Economic events i.e., External Events and Internal Events.
External Events are those events that involve transactions between an outsider and an organization.
In this example, the Customer is an outsider and goods belongs to the business, therefore, this is an example of External Events.
Q111. Accounting covers only the following octillion __________. 1 Mark
A Rewriting and Classifying. B Recording, Classifying and Analysing.
C Analysing, Recording and Interpreting. D Identifying, Classifying, Recording, Summarising and Communicating.
Ans: D Identifying, Classifying, Recording, Summarising and Communicating.
Explanation:
Accounting starts with the golden rules of accounting after that it identifies which type of accounts are affected in the transaction and accordingly we
have to record the transactions by passing journal entry.
Further, it measures the profit and loss and determines the financial position of the company. This is finally communicated to the users by way of
financial reports.
Q112. Which of the following would be considered as external users of accounting information's? 1 Mark
A Board of Directors B Shareholders C Finance manager D Sales manager
Ans: B Shareholders
Explanation:
External Users of Financial statements are those people which are outside the affairs of the business but use accounting information.
Example: banks, shareholders, creditors, etc.
Q113. Which of these would be considered as external user of the financial statements? 1 Mark
A Board of directors B Shareholders C Finance manager D Production manager
Ans: B Shareholders
Explanation:
Financial statement of the business are prepared on a periodic basis to check the health of the business. This is a statutory requirement also.
There are internal and external users to view and refer the financial statement. Banks, financial institutions and investors are considered as external
users.
Investors are always look for a better returns from the business where they have invested the amount for which they have a tool i.e. financial statement.
Q114. Which of the following is a credit transaction? 1 Mark
A Sold goods B Sold goods for cash
C Sold goods to a customer for cash D Sold goods to a customer
Ans: D Sold goods to a customer
Explanation:
Sold goods to customer is defined as credit sales.
Rest three statements are specifically denotes cash sales.
Q115. State the fundamental steps in the accounting process __________. 1 Mark
 A Identifying financial transaction B Recording the business transaction
C Classifying the business transaction D All of the above
Ans: D All of the above
Explanation:
The first step involves identifying the transactions to be recorded and preparing the source documents which are in turn recorded in the basic book of
original entry called journal and are then posted to individual accounts in the principal book called ledger.
It involves classification of the business transaction, The process of recording transactions in journal is called journalising, Once this journalising
process is completed, the journal entry provides a complete and useful description of the event's effect on the organisation.
The process of transferring journal entry to individual accounts is called posting.

Q116. Main feature of business transaction is: 1 Mark

A It involves an economic activity. B It results in a change in the financial position of the firm.
C Change must be capable of being expressed in terms of money. D All of the above.
Ans: D All of the above.
Q117. The gross decrease is economic benefits to the enterprise is referred to as __________. 1 Mark
A Inflow B Cash outflow C Expense D Income
Ans: C Expense
Explanation:
Expenses are those which are incurred for day to day business operations.
All indirect expenses are debited to the profit & loss account which finally impact the owners' equity.
There are mainly two types of expenses
Q118. The term sales is used only for the sales of _______ and is never used for the sale of _______: 1 Mark
A Assets, Investments. B Assets, Goods.
C Intangible Assets, Goods. D Goods, Assets
Ans: D Goods, Assets
Q119. If accounting information is based on facts and it is verifiable by documents it has the quality of..... 1 Mark
A Relevance. B Reliability. C Understandability. D Comparability.
Ans: B Reliability.
Q120. Trade Discount is: 1 Mark
A Which is allowed at the time of receiving the payment. B Which is allowed at the time of sale of goods.
C Which is allowed both at the time of receiving payment and sale of D Allowed in all of the above.
goods.

Ans: B Which is allowed at the time of sale of goods.

Q121. Total amount of goods and services withdrawn by the proprietor for self use is known as ____________. 1 Mark
A Capital B Drawings C Expense D Income
Ans: B Drawings
Explanation:
Withdrawal of money and/or goods by the owner from the business for personal use is known as drawings.
Drawings reduces the investment of the owners. It is maintained to track money withdrawn from a business.
A drawing account is used primarily for businesses that are taxed as sole proprietorship's or partnerships.
Owner withdrawals from businesses that are taxed as separate entities must generally be accounted for as either compensation or dividends.
Q122. _______ is the first phase of accounting process. 1 Mark
A Classification B Summarizing C Recording D Communicating
Ans: C Recording
Explanation:
In accountancy, firstly all the transaction which are of financial nature and related to the business are identified and recorded in the books of
accounting.
The transactions are recorded in a chronological manner in the primary books.
After that, they are classified in the ledger books, then summarised, interpreted and communicated to the users of the financial statement.
There are mainly two types of users of the financial statement i.e., internal users and external users.
Q123. The prime objective of accounting is to _________________. 1 Mark
A To record economic data B Provide the information basis of action
C Classifying and recording business transaction D Attainment of economic goal
Ans: C Classifying and recording business transaction
Explanation:
Accounting is an art of recording, classifying, summarizing and interpreting the data in a significant manner of money's worth business transactions.
The prime function of accounting is to classify and record all such business transaction.
It plays an important role in providing appropriate information to the business for decision making.
Q124. _______ is concerned with the transmission of summarized, analysed and interpreted information to the end users to enable them to make rational 1 Mark
decision.
A Summarizing B Analysis C Classifying D Communicating
Ans: D Communicating
Explanation:
Communication is concerned with the transmission of summarized, analysed and interpreted information to the end-user to enable them to make a
rational decision.
The accounting information after being meaningfully analysed and interpreted has to be communicated in a proper form and manner to the proper
person.
Q125. External users of accounting information are not: 1 Mark
A Lenders. B Officers. C Employees. D Public.a
Ans: B Officers.
Q126. Which of the following is not characteristic of accounting information? 1 Mark
A Understandability B Relevance C Future transactions D Completeness
Ans: C Future transactions
Explanation:
There are mainly 4 characteristics of the accounting information:
Q127. The correct sequence of accounting process is _________ . 1 Mark
A Identifying, classifying and recording. B Identifying, recording and communicating.
C Analysis, recording and summarizing. D Communicating, recording and interpreting.
Ans: B Identifying, recording and communicating.
Explanation:
Accounting can be defined as the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events
which are, in part at least, of financial character, and interpreting the results thereof.
The correct sequence of accounting process is identifying, recording and communicating.
Q128. In every business transaction, at least _______ parties are involved. 1 Mark
A Two B Three C Four D Six
Ans: A Two
Explanation:
Any business transaction will involve at least two parties. One can not do the transaction with himself. One party may be receiver and another will be
give.
For example, XYZ Ltd sold goods to ABC Ltd. In this case, XYZ Ltd is the giver who is transferring the goods and ABC Ltd is the receiver who is
accepting the goods.
Q129. _______ is a liability that results from a purchase of goods or service. 1 Mark
A Accounts payable B Bills payable C Accounts receivables D Accrued liability
Ans: A Accounts payable
Explanation:
When a company purchases goods on credit which needs to be paid back in a short period of time, it is known as Accounts Payable.
It is treated as a liability and comes under the head 'current liabilities'.
Accounts payable is a short-term debt payment which needs to be paid to avoid default.
Q130. If presentation of financial information/statement or accounting policy is designed with a pre-designed motive to influence the decision-making or 1 Mark
judgement or achieve a pre-determined result or object, the financial statement are not said to have satisfied the criteria of ___________.
A Relevance B Materiality C Neutrality D Substance over form
Ans: C Neutrality
Explanation:
Financial report should present true and fair view, which means that financial statements must be free from errors or from other missions.
Financial statements cannot be prepared with the purpose to influence certain decisions, i.e. they might be neutral.
Q131. Accounting is a substitute of ________ . 1 Mark
A Recording B Book-keeping C Memory D None of these
Ans: C Memory
Explanation:
Accounting is a process of recording, classifying, summarsing and interpretation of business transactions.
As information is recorded in the books of the accounts so, there is no need for users to remember each and every information in brain.
Thus, Accounting is substitute of the memory.
Q132. Explain the term 'Goods' _________________. 1 Mark
A Manufactured for the purpose of sales to earn profit. B Purchased for the purpose of sales to earn profit.
C Commodities into which seller trade. D All of the above.
Ans: D All of the above.
Explanation:
The commodities which are bought to resale or for packing and selling or for production to produce final goods for sale are called goods.
It is basically things in which sellers trade. For example, for a seller of furniture goods are wood that he will purchase to make furniture.
Q133. Determining the debit and credit parts of a transaction is called ____________. 1 Mark
A Analyzing business transaction B Classifying the transaction
C Summarizing D Interpreting
Ans: A Analyzing business transaction
Explanation:
Before passing any accounting entry in journal, this has to identify that which account need to be debited and credited.
For this, analysis of the business transaction is must which is done on the basis of nature of transaction.
Q134. Ram purchased goods of Rs. 10,000. This can be classified as _________. 1 Mark
A An Event. B A Transaction.
C A transaction as well as an event. D Neither a transaction nor an event.
Ans: B A Transaction.
Explanation:
Any exchange of value for value (for money or money's worth) is called a transaction.
Something having value is received, and something having value goes out.
 Selling or purchasing of goods or taking or granting any loan are examples of transactions.
Ram purchased goods of Rs.10,000 is a transaction.
Q135. Which of the following characteristics of accounting information primarily allows user of financial statements to generate predictions about an 1 Mark
organization?
A Reliability B Timeliness C Neutrality D Relevance
Ans: D Relevance
Explanation:
Information is relevant if it is available in time and helps in prediction. The management needs accounting information for making a useful decision like
where to invest, how was the performance of the business the year, where management needs to improve but if management does not get this
information on time then they cannot make a certain prediction which is important for the success of the company.
Q136. Which branch of Accounting is concerned with ascertainment and control of cost of business activities? 1 Mark
A Cost Accounting B Management Accounting
C Human Resource Accounting D Financial Accounting
Ans: A Cost Accounting
Explanation:
Cost accounting is a branch of accounting. This tool is basically used by the business to find out the cost of any product or service.
It also have various methods to find out the cost of any product.
Cost accounting is a mechanism through which any business can control the cost. It has various tools and scientific method to have such control.
Q137. Book-keeping is mainly concerned with: 1 Mark
A Recording of financial data. B Designing the systems of summarising the recorded data.
C Interpreting the data for internal and external users. D Preparation of financial statements of the business enterprise.
Ans: A Recording of financial data.
Q138. Excess of revenue over its cost _______________. 1 Mark
A Cost B Profit C Income D Loss
Ans: B Profit
Explanation:
At the end of a specified period normally a year, every business prepare a statement i.e. profit & loss account to know about the profitability of the
organization.
There are two sides of profit & loss account. One side the revenue are recorded and on another side costs are recorded.
Excess of revenue over the cost is called profit and vice versa.
Q139. _________ refers the amount invested by the owner into business. 1 Mark
A Loan B Advance C Capital D Prepaid expenses
Ans: C Capital
Explanation:
Capital refers the amount invested by the owner into business.
When the owner withdraws some amount from the business it is known as the drawings.
As per Business Entity Concept, the business man is considered separate from the business.
Therefore, capital is liability for the business and investment for the owner.
Q140. Select the odd on in relation to users of accounting information. 1 Mark
A Officers B Managers C Debtors D Board of directors
Ans: C Debtors
Explanation:
Officers, Mangers and Board of directors are the team of employees and board.
Debtors are those to whom company has sold goods on credit. These are part of current assets.
Q141. The term 'sales' is used only for the sales of _______ and is never used for the sale of ______. 1 Mark

Ans:The term 'sales' is used only for the sales of Goods and is never used for the sale of Assets.
Q142. State whether the following statements are True or False with reason: 1 Mark
Accounting Information must be reliable.

Ans:True.
Explanation:
Accounting Information must be reliable, i.e., the information must be factual and verifiable.
Q143. State whether the following statements are True or False with reason: 1 Mark
Accounting Information must be presented in such a way that only accounting people understand it.

Ans:False.
Explanation:
Accounting information must be presented in a simple and logical manner that they are understood easily by the users.
Q144. The persons to whom money is owing by the firm are termed as _______. 1 Mark

Ans:The persons to whom money is owing by the firm are termed as Creditor.
Q145. Amount which the firm owes to outsiders is known as ______. 1 Mark

Ans:Amount which the firm owes to outsiders is known as Liability.

Q146. Accounting involves only the recording of business transactions. 1 Mark

Ans:True.
Q147. Assets held for continued use in the business and not meant for resale are termed as _______. 1 Mark

Ans:Assets held for continued use in the business and not meant for resale are termed as Fixed Assets.
Q148. Accounting is a service function. 1 Mark

Ans:True.
Q149. Only those transactions are recorded in accounting which can be expressed in terms of money. 1 Mark

Ans:True.
Q150. Accounts are prepared on the basis of historical costs. 1 Mark

Ans:True.
Q151. Accounting is helpful in raising loans. 1 Mark
Ans:True.
Q152. ___________ are those assets which have a physical existence and which can be seen or felt. 1 Mark

Ans:Tangible Assets are those assets which have a physical existence and which can be seen or felt.
Q153. ______ refer to those liabilities which are to be paid normally within one year. 1 Mark

Ans:Current Liabilities refer to those liabilities which are to be paid normally within one year.
Q154. Accounting makes a record of qualitative aspects of business. 1 Mark

Ans:False.
Q155. Book-keeping starts where accounting ends. 1 Mark

Ans:False.
Q156. Amount which the proprietor has invested in a business is known as _______. 1 Mark

Ans:Amount which the proprietor has invested in a business is known as Capital.

Q157. Management of an enterprise is internal user of its accounting information. 1 Mark

Ans:True.
Q158. Accounting is not accepted as evidence in legal matters. 1 Mark

Ans:False.
Q159. The persons who still owe some amount to the business are termed as ______. 1 Mark

Ans:The persons who still owe some amount to the business are termed as Debtor.
Q160. State whether the following statements are True or False with reason: 1 Mark
Accounting may be influenced by the personal judgment.

Ans:True.
Explanation:
Accountant has to exercise his personal judgment in respect of various items such as estimating useful life of an asset to charge depreciation.
Q161. Creditors are external users of accounting information. 1 Mark

Ans:True.
Q162. Revenue means the income of a ______. 1 Mark

Ans:Revenue means the income of a Regular or Recurring.

Q163. State whether the following statements are True or False with reason: 1 Mark
Financial Statements are not comparable.

Ans:False.
Explanation:
Financial Statements of two or more years are comparable or of different firms in the same industry if they adopt the same accounting policies year to
year.
Q164. Accounting may be affected by window dressing. 1 Mark

Ans:True.
Q165. ______ is the cost incurred in producing goods and services. 1 Mark

Ans:Expenses is the cost incurred in producing goods and services.

Q166. Accounting is the language of business. 1 Mark

Ans:True.
Q167. A creditor would use an entitie's financial report to determine whether or not credit may be granted to the firm. 1 Mark

Ans:True.
Q168. Explain briefly any five advantages of accounting. 6 Marks

Ans:1. Financial Information about Business: Financial performance during the accounting period, i.e., profit earned or loss incurred and also the financial
position at the end of the accounting period is known through accounting.
2. Assistance to Management: The management makes business plans, takes decisions and exercises control over the affairs on the basis of
accounting information.
3. Replaces Memory: A systematic and timely recording of transactions obviates the necessity to remember transactions. The accounting record
provides the necessary information.
4. Facilitates Comparative Study: A systematic record enables a businessman to compare one year's results with those of other years and locate
significant fac leading to change, if any.
5. Facilitates Settlement of Tax Liabilities: A systematic accounting record immensely helps in settlement of income tax and Goods and Services Tax
(GST) liabilities, since it is a good evidence of the correctness of transactions.
6. Facilitates Loans: Loan is granted by the banks and financial institutions on the basis of growth potential which is supported by the performance.
Accounting makes available the information with respect to performance.
7. Evidence in Court: Systematic record of transactions is often accepted by the Courts as good evidence.
8. Facilitates Sale of Business: If someone desires to sell his business, the accounts maintained by him will enable the ascertainment of the proper
purchase price.
9. Assistance in the Event of Insolvency: Insolvency proceedings involve explaining many transactions that have taken place in the past. Systematic
accounting records assist a great deal in such situation.
Q169. What are types of Accounting? 6 Marks

Ans:Types of Accounting:
1. Financial Accounting: The main purpose of this branch of account ng is to record the business transactions in a systematic manner, to ascertain the
profit or loss of the account ng period by preparing a Profit & Loss Account and to present the financial posit on of the business by preparing a
Balance Sheet. This branch of accounting provides informations required by the management and various other interested parties.
2. Cost Accounting: The main purpose of cost accounting is to ascertain the total cost and per unit cost of goods produced and services rendered by
a bus ness. It also estimates the cost in advance and helps the management in exercising strict control over cost.
3. Management Accounting: The main purpose of management accounting is to present the accounting information in such a way as to assist the
management in planning and controlling the operations of a business. The management accountant uses various techniques and concepts to make
the accounting data more useful for managerial decision making. These techniques include ratio analysis, budgetary control, fund flow statement,
cash flow statement etc.
4. Tax Accounting: The branch of accounting which is used for tax purposes is called Tax Accounting. Income tax and GST are computed on the basis
of this accounting.
5. Social responsibility Accounting: The society provides the infrastructure and the facilities without which business cannot operate at all. Hence the
business also has a responsibility to the society. There is a growing demand for reports on activities which reflect the contribution of an enterprise to
the society. Social responsibility accounting is the process of identifying, measuring and communicating the contribution of a business to the
society. The contribution of a business to the society consist of providing employment to under-privileged, providing financial and manpower
support for public programs, environmental contribution, product safety, product durability, customer satisfaction etc. In social responsibility
accounting techniques have been developed for measuring the cost of these contributions and the benefit to the society.
Q170. State any six users of accounting information Why do they need accounting information? 6 Marks

Ans:1. The owners/shareholders: use them to see if they are getting satisfactory returns on their investment and also to assess the financial health of their
enterprise.
2. The managers/directors: use them to ascertain the strengths and weaknesses of the enterprise.
3. The creditors: use them to know whether the firm will be able to pay the interest regularly and will be able to pay their debts as they become due.
4. The prospective investors: use them to assess whether or not to invest their money in this firm.
5. Employees: They need accounting information to claim increase in wages, bonus and other benefits.
6. The government agencies: use them for the payment of various taxes such as Goods and Service Tax (GST), Income Tax etc.
Q171. Describe the informational needs of external users. 6 Marks

Ans:There are various external users of accounting who need accounting information for decision making, investment planning and to assess the financial
position of the business. The various external users are given below.
Banks and other financial institutions: Banks provide finance in form of loans and advances to various businesses. Thus, they need information
regarding liquidity, creditworthiness, solvency and profitability to advance loans.
Creditors: These are those individuals and organisations to whom a business owes money on account of credit purchases of goods and receiving
services; hence, the creditors require information about credit worthiness of the business.
Investors and potential investors: They invest or plan to invest in the business. Hence, in order to assess the viability and prospectus of their
investment, creditors need information about profitability and solvency of the business.
Tax authorities: They need information about sales, revenues, profit and taxable income in order to determine the levy various types of tax on the
business.
Government: It needs information to determine national income, GDP, industrial growth, etc. The accounting information assist the government in
the formulation of various policies measures and to address various economic problems like employment, poverty etc.
Researcher: Various research institutes like NGOs and other independent research institutions like CRISIL, stock exchanges, etc. undertake
various research projects and the accounting information facilitates their research work.
Consumer: Every business tries to build up reputation in the eyes of consumers, which can be created by the supply of better quality products
and post-sale services at reasonable and affordable prices. Business that has transparent financial records, assists the customers to know the
correct cost of production and accordingly assess the degree of reasonability of the price charged by the business for its products and thus helps
in repo building of the business.
Public: Public is keenly interested to know the proportion of the profit that the business spends on various public welfare schemes; for example,
charitable hospitals, funding schools, etc. This information is also revealed by the profit and loss account and balance sheet of the business.
Q172. What is accounting? Define its objectives. 5 Marks

Ans:Accounting is the art of recording, classifying , and summarising in a significant manner and in terms of money, transactions and events which are, in
part at least, of financial character, and interpreting the results there of.
Objectives of Accounting are:
To keep systematic record of business transactions: The main objective of accounting is to keep complete record of business transaction
according to specified rules. It helps to avoid the possibility of errors and fraud.
To calculate Profit and loss: Accounting helps in ascertaining the net profit or loss suffered on account of business transaction during a particular
period. For this purpose trading and profit and loss account are prepared. It gives information regarding how much of goods have been purchased
and sold, expenses incurred and amount earned during a year.
To ascertain the financial position of the business: Ascertaining profit or loss is not sufficient for a businessman. The businessman must also
know the financial health of the business. This purpose is served by preparing the balance sheet that facilitates in ascertaining the true financial
position of the business.
To ascertain the progress of business from year to year: Accounting helps in assessing the progress of business from year to year, as
accounting facilitates the comparison both inter-firm as well as intra-firm.
To prevent and detects errors and frauds.
To Provide informations to various parties: Another main objective accounting is to communicate financial and accounting information to various
users including both internal and external users like owners, management, government, labour, tax authorities, etc. The information helps them in
taking sound and judicious decisions about the business entity.
Q173. Explain the qualitative characteristics of accounting information. 5 Marks

Ans:Qualitative characteristics are the attributes of accounting information which tend to enhance its understandability and usefulness. In order to assess
whether accounting information is decision useful, it must possess the characteristics of reliability, relevance, understandability and comparability.
Reliability: Reliability means the users must be able to depend on the information. The reliability of accounting information is determined by the
degree of correspondence between what the information conveys about the transactions or events that have occurred, measured and displayed.
A reliable information should be free from error and bias and faithfully represents what it is meant to represent. To ensure reliability, the
information disclosed must be credible, verifiable by independent parties use the same method of measuring, and be neutral and faithful.
Relevance: To be relevant, information must be available in time, must help in prediction and feedback, and must influence the decisions of users
by:
1. helping them form prediction about the outcomes of past, present or future events; and/ or
2. confirming or correcting their past evaluations.
Understandability: Understandability means decision-makers must interpret accounting information in the same sense as it is prepared and
conveyed to them. The qualities that distinguish between good and bad communication in a message are fundamental to the understandability of
the message. A message is said to be effectively communicated when it is interpreted by the receiver of the message in the same sense in which
the sender has sent. Accountants should present the comparable information in the most intenlligible manner without sacrificing relevance and
reliability.
Comparability: It is not sufficient that the financial information is relevant and reliable at a particular time, in a particular circumstance or for a
particular reporting entity. But it is equally important that the users of the general purpose financial reports are able to compare various aspects of
an entity over different time period and with other entities. To be comparable, accounting reports must belong to a common period and use
common unit of measurement and format of reporting.
Q174. Read the following hypothetical Case Study and answer the given questions: 5 Marks
Business Transactions are only recorded in the Accounting Books of a firm and no other transaction that happens in the day to day functioning of the
business. Now the question arises what exactly is the Business transactions? To answer this basic question we need to see that the transaction fulfils
the basic criteria. First one being the transaction should be an economic activity, that is it should create an income for the firm or an expense for it. Like
we can say that the payment of salary to the staff is a business transaction but persuading a customer to buy a product or hiring a staff for that matter
 is not a business transaction. Secondly, the transaction should change the financial position of the firm, that is it should either raise the income of the
firm or create debt for the firm. For example, even if the goods are bought on credit, increasing creditors of the firm, it is a business transaction as it is
creating a debt for the firm. But obviously, praising a staff for his work to sell the product at a better profit, is not termed as business transaction
although it motivates the employee but does not result in changing the financial position of the firm. Lastly, the transaction should be able to be
expressed in terms of money.
Every business transaction lead to an event, that is a consequence of the transaction. Say for example, when the goods bought for ₹ 30,000 is sold for
₹ 32,000, the profit ₹ 2,000 is the event. In other words, we can say that event is what a transaction does for the business entity. Every transaction is
supported by a document that provides the authorisation and allows the transaction to be recorded in the books of accounts. It varies from entity to
entity and every transaction needs to have a separate uniquely numbered voucher. When we talk of business transactions, everything inclusive of
acquiring of assets, whether current or non-current, and incurring of liability, whether internal, external, current or non-current, is present. The change
in stock due to sale or purchase whether cash or credit, the expenses incurred, and other revenue generated are all business transactions, that are
called events and have separate unique vouchers.
1. Business Transaction of _____________ nature.
1. Economic
2. Monetary
3. Financial
4. All of the above
2. Business Transactions leads to an _________, that is nothing but its consequence.
1. Event
2. Analyze transactions.
3. Record transactions to a journal.
4. Unadjusted trial balance.
3. Which of the following is not a business transaction?
1. Buying of Furniture.
2. Paying salaries of the accountant.
3. Giving a motivation speech to the employee.
4. Buying a good for personal use from the office money.
4. Every business transaction is accompanied by _______________ voucher.
1. Receipt voucher
2. Separate uniquely numbered
3. Debtor account
4. Creditor account
5. Pick the odd one out:
1. Bank Loan
2. Cash at Bank
3. Creditors
4. Bills Payable

Ans:1. (d) All of the above

Explanation:
The purchase and sale of goods for cash or on credit, the receipts and payments of cash etc., are termed as business transactions since these
activities involve exchange of values between parties. A business transaction therefore results in some property, goods or services changing hands.
2. (a) Event
3. (c) Giving a motivation speech to the employee.
Explanation:
In the context of accounting, a nonfinancial transaction is a transaction in which assets, liabilities, expenses, income, and equity do not change. An
example of this would be hiring an employee. No journal entry is necessary for a non-financial transaction.
4. (b) Separate uniquely numbered
5. (b) Cash at Bank
Explanation:
Cash at Bank: The total amount of money held at the bank by a person or company, either in current or deposit accounts. It is included in the balance
sheet under current assets.
Q175. Explain the factors which necessiated systematic accounting. 5 Marks

Ans:Main purpose of accounting is to provide information to a variety of users for taking various decisions. Hence the information should have the quality
of reliability, understandability and comparability which is possible only if the accounting is carried out systematically i.e. based on principles and rules
of accounting. Further, the role of accounting has been changing with the changes in economic development and increasing social demands, which
requires analyses of accounting data and preparation of reports. Systematic recording is also needed for assessment of various taxes such as Goods
and Service Tax (GST), Income Tax etc.
Q176. What do you mean by Financial Accounting? Explain the four main limitations of Financial Accounting. 5 Marks

Ans:Financial accounting is the process of preparing financial statements that companies’ use to show their financial performance and position to people
outside the company, Including investors, creditors, suppliers, and customers.
1. Dependence on historical costs: Transactions are initially recorded at their cost. This is a concern when reviewing the balance sheet, where the
values of assets and liabilities may change over time. Some items, such as marketable securities, are altered to match changes in their market
values, but other items, such as fixed assets, do not change. Thus, the balance sheet could be misleading if a large part of the amount presented is
based on historical costs.
2. Inflationary effects: If the inflation rate is relatively high, the amounts associated with assets and liabilities in the balance sheet will appear
inordinately low, since they are not being adjusted for inflation. This mostly applies to long-term assets.
3. Intangible assets not recorded: Many intangible assets are not recorded as assets. Instead, any expenditure made to create an intangible asset are
immediately charged to expense. This policy can drastically underestimate the value of a business, especially one that has spent a large amount to
build up a brand image or to develop new products. It is a particular problem for startup companies that have created intellectual property, but which
have so far generated minimal sales.
4. Based on specific time period: A user of financial statements can gain an incorrect view of the financial results or cash flows of a business by only
looking at one reporting period. Any one period may vary from the normal operating results of a business, perhaps due to a sudden spike in sales
or seasonality effects. It is better to view a large number of consecutive financial statements to gain a better view of ongoing results.
Q177. Enumerate main objectives of accounting. 5 Marks

Ans:1. Maintaining Records: Maintaining financial records is the main objective of accounting. Financial records must be kept systematically to find out the
results of business. When records are not properly organized it would be of no use to management in decision making, Preserving records, support
documents and helping management in tracking transactions and outcome of business is the main objective of accounting.
2. Estimating Profit or Loss: Profit is the aim of any business. The businessman should have clear information regarding the result of his business
activity. If there is accurate measure of profit of loss, the businessman will take blind actions that will ultimately fail.
3. Presenting the Financial Position: Financial position of the business is presented in the form of Balance Sheet. This is an essential statement sought
by banks, creditors and prospective investors to find out exactly what the business owns and what owes.
Q178. Write a short note on Double Entry System of Accounting. 5 Marks

Ans:Double Entry System of accounting is a system of accounting under which both, debit and credit, aspects of accounting are recorded. A transaction
has two aspects Debit and Credit and at the time of recording a transaction, one aspect is recorded on the debit side and other aspect is recorded on
the credit side. For example, at the tirr e of cash purchases, goods are received and in return cash is paid. In the transaction, two aspects are involved,
i.e., receiving goods and paying cash and under the Double Entry System, both these aspects are recorded. One part, i.e., the receipt of goods, is
debited and the second part, i.e., payment of cash, is credited. In other words, if only two accounts are affected (as in the purchase of building for
cash), one account, Builcing, is debited and the other account, Cash, is credited for the same amount. If more than two accounts are affected by a
transaction, the sum of the debit entries must be equal to the sum of the credit entries. Thus, on any day, total amount debited is equial to the total
amount credited.
Thus, we can define Double Entry System as: "The system which recognises and records both aspects of a transaction. The Double Entry System has
proved to be a scientific and complete system of accounting.”
Q179. Describe the role of accounting in the modern world. 5 Marks

Ans:The role of accounting has been changing over the period of time. In the modern world, the role of accounting is not only limited to record financial
transactions but also to provide a basic framework for various decision making, providing relevant information to various users and assists in both
short run and long run planning. The role of accounting in the modern world are given below.
Assisting management: Management uses accounting information for short term and long term planning of business activities, to predict the
future conditions, prepare budgets and various control measures.
Comparative study: In the modern world, accounting information helps us to know the performance of the business by comparing current year's
profit with that of the previous years and also with other firms in the same industry.
Substitute of memory: In the modern world, every business incurs large number of transactions and it is beyond human capability to memorise
each and every transaction. Hence, it is very necessary to record transactions in the books of accounts.
Information to end user: Accounting plays an important role in recording, summarising and providing relevant and reliable information to its users,
in form of financial data that helps in decision making.
Q180. What do you mean by an asset and what are different types of assets? 5 Marks

Ans:Assets are economic resources of an enterprise that can be usefully expressed in monetary terms. Assets are items of value used by the business in its
operations. For example, Super Bazar owns a fleet of trucks, which is used by it for delivering foodstuffs; the trucks, thus, provide economic benefit to
the enterprise. This item will be shown on the asset side of the balance sheet of Super Bazaar.
Classification of Assets:
Current Assets: Current assets are assets that can be easily converted into cash and cash equivalents (typically within a year). Current assets are
also termed liquid assets and examples of such are: Cash, Cash equivalents, Short-term deposits, Stock, Marketable securities, Office supplies.
Fixed or Non-Current Assets: Non-current assets are assets that cannot be easily and readily converted into cash and cash equivalents. Non-
current assets are also termed fixed assets, long-term assets, or hard assets. Examples of non-current or fixed assets include: Land, Building,
Machinery, Equipment, Patents, Trademarks.
Tangible Assets: Tangible assets are assets that have a physical existence (we can touch, feel, and see). Examples of tangible assets include:
Land, Building, Machinery, Equipment, Cash, Office supplies, Stock, Marketable securities.
Intangible Assets: Intangible assets are assets that do not have a physical existence. Examples of intangible assets include: Goodwill, Patents,
Brand, Copyrights, Trademarks, Trade secrets, Permits, Corporate intellectual property.
Operating Assets: Operating assets are assets that are required in the daily operation of a business. In other words, operating assets are used to
generate revenue. Examples of operating assets include: Cash, Stock, Building, Machinery, Equipment, Patents, Copyrights, Goodwill.
Non-Operating Assets: Non-operating assets are assets that are not required for daily business operations but can still generate revenue.
Examples of non-operating assets include: Short-term investments, Marketable securities, Vacant land, Interest income from a fixed deposit.
Q181. Explain the factors which necessitated systematic accounting. 5 Marks

Ans:The factors that necessitated systematic accounting are given below.

Only financial transactions are recorded− Those events that are financial in nature are only recorded in the books of accounts. For example,
salary of an employee is recorded in the books but his/ her educational qualification is not recorded.
Transactions are recorded in monetary terms− Only those transactions which can be expressed in monetary terms are recorded in the books. For
example, if a business has two buildings and four machines, then their monetary values is recorded in the books, i.e. two buildings costing
₹ 2,00,000, four machines costing ₹ 8,00,000. Thus the total value of assets is ₹ 10,00,000.
Art of recording− Transactions are recorded in the order of their occurrence.
Classification of transaction− Business transactions of similar nature are classified and posted under their respective accounts. For example, all
the transactions relating to machinery will be posted in the Machinery Account.
Summarising of data− All business transactions are summarised in the form of Trial Balance, Trading Account, Profit and Loss Account and
Balance Sheet that provides necessary information to various users.
Analysing and interpreting data− Systematic accounting records enable users to analyse and interpret the accounting data in a proper and
appropriate manner. These accounting data and information are presented in form of graphs, statements, charts that leads to easy communication
and understandability by various users. Moreover, these facilitates in decision making and future predictions.
Q182. What do you mean by Accounting? Explain in brief any four advantages of Accounting. 5 Marks

Ans:Accounting is the art of recording, classifying, summarising and communicating financial information to users for correct decision making.
1. Financial Information about Business: Financial performance during the accounting period, i.e., profit earned or loss incurred and also the financial
position at the end of the accounting period is known through accounting.
2. Assistance to Management: The management makes business plans, takes decisions and exercises control over the affairs on the basis of
accounting information.
3. Replaces Memory: A systematic and timely recording of transactions obviates the necessity to remember transactions. The accounting record
provides the necessary information.
4. Facilitates Comparative Study: A systematic record enables a businessman to compare one year's results with those of other years and locate
significant factors leading to change, if any.
Q183. Distinguish between debtors and creditors; profit and gain. 4 Marks

Ans:Difference between Debtors and Creditors is given below.

Debtors Creditors
1 Debtors avail credit facility as they borrow. Creditors extend credit as they act as lenders.
2It is a current asset for the business. It is a current libility for the business.
3Debtors are a result of credit sales by the business. Creditors are a result of credit purchases by the business.
4Discount is allowed to debtors. Discount is received from creditors.
 Total amount to be received (total debtors) is also known as Sales LedgerTotal amount to be paid (total creditors) are also known as purchase ledger
5
Control. control.
6Collectively they form company’s accounts receivables. Collectively they form company’s accounts payables.
7 Also known as Trade Debtors or Trade Receivables. Also known as Trade Creditors or Trade Payables.
8A provision for doubtful debtful debts is created for debtors. No such provision or reserve is created.

Difference between Profit and Gain is given below.

Profit: The excess of revenues of a period over its related expenses during an accounting year is profit. Profit increases the investment of the owners.
Gain: A profit that arises from events or transactions which are incidental to business such as sale of fixed assets, winning a court case, appreciation in
the value of an asset.
Q184. Give any three examples of revenues. 4 Marks

Ans:1. Amount received from sale of goods.

2. Amount received from providing service to customers.
3. Receipts of commission, interest, rent etc.
Q185. Enumerate information needs of management. 4 Marks

Ans:Some of the most important information required for managing a business are the following:
1. Financial information such as income generated, expenses incurred, assets and liabilities of the business.
2. Administrative information such as list of employees, their service records, list and location of assets.
3. General information such as governing laws, regulations, obligations of the company etc.
Q186. Explain the primary objectives of Accounting. 4 Marks

Ans:The main objective of accounting of Primary objectives accounting are as under:

1. To maintain accounting records: Now a days the volume of transaction is to large that human memory cannot remember them. Hence the object of
accounting is to keep a systematic record of all financial transaction, all assets and all liabilities. Written records are always better than oral records,
since written records can be used by different person for taking rational decisions and serve as evidence of transactions.
2. To calculate the results of operation: At the end of the accounting period, the income statement e.g, profit and loss account is prepared to calculate
net profit or loss. This done record of income and expenses facilities the preparation of the income statement.
3. To ascertain the financial position: A position statement is prepared as at last date of the accounting period to know the financial position of an
organization. The balance sheet rows various resources owned by organization and claims against these resources or assets. The claim of outsiders
against the assets is called liability and claim of owns against the assets is called capital. A systematic record of various and liabilities facilities the
preparation of position statement.
Q187. Explain the meaning of any three of the following terms: 4 Marks
1. Assets.
2. Capital.
3. Goods.
4. Drawings.
5. Trade Receivables.

Ans:1. Assets: Anything which is in the possession or is the property of a business enterprise including the amounts due to it from others, is called an
asset. In other words, anything which will enable a business enterprise to get cash or a benefit in future is an asset. Thus, Cash and Bank balances,
Stock, Furniture, Machinery, Land and Building, Bills Receivable, Money owing by Debtors etc. are all assets.
2. Capital: It refers to the amount invested by the proprietor in a business enterprise. Amount may be in the form of cash, goods or assets. It is the
amount with the help of which goods and assets are purchased in the business. As such, in order to calculate the amount of capital all current assets
and fixed assets are added up and external liabilities are deducted out of it.
Capital = Assets - Liabilities
3. Goods: Goods include all those things which are purchased for resale or which are used for producing the finished products which are also meant to
be sold. Thus, for a furniture dealer purchase of chairs and tables is termed as goods, while for others it is furniture and is termed as an asset.
Similarly, for a stationery trader, stationery is goods, whereas for others it is expense.
4. Drawings: Any cash or value of goods withdrawn by the owner for personal use or any private payments made out of business funds are called
drawings.
5. Trade Receivables: Trade receivables refer to the amount receivable on account of sale of goods or services rendered by the company in the normal
course of business.
Trade receivables include both Debtors and Bills Receivables.

Q188. Define accounting. 4 Marks

Ans:In 1941, The American Institute of Certified Public Accountants (AICPA) had defined accounting as the art of recording, classifying, and summarising in
a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results
thereof’.
In 1966, the American Accounting Association (AAA) defined accounting as ‘the process of identifying, measuring and communicating economic
information to permit informed judgments and decisions by users of information’.
Q189. Explain the meaning of any three of the following terms: 4 Marks
1. Liability.
2. Stock.
3. Business Transaction.
4. Drawings.

Ans:1. Liability: It refers to the amount which the firm owes to outsiders (excepting the amount owed to proprietors). In the words of Finney and Miller,
“Liabilities are debts, they are amounts owed to Creditors”. This can be expressed as:
Liabilities = Assets - Capital
Thus, when a firm purchases goods on credit from A, the amount owing to A is a liability. Likewise when a bank account is overdrawn, the amount
owing to the bank (i.e., bank overdraft) is known as a liability. Likewise the Bills Payable, Creditors, Unpaid Wages are also the examples of liabilities.
2. Stock: The term stock’ includes the value of those gocds which are purchased for reselling and which are lying unsold at the end of accounting
period. The Stock may be of two types:
​Opening Stock.
Closing Stock.
The term 'Opening Stock' means the value of goods lying unsold at the beginning of the accounting period whereas the term "Closing Stock' means
the value of goods lying unsold at the end of the accounting period.
3. Business Transaction: A business transaction is an economic activity of the business that changes its financial position. Whenever any business
transaction takes place, it results in a change in the values of some of the assets, liabilities or capital.
4. Drawings: Any cash or value of goods withdrawn by the owner for personal use or any private payments made out of business funds are called
drawings.
Q190. Briefly appreciate the exact nature of accounting. 4 Marks

Ans:In order to appreciate the exact nature of accounting, we must understand the following aspects of accounting :
1. Economic Events: Accounting records only economic events. An economic event is a transaction which can be measured and expressed in terms of
money.
2. Identification, Measurment, Recording and Communication:
1. Identification: It means determining what transactions are to be recorded. It involves observing activities and selecting those events that are of
financial character and relate to the organisation.
2. Measurment: It means quantification of business transactions into financial terms by using monetary units.
3. Recording: Accounting is the art of recording business transactions according to some specified rules and in chronological order.
4. Communication: The recorded events are communicated to management and other internal and external users regularly through accounting reports.
3. Organisation: It refers to a business enterprise which can be a sole-proprietory concern, partnership firm, company or any other association of
persons.
4. Interested users of information: They may be internal users and external users. Internal users include Chief Executive, Financial Officer, Vice
President, Plant Managers, Stores Managers etc. External users include owners, potential investors, creditors, lenders, labour unions, Tax
Authorities, Customers etc.
Q191. State three limitations of accounting. 4 Marks

Ans:1. Accounting is not Fully Exact: Accounting is not fully exact in spite of the fact that most transactions are recorded on the basis of evidence, yet
some estimates are also made for ascertaining profit or loss, for examples, estimating the useful life of an asset, providing for doubtful debts, net
realisable value of closing stock, etc.
2. Unrealistic Information: Accounting information may not be realistic since accounting statements are prepared following the accounting concepts
and conventions. For example, under the Going Concern Concept, it is taken that business will continue for a foreseeable future. Accordingly, assets
are recorded at cost and depreciated over their useful life. The assets may not be actually realisable at book value.
3. Accounting Ignores the Qualitative Elements: Accounting is confined to monetary matters only, therefore, qualitative elements like quality or skills
of management and staff, industrial relations and public relations are ignored.
4. Accounting Ignores the Effect of Price Level Changes: Accounting statemerts are prepared at historical cost. Money, as a measurement unit,
changes in value frequently, i.e., it does not remain stable. Accounting, however, presumes that value of money remains stable. Unless price level
changes are considered, accounting information will not show correct financial results.
5. Accounting May Lead to Window Dressing: The term window dressing means manipulation of accounts in a way so as to conceal vital facts and
present the financ al statements to show a better position than what it actually is. In this situation, inccine statement (i.e., Profit and Loss Account)
fails to provide a true and fair view of the result of operations and the Balance Sheet fails to provide a true and fair view of the financial position of
the enterprise.
Q192. Explain the meaning of gain and profit. Distinguish between these two terms. 4 Marks

Ans: Gain: It arises from irregular activities or non-recurring transactions. In other words, a gain is a result of transactions that are incidental to the
business, other than operating transactions. For example, an old machinery of book value ₹ 20,000 is sold at ₹ 25,000. Hence, the gain is ₹ 5,000
(i.e. ₹ 25,000 - ₹ 20,000). Here, the sale of the old machinery is an irregular activity; so, the difference is termed as gain Thus, in other words the
only difference between profit and gain is that profit is the excess of revenue over expense and gain arises from other than operating transactions.
Profit: Excess of revenue over expense is known as profit. It is normally categorised into gross profit or net profit. It increases the owner’s capital
as it is added to the capital at the end of each accounting period. For example, goods costing ₹ 1,00,000 is sold at ₹ 1,20,000, then the sale
proceeds of ₹ 1,20,000 is the revenue and 1,00,000 is the expense to generate this revenue. Hence, accounting profit of ₹ 20,000 (i.e. ₹ 1,20,000 -
₹ 1,00,000) is the difference between the revenue and expense that is earned by the business.
Q193. Explain the following terms with examples: 4 Marks
1. Capital Expenditure
2. Non-Current Assets

Ans:1. Capital Expenditure: Any expenditure which is incurred in acquiring or increasing the value of a fixed asset is termed as capital expenditure. As
such, the amount spent on the purchase or erection of Building, Plant, Furniture etc. is capital expenditure. Such expenditure yields benefit over a
long period and hence written in Assets.
2. Non-Current Assets: Non-Current Assets refer to those assets which are held for continued use in the business for the purpose of producing goods
or services and are not meant for sale. Examples of non-current assets are long-term investments and fixed assets such as Land and Building, Plant
and Machinery, Computer, Motor Vehicles, Furniture etc.
Q194. Name the qualitative characteristics of accounting information. Explain any two of them. 4 Marks

Ans: Qualitative characteristics are attributes that make the accounting information use ul to users. The qualitative characteristics are:
1. Reliability: Accounting information must be reliable. Reliability of information means it is verifiable, free from bias and material error.
2. Relevance: Accounting information must be relevant to the user. Information is relevant il it meets the needs of the users in decision-making.
3. Understandability: Understandability means that the information provided through the financial statements must be presented in a manner that the
users are able to understand it.
4. Comparability: Comparability means that the users should be able to compare the accounting information of an enterprise of the period either with
that of other periods, known as intra-firm comparison or with the accounting information of other enterprises, known as inter-firm comparison.
Q195. Giving examples, explain each of the following accounting terms: 4 Marks
Fixed assets
Revenue
Expenses
Short-term liability
Capital

Ans: Fixed Assets: Fixed Assets refers to those assets which are held for continued use in the business for the purpose of producing goods and
services and not meant for resale. Examples: Plant and Machinery, Land and Building etc.
Revenues: These are the amounts of the business earned by selling its products or providing services to customers, called sales revenue. Other
items of revenue common to many businesses are: commission, interest, dividends, royalities, rent received, etc. Revenue is also called income.
Expenses: Costs incurred by a business in the process of earning revenue are known as expenses. Generally, expenses are measured by the cost
of assets consumed or services used during an accounting period. The usual items of expenses are: depreciation, rent, wages, salaries, interest,
cost of heater, light and water, telephone, etc.
Short-term liability: A debts or current liability arising from normal business opretions and recurring expenses that is expected to be satisfied
within one year. Examples of short term liabilities are accounts payable, taxes payable, unearned revenues, current purcheses, vendor invoices,
accuerd exspenses payable and current portions of long-term debts.
Capital: Amount invested by the owner in the firm is known as capital. It may be brought in the form of cash or assets by the owner for the
business entity capital is an obligation and a claim on the assets of business. It is, therefore, shown as capital on the liabilities side of the balance
sheet.
Capital = Assets − Liabilities.
Q196. Explain the following terms: 4 Marks
 1. Revenue.
2. Trade Payables.
3. Fictitious Assets.
4. Working Capital.
Working Capital = Current Assets - Current Liabilities.

Ans:1. Revenue: Revenue in accounting ineans the income of a recurring (regular) nature from any source. It consists of the amount received from sale of
goods and from service provided to customers. It also includes receipt of rent, commission, dividend, interest etc. Revenue is related with the day-
to-day affairs of the business and should also be regular in nature. As such, the amount of capital introduced by the proprietor or borrowing loan is
not revenue
2. Trade Payables: Trade payables is the amount payable on account of goods purchased or services taken in the normal course of business.
Trade Payables include both 'Creditors' and 'Bills Payables'.
3. Fictitious Assets: These are the Assets which cannot be realised in Cash or no further benefit can be derived from these assets. Such assets
include Debit balance of P & L A/c and the expenditure not yet written off such as Advertisement Expenses etc. These assets are not really assets
but are shown on the Assets side only for the purpose of transferring them to the Profit & Loss Account gradually over a period of time.
4. Working Capital: The capital of a business which is used in its day-to-day trading operations, calculated as the current assets minus the current
liabilities.
Working Capital = Current Assets - Current Liabilities.
Q197. What is the difference between Book Keeping and Accounting? 4 Marks

Ans:
Basis Book Keeping Accounting
Book Keeping is concerned with identifying financial transcations and eventAccording is concerned with summarising the recorded transacti
1. Scope s measuring them in money terms recording them un the books of account aons and events, interpreting them and communicating the results
nd classifying them. there of.
2.Stage It is a primary stage. it is the basis for accounting. It is a secondary stage. It begins where Booking Keeping ends.
The objective of According is to ascertain net results of operatio
Object The objective of Book Keeping is to maintain systematic records of financial
3. ns and financial position and to communicate information to the i
ive transactions.
nterested parties.
Nature
4. This job is routine in nature. This job is analytical and dynamic in nature.
of Job
Perfor
5. It being a routine work is performed by junior staff. It being a specialised function is performed by senior staff.
mance
Specia Book Keeping is mechanical in nature and thus, does not require special skillAccording requires special skills and ability to analyse and interp
6.
l skills s. ret.

Q198. Why assets are classified into current and non-current? 4 Marks

Ans:Classification of assets into current and non-current helps in ascertaining the liquidity position of the business entity. Non-Current Assets are held for
continued use in the business whereas current assets are expected to be converted into cash within one year.
Q199. “Only financial transactions are recorded in Accountancy.” Explain the statement. 4 Marks

Ans:Only those transactions and events are recorded in accounting which are of a financial character. There are so many transactions in the business
which are very important for business but which cannot be measured and expressed in terms of money and hence such transactions will not be
recorded. For example, the quarrel between the Production Manager and the Sales Manager, resignation by an able and experienced manager, strike
by employees and starting of a new business by the other competitor etc. Though these events affect the earnings of the business adversely but as no
one can measure the effect of such events in terms of money, these will not be recorded in the books of the business.
Q200.Why receipts are classified into capital and revenue? 4 Marks

Ans:Classification of receipts into capital receipts and revenue receipts is essential for the preparation of financial statements since revenue receipts are
shown on the credit side of Trading and Profit and Loss Account whereas capital receipts are shown in the Balance Sheet.
Q201. What is Accounting? Explain four of its functions. 4 Marks

Ans:Accounting is the art of recording, classifying, summarising and communicating financial information to users for correct decision making.
1. Maintaining Systematic Accounting Records: The primary function of accounting is to maintain systematic accounting records of financial
transactions and events. It means that the accounting records should be maintained following the accounting rules, principles and concepts. It is so
because reliable financial statements can be drawn if proper accounting records are maintained.
2. Preparation of Financial Statements: Financial statements means final accounts prepared at the end of the accounting period. It includes Income
Statement (Profit and Loss Account) and Position Statement (Balance Sheet). It is an important function of accounting because the financial
statements show the financial performance, i.e., provit earned or loss incurred during the accounting year and the financial position, 1.2., Balance
Sheet as at the end of the accounting year. Both the statements are important for all the users for taking decisions.
3. Meeting Legal Requirements: Accounting records are accepted as evidence by the court of law if they are maintained systematically following the
accounting rules, principles and concepts. Besides, the law such as the Companies Act, Income Tax Act, GST Act, etc., require submissions of
returns in the form and period as is prescribed in the law. The returns can be submitted if the accounting records are maintained systematically and
timely. A systematic accounting record maintained following the accounting principles and concepts is accepted by the authorities to be correct.
Thus, it is a function of accounting to meet the legal requirements.
4. Communicating the Financial Information: It is yet another function of accounting to communicate the financial information to the users, which may
be interrial users cr external users, such as management, banks, employees, government authorities, etc.
Q202.State what is the end-product of Financial Accounting. 3 Marks

Ans:Financial Statements:
1. Income Statement.
2. Balance Sheet.
Q203.“The role of accounting has changed over the period of time”- Do you agree? Explain. 3 Marks

Ans:The role of accounting is ever changing. While in earlier times, accounting was merely concerned with recording the financial events, i.e. record-
keeping activity; however, now-a-days, accounting is done with the rationale of not only maintaining records, but also providing an information system
that provides important and relevant information to various accounting users. The need of this change is brought over due to the ever-changing and
dynamic business environment, which is more competitive in nature now than it was in earlier times. Further, there are various relevant activities like
decision making, forecasting, comparison, and evaluation that make these changes in the role of accounting, inevitable.
Q204.Give the meaning of 'Accounting'. 3 Marks

Ans:Accounting is a process of identifying financial transactions, measuring them in money terms, recording them in primary books, classifying,
summarising, analysing, interpreting them and communicating the results to the users.
Q205.What are the steps involved in the process of accounting? 3 Marks
Ans:The steps involved in the process of accounting are:
1. Identifying financial transactions and events.
2. Recording in the books of account.
3. Classifying the recorded entries.
4. Preparation of Trial Balance.
5. Preparation of Final Accounts.
6. Analysis and Interpretation of Financial Statements.
7. Communicating to the users.
Q206.Accounting provides information about the profitability and financial soundness of a concern. In addition, it provides various other valuable information 3 Marks
also. However, accounting has certain limitations. Explain any three of such limitations.

Ans:1. Accounting is not Fully Exact: Accounting is not fully exact in spite of the fact that most transactions are recorded on the basis of evidence, yet
some estimates a re also made for ascertaining profit or loss, for examples, estimating the useful life of in ASSET, providing for doubtful debts, net
realisable value of closing stock, etc.
2. Unrealistic Information: Accounting information may not be realistic since accounting statements are prepared following the accounting concepts
and conventions, For example, under the Going Concern Concept, it is taken that business will continue for a foreseeable future. Accordingly, assets
are recorded at cost and depreciated crer their useful life. The assets may not be actually realisable at book value.
3. Accounting Ignores the Qualitative Elements: Accounting is confined to monetary matters only, therefore, qualitative elements like quality or skills
of management and staff, industrial relations and public relations are ignored.
Q207. What do you mean by Financial Accounting? Explain its one main function. 3 Marks

Ans:Financial accounting is the process of preparing financial statements that companies' use to show their financial performance and position to people
outside the company, Including investors, creditors, suppliers, and customers.
One main function.
Maintaining Systematic Accounting Records: The primary function of accounting is to maintain systematic accounting records of financial
transactions and events. It means that the accounting records should be maintained following the accounting rules, principles and concepts. It is so
because reliable financial statements can be drawn if proper accounting records are maintained.
Q208.A firm follows a practice of giving the figures of previous year alongwith the figures of current year. Now the Accountant of the firm wants to 3 Marks
discontinue this practice. Do you justify this decision?

Ans:No. Comparability of current year figures with that of previous year is a qualitative characteristic of financial information. Discontinuation of this
practice will result in discontinuation of a good practice being followed by the firm.
Q209.Distinguish between expenses and expenditure. 3 Marks

Ans:Expense is the cost incurred in producing and selling the goods and services. Thus it includes cost of goods sold and amount paid for salaries, rent,
commission etc. On the other hand, expenditure is a wider term which includes expenses also. Expenditure is the amount spent for acquiring assets,
goods and services.
Q210. What is the reason that the capital expenditure is shown in the Balance Sheet? 3 Marks

Ans:Amount spent on acquiring or erection of fixed assets is termed as capital expenditure. Such expenditure is shown in the assets because it yields
benefit over a long period of time.
Q211. Define revenues and expenses? 3 Marks

Ans:Revenues: These are the amounts of the business earned by selling its products or providing services to customers, called sales revenue. Other items
of revenue common to many businesses are: commission, interest, dividends, royalities, rent received, etc. Revenue is also called income.
Expenses: Costs incurred by a business in the process of earning revenue are known as expenses. Generally, expenses are measured by the cost of
assets consumed or services used during an accounting period. The usual items of expenses are: depreciation, rent, wages, salaries, interest, cost of
heater, light and water, telephone, etc.
Q212. Define Book Keeping. What is the function of Book Keeping? 3 Marks

Ans:Book Keeping is a part of accounting being a process of recording financial transactions and events in the books of account. Thus,
Book Keeping involves:
1. Identifying financial transactions and events.
2. Measuring them in terms of money.
3. Recording the identified financial transactions and events in the books of accourt.
4. Classifying recorded transactions and events, i.e., posting them into Ledger accounts.
Q213. Define Accounting. Explain any two limitations of Accounting. 3 Marks

Ans:Accounting is the art of recording, classifying, summarising and communicating financial information to users for correct decision making.
1. Accounting is not Fully Exact: Accounting is not fully exact in spite of the fact that most transactions are recorded on the basis of evidence, yet
some estimates are also made for ascertaining profit or loss, for examples, estimating the useful life or in asset, providing for doubtful debts, net
realisable value of closing stock, etc.
2. Unrealistic Information: Accounting information may not be realistic sirce accounting statements are prepared following the accounting concepts
and conventions. For example, under the Going Concern Concept, it is taken that business will continue for a foreseeable future. Accordingly, assets
are recorded at cost and depreciated cver their useful life. The assets may not be actually realisable at book value.
Q214. “The role of accounting has changed over the period of time". Explain. 3 Marks

Ans:The role of accounting has now shifted from that of a mere recording of business transactions to that of providing information to managers and other
interested persons in order to help them to make appropriate decisions. It is now regarded as an information system.
Q215. "Accounting information should be comparable”. Do you agreewith this statement? Give two reasons. 3 Marks

Ans:Yes, accounting information should be comparable, because

1. Comparability is needed to make inter-firm comparisons, i.e. to find out how a firm has performed as compared to the other firms,
2. Comparability is needed to make inter-period comparison, i.e. to find out how it has performed as compared to the previous years.
Q216. Distinguish between debtors and creditors. 3 Marks

Ans:Debtors are the persons who owe an amount to the enterprise for the goods sold or service provided to them on credit whereas creditors are the
persons who are to be paid an amount by the enterprise for buying from them goods or services on credit.
Q217. Distinguish between profit and gain. 3 Marks

Ans:Profit is the excess of revenues over expenses during an accounting period. It is the result of business transactions which are of regular nature
whereas gain arises from events or transactions which are incidental to business such as sale of a fixed asset or winning a lottery prize.
Q218. What is the primiary reason for the business students and others to familiarise themselves with the accounting discipline? 3 Marks

Ans:Every monetary transaction must be recorded in such a manner that various accounting users must understand and interpret these results in the same
manner without any ambiguity.
The reasons for why business students and others should familiarise themselves with the accounting discipline are given below.
1. It helps in learning the various aspects of accounting.
2. It helps in learning how to maintain books of accounts.
3. It helps in learning how to summarise accounting information.
4. It helps in learning how to interpret the accounting information with relative accuracy.
Q219. Classify the following into: 3 Marks
1. Assets.
2. Liabilities.
3. Expenses.
4. Revenues.
Sales, Bank balance, Debtors, Bank Overdraft, Creditors, Salary to manager, Discount to debtors, Cost of goods sold.

Ans:1. Assets: Bank balance, Debtors.

2. Liabilities: Bank overdraft, creditors.
3. Expenses: Salary to Manager, Discount to debtors, cost of goods sold.
4. Revenues: Sales.
Q220.Give difference between Book-keeping and Accounting on the basis of stage, special skills and nature of job. 3 Marks

Ans:
Basis Book keeping Accounting
Stage It is a primary stage. It is the basis for acconiting. It is a secondary stage. It begins where Book keeping ends.
Special Skill Book keeping is mechanical in nature and, thus, does not require special Accounting requires special skills and abillity to analyse and inter
s skills. pret.
Nature of jo
This Job is routine in nature. This Job is analytical and dynamic in nature.
b

Q221. Distinguish between revenue expenditure and capital expenditure. 3 Marks

Ans:If the benefit of an expenditure is exhausted within a year, it is treated as revenue expenditure (also called expense). On the other hand, if the benefit of
an expenditure lasts for more than a year it is treated as capital expenditure (also called an asset).
Q222.What is the primary reason for business students and others to study accounting discipline? 3 Marks

Ans:Accounting information is presented and communicated in the form of financial statements, reports, graphs and charts to the internal and external
users who require it for making important decisions. Primary reason to study accounting discipline is to acquire such knowledge which is helpful in
understanding these statemenis, reports etc.
Q223.What are Fictitious Assets? 3 Marks

Ans:These are the Assets which cannot be realised in Cash or no further benefit can be derived from these assets. Such assets include Debit balance of P
& L A/C and the expenditure not yet written off such as Advertisement Expenses etc.
Q224.“Non-monetary transactions are not recorded in the books of accounts". Explain. 3 Marks

Ans:According to the Money Measurement Concept, only those events are recorded in the books of account to which money value can be attached, i.e.
which can be expressed in the monetary terms. These transactions are recorded in the currency of a particular country, say Rupee, Dollar, etc.
For example, purchase of Machinery is expressed in monetary terms of say ₹ 10,000 and thereby can be recorded in the books of account with
₹ 10,000. On the other hand, loyalty and hard work of an employee cannot be expressed in monetary terms, thus cannot be recorded in the books of
accounts.
Q225.What is the process of Accounting? 3 Marks

Ans:An accounting process is the collective process of identifying, analyzing, and recording the accounting events of a company. The series of steps
begins when a transaction occurs and end with its inclusion in the financial statements. Additional accounting records used during the accounting
cycle include the general ledger and trial balance.
Based on the attributes of accounting, the steps of accounting process are as follows:
1. Identifying Financial Transactions and Events.
2. Recording.
3. Classifying.
4. Summarising.
5. Analysing and Interpreting.
6. Communicating.
The accounting process may be explained with the help of a diagram:
Q226.What do you mean by Accounting? What are its main objectives? 3 Marks

Ans:Accounting is a process of identifying the events of financial nature, recording them in the journal, classifying in their respective accounts and
summarising them in profit and loss account and balance sheet and communicating results to users of such information, viz. owner, government,
creditor, investors, etc.
Objectives of Accounting:
1. Recording business transactions systematically: It is necessary to maintain systematic records of every business transaction, as it is beyond
human capacities to remember such large number of transactions. Skipping the record of any one of the transactions may lead to erroneous and
faulty results.
2. Determining profit earned or loss incurred: In order to determine the net result at the end of an accounting period, we need to calculate profit or
loss. For this purpose trading and profit and loss account are prepared. It gives information regarding how much of goods have been purchased and
sold, expenses incurred and amount earned during a year.
3. Ascertaining financial position of the firm: Ascertaining profit earned or loss incurred is not enough; proprietor also interested in knowing the
financial position of his/her firm, i.e. the value of the assets, amount of liabilities owed, net increase or decrease in his/her capital. This purpose is
served by preparing the balance sheet that facilitates in ascertaining the true financial position of the business.
4. Assisting management: Systematic accounting helps the management in effective decision making, efficient control on cash management policies,
preparing budget and forecasting, etc.
Q227. How is accounting influenced by personal judgements? 3 Marks

Ans:Accountant has to exercise his personal judgement in respect of various items. For example, it is extremely difficult to predict with any degree of
accuracy the actual useful life of an asset which is needed for calculating depreciation. The same is true about method of valuation of stock and
making provision for doubtful debts.
Q228.Distinguish between fixed assets and current assets. 3 Marks

Ans:Fixed assets refer to those assets which are held for continued use in the business and are not meant for resale whereas current assets are either
meant for sale or which are expected to be converted into cash within one year.
Q229.Why expenditure is classified into capital and revenue. 3 Marks

Ans:Financial statements cannot be prepared without classifying the expenditure into capital and revenue. Capital expenditure is written in the Balance
Sheet whereas revenue expenditure is written on the debit side of Trading or Profit and Loss Account.
Q230.What is the meaning of recording in terms of money? 3 Marks

Ans:Each transaction is recorded in the books in terms of money only. For example, if a businessman purchases 200 Chairs and 10 Tables, their value in
terms of money will be recorded in the books. Similarly, if a business possesses ₹ 50,000 in Cash; Land measuring ₹ 2,000 Metres; 5 Trucks, 5
Machines; 10 ton of raw materials; 200 Chairs; 10 Tables, and so on, then in the absence of money measurement concept these different types of
assets cannot be added up and hence cannot give any useful information. But if they are expressed in terms of money, they will immediately provide
useful information such as, Cash ₹ 350,000; Land ₹ 2 Crore; Trucks ₹ 350,00,000; Machines ₹ 20,00,000; Goods ₹ 5,00,000; Chairs ₹ 50,000 and
Tables ₹ 25,000.
Q231. Explain 'Comparability' as qualitative characteristics of accounting information. 3 Marks

Ans:Comparability: Comparability means that the users should be able to compare the accounting information of an enterprise of the period either with
that of other periods, known as intra-firm comparison or with the accounting information of other enterprises, known as inter-firm comparison.
Q232.Explain any three objectives of accounting. 3 Marks

Ans:1. Maintaining Accounting Records: The objective of accounting is to record financial transactions and events of the organisation in the books of
account in a systematic manner following the principles of accountancy.
2. Determining Profit or Loss: Another objective of accounting is to determine the net result of transactions for a period. In other words, to determine
whether during the accounting period, the firm has earned a profit or incurred a loss. For this purpose, a statement called an Income Statement or
the Trading and Profit and Loss Account is prepared. Revenues resulting from the transactions of the period &re recorded in the credit and expenses
 in the debit. The difference between the two sides is either profit or loss.
3. Determining Financial Position: Another objective of accounting is to determine financial position. It is known from the Balance Sheet. Financial
position of the business is as relevant for the users of financial statements as is the Income Statement, i.e., Profit and Loss Account (Statement of
Profit and Loss, in the case of Companies).
4. Facilitating Management: The management often requires financial information for decision-making, effective control, budgeting and forecasting.
Accounting provides financial information to assist the management in discharging this function.
5. Providing Accounting Information to Users: Yet another objective of accounting is to provide accounting information to users, both internal and
external, who analyse them as per their needs.
6. Protecting Business Assets: Another objective of accounting is to have records of assets owned by the business. Accounting maintains record of
assets owned by the business which enables the management to protect them and exercise control.
Q233.What is the function of Book Keeping? 3 Marks

Ans:The function of Book Keeping is to identify financial transactions and events, measuring them in money terms, recording them in the books of account
and classifying the recorded transactions.
Q234. What is Accounting Cycle? 3 Marks

Ans:Accounting cycle is a step-by-step process of recording, classification and summarization of economic transactions of a business. It generates useful
financial information in the form of financial statements including income statement, balance sheet, cash flow statement and statement of changes in
equity.
Q235.Identify the stakeholder group who would be most interested in the following: 3 Marks
1. The ethical or environmental activities of the firm.
2. Whether the firm has a long-term future.
3. The ability of the firm to carry on providing quality products.

Ans:1. Social Responsibility Groups (such as environmental protection group).

2. Potential Investors and Long term Creditors.
3. Public or Customers.
Q236.What are the attributes (features) of Accounting? 2 Marks

Ans:Accounting is recording,identifying,classifying, summarising, analyzing and interpreting the financial information in a manner which can be
communicated to its users.
Therefore, from the meaning of the accounting it seems clear that attributes of accounting includes:
1. Identification of financial transaction and measuring it in monetary terms.
2. Classifying and summarising financial transactions by preparing the final accounts in a manner which is understandable and clear.
3. Financial information is analysed and interpreted to make a meaningful judgement of the financial position of the business.
4. Communicating this information to the users of financial information.
Q237. Why the following parties are interested in Accounting Information: 2 Marks
1. Investors.
2. Government?

Ans:1. Investors: Use them to see if they are getting satisfactory returns on their investment and also to assess the financial health of their enterprise.
2. The government agencies: Use them for the payment of various taxes such as Goods and Service Tax (GST), Income Tax etc.
Q238.What are Assets? 2 Marks

Ans:Assets are valuable resources owned by a business enterprise which can be measured in terms of money.
Q239.What is Trade Discount? 2 Marks

Ans:When discount is allowed by a seller to its customers at a fixed percentage on the list or catalogue price of the goods it is called trade discount. It is not
recorded in the books of accounts.
Q240.Distinguish between expenses and losses. 2 Marks

Ans:If the benefit of an expenditure is exhausted within a year it is called expense whereas excess of expenses of a period over its related revenues is
termed as loss.
Q241. What are Liabilities? 2 Marks

Ans:It refers to the amount which the firm owes to outsiders (expecting the amount owed to proprietors).
Q242.What is Cash Discount? 2 Marks

Ans:When discount is allowed to the customers for making prompt payment it is called cash discount. It is always recorded in the books of accounts.
Q243.What type of information is required by long-term lenders? 2 Marks

Ans:They want information about the creditworthiness and the ability of the enterprise to pay interest and the repayment of their loans.
Q244.Give one point of distinction between Book-keeping and Accountancy. 2 Marks

Ans:The main objective of book-keeping is to maintain systematic record of business transactions whereas the main objective of accounting is to ascertain
profit or loss and the financial position of the business.
Q245.Define Book Keeping. 2 Marks

Ans:Book Keeping is an art of recording in the books of account the monetary aspect of commercial and financial transactions.
Q246.Who are the internal users of accounting information? 2 Marks

Ans:Internal users are the persons who are directly involved in managing and operating the business enterprise such as directors or the partners, managers
and officers.
Q247. Differentiate between Assets and Goods on the basis of any two points. 2 Marks

Ans:1. Goods are purchased for resale whereas assets are held for continued use in the business.
2. Goods are always 'tangible' i.e., they can be seen and touched whereas assets may be both tangible and intangible.
Q248.Discuss briefly the types of Accounting Information. 2 Marks

Ans:Accounting information refers to the financial statements generated through the process of Book Keeping, use of which helps the users to arrive at
decisions. The financial statements so generated are the Income Statement, i.e., Profit and Loss Account and the Position Statement, i.e., Balance
Sheet. The information made available by these statements can be categorized into the following:
1. Information Relating to Profit or Surplus.
2. Information Relating to Financial Position.
3. Information about Cash Flow.
Q249.Name any two objectives of Accounting. 2 Marks

Ans:The two objectives of Accounting are:

1. Ascertaining profit or loss.
2. Ascertaining financial position.
Q250.Name the branch of commerce, which keeps a record of monetary transactions in a sec of books. 2 Marks

Ans:Book Keeping.
Q251. What is a Voucher? 2 Marks

Ans:A voucher is a document on the basis of which transactions are first recorded in the books.
Q252.What are the informational needs of management? 2 Marks

Ans:Management needs timely information regarding sales, costs, profitability etc. for planning, controlling and decision making.
Q253.‘Accounting information should be comparable’. Do you agree with this statement. Give two reasons. 2 Marks

Ans:Accounting information should be comparable because of the following reasons.

1. Comparable accounting information helps in inter-firm comparisons. This helps in assessing viability and advantages of various policies adopted by
different firms.
2. It also helps in intra-firm comparisons that help in determining the changes and also to ascertain the results of various policies and plans adopted in
different time periods. This also helps to figure out the errors, ascertain growth and assist in management planning.
Q254.Write one limitation of accounting. 2 Marks

Ans:Based on Hisorical Coast: Accounts are prepared on the basis of historical costs (i.e., the original costs) and as such the figures given in the financial
statements do not show the effect of changes in price level.
Q255.Give two characteristics of a business transaction. 2 Marks

Ans:1. It results in a change in the financial position of the firm, i.e. a change in the values of some of the assets, liabilities or capital.
2. The change must be capable of being expressed in terms of money.
Q256.What is meant by Accounting? 2 Marks

Ans:Accounting is the art of recording, classifying, summarising and communicating financial information to users for correct decision making.
Q257. What are the limitations of Accounting? (Any Two) 2 Marks

Ans:The limitations of Accounting are:

1. Non-financial informations are not recorded.
2. It ignores price level changes.
Q258.Name the external users directly concerned with accounting information. 2 Marks

Ans:1. Creditors.
2. Bankers or Financial Institutions.
3. Government and its Authorities.
Q259.What are the two accounting systems to record financial transactions in the books of account? 2 Marks

Ans:The two accounting systems are:

1. Double Entry System.
2. Accounts from Incomplete Records or Single Entry System.
Q260.What are the advantages of Accounting? (Any Two) 2 Marks

Ans:Two advantages of Accounting are:

1. Financial performance and position is known.
2. Assist management in making business plans, take decisions and exercise control.
Q261. Name any two external users of accounting inforrnation? 2 Marks

Ans:Any two of these: potential investors, creditors, lenders, employee unions, customers, Government etc.
Q262.What are Current Assets? 2 Marks

Ans:Current Assets include Cash and other assets which are expected to be converted into Cash within a short period (normally within one year).
Q263.Explain the meaning of Accounting. 2 Marks

Ans:Accounting is the art of recording, classifying, summarising and communicating financial information to users for correct decision making.
Q264.What is meant by Purchases? 2 Marks

Ans:The term purchases is used for buying of goods for resale or for use in manufacturing process. The term purchases includes both Cash and Credit
purchase of goods.
Q265.List any two functions of Accounting. 2 Marks

Ans:Two functions of accounting are:

1. Identifying financial transactions.
2. Recording them in the books of account.
Q266.What is income? 2 Marks

Ans:Excess of revenue over expenses is called income.

Income = Revenue – Expenses
Q267. Mention two advantages of accounting. 2 Marks

Ans:1. It provides complete and systematic record.

2. It provides information regarding Profit or Loss.
Q268.Name the branch of commerce, which keeps a record of monetary transactions in a set of books. 2 Marks

Ans:Book-keeping.
Q269.What is end product of financial accounting? 2 Marks

Ans:End product of accounting are the financial statements (i.e., Profit & Loss Account and Balance Sheet) and reports which provide information that are
useful to a variety of users who want to know the profitability and financial position of an enterprise.
Q270.What are Drawings? 1 Mark

Ans:Drawings refer to any Cash or value of goods withdrawn by the owner for personal use.
Q271. Is the basic objective of Book Keeping to maintain systematic records or to ascertain net results of operations of financial transactions? 1 Mark

Ans:The basic objective of Book Keeping is to maintain systematic records of financial transactions.
Q272.Give two examples of transactions which are not recorded in accounting. 1 Mark

Ans:1. Resignation by General Manager.

2. Value of hunan resources.
Q273.Name the external user of accounting information from whom the firm purchases goods on credit. 1 Mark
Ans:Supplier of goods.
Q274.Mr. Ganpati, the proprietor of a business, sold his residential house for 50 Lac. Will it be recorded in the books of accounts? 1 Mark

Ans:No. Personal dealings of the proprietor are not recorded in the books of the firm. However, if he invests this amount in the business it will be treated as
additional capital introduced by the proprietor and then it will be recorded in books of the firm.
Q275.‘Accounting information should be verifiable and free from personal Bias’. Name the qualitative characteristic of accounting information denoted by this 1 Mark
statement.

Ans:Reliability.
Q276.What is meant by Sales? 1 Mark

Ans:The term sales is used for the amount of sale of goods and services rendered. The term sales includes both Cash and Credit Sales.
Q277. What is the first step of Accounting Process? 1 Mark

Ans:Recording of transactions in the books of accounts.

Q278.Give two examples of Tangible Assets. 1 Mark

Ans:1. Land and Building.

2. Stock.
Q279.How is profit or loss of a particular period is ascertained? 1 Mark

Ans:Profit or loss of a particular period is ascertained by preparing a Trading and Profit and Loss Account.
Q280.Mr. Vishwanath established a Travel Agency. Over the years the Travel Agency earned high reputation. Mr. Vishwanath considers the value of goodwill 1 Mark
of his Travel Agency at ₹ 50 lac. He wants to record the value of the goodwill in the books of accounts. Can he do so?

Ans:No. Only the purchased goodwill can be recorded in the books of accounts. As per Accounting Standard 26 (Intangible Assets), self generated
goodwill is not recorded in the books of accounts because consideration in money or money's worth has not been paid for it.
Q281. Miss Priti. an electronic goods dealer, gifted a washing machine valued ₹ 325,000 to her friend Suruchi. Will it be recorded in the books of accounts? 1 Mark

Ans:Yes. It will be treated as drawings of Miss Priti and will be recorded in the books.
Q282.What is expense? 1 Mark

Ans:Expense is the cost incurred in producing and selling the goods and services.
Q283.On 1st Jan., 2015, Mr. Vadera was appointed as Marketing Manager of the firm with a salary of ₹ 50,000 per month. State whether this event will be 1 Mark
recorded in the books of accounts.

Ans:No. The appointment will not be recorded because it has not resulted in any change in the financial position of the firm. (It will be recorded only when
the salary is paid).
Q284.Profit is earned on sale of Fixed Asset. What should be the accounting treatment of this profit? 1 Mark

Ans:It is a capital profit. Hence, it should be transferred to capital reserve.

Q285.Confidence and rust that the reported information is a reasonable representation of the actual items and events, that have occurred, depicts which 1 Mark
qualitative characteristic of accounting information.

Ans:Reliability.
Q286.Recording the transactions and events correctly and preparing financial statements are the only objectives of accounting. Do you agree? 1 Mark

Ans:No. Besides recording them correctly and preparing financial statements, accounting has the objectives of facilitating management control and
communicating financial information to the users.
Q287. Define Merchandise. 1 Mark

Ans:Merchandise means goods for resale.

Q288.Mr. Dinanath who owed us 350,000 became insolvent and paid only 40% of this amount. What is term used for the amount not received? 1 Mark

Ans:Bad Debts.
Q289.Give two examples of Current Assets. 1 Mark

Ans:1. Cash.
2. Stock.
Q290.Give two examples of Intangible Assets. 1 Mark

Ans:1. Goodwill.
2. Prepaid Expenses.
Q291. How do we ascertain the financial position of the business? 1 Mark

Ans:By preparing a Balance Sheet.

Q292.Give two examples of Current Liabilities. 1 Mark

Ans:1. Creditors.
2. Bills Payable.
Q293.State the nature of information required by Investors. 1 Mark

Ans:They want information regarding risks and returns on their investment in the business enterprise.
Q294.Which qualitative characteristic of accounting information requires the use of common unit and common format of reporting? 1 Mark

Ans:Comparability.
Q295.Accounting records transactions and events that can be measured in money terms. Is this, in your opinion, a limitation of accounting or an advantage? 1 Mark
Give reasons.

Ans:Yes. Accounting records only financial transactions and events. It is an advantage as transactions of diverse nature are recorded using a common
yardstick, i.e., money, But there are other important transactions and events which may have far-reaching effect on business. They are not recorded
because they cannot be measured in money terms. For example, production loss due to labour strike. Thus, it is a limitation to that extent.
Q296.The accountant of the firm found an error in the books of accounts but neither he rectified the error nor disclosed it to the management fearing that it 1 Mark
will risk his job. Which value has been violated by the accountant?

Ans:Accountant has violated the value of honesty and trust.

Q297. Resignation by a Marketing Manager is not recorded in the books of account. Why? 1 Mark

Ans:It is not recorded because it cannot be measured in money terms.

Q298.Recording of financial transactions and preparing the financial statements are the only objectives of accounting. Do You agree? 1 Mark

Ans:No. Besides these two, accounting has objective of providing useful information to the management and communication of financial information to the
users.
Q299.Who are the external users of information? 1 Mark
Ans:External users: who are outsiders to an organisation and are interested in the financial affairs of the business. who have limited authority, ability and
resources to obtain the necessary information and have to rely on financial statements (Balance Sheet, Profit and Loss account).
External users include: present and potential Investors (shareholders), Creditors (Banks and other Financial Institutions, Debentureholders and other
Lenders), Tax Authorities, Regulatory Agencies (Department of Company Affairs, Registrar of Companies, Securities Exchange Board of India, Labour
Unions, Trade Associations, Stock Exchange and Customers, etc.
Q300.What is revenue? 1 Mark

Ans:Revenue is the income of a recurring (regular) nature such as receipts from sale of goods, rent, commission etc.
Q301. State the nature of accounting information required by long-term lenders. 1 Mark

Ans:Long term lenders are interested in repaying capacity of the business, profitability, liquidity, operational efficiency, potential growth of business.
Q302.A firm has received a large order to supply the goods. Will it be recorded in the books? 1 Mark

Ans:No. Only the receipt of order has not resulted in any change in the financial position of the firm.
Q303.What is Capital? 1 Mark

Ans:It refers to the amount invested by the proprietor in a business enterprise. It can be expressed as:
Capital = Assets - External Liabilities
Q304.Which type of accounting information shows profit earned or loss incurred? 1 Mark

Ans:Profit and Loss Account (in case of firms) and Statement of Profit and Loss (in case of Companies) shows profit earned or loss incurred during the
accounting period.
Q305.Name any one external user of Accounting information. 1 Mark

Ans:Creditors.
Q306.Which of the following transactions are of financial character and will be recorded in the books? 1 Mark
1. Credit purchase of goods.
2. Strike by employees.
3. Goods worth ₹ 20,000 taken from the business and given by the proprietor to his friend as gift.
4. Withdrawing of money by proprietor from business for personal use.
5. Interviewing the candidates for employment.
6. Sale of household furniture for ₹ 10,000.
7. Payment of school fees of proprietor's son from proprietor's personal bank Account.
8. Make promise to send the goods.
9. Receiving an order to send the goods.
10. Loss of goods by fire.
11. Value of human resources.

Ans:The following transactions are financial character and will be recorded in the books:
1. Credit purchase of goods.
3. Goods worth ₹ 20,000 taken from the business and given by the proprietor to his friend as gift.
4. Withdrawing of money by proprietor from business for personal use.
10. Loss of goods by fire.
Q307. Name any two users of accounting information. 1 Mark

Ans:1. Owners.
2. Creditors.
Q308.Meena is owner of a Restaurant. She paid son's fees from her personal bank account ₹`20,000. Whether this constitute her Business Transaction? Give 1 Mark
reason.

Ans:No. It is not a business transaction. It relates to personal dealings of the Proprietor which are not recorded in the books.
Q309.Accounting records business transactions and events which are of financial nature. Do you consider it a limitation of accounting? 1 Mark

Ans:Yes, it is a limitation of accounting because there are events which have a vital bearing on the profitability of the firm and such events are ignored.
Q310. What is the traditional function of Accounting? 1 Mark

Ans:Recording of financial transactions.

Q311. What is meant by qualitative information? 1 Mark

Ans:Qualitative aspects of business units are those aspects which cannot be expressed in rnonetary terms, such as changes in management, reputation of
the business, cordial management-labour relations, firm's ability to develop new products, efficiency of management, satisfaction of firm's customers
etc.
Q312. Which value is most important for a good accountant? 1 Mark

Ans:A good accountant is the one who is honest and shrewd. He must ensure that all transactions are recorded in the books of accounts and there should
be no hiding of facts. Sometimes, pressure may be put on him to hide certain facts in accounts to evade tax or any other purpose. But he should
behave in a honest and shrewd manner.
Q313. Give two examples of revenue expenditure. 1 Mark

Ans:1. Cost of goods sold.

2. salary.
Q314. What are Internal Liabilities? 1 Mark

Ans:All amounts which a business entity has to pay to the proprietor or owners are internal liabilities such as capital and accumulated profits.
Q315. If the accounting information is not clearly presented, which of the qualitative characteristic of the accounting information is violated? 1 Mark

Ans:Understandability.
Q316. What are Current Liabilities? 1 Mark

Ans:Current liabilities refer to those liabilities which are to be paid in near future (normally within one year).
Q317. Mr. Jaspal Singh dealing in electronic goods sold 20 TV sets costing ₹ 30,000 each at 40,000 each. Out of this ₹ 5,00,000 were received in cash and 1 Mark
the balance is not yet received. State the amount of revenue.

Ans:Revenue will be ₹ 8,00,000 (i.e. 20 TV Sets x ₹ 340,000) Revenue is the amount either received or receivable from sale of goods and services. Both
cash sales and credit sales are included in revenue.
Q318. Huge loss occurred due to the strike by employees. Will it be recorded? 1 Mark

Ans:No. Because only those transactions and events are recorded in accounting which are of a financial character and the effect of which can be measured
in terms of money.
Q319. Book Keeping is not a part of accounting. Do you agree with the statement? 1 Mark
Ans:No. Book Keeping is a part of accounting. Two processes of accounting, i.e., collecting and recording of financial transactions and events are the
processes of Book Keeping.
Q320.Godrej Ltd. imported from Germany one machinery for sale in India and another machinery for production purpose. Will you treat them goods or fixed 1 Mark
assets?

Ans:First machinery will be treated as goods, and second machinery will be treated as Fixed Asset.