TN STATEBOARD 11th ACCOUNTANCY CHAPTER 1 TEST

SOLUTIONS

INTRODUCTION TO ACCOUNTING CHAPTER TEST

TEST – 1

PADVIKSHA BLOG

TOTAL MARKS: 25

 

I Multiple Choice Questions (MCQ) (Mark- 5 x 1 = 5)

1. Who Developed the Double Entry Book-keeping system?

(a) Luca Pacioli

 

2. Who wrote the book named "Arthashastra”?

 (b) Kautilya

 

3. The root of Financial Accounting system is

(a) Stewardship Accounting

 

4. Financial position of a Business is ascertained on the basis of

(c) Balance Sheet

 

5. Who is considered to be the External user of the financial information?

 (c) Creditor

 

II VERY SHORT ANSWER QUESTION (4 x 2 = 8)

Write Any 4 Questions:

1. Define Accounting.

Answer:

American Accounting Association has defined accounting as "the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by users of the information."

2. In which Century Records of Debit and Credit were found?

Answer: The records of debit and credit were found in 12th Century.

 

3. Define Asset and Liability.

Asset: Any physical thing or right owned that has a monetary value is called asset.

Liability: It refers to the financial obligation of the business.

4. Name any 2 bases of recording Accounting information.

(i) Cash basis

(ii) Accrual or mercantile basis

5. What is Capital Structure?

Capital structure refers to the mix of a firm’s permanent long-term financing represented by debt, preference share capital and equity shareholders’ funds.

6. What are the steps involved in the process of Accounting?

Answer:


Accounting is the systematic process of identifying, measuring, recording, 

classifying, summarising, interpreting and communicating financial 

information.

III SHORT ANSWER QUESTION

WRITE ANY 4 QUESTIONS

1. Write a note on:

    a. Purchases

Buying of goods with the intention of resale is called purchases.  

    b. Sales

When goods meant for resale are sold, it is called sales.

   c. Purchases Returns

When goods bought are returned to the suppliers, it is known as purchases returns or returns outward.

2. Discuss briefly about Cash Basis.

Answer:

Cash basis

Under cash basis of accounting, actual cash receipts and actual cash payments are recorded.

In this basis, revenue is recognized when cash is received and expenses are recognized when cash is paid. Credit transactions are not recorded till cash is actually received or paid. Under this basis,

(a) Any income received

(b) Any expenditure paid

(c) Any asset purchased for which cash is paid

 

3. Explain the Importance of Accounting.

Answer:

Importance of Accounting

1. Systematic records: All the transactions of an enterprise which are financial in nature are recorded 

in a systematic way in the books of accounts.


2. Preparation of financial statements: Results of business operations and the financial position of the 

concern can be ascertained from accounting periodically through the preparation of 

financial statements.

3. Assessment of progress: Analysis and interpretation of financial data can be done to assess the 

progress made in different areas and to identify the


areas of weaknesses.


4. Aid to decision making: Management of a firm has to make routine and strategic decisions while 

discharging its functions.



5. Satisfies legal requirements: Various legal requirements like maintenance of provident fund (PF) for 

employees, Tax deducted at source (TOS), filing of tax returns and properly fulfilled with the help of 

accounting.

6. Information to interested groups: Accounting supplies appropriate information to different 

interested groups like owners, management, creditors, employees, financial institutions, tax 

authorities and the Government.

7. Legal evidence: Accounting records are generally accepted as evidence in courts of law and other

 legal authorities in the settlement of disputes.


8. Computation of tax: Accounting records are the basic source for computation and settlement of

 income tax and other taxes.

9. Settlement during mergers: When two or more business units decide to merge, accounting records

 provide information for deciding the terms of merger and any compensation payable as a 

consequence of merges.

4. Why are the following parties interested in accounting information?

Answer:

   a. Owner

The owners of a business provide capital to be used in the business. They are interested to know whether the business has earned profit or not during a particular period and also its financial position on a particular date. They want accounting reports in order to have an appraisal of performance and also for an assessment of future prospects to ensure that they will get their expected returns from the business and get back their capital safely.

   b. Customer

Customers who buy and use the products and services of business enterprises are interested in knowing the details of the products and the prices charged to them. They are interested in knowing the stability and profitability of an enterprise to ensure continued supply of the products or services by the enterprise.

   c. Government

The scarce resources of the country are used by business enterprises. Information about performance of business units in different industries helps the government in policy formulation for development of trade and industry, allocation of scarce resources, grant of subsidy, etc. Government also administers prices of certain commodities. In such cases, government agencies have to ensure that the guidelines for pricing are followed.

5. Write any 3 roles of an accountant.

Answer:

The important role of an accountant is:


1 . Record keeper: The accountant maintains a systematic record of 

financial transactions.


2. Provider of information to the management: The accountant 

assists the management by providing financial information required 

for decision making and for exercising controls.

3. Protector of business assets: The accountant maintains records of 

assets owned by the business which enables the management to 

protect and exercise control over these assets.

4. Financial advisor: The accountant analysis financial information 

and advises the business managers regarding investment 

opportunities, strategies for cost savings, capital budgeting

, provision for future growth and development, expansions of 

enterprise, etc.

5. Tax managers: The accountant ensures that tax returns are

 prepared and filed correctly on time and payment of tax is made on

 time

6. Public relation officer: The accountant provides accounting

 information’s to various interest users for analysis as per their 

requirements.

 

6. Explain the meaning of Accounting.

Answer:

Accounting is the systematic process of identifying, measuring, recording, classifying, 

summarizing, interpreting and communicating financial information. Accounting gives 

information on:

 

1. The resources available

2. How the available resources have been employed and

3. The results achieved by their use.