TN
STATEBOARD 11th ACCOUNTANCY – UNIT 2 – CONCEPTUAL FRAMEWORK OF
ACCOUNTING – ADDITIONAL QUESTION
I. MULTIPLE
CHOICE QUESTIONS
1.
ASB was
constituted in India in the year of ………………
Answer:
1977
2.
……………… is
the primary stage in accounting.
Answer:
Book –
keeping
3.
According
to ……………… concept, every transaction or event has two aspects i.e.,’dual
effect.
Answer:
Dual aspect concept
4.
……………… is
routine and clerical in nature.
Answer:
Book –
keeping
5.
………………
requires analytical skill.
Answer:
Accounting
6.
The word
convention refers ………………
Answer:
traditions
7.
Capital +
Liabilities = Assets
Answer:
Dual aspect concept
8.
_________Requires
that all accounting transactions recorded should be based on objective
evidence.
Answer:
Objective
evidence concept
9. The
first step in the accounting process is _____________ in the books of accounts.
Answer:
identifying and recording of transactions
10. “Book-keeping is an art of recording business dealings
in a set of books”. Who Wrote this Definition of Book Keeping?
Answer:
J.R.Batliboi.
11. Which of the following is the objective of Accounting:
(i) It is the process of recording transactions in the books
of accounts.
(ii) Monetary transactions only are recorded in the
accounts.
(iii) Book-keeping is the primary stage in the accounting
process.
(iv) To know the progress of the business.
Answer:
(iv) To know the progress of the business.
12.
_____________ is the part of Accounting
Answer:
Accounting
13. Which concept
implies that a business unit is separate and distinct from the owner or owners,
that is, the persons who supply capital to it?
Answer:
Business entity concept
14. Going concern concept, Convention of consistency and
Accrual concept are considered as ________________
Answer:
fundamental accounting assumptions
15. IFRS – stands for
Answer:
International Financial Reporting Standards
16. IASB – stands for
Answer:
International Accounting Standard Board
17. ICAI – stands for
Answer:
Institute of Chartered Accountants of India
18. ASB – stands for
Answer:
Accounting Standards in India
19. Revenue should be recorded only when it is ________.
Answer:
Realised
20. Assets are recorded at _________.
Answer:
cost price
II. VERY SHORT ANSWER: 2 MARKS
1. Write any two features of book – keeping.
Answer:
The main features of Book – keeping are:
It is the process of recording transactions in the books of
accounts.
Monetary transactions only are recorded in the accounts.
2. Write any two limitations of book-keeping.
Answer:
The limitations of Book-keeping are:
Only monetary transactions are recorded in the book
accounts.
Effects of price level changes are not considered.
3. Write any two advantages of book – keeping.
Answer:
The advantages of Book – keeping are:
Transactions are recorded systematically in chronological
order in the book of accounts. Thus, book – keeping provides a permanent and
reliable record for all business transactions.
Book – keeping is useful to get the financial information.
4. What is dual aspect concept?
Answer:
According to this concept, every transaction or event has
two aspects, i.e., dual effect. This is the concept which recognises the fact
that for every debit, there is a corresponding and equal credit. This is the
basis of the entire system of double entry book – keeping.
5. Write any two needs for accounting standards.
Answer:
The need for accounting standards is:
To promote better understanding of financial statements.
To help accountants to follow uniform procedures and
practices.
6. Accounting Principles and conventions Concept Pg. No 21.
Business entity
Money measurement
Going concern
Cost
Dual aspect
Periodicity
Matching
Realisation
Objective evidence
Accrual
Consistency
Full disclosure
Materiality
Conservatism
7. State the nature of job of accounting.
Answer:
It is analytical in
nature
III. SHORT ANSWER QUESTION: 3 MARK
1. Explain the Relationship among Book-keeping, Accounting
and Accountancy.
Book-keeping is part of Accounting. It is the primary stage
in accounting. It is the process of recording transactions in the books of
accounts. Accounting is part of Accountancy. Accounting is the process of recording,
classifying, analysing and interpreting of financial data. Accountancy is the
systematic knowledge of accounting process and contains the standards,
principles, policies and procedures to be followed in accounting.
2. “Revenue is recognised when it is earned and expenses are
recognised when they are incurred.” Justify this statement.
Answer:
Accrual concept According to accrual concept, the effects of
the transactions are recognised on mercantile basis, i.e., when they occur and
not when cash is paid or received. Revenue is recognised when it is earned and
expenses are recognised when they are incurred. All expenses and revenues
related to the accounting period are to be considered irrespective of the fact
that whether revenues are received in cash or not and whether expenses are paid
in cash or not. For example, i) Credit sale is recognised as sale though the
amount has not been received immediately.
3. State the features of Book-keeping. Any 3
Answer:
Following are the features of book-keeping:
(i) It is the process of recording transactions in the books
of accounts.
(ii) Monetary transactions only are recorded in the
accounts.
(iii) Book-keeping is the primary stage in the accounting
process.
(iv) Book-keeping includes journalising and ledger posting.
IV. LONG ANSWER QUESTION: 5 MARK
1. State the objectives of Book-keeping. (Read all)
Answer:
Following are the objectives of book-keeping:
(i) To have a complete and permanent record of all business
transactions in chronological
order and under appropriate headings.
(ii) To facilitate ascertainment of the profit or loss of
the business during a specific period.
(iii) To facilitate ascertainment of financial position.
(iv) To know the progress of the business.
(v) To find out the tax liabilities.
(vi) To fulfil the legal requirements.
2. Write the Advantages and Disadvantages of Book-keeping.
Book-keeping has the following advantages:
(i) Transactions are recorded systematically in
chronological order in the book of accounts.
Thus, book-keeping provides a permanent and reliable record
for all business transactions.
(ii) Book-keeping is useful to get the financial
information.
(iii) It helps to have control over various business
activities.
Limitations of book-keeping
Book-keeping has the following limitations:
(i) Only monetary transactions are recorded in the books of
accounts.
(ii) Effects of price level changes are not considered.
3. Differentiate between book-keeping and accounting.
4. Explain the concept of Accounting Standards in India.
Answer:
1. In India, Standards of Accounting is issued by the
Institute of Chartered Accountants of India (ICAI).
2. The Council of the Institute of Chartered Accountants of
India constituted Accounting Standards Board (ASB) on 21st April, 1977
recognising the need for Accounting Standards in India.
3. ASB formulates Accounting Standards so that such
standards may be established by the Council of the Institute in India. The ASB
will consider the applicable law, custom, usage, business environment and the
International Accounting Standards while framing Accounting Standards (AS) in
India.
4. Due to globalisation, the accounts prepared in India must
be compatible with accounts prepared in other countries. This has resulted in
the existing AS being converged with the IFRS.
5. Presently, all big companies have to follow Ind AS rules,
but smaller business units are allowed to continue using AS. In future, it is
expected that all business entities in India will migrate to Ind AS.
5. Write a note on:
1. Dual aspect concept
2. Money measurement concept
Answer:
Dual aspect concept
According to this concept, every transaction or event has
two aspects, i.e., dual effect.
For example, when Arun starts a business with cash ` 5,
00,000, on the one hand, the business gets cash of ` 5,00,000 and on the other hand,
a liability arises, that is, the business has to pay Arun a sum of ` 5,00,000.
This is the concept which recognises the fact that for every
debit, there is a corresponding and equal credit. This is the basis of the entire
system of double entry book-keeping.
From this concept arises the basic accounting equation, that
is,
Capital + Liabilities
= Assets
Money measurement concept
This concept implies that only those transactions, which can
be expressed in terms of money, are recorded in the accounts. Since, money
serves as the medium of exchange transactions expressed in money are recorded
and the ruling currency of a country is the measuring unit for accounting.
Transactions which do not involve money will not be recorded
in the books of accounts.
For example, working conditions in the work place, strike by
employees, efficiency of the management, etc. will not be recorded in the
books, as they cannot be expressed in terms of money.
It helps in understanding of the state of affairs of the
business as money serves as a common measure by means of which heterogeneous
facts about the business are recorded. For example, if a business has 5
computers, 2 tables and 3 chairs, the assets cannot be added to give useful
information, unless, they are expressed in monetary terms ` 1, 00,000 for
computers, ` 10,000 for tables and ` 1,500 for chairs.
CASE STUYD:
Magesh started a new trading business. He buys and sells
packing materials. He wants to be honest in doing his business. He has plans to
establish his business in the future. He has little accounting knowledge but
has excellent business skills. At the end of his first year of trading, he
wanted to value his closing stock. He finds some of the goods are damaged. If
he wants to sell them, then he has to • spend some amount for making them in a
saleable condition. He also takes some money from his business bank account for
his personal use. But, he forgot to record that.
Now, discuss on the following points:
1.
Does every businessman need accounting knowledge?
Answer:
No, Every businessman does not need accounting knowledge.
The businessman is called sole trader. If he has little accounting knowledge,
is enough, but he should have business skill.
2.
Identify some of the accounting concepts in this case study.
Answer:
Money measurement concept.
Going concern concept.
Matching concept.
Realisation concept
Accrual concept
3.
How should his closing stock be valued?
Answer:
Convention of conservation or prudence concept. The closing
stock will be valued at market price or cost price whichever is lower.
4.
Is it possible for him to compare his business results with
that of his competitors?
Answer:
Yes, it is possible for him to compare his business results with that of his competitors, but the method is not accurate. It may be approximated i.e., capital comparison method followed.