TN STATEBOARD 11th ACCOUNTANCY UNIT 2

TEST

CONCEPTUAL FRAMEWORK OF ACCOUTNING UNIT TEST

 

TEST –2

PADVIKSHA BLOG

  

TOTAL MARKS: 25

 

 

         

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

Write all questions

1. GAAPs are:

 (b) Generally Accepted Accounting Principles

         

2. The word convention refers ………………

a. Traditions

 

3. Which of the following is the objective of Accounting:

d. To know the progress of the business.

 

 

4. In India, Accounting Standards are issued by

 (d) The Institute of Chartered Accountants of India

 

5. ASB was constituted in India in the year of ………………

b. 1977

 

II very short answer question. (3x2=6)

 

Write Any 3 Questions:

1. 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.

 

2. What is “Full Disclosure Principle” of accounting?

Answer:

It implies that the accounts must be prepared honestly and all material information should be disclosed in the accounting statement. This is important because the management is different from the owners in most of the organisations.

 

3. 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.

 

4. Write a note on:

1. Matching

Expenses relating to a particular period are to be matched with revenues relating to that period.

2. Realisation

Revenue should be recorded only when it is realised.

 

5. 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.

III Short answer questions. (3 X 3 = 9)

 

WRITE ANY 3 QUESTIONS

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, analyzing 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. “Business units last indefinitely”. Mention and explain the concept on which the statement is based.

Answer:
It is the basic assumption that business is a going concern and will continue its operations for a foreseeable future. Going concern concept influences accounting practices in relation to valuation of assets and liabilities, depreciation of the fixed assets, treatment of outstanding and prepaid expenses and accrued and unearned revenues. For example, assets are generally valued at historical cost. Any increase or decrease in the value of assets in the short period is ignored.

 

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.

 

4. “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.

 

5. What is matching concept? Why should a business concern follow this concept?

Answer:
Matching concept: According to this concept, revenues during an accounting period are matched with expenses incurred during that period to earn the revenue during that period. This concept is based on accrual concept and periodicity concept. Periodicity concept fixes the time frame for measuring performance and determining financial status. All expenses paid during the period are not considered, but only the expenses related to the accounting period are considered.
On the basis of this concept, adjustments are made for outstanding and prepaid expenses and accrued and unearned revenues. Also due provisions are made for depreciation of the fixed assets, bad debts, etc., relating to the accounting period. Thus, it matches the revenues earned during an accounting period with the expenses incurred during that period to earn the revenues before sharing any profit or loss

IV. Long Answer question (1 x 5 = 5)

 

WRITE ANY ONE QUESTION

1. Differentiate between book-keeping and accounting.

2. 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

• Does every businessman need accounting knowledge?

• Identify some of the accounting concepts in this case study.

• How should his closing stock be valued?

• Is it possible for him to compare his business results with that of his competitors?

 

Question 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.

 

Question 2.

Identify some of the accounting concepts in this case study.

Answer:

 

1. Money measurement concept.

2. Going concern concept

3. Matching concept.

4. Realisation concept

5. Accrual concept

 

Question 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

 

Question 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.