Balbharti Maharashtra State Board 11th Commerce Book Keeping & Accountancy Important Questions Chapter 1 Introduction to Book Keeping and Accountancy Important Questions and Answers.
Maharashtra State Board 11th Commerce BK Important Questions Chapter 1 Introduction to Book Keeping and Accountancy
1. Answer in One Sentence:
Question 1.
What is Transaction?
Answer:
The exchange of goods or services for money or money’s worth is called a transaction.
Question 2.
What is Cash Discount?
Answer:
The amount which is deducted by the seller from the amount due at the time of the receipt is called cash discount.
Question 3.
What is the entity concept?
Answer:
The business entity concept states that a business has a separate entity and has an independent legal existence distinct from the person who owns it.
Question 4.
What is the money measurement concept?
Answer:
The money measurement concept implies that every business transaction must be recorded in a common unit of measurement i.e. in terms of money only.
Question 5.
What is the consistency concept?
Answer:
The consistency concept implies that any policy adopted for accounting should be continuous or consistent throughout the business and it need not be changed generally unless and until circumstances demand.
Question 6.
What is conservatism?
Answer:
The concept of conservatism states that while deciding the policy of the enterprise the businessman has to anticipate no profit but provide for all possible losses.
Question 7.
What is accounting?
Answer:
Accounting is a process of recording, classifying, summarising, analyzing, and interpreting financial transactions and communicating the result thereof to the users of such information.
Question 8.
Name the financial statements prepared by a business.
Answer:
A businessman prepares the financial statements such as income statements i.e. Trading Account and Profit and Loss Account and Position Statement i.e. Balance Sheet.
Question 9.
Explain the term ‘Profit’.
Answer:
Excess of revenue income over revenue expenditure is termed as profit.
Question 10.
Explain the term ‘Cost Concept’.
Answer:
The concept according to which assets are recorded in the books of accounts at the price at which they are acquired or purchased is called the cost concept.
2. Give the word term or phrase which can substitute each of the following statements:
Question 1.
Dealings between two persons.
Answer:
Transaction
Question 2.
Business transaction in which cash is not paid or received immediately.
Answer:
Credit Transaction
Question 3.
An allowance is given by the receiver of the cash to the giver of cash at the time of payment.
Answer:
Cash Discount
Question 4.
Liability depends on the happening or not happening a certain event.
Answer:
Contingent Liability
Question 5.
Expenditure on fixed assets increases the earning capacity of the business.
Answer:
Capital Expenditure
Question 6.
System in which entry is recorded for cash as well as credit transactions.
Answer:
Accrual System
Question 7.
The concept under which comparison of one accounting period with the other period is possible.
Answer:
Consistency Concept
Question 8.
A science and art of correctly recording in the books of accounts, all those business transactions that result in the transfer of money or money’s worth.
Answer:
Bookkeeping
Question 9.
Exchange of goods and services either for cash or any other goods or services.
Answer:
Transaction
Question 10.
Sale or purchase of goods or services for immediate cash payment.
Answer:
Cash Transaction
Question 11.
Sale or purchase of goods or services for a certain value to be receivable or payable in the future.
Answer:
Credit Transaction
Question 12.
Commodity purchased or produced for sale.
Answer:
Goods
Question 13.
Excess of assets over liabilities.
Answer:
Capital
Question 14.
Excess of profit over normal profit.
Answer:
Super Profit
Question 15.
The total amount of goods and services are withdrawn by the proprietor for self-use.
Answer:
Drawings
Question 16.
Amount of discount deducted from the invoice price.
Answer:
Trade discount
Question 17.
The reputation of a business is expressed in terms of money.
Answer:
Goodwill
Question 18.
The concept states that assets when purchased should be recorded at cost price.
Answer:
Cost concept
Question 19.
The concept states that business operations will continue forever.
Answer:
Concept of Going Concern
Question 20.
A concept on which a double-entry bookkeeping system is based.
Answer:
Dual Aspect Concept
Question 21.
Rules of conduct are accepted universally to record business transactions.
Answer:
Accounting Principles
Question 22.
General ideas which convey certain meanings.
Answer:
Concepts
Question 23.
The general notion or abstract ideas on which accounting is based.
Answer:
Accounting Concept
Question 24.
The accounting concept suggests that a business has a separate identity from its owner.
Answer:
Business Entity Concept
Question 25.
The accounting concept states that monetary transactions are only recorded in the books of accounts.
Answer:
Money Measurement Concept
Question 26.
The money value for which assets are acquired or manufactured.
Answer:
Cost
Question 27.
Proprietor’s contribution to the business.
Answer:
Capital
Question 28.
Valuable things are owned by the business.
Answer:
Assets
Question 29.
Period of time for which accounts of the business are prepared.
Answer:
Financial year/Accounting year
Question 30.
Amount received after selling of goods or services.
Answer:
Revenue
Question 31.
Excess of revenue over its cost.
Answer:
Profit
Question 32.
Name the accounting concept on the basis of which the income statement is prepared.
Answer:
Accrual Accounting Concept
3. Select the most appropriate alternatives from those given below and rewrite the statements.
Question 1.
Money value of the reputation of business is known as ____________
(a) Copyright
(b) Goodwill
(c) Patents
(d) Trademark
Answer:
(b) Goodwill
Question 2.
Heavy advertising expenditure for launching a new product is called as ____________
(a) Capital expenditure
(b) Revenue Expenditure
(c) Deferred Revenue Expenditure
(d) None of these
Answer:
(c) Deferred Revenue Expenditure
Question 3.
Expenditure incurred on purchase of fixed asset is ____________
(a) Revenue Expenditure
(b) Capital Expenditure
(c) Deferred Revenue Expenditure
(d) None of these
Answer:
(b) Capital Expenditure
Question 4.
Concept which provides a line between present and future is known as ____________
(a) Going Concern Concept
(b) Cost Concept
(c) Accrual Concept
(d) Entity Concept
Answer:
(a) Going Concern Concept
Question 5.
Totalling of Journal or Ledger is called as ____________
(a) Posting
(b) Folio
(c) Casting
(d) Journalising
Answer:
(c) Casting
Question 6.
In cash transaction, goods or services are exchanged for ____________
(a) other goods
(b) other services
(c) immediate cash
(d) grains
Answer:
(c) immediate cash
Question 7.
The work of book-keeping is of ____________ nature.
(a) competitive
(b) primary/basic
(c) secondary
(d) none of these
Answer:
(b) primary/basic
Question 8.
Capital is ____________ of the business.
(a) asset
(b) liability
(c) property
(d) goodwill
Answer:
(b) liability
Question 9.
The work of accounting depends upon ____________
(a) book-keeping
(b) cash book
(c) subsidiary books
(d) ledger
Answer:
(a) book-keeping
Question 10.
____________ is the amount invested by the owner of a business.
(a) Cash
(b) Money
(c) Asset
(d) Capital
Answer:
(d) Capital
Question 11.
Revenue expenditure is ____________ in nature.
(a) capital
(b) outstanding
(c) recurring
(d) contingent
Answer:
(c) recurring
Question 12.
Amount withdrawn by the owner for his personal expenses is called ____________
(a) Drawings
(b) Personal expenses
(c) Cash
(d) Assets
Answer:
(a) Drawings
Question 13.
Financial statements are a part of ____________
(a) Book keeping
(b) Planning
(c) Accounting
(d) None of these
Answer:
(c) Accounting
Question 14.
A ____________ liability is an uncertain liability.
(a) Long term
(b) Contingent
(c) Current
(d) Fixed
Answer:
(b) Contingent
Question 15.
A Derson who is unable to nay his debts, is called ____________
(a) insolvent
(b) solvent
(c) well to do
(d) poor
Answer:
(a) insolvent
Question 16.
According to ____________ concept business shall go on for a long time.
(a) going concerned
(b) consistency
(c) materiality
(d) dual aspects
Answer:
(a) going concerned
Question 17.
According to ____________ concept, every business transaction has two aspects.
(a) going concerned
(b) materiality
(c) business entity
(d) dual aspects
Answer:
(d) dual aspects
Question 18.
According to ____________ concept revenue is recognised when it is earned.
(a) Realisation
(b) Accounting period
(c) Accrual
(d) Matching cost
Answer:
(c) Accrual
Question 19.
According to ____________ convention, while preparing planning anticipate losses.
(a) Materiality
(b) Consistency
(c) Conservatism
(d) disclosure
Answer:
(c) Conservatism
Question 20.
Customs and traditions which guide the accountants to prepare accounting statements are called ____________
(a) Conventions
(b) Principles
(c) Concepts
(d) Procedure
Answer:
(a) Conventions
Question 21.
According to ____________ concept, assets are recorded at a price paid to acquire them.
(a) Cost
(b) Money measurement
(c) Entity
(d) Dual aspect
Answer:
(a) Cost
4. State whether the following statements are true or false with reasons:
Question 1.
The trading concern is established for rendering services to society.
Answer:
This statement is False.
The main objective of trading concern is to earn profit. It is for traders’ livelihood, so the trading concern is not established for rendering services to the society.
Question 2.
Book-keeping is an art as well as a science.
Answer:
This statement is True.
Book-keeping is also considered as an art of recording business transactions because the writing of accounts in a specific style and format requires education, knowledge, training, skill, and experience. From another point of view, Book-keeping is a continuous process of collecting, analyzing, classifying, summarising, and recording the different types of business transactions. In brief, bookkeeping may be defined as “A science as well as an art of collecting, analyzing, classifying, summarising and recording all types of business transactions in a significant manner and in terms of money in a separate set of books.”
Question 3.
In Book-keeping & Accountancy non-monetary transactions are also recorded.
Answer:
This statement is False.
Only monetary transactions are recorded in Book-keeping & Accountancy. It is done to find financial results for the purpose of analyzing and interpreting.
Question 4.
Perpetual succession is explained by the concept of the entity.
Answer:
This statement is False.
The concept of entity is different from the perpetual succession. Entity means separate existence of business from the owner whereas perpetual succession means long life and continuation.
Question 5.
Accounting is useful only to the owner.
Answer:
This statement is False.
Accounting is not only useful for the owner but also to the suppliers, government, customers, lenders, etc.
Question 6.
Writing of account does not require specific skill and knowledge.
Answer:
This statement is False.
Writing of account requires specific skill and knowledge as book-keeping is an art and science of correctly recording business transactions.
Question 7.
The main objective of Bookkeeping is to keep permanent records of business transactions.
Answer:
This statement is True.
The record of business transactions is prepared for a specific period of time i.e. one year and it is preserved for a long period of time.
Question 8.
In credit transactions, goods or services are purchased for cash only.
Answer:
This statement is False.
In credit transactions, goods and services are purchased and sold for credit only. Credit means post-pone payments for a future date.
Question 9.
In barter transactions, goods or services are purchased for other goods or services.
Answer:
This statement is True.
Barter means exchange of goods or services for goods or services. No money is involved in barter transactions.
Question 10.
In cash transactions, goods or services are purchased for a certain value to be paid in the future.
Answer:
This statement is False.
In a cash transaction, goods or services are purchase or sold for spot payments or receipts. No credit is allowed.
Question 11.
Good is a commodity that is purchased for self-use.
Answer:
This statement is False.
Good is a commodity that is purchased for resale purposes. It is an article or a commodity in which businessman deals.
Question 12.
Amount due from other person is known as debt.
Answer:
This statement is True.
Debt is a total sum of money due from a person with whom the business has dealings. Accordingly, a person from whom such debt is due to a business is called the debtor.
Question 13.
Liabilities represent the debts or obligations that a business must receive in terms of money.
Answer:
This statement is False.
Liabilities refer to the total amount of obligations that a business has to pay in the future. Liability means the total amount owed by the business to other persons.
Question 14.
Capital = Liabilities – Assets.
Answer:
This statement is False.
Excess of business assets over business liabilities is called capital.
Capital = Assets – liabilities.
Question 15.
Drawings made by the businessman increase his capital.
Answer:
This statement is False.
Drawing means cash or goods withdrawn by the proprietor for his personal or family use. Drawings made by the businessman decreases his capital.
Question 16.
A person whose assets are equal to or greater than liabilities is known as insolvent.
Answer:
This statement is False.
Insolvent means a person whose liabilities are greater than assets is known as ‘Insolvent’.
Question 17.
A person whose assets are less than business liabilities is known as insolvent.
Answer:
This statement is True.
When a person is not able to pay liabilities is called insolvent. Liabilities are greater than assets.
Question 18.
The cost or sacrifice which is incurred to run the business is known as an income.
Answer:
This statement is False.
The cost or sacrifice which is incurred to run the business is known as an expenditure.
Question 19.
Benefits which are given by giver to the receiver is known as discount.
Answer:
This statement is False.
Discount is a concession given by the seller to the buyer. There are two types of discount,
- Cash discount
- Trade discount
Question 20.
Posting implies recording a transaction in a journal.
Answer:
This statement is False.
Posting means transferring or recording journal entries from the journal to the respective ledger accounts. Ledger is the main book of accounting.
Question 21.
Contingent liabilities can also be called doubtful liabilities.
Answer:
This statement is True.
The contingent liabilities are the liabilities whose occurrence depends upon the happening of a certain event that may or may not take place. So a contingent liabilities can also be called doubtful liabilities.
Question 22.
A sports club is a trading concern.
Answer:
This statement is False.
The sports club is a nontrading concern as they do not work for profit-making. They work for the promotion of sports.
Question 23.
A cash discount is an incentive allowed for the speedy recovery of income.
Answer:
This statement is True.
A cash discount is given by the creditor or seller to the debtor or buyer to induce him to make prompt payment. It is given at the time of cash payment.
Question 24.
Excess of revenue over expenses is called loss.
Answer:
This statement is False.
Excess of revenue over expenses is called profit. Your income is less and expenditures are less so you get profit.
Income ₹ 50,000 – Expenses ₹ 35,000 = Profit is ₹ 15,000.
Question 25.
Excess of liabilities over assets represents the solvency of a business.
Answer:
This statement is False.
Excess of liabilities over assets represents insolvency of business. A trader cannot pay his debts as liabilities are greater than his assets.
Liabilities ₹ 1,50,000 Assets ₹ 80,000.
₹ 1,50,000 – ₹ 80,000 = ₹ 70,000 deficiency.
Question 26.
A business can not run without bookkeeping.
Answer:
This statement is False.
Book-keeping is a recording of business financial transactions which is useful to prepare ledger, trial balance, financial statements. All the above are useful to take decisions, planning, liabilities, and assets so a businessman cannot run his business without book-keeping.
Question 27.
Bookkeeping is necessary only for organizing with profit objectives.
Answer:
This statement is False.
Books of accounts are maintained by trading and non-trading concerns. Non-trading concerns do not earn any profits so book-keeping is not necessary only with the objective of profit.
Question 28.
The figures of profit and net worth are disclosed by books of accounts.
Answer:
This statement is True.
The purpose of preparing books of accounts is to know financial details of organization from journal ledger, trial balance, final accounts proprietor to get an idea of his financial status. The purpose of financial books of accounts is to get profit and net worth etc.
Question 29.
Financial statements are an effective weapon in the hands of management.
Answer:
This statement is True.
With help of financial statements, management does planning, decision-making for the future. The past record gives ideas to the management to improve financial decisions like more profit better financial conditions etc. so financial statements are effective weapons in the hands of management.
Question 30.
Irregularities, frauds, and misappropriations can be detected only because of books accounts.
Answer:
This statement is False.
Irregularities frauds and misappropriations can be detected by auditing. Continuous and periodical auditing will detect the irregularities frauds and misappropriations which is done by a chartered accountant.
5. Do you agree or disagree with the following statements:
Question 1.
Goodwill is a tangible asset.
Answer:
Disagree
Question 2.
For income tax purposes an accounting year starts on 1st January and ends on 31st March.
Answer:
Disagree
Question 3.
Earning profits is an aim of Not for Profit Concern.
Answer:
Disagree
Question 4.
Trade discount is recorded in the books of accounts.
Answer:
Disagree
Question 5.
Wages paid on installation of machinery are revenue expenditures.
Answer:
Disagree
Question 6.
An amount that is not recoverable from debtors is called bad debt.
Answer:
Agree
Question 7.
The double-entry book-keeping system is invented in India.
Answer:
Disagree
Question 8.
Book-keeping does not have any rules and regulations for recording business transactions.
Answer:
Disagree
Question 9.
The owner of the business does not have any utility of book-keeping.
Answer:
Disagree
Question 10.
Bookkeeping cannot be used as financial evidence in a court of law.
Answer:
Disagree
Question 11.
It is not possible for management to plan and take decisions in business with help of book-keeping and accountancy.
Answer:
Disagree
Question 12.
Cash-withdrawn by the proprietor from his business for personal use is called capital.
Answer:
Disagree
Question 13.
A person who has to pay the business for getting goods and services on credit is known as the debtor.
Answer:
Agree
Question 14.
Trade discount is not recorded in the books of accounts.
Answer:
Agree
Question 15.
Purchase of goods is revenue expenditure.
Answer:
Agree
Question 16.
Heavy expenditure on advertising is deferred revenue expenditure.
Answer:
Agree
Question 17.
A solvent person’s assets are more than his liabilities.
Answer:
Agree
Question 18.
Net Worth = Total Assets – Outsiders Liabilities
Answer:
Agree
Question 19.
Conservatism’s concept means to play safe.
Answer:
Agree
Question 20.
The dual aspect means every transaction has two effects i.e. debit and credit.
Answer:
Agree
6. Complete the following sentences:
Question 1.
In barter transaction goods are exchange for ____________
Answer:
Goods
Question 2.
Asset is ____________ of the business.
Answer:
property
Question 3.
Capital expenditures are ____________ in nature.
Answer:
Non Recurring
Question 4.
A ____________ liability is an uncertain liability.
Answer:
Contingent
Question 5.
A person whose liabilities are more than his assets is known as ____________
Answer:
Insolvent
Question 6.
An article or a commodity which is purchase for resale in business is called ____________
Answer:
Goods
Question 7.
Customs and traditions which guide the accountants to prepare accounting systems are called ____________
Answer:
Conventions
Question 8.
Discount given by the creditor to the debtor on payment of cash is called ____________
Answer:
Cash discount
Question 9.
For tax purpose an year starts on 1st April and ends on 31st March is called ____________
Answer:
Accounting year
Question 10.
An institution which provides standard of accounting in India called ____________
Answer:
Institute of Chartered Accountants of India
Question 11.
Which accounting standard is followed for depreciation on fixed assets ____________
Answer:
AS-6
Question 12.
Brief explanation of an entry is called as ____________
Answer:
Narration
Question 13.
Businessman open ____________ type of bank account.
Answer:
Current
Question 14.
The main objective of business concern ____________
Answer:
making profits
Question 15.
Assets which are held in the business for a period of less than one year ____________
Answer:
Current Assets
Question 16.
10 years loan taken from bank by organisation is ____________ term loan.
Answer:
long
Question 17.
Heavy expenses paid on formation of an organisation is known as ____________ expenditure.
Answer:
Deferred Revenue
Question 18.
Dividend received on shares is ____________ income.
Answer:
Revenue
Question 19.
Loss on sale of old machine is ____________ loss.
Answer:
Capital