Subject:Accountancy
Month – April,May and July
Session-2023-24
Chapters Covered
1. Unit 1 – Theoretical Frame work
- Introduction to Accounting
- Basic Accounting terms
- Theory base of Accounting
2. Unit 2- Accounting Process
- Accounting equation
- Accounting procedures- Rules of debit and credit
- Journal
Introduction to Accounting
Q.1. Mention two external users of accounting information and their areas of interest.
Q2. Give two examples of transactions which are not recorded in accounting?
Q.3. Why resignation by a Production Manager is not recorded in the books
of accounts?
Q.4. ‘Accounting maintains record of assets owned by the business which enables the
management to protect them and exercise control.’ Identify the objective of accounting
referred above.
Q.5. ‘Although most of the transactions are recorded on the basis of evidence such as
sale or purchase or receipt of cash, yet some estimates are also made for ascertaining
profit or loss.’ Identify the limitation of accounting referred above.
Q.6. How Accounting Information will be useful to public and employees?
Q.7. Shyam, a firm’s accountant shows the conflicts between Sales and Production
Manager by assigning the figure of loss due to such conflicts in P&L A/c.
Q.8. Mohan gives the job of book keeping to senior staff of his firm. Is he right in doing
so?
Q9. A firm has received a large order to supply the goods. Will it be recorded in the
books?
Q10 Which stakeholder group would be most interested in .......?
(a) GST and other tax liabilities of the firm
(b) the potential for pay awards and bouns deals
(c) the ethical or environmental activities of the firm
(d) whether the firm has a long-term future
(e) profitability and share performance
(f) the ability of the firm to carry on providing a
service or producing a product. [NCERT]
MCQS / True false / Fill ups
Q11.Which of the following is not a limitation of accounting?
(a) based on accounting conventions
(b) evidence in legal matters
(c) Incomplete information
(d) omission of qualitative information
Q.12. State whether the following statements are true or false:
• The accounting data should be verifiable and free from any bias.
• All Financial transactions that affect the business must be recorded.
• The expenses of the owners of the business need to be recorded
as expenses of business.
• Accounting is commonly treated as the language of business.
Q13. Last step of accounting process is
.
Q14. Mr Pradeep is appointed as a Factory manager on 15th November 2018.He
was to be given a salary of Rs 25,000 per month. What transaction will be recorded
on 15th November 2018?
Answers
[Ans 1. Creditors, Suppliers]
[ Ans4. Protecting Business
Assets][ Ans5. Not Fully Exact]
[ Ans7. Lack of concepts of Accounting]
[ Ans 9: No, only receipt of order has not resulted in any change in financial position of
firm] [Answer:10(a) Government and other regulators (b) Management (c) Social
responsibility groups
(d) Lenders (e) Suppliers and Creditors (f)
Customers]Ans 11(b)
[ Ans12. (a) T (b) T (c) F (d) T]
Ans 13(providing information to various parties)
Basic Accounting Terms
1 Give one word for the following:
a. It is a summarised record of relevant transactions at one place relating
to a particular head.
b. It is the surplus of revenues of a business over its costs.
c. It is the amount spent or liability incurred for the value received.
d. It is the amount which business owes to outsiders.
e. These are the assets which are kept for short term with the purpose to
convert them into cash or for resale.
f. It is a fall in the value of an asset because of usage or with passage of
time or obsolescence or accident.
2. Identify them as a) capital expenditure b) revenue expenditure c) Deferred
Revenue Expenditure and give reasons:
a. ₹1200 spent on the repairs of machine necessitated by the
negligence of operating manager
b. ₹2500 spent on the overhaul of the second hand machinery.
c. White wash expenses.
d. Paper and pens purchased for business.
e. Advertising expenses.
f. Renovation of cinema hall and seating capacity is increased.
g. Brokerage on sale of goods.
h. Expenses incurred on the air – conditioning of the office.
i. Renovation of office.
j. Brokerage on the purchase of building.
k. Loss on investment.
l. Expenses on transportation of inventory.
m. Custom duty paid on machinery import.
n. Wages on the installation of fixed assets.
o. ₹10,000 on repainting of factory.
p. Electricity bill.
q. Insurance premium.
r. First white wash of building.
s. Lawyer’s fees, registration fees on purchase of plant.
t. Depreciation of fixed assets.
u. Expenses of power fuel
v. Maintenance of fixed assets.
w. Cost of obtaining business license to carry out business activities.
3 Sohan, a firm’s accountant takes wages paid to the workers to install a second hand
machinery to wages a/c. Is he correct in doing so?
4. Mahesh has used stationery items for his children thinking that it is his business
and hehas invested capital . Which accounting term is he ignoring?
Case Study based Question
5. Mr Mohit dealing in electronic sets sold 20 TV sets costing ₹30,000 each at ₹
40,000each. Out of this 5,00,000 was received in cash and the balance is not yet
received.
a. State the amount of revenue.
b. State the value of Debtors in the above case.
6. Mr. Dinanath who owed us Rs 50,000 became insolvent and paid only 40% of
this amount. What is term used for the amount not received ?
7. What is the reason that the capital expenditure is shown in balance sheet?
8. Mr. Sunrise started a business for buying and selling of stationery with Rs.
5,00,000 as an initial investment. Of which he paid Rs.1,00,000 for furniture, Rs.
2,00,000 for buying stationery items. He employed a sales person and clerk. At the
end of the month he paid Rs.5,000 as their salaries. Out of the stationery bought he
sold some stationery for Rs.1,50,000 for cash and some other stationery for
Rs.1,00,000 on credit basis to Mr.Ravi. Subsequently, he bought stationery items of
Rs.1,50,000 from Mr. Peace. In the first week of next month there was a fire
accident and he lost Rs. 30,000 worth of stationery. A part of the machinery, which
cost Rs. 40,000, was sold for Rs. 45,000.
From the above, answer the following :
(a) What is the amount of capital with which Mr. Sunrise started business.
(b) What are the fixed assets he bought?
(c) What is the value of the goods purchased?
(d) Who is the creditor and state the amount payable to him?
(e) What are the expenses?
(f) What is the gain he earned?
(g) What is the loss he incurred?
(h) Who is the debtor? What is the amount receivable from him?
9. Determine if the following are assets, liabilities, revenues, expenses or none of
these:
Sales, debtors, creditors, salary to manager, discount to debtors, drawings by the owner
10. Mr Dinanath who owed us Rs 50,000 became insolvent & paid only 40% of
this amount. What is the term used for the amount not received?
ANSWERS / HINTS
1. (a) ledger (b) income (c) expenditure (d) liability (e) current asset (f)
depreciation
2. [ Ans. (a) revenue (b) capital (c) revenue (d) revenue (e) deferred revenue (f)
capital (g) revenue (h) capital (i) deferred revenue (j) capital (k) capital (l)
revenue
(m) capital (n) capital (o) revenue (p) revenue (q) revenue (r) capital (s) capital
(t)revenue (u) revenue (v) revenue w) capital]
3. No
4. Drawings
5. Revenue=40,000x20= Rs. 8,00,000, with proper expln]
6. Bad Debt
7. because being capital expenditure it yields benefit over a long period of
time
8. Bad Debt
THEORY BASE OF ACCOUNTING,
ACCOUNTING STANDARDS AND
INTERNATIONAL FINANCIAL
REPORTING STANDARDS
Q.1. State the accounting concept /convention involved in each of the
following situation:
a. Advance received from a customer is not taken as income or sale.
b. Sale is recognised on the basis of Cash Memo or Invoice.
c. Purchase of pen treated as expense.
d. Harish has entered into agreement whereby he will earn Rs 10 lakhs for the
services to be provided in the next year. The income should be recognised as
revenue in the next year after services have been provided.
e. Financial statements of the firm are prepared every year on 31st March.
f. Capital contributed by the owner is credited to his capital.
g. Revenue must be recognised when it is realised and expenses are recognised when
incurred.
h. Goods sold on credit to X and X’s account is debited and sales account is credited.
i. Revenue is generally recorded at point of sale.
j. The accountants assume that the business will not be liquidated in the near future.
k. Making provision for doubtful debts.
l. Appending notes to the financial statements.
m. Closing stock is valued at a lower of cost or market value
n. Fixed assets are recorded at their cost and depreciated in a systematic
manner without reference to their market value.
Q.2. Name the Accounting Standard for
(a) Valuation of Goodwill
(b) Preparation of Cash Flow statement
(c) Valuation of Inventory
Q.3. Mohan, owner of the firm doesn’t put the amount withdrawn for personal use to
drawings account. Which accounting concept is ignored by him?
Q.4. Shyam, an accountant of the firm records the land at the market price in the
Balance Sheet believing that the market price of the land is increasing constantly and
shall be recorded. Which principle is being ignored by him?
Q5. What are the two basic objectives of having accounting standard?
CASE BASED:
Q6. Ruchica’s father is the sole proprietor of ‘Friends Gifts’, a firm engaged in the sale
of gift items. In the process of preparing financial statements, the accountant of the firm
Mr. Goyal fell ill and had to proceed on leave. Ruchica’s father was urgently in need of
the statements as these had to be submitted to the bank, in pursuance of a loan of Rs.
5 lakh applied for the expansion of the business of the firm. Ruchica who is studying
Accounting in her school, volunteered to complete the work. On scrutinising the
accounts, the banker found that the value of building bought a few years back for Rs. 7
lakh has been shown in the books at Rs. 20 lakh, which is its present market value.
Similarly, as compared to the last year, the method of valuation of stock was changed,
resulting in value of goods to be about 15 per cent higher. Also, the whole amount of
Rs. 70,000 spent on purchase of personal computer (expected life 5 years) during the
year had been charged to the profits of the current year. The banker did not rely on the
financial data provided by Ruchica. Advise Ruchica for the mistakes committed by her
in the preparation of financial statements in the context of basic concepts in accounting.
Q7. Sohan the owner of business receives an order for supply of goods
worth₹2,00,000. He has also received₹25,000 against this order.
Mohan wants to record it as a sale.
(i) Is Mohan correct in doing so? Why? Explain the identified concept.
CASE BASED:
Q.8. During the financial year 2012-13, Mohan had cash sales of ₹90,000 and credit
sales of ₹60,000. His expenses for the year were `₹70,000 out of which ₹30,000 is still
to be paid. Find out Mohan’s income for 2012-13 following the Cash Basis of
Accounting.
MCQ/ TRUE FALSE/ FILL UP
Q9. A debtor who owes Rs 2 lakh to the company is rumored to be declared as
insolvent .Will you disclose this information in the books?
Q12 Income is measured on the basis of:
(a) Matching concept
(b) Consistency concept
(c) cost concept
(d) none of the above
Q10. State whether the following statements are true or false:
a. The essence of conservative convention is to anticipate no profit and provide
for all the losses.
b. The money measurement concept takes into account changes in the value of
monetary unit.
c. Revenues are matched with expenses in accordance with the matching principle.
d. The materiality principle is an exception to the full disclosure principle.
Q11. Recognition of the cost in the same period as associated revenues is called
Answers:
[ Ans1. a) revenue recognition (b) verifiable objective evidence (c) materiality (d)
revenue recognition (e) accounting period (f)business entity (g) accrual (h) dual
aspect (i) revenue recognition (j) going concern concept (k)prudence (l) full
disclosure m) Prudence n) Going concern concept ]
[Ans2. (a) AS- 26; (b) AS-3(Revised); (c) AS-2]
[ Ans5. uniformity, comparability,
transparency]
[Ans 7. Revenue recognition
principle][Ans8. Rs 50,000]
[Ans9 (a)]
[ Ans10. (a) T (b) T (c) T (d) T]
ACCOUNTING
EQUATION
Q.1. How will you deal with the following items in Accounting equation?
• Outstanding expenses
• Prepaid expenses
• Accrued Income
• Unearned Income
• Amount withdrawn by owner.
Q.2. Calculate the total assets of the business if:
Ram starts business with ₹1,00,000. He earned a profit of ₹20,000. He has to pay his
creditors for goods Rs7,000 and outstanding salary amounts to ₹1,000.
Q.3. Give two transactions that will:
• Increase an asset and increase a liability.
• Increase an asset and decrease another asset.
• Decrease an asset and Decrease capital
• Increase in one liability, decrease in another liability
Q.4. Prepare ‘Accounting Equation’ on the basis of following:
a. Aman started business with cash ₹20,000, Goods ₹12,000 and Machine
₹8,000.
b. He purchased goods ₹5,000
c. Sold goods (Costing ₹2,000) for ₹2,500.
d. Purchased goods on credit ₹7,000
e. Payment made to creditors in full settlement ₹6,900
f. Sold goods on credit (Costing ₹5,400) ₹6,000
g. Payment received from debtors ₹5,800. Discount allowed ₹200.
h. Salaries paid ₹4,000
i. Wages outstanding ₹400
j. Prepaid insurance ₹100
k. Rent received ₹300.
l. Amount withdrawn by owner ₹3,000.
m. Interest on drawings ₹200
n. Depreciation on machinery ₹800.
o. Purchased goods on credit ₹17,000.
Q.5. Prepare ‘Accounting Equation’ on the basis of following transactions:
a. Mahi started business with cash ₹5,00,000
b. Purchased a building on cash from Anil by raising a loan From PNB,
Noida ₹10,00,000
c. Paid interest on loan ₹20,000 and instalment of ₹2,00,000.
d. Purchased goods from Hari on credit ₹1,00,000.
e. Goods returned to Hari costing ₹20,000.
f. Sold goods worth ₹50,000(Costing ₹40,000) on credit to Ram
g. Took goods of ₹10,000 from business for personal use
h. Accrued interest ₹5000.
i. Commission received in advance ₹20,000.
j. Cash received from Ram ₹10,000.
CASE STUDY BASED QUESTION
Q.6. Rajesh started a business on 1stApril ,2015 with a capital of ₹50,000 and a loan of
₹25,000 borrowed from Mahesh . During the 2015-16, he had introduced additional
capital of ₹25,000 and had withdrawn ₹15,000 for personal use .On 31stMarch ,
2016 his assets were ₹ 1,50,000.
a. Find out his capital an on 31st March,2016.
b. Find out Profit made or loss incurred during the year 2015-16.
Q.7. Show the accounting equation on the basis of following transaction:
a. Commenced business with cash ₹20,000; Goods ₹50,000; Furniture ₹30,000.
b. Purchased goods from Gopal on credit ₹40,000.
c. Sold goods for cash ₹40,000(costing ₹30,000)
d. Sold goods to Hari on credit ₹65,000(costing ₹50,000)
e. Withdrew for personal use goods costing ₹5,000.
f. Purchased Typewriter for personal use of the proprietor ₹20,000.
g. Purchased chairs for office use for cash ₹10,000.
h. Paid for printing ₹500 and received commission ₹1,200.
i. Introduced fresh capital ₹40,000.
j. Paid to Gopal ₹30,000.
Q.8. Rajender started business on 1st Jan 2008 with capital of ₹1,50,000 and a loan of
`40,000 taken from SBI. On 31st Dec 2008 his assets were ₹3,00,000. Find out
his capital on 31st Dec 2008 and profits made or losses incurred during the year
2008. If in the above case the proprietor had introduced additional capital of
₹25,000 and had withdrawn ₹8,000 for personal purposes, find out the profit.
Q.9. Rohit has the following transactions :
a. Commenced business with cash ₹1,50,000
b. Purchased machinery on credit ₹ 40,000
c. Purchased goods for cash ₹ 20,000
d. Purchased car for personal use ₹ 80,000
e. Paid to creditors in full settlement ₹ 38,000
f. Sold goods for cash costing ₹ 5,000 ₹ 4,500
g. Paid rent ₹ 1,000
h. Commission received in advance ₹ 2,000
Prepare the Accounting Equation to show the effect of the above transactions on
the assets, liabilities and capital.
Q.10. Show the effect of following transaction on the accounting equation:
a. Manoj started business with (i) Cash ₹ 2,30,000 (ii) Goods ₹
1,00,000
(iii) Building ₹ 2,00,000
b. He purchased goods for cash ₹ 50,000
c. He sold goods(costing ₹20,000) ₹ 35,000
d. He purchased goods from Rahul ₹ 55,000
e. He sold goods to Varun (Costing ₹ 52,000) ₹ 60,000
f. He paid cash to Rahul in full settlement ₹ 53,000
g. Salary paid by him ₹ 20,000
h. Received cash from Varun in full settlement ₹ 59,000
i. Rent outstanding ₹ 3,000
j. Prepaid Insurance ₹ 2,000
k. Commission received by him ₹ 13, 000
l. Amount withdrawn by him for personal use ₹ 20,000
m. Depreciation charge on building ₹ 10,000
n. Fresh capital invested ₹ 50,000
o. Purchased goods from Rakhi ₹ 6,000
Q11.Transactions of M/s Vipin Traders are given below. Show the effects on
Assets,Liabilities and Capital with the help of accounting Equation.
(a) Business started with cash ₹ 1,25,000
(b) Purchased goods for cash ₹ 50,000
(c) Purchase furniture from R.K. Furniture ₹ 10,000
(d) Sold goods to Parul Traders (Costing ₹ 7,000 vide ₹9,000 bill no. 5674)
(e) Paid cartage ₹ 100
(f) Cash Paid to R.K. furniture in full settlement ₹ 9,700
(g) Cash sales (costing ₹10,000) ₹ 12,000
(h) Rent received ₹ 4,000
(i) Cash withdrew for personal use ₹ 3,000
