Chapter number & Name: CH.

2 BASIC TERMS Time: -

CH. 3 ACCOUNTING PRINCIPLES
CH. 4 BASIS OF ACCOUNTING
Standard: XI COM Subject: -
Accountancy
Date: 2.7.25 Marks:-

CH. 2
1 MARKER QUESTIONS
1. Purchase refers to the purchase of:
(a) Goods for resale. (b) Stationery for office use.
(c) Assets for the factory. (d) None of the above.
2. The nature of accrued income is:
(a) Revenue. (B) Liability.
(c) Expenses. (d) Asset.
3. Which of the following is revenue?
(a) Purchases.
(b) Purchases Return.
(c) Sales.
(d) Salary Payable.
4. The amount invested by the proprietor in a business is called:
(a) Capital.
(b) Cash.
(c) Revenues.
(d) Loan.
5. Expenditure of revenue nature that gives benefit for more than one accounting period is
categorized as:
(a) Capital Expenditure.
(b) Revenue Expenditure.
(c) Deferred Revenue Expenditure.
(d) None of these.
6. The nature of capital is:
(a) An asset.
(b) A liability.
(c) An income.
(d) An expense.
7. Goodwill is a/ an:
(a) Tangible Asset.
(b) Intangible Asset.
(c) Current Asset.
(d) Fictitious Asset.
8. Out of the following assets, which one is not an intangible asset?
(a) Machinery.
(b) Patents.
(c) Goodwill.
(d) Trade Mark.
9. A person who owes money to a firm against goods sold is called a:
(a) Creditor.
(b) Debtor.
(c) Both (a) and (b).
(d) None of these.
10. Which of the following is not a long-term liability?
(a) Creditors.
(b) Term-loan.
(c) Debentures.
(d) Capital.
11. Which of the following are goods?
(a) Machines manufactured for sale.
(b) Furniture purchased for sale.
(c) Books and stationery purchased by a book seller.
 (d) All of the above.
12. Revenue from Operations refers to:
(a) Revenue earned from Operating Activities.
(b) Revenue earned from activities that are not Operating Activities.
(c) Both (a) and (b).
(d) None of the above.
13. Which of the following is not a fixed asset?
(a) Building.
(b) Plant and Machinery.
(c) Balance with bank.
(d) Goodwill.
14. Which of the following is an asset?
(a) Machinery.
(b) Purchases.
(c) Sales Return.
(d) Interest Received.
15. Purchase refers to the buying of:
(a) Stationery for office use.
(b) Assets for the factory.
(c) Goods for resale.
(d) Investment.
16. Amount paid or payable against purchase of goods is:
(a) Revenue expenditure.
(b) Capital expenditure.
(c) Both (a) and (b).
(d) None of these.
17. Which of the following is a business transaction?
(a) Goods purchased on credit.
(b) An employee being dismissed.
(c) Proprietor purchasing a car for own use.
(d) Sale of personal asset by the proprietor.
18. Which of the following is not an expense?
(a) Furniture.
(b) Salary.
(c) Rent.
(d) Electricity Expenses.
19. Which of the following transaction is not of financial character?
(a) Purchase of asset on credit.
(b) Purchase of asset for cash.
(c) Withdrawing of money by proprietor from business.
(d) Strike by employees.
20. Which of the following is not a business transaction?
(a) Bought furniture of ₹ 25,000 for business.
(b) Paid for salaries of employees, ₹ 20,000.
(c) Cash withdrawn from personal bank account, ₹ 10,000 for domestic use.
(d) All of the above.
21. Which of the following is a liability?
(a) Furniture.
(b) Rent Payable.
(c) Interest Received.
(d) Stock.
22. Capital is:
(a) Internal liability.
(b) External liability.
(c) Internal as well as external liability.
(d) None of these
23. A person to whom money is owed by a firm for purchase of goods is called a:
(a) Creditor.
(b) Debtor.
(c) Both (a) and (b).
 (d) None of these.
24. Bank overdraft is:
(a) Short-term liability.
(b) Long-term liability.
(c) Contingent liability.
(d) None of these.
25. Sale is recognized as revenue:
(a) When the contract for sale is entered into.
(b) At the point of sale or performance of service.
(c) After the expiry of credit period allowed to debtors.
(d) After the money collected from the customers.
26. Goods taken by the proprietor for personal use is:
(a) Sale.
(b) Drawings.
(c) Purchase.
(d) None of these.
27. Which of the following is capital expenditure?
(a) Wages.
(b) Wages paid for building construction.
(c) Repair expenses of building.
(d) Advertisement Expenses.
28. Which of the following will be treated as drawings:
(a) Withdrawing money for payment of salary to employees.
(b) Withdrawing money for payment to creditors.
(c) Withdrawing money from business for private expenses.
(d) Withdrawing money for purchase of asset.
29. A person who owes money to the firm is called:
(a) Debtor.
(b) Creditor.
(c) Supplier.
(d) None of these.
30. Cash Discount is:
(a) Which is received at the time of making the payment.
(b) Which is allowed at the time of sale of goods.
(c) Which is received at the time of purchase of goods.
(d) Which is received both at the time of making payment and purchase of goods.
31. At the end of financial year, during which sale of goods was worth ₹ 35,00,000, the closing
stock is valued at ₹ 40,000. This is ......
(a) An event.
(b) A transaction.
(c) Both an event as well as transaction.
(d) None of (A) and (B).
32. Tangible Assets do not include:
(a) Goodwill.
(b) Furniture.
(c) Stock.
(d) Cash.

CH. 3
1. The convention of disclosure implies that all material information should .
a. Be disclosed with the financial statements.
b. Be disclosed as per choice.
c. Not be disclosed.
d. None of these.
2. The proprietor of a business is treated as a creditor for capital introduced by him according
to .
a. Money Measurement Concept
b. Cost Concept
c. Business Entity Concept
 d. Dual Aspect Concept
3. Convention of conservatism takes into account:
a. All future profits and losses.
b. All future profits and not losses.
c. All future losses and not profits.
d. Neither profits nor losses of the future.
4. The practice of appending notes regarding contingent liabilities in accounting statements is
in pursuance to .
a. Convention of consistency
b. Money measurement concept
c. Convention of conservatism
d. Convention of disclosure
5. The cost of a small calculator is accounted as an expense and not shown as an asset in a
financial statements of a business entity due to ........... .
a. Materiality Convention.
b. Matching concept.
c. Periodicity concept.
d. Convention of full disclosure
6. Qualitative transactions are not recorded in accounts due to .
a. Dual Concept
b. Accrual Concept
c. Money Measurement Concept
d. None of the Above
7. The cost concept records the figures at .
a. Market values
b. Actual amount paid
c. Actual amount or market values whichever is less
9. MRP maximum retail priceIncome is measured on the basis of:
a. Matching Concept.
b. Consistency Concept.
c. Cost Concept.
d. None of the above.
10. Dual aspect concept is the basis for .
a. Double entry system of book-keeping
b. Accounting equation
c. Both (A) and (B)
d. None of the above
11. The owner of the firm records his medical expenses in the firms' income statement. Indicate
the principle that is violated:
a. Cost Concept.
b. Prudence.
c. Full disclosure.
d. Entity concept.
12. The going concern concept assumes that .
a. The entity will continue running for foreseeable future.
b. The entity will continue running until the end of accounting period.
c. The entity will close its operations in 10 years.
d. The entity can't be liquidated.
13. According to which of the following concepts even the owner of the business who provides
capital is treated as a creditor of the business?
a. Entity concept.
b. Cost concept.
c. Money measurement concept.
d. Convention of disclosure.
14. According to which concept, business is treated as a unit apart from owner .
a. Dual concept
 b. Divider concept
c. Entity concept
d. Landlord concept
15. According to the going concern concept, a business entity is assumed to have .
a. A long life
b. A very short life
c. An indefinite life
d. A medium life
16. According to the Money Measurement Concept:
a. All transactions and events are recorded.
b. All transactions and events which can be estimated in money terms are
recorded in the books of account.
c. All transactions and events which can be measured in money terms are recorded
in the books of account.
d. None of the above.
17. According to the Accrual Concept:
a. Transactions and events are recorded in the books at the time of their settlement in
cash.
b. Transactions and events are recorded in the books at the time when they are
entered into.
c. Transactions and events may be recorded either at the time of the settlement of
when they are entered into.
d. None of the above.
18. Which of the following is/ are fundamental concepts?
a. The entity concept
b. The money measurement
c. Both (A) and (B)
d. None of these.
19. The policy to anticipate no profit and provide for all possible losses arises due to
convention of .
a. Consistency
b. Disclosure
c. Matching
d. Conservatism
20. The allocation of owner's private expenses to his/ her business violates which of the
following?
a. Accrual concept
b. Matching concept
c. Separate business entity concept
d. Consistency concept
21. According to the Convention of Consistency:
a. Accounting policies and practices once adopted should be consistently followed.
b. Accounting policies and practices adopted may be changed as per the
management's decision.
c. Accounting policies and practices once adopted cannot be changed under any
circumstances.
d. None of the above.
22. According to which Concept even the proprietor of the business is treated as a creditor of
the business:
a. Going concern Concept.
b. Cost Concept.
c. Business Entity Concept.
d. Accounting Period Concept.
23. According to which of the following concepts, in determining the net income from
business, all costs which are applicable to the revenue of the period should be charged
against that revenue?
 a. Matching Concept.
b. Money Measurement Concept.
c. Cost Concept.
d. Dual Aspect Concept.
24. The accrual cost is the basis for .
a. Management system of accounting
b. Mercantile system of accounting
c. Internal system of accounting
d. External system of accounting
25. During the life-time of an entity, accounting produces financial statements in accordance
with which of the following accounting concept?
a. Matching.
b. Conservatism.
c. Accounting period.
d. Cost.

26. Closing stock is valued at .

a. Market price
b. Cost price
c. Cost price or market price whichever is lower
d. Cost price or market price whichever is higher
27. Which of the following is not related with Money Measurement Concept?
a. All business transaction should be expressed only in Money.
b. The transactions which cannot be expressed in money, will not be recorded in
accounting books.
c. Business is treated as separate from the proprietor.
d. None of these.
28. In stock valuation, application of the principle 'at cost price or market price whichever is
lower' will result in the valuation of stock sometimes at cost price and at other times at
market price. This is an application of the principle of .
a. Consistency
b. Materiality
c. Conservatism
d. Disclosure

29. X Ltd. follows the Written Down Value Method of depreciating machinery year after year
due to:
a. Comparability.
b. Convenience.
c. Consistency.
d. All of these.

CH. 4

1. Under Accrual Basis of Accounting:

a. Both Cash and Credit transactions are recorded. b. Only cash transactions are recorded.
c. Only credit transactions are recorded. d. None of the above

2. Under the Cash Basis of Accounting, expenses are recorded:

a. On payment. b. On being incurred.
c. Either (a) or (b). d. None of these

3. Accrual Basis of Accounting recognises:

a. Outstanding and Prepaid Expenses.
b. Accrued Incomes and Incomes Received in Advance.
c. Both (a) and (b).
d. None of the above.

4. Accrual Basis of Accounting:

a. Does not give a true and fair view of profit and financial position.
b. Gives a true and fair view of profit and financial position.
c. May or may not give a true and fair view of profit and financial position.
d. None of the above

5. What are the advantages of Accrual Basis of Accounting? (Two Points)

6. Differentiate between Cash Basis of accounting and Accrual Basis of accounting on the
basis of timing of recording of an income

7. A firm earns a revenue of ₹ 21,000 and the expenses to earn this revenue are ₹ 15,000.
Calculate its income.

8. advised by his Accountant to maintain his accounts on Accrual Basis instead of the
presently followed Cash Basis of Accounting. Do you agree with the advice of the
Accountant? Give reasons.
9. Harpreet has entered into agreement whereby he will earn ₹ 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.

10. Rent for the month of March, 2019 is not paid. Under which accounting concept it should
be recorded as expense for the year ended 31st March, 2019?

11. An enterprise prepares its accounts under the accrual basis. Salaries amounting to
₹ 10,000 for the month of March, 2019 were not paid. The owner did not want to account it
in the books of account on the ground that the amount was not paid. The enterprise
closes its books of account on 31st March every year. Is he correct?
12. In which basis of accounting Outstanding expenses are not recorded?

13. Which basis of accounting is recognised under the Companies Act, 2013.

14. Does cash basis of accounting violate GAAP? If yes, how?

15. Which transactions will: i. Decrease the Assets and Decrease the Capital. ii. iii. iv.

16. Which of the following equations are correct?

i. Assets = Capital + Liabilities
ii. Assets = Capital - Liabilities
iii. . Assets = Liabilities - Capital
vi. Capital = Assets - Liabilities

3 MARKER QUESTIONS

CH. 2
1. Explain the meaning of the following term: Business Transaction.
2. Explain the meaning of the following term: Capital.
3. Explain the following term: Fictitious Assets.
4. Explain the meaning of the following term: Stock.
5. Distinguish between expenses and expenditure.
6. What is the reason that the capital expenditure is shown in the Balance Sheet?
7. Distinguish between debtors and creditors.
8. What are Fictitious Assets?
CH. 3
1) EXPLAIN THE FOLLOWING CONCEPTS
i. conservatism concept ii. going concern concept iii. accrual concept

2) EXPLAIN THE FOLLOWING CONCEPTS

i. consistency ii. materiality iii. conservatism
3) EXPLAIN THE FOLLOWING CONCEPTS
i. going concern ii. Consistency iii. materiality

CH. 4
1) What is meant by Cash Basis of Accounting? Give two disadvantages of Cash Basis of
Accounting.
2) During the financial year 2018-19, 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 2018-19 following the Cash Basis of Accounting.

3) Write down any three differences between Cash Basis and Accrual Basis of Accounting.

4 MARKER QUESTIONS
CH. 2
33. Give any three examples of revenues.
34. Explain the meaning of any three of the following terms:
i. Liability.
ii. Stock.
iii. Business Transaction.
iv. Drawings.
100. Explain the following terms with examples:
a. Capital Expenditure Non-Current Assets
101. Explain the following terms:
a. Revenue.
b. Trade Payables.
c. Fictitious Assets.
d. Working Capital.
CH. 4
“Cash Basis of Accounting is not a better basis for depicting the correct financial position of an
enterprise.” Do you agree? Give reasons in support of your answer.

2. Vijay, a consultant, during the financial year 2018-19 earned ₹ 4,00,000. Out of which he received
₹ 3,50,000. He incurred an expense of ₹ 1,70,000, out of which ₹ 40,000 are outstanding. He also
received consultancy fee relating to previous year ₹ 45,000 and also paid ₹ 20,000 expenses of last
year. You are required to determine his income for the year if,
i. He follows Cash Basis of Accounting.
ii. He follows Accrual Basis of Accounting

3. “Cash Basis of Accounting is not a better basis for depicting the correct financial position of an
enterprise.” Do you agree? Give reasons in support of your answer

6 MARKER QUESTIONS
CH. 4
1. During the financial year 2018-19, 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 the net income according to Accrual Basis of Accounting and cash basis of accounting.

2. Mehta enterprise gives you the following information about his income and expenses for the year
ended 31st March, 2023
Sales Rs. 50,000
Purchase Rs. 38,000
Expenses paid Rs. 4,000
Expenses outstanding Rs. 1,000
Other income received Rs. 1,500
Other income outstanding Rs. 600
Determine the income if the firm adopts (i) cash basis of accounting, and (ii) Accrual basis of
accounting.