Tamilnadu State Board New Syllabus Samacheer Kalvi 11th Accountancy Guide Pdf Chapter 2 Conceptual Framework of Accounting Text Book Back Questions and Answers, Notes.
Tamilnadu Samacheer Kalvi 11th Accountancy Solutions Chapter 2 Conceptual Framework of Accounting
11th Accountancy Guide Conceptual Framework of Accounting Text Book Back Questions and Answers
I. Multiple Choice Questions
Choose the correct answer.
Question 1.
The business is liable to the proprietor of the business in respect of capital introduced by the person according to ………………
(a) Money measurement concept
(b) Cost concept
(c) Business entity concept
(d) Dual aspect concept
Answer:
(c) Business entity concept
Question 2.
The profounder of double entry system of book-keeping is ……………..
(a) J, R. Batlibai
(b) Luca Pacioli
(c) Old Kesal
(d) Menhar
Answer:
(b) Luca Pacioli
Question 3.
The concept which assumes that a business will last indefinitely is
(a) Business Entity
(b) Going concern
(c) Periodicity
(d) Conservatism
Answer:
(b) Going concern
Question 4.
GAAPs are …………….
(a) Generally Accepted Accounting Policies
(b) Generally Accepted Accounting Principles
(c) Generally Accepted Accounting Provisions
(d) None of these
Answer:
(c) Generally Accepted Accounting Provisions
Question 5.
The rule of stock valuation ‘cost price or realisable value’ whichever is lower is based on the accounting principle of ……………….
(a) Materiality
(b) Money measurement
(c) Conservatism
(d) Accrual
Answer:
(c) Conservatism
Question 6.
In India, Accounting Standards are issued by ……………
(a) Reserve Bank of India
(b) The Cost and Management Accountants of India
(c) Supreme Court of India
(d) The Institute of Chartered Accountants of India
Answer:
(d) The Institute of Chartered Accountants of India
Question 7.
Which of the following does not follow dual aspect concept?
(a) Increase in one asset and decrease in other asset
(b) Increase in both asset and liability
(c) Decrease in one asset and decrease in other asset
(d) Increase in one asset and increase in capital
Answer:
(c) Decrease in one asset and decrease in other asset
II. Very Short Answer Type Questions
Question 1.
Define book-keeping.
Answer:
According to R.N. Carter, “Book-keeping is the science and art of recording correctly in the books of account all those business transactions of money or money’s worth”.
Question 2.
What is meant by accounting concepts?
Answer:
Accounting concepts are the basic assumptions or conditions upon which accounting has be laid. The word concept means a notion or abstraction which is generally accepted. Accounting concepts provide unifying structure to the accounting process and accounting reports.
Question 3.
Briefly explain about revenue recognition concept.
Answer:
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.
Question 4.
What is “Full Disclosure Principle” of accounting?
Answer:
1. It implies that the accounts must be prepared honestly and all material information should be disclosed in the accounting statement.
2. This is important because the management is different from the owners in most of the organizations.
3. The disclosure should be full, fair and adequate so that the users of the financial statements can make correct assessment about the financial position and performance of the business unit.
Question 5.
Write a brief note on ‘Consistency’ assumption.
Answer:
It indicates that the accounting policies must be followed consistently from one accounting period to another.
The results of different years will be comparable only when the same accounting policies are followed from year to year.
The changes in accounting policy can be incorporated when it is comply with the provision of law.
It is comply with the accounting standards issued.
It helps to reflect true and fair view of state of affairs of the business.
III. Short Answer Questions
Question 1.
What is matching concept? Why should a business concern follow this concept?
Answer:
1. According to this concept, revenues during an accounting period are matched with expenses incurred during that period to earn the revenue during that period.
2. This concept is based on accrual concept and periodicity concept.
3. Periodicity concept fixes the time frame for measuring performance and determining financial status.
4. Based on this the adjustments are made for outstanding and prepaid expenses and accrued and unearned revenues.
5. 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.
Question 2.
Only monetary transactions are recorded in accounting”. Explain the statement.
Answer:
Money serves as the medium of exchange
The Money Measuring Concept implies that only those transactions, which can be expressed in terms of money.
Transactions which do not involve money will not be recorded in the books of accounts.
E.g : 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.
Question 3.
“Business units last indefinitely”. Mention and explain the concept on which the statement is bused.
Answer:
1. It is based on Going Concern Concept.
2. It influences accounting practices in relation to valuation of assets and liabilities, depreciation of assets, treatment of outstanding and prepaid expenses and accrued and unearned revenues.
3. Business will be continued for a foreseeable future.
Question 4.
Write a brief note on Accounting Standards.
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 (AS(b) 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.
4. The ASB will, consider the applicable law, custom, usage, business environment and the International Accounting Standards while framing Accounting Standards (AS) in India.
11th Accountancy Guide Books of Prime Entry Additional Important Questions and Answers
I. Multiple Choice Questions
Question 1.
The practice of transferring closing stock into trading accounting is the ……………
(a) Going Concern Concept
(b) Matching Concept
(c) Money measurement Concept
(d) Revenue Realization Concept
Answer:
(a) Going Concern Concept
Question 2.
Business is distinct from owner. This concept is called …………….
(a) Going Concern Concept
(b) Separate Entity Concept
(c) Money measurement Concept
(d) Revenue Realization Concept
Answer:
(b) Separate Entity Concept
Question 3.
The incomplete system of accounting …………….
(a) Double Entry System
(b) Single Entry System
(c) Double Account system
(d) None of the above
Answer:
(b) Single Entry System
Question 4.
Financial or business transaction is recorded, according to accrual concept of accounting ………………
(a) When cash is received or paid
(b) When transaction occurs
(c) When profit is computed
(d) When balance sheet is prepared
Answer:
(b) When transaction occurs
Question 5.
Matching concept means ………………
(a) Transactions recorded at accrual concept
(b) Anticipate no profit but recognize all losses
(c) Assets = Capital + Liabilities
(d) Expenses = Revenue
Answer:
(d) Expenses = Revenue
Question 6.
Which of the following is not the main objective of accounting?
(a) Systematic recording of transactions
(b) Ascertaining profit or loss
(c) Ascertainment of financial position
(d) Solving tax disputes
Answer:
(d) Solving tax disputes
Question 7.
Which of the following provide frame work and accounting policies so that the financial statements of different enterprises become comparable?
(a) Business Standards
(b) Accounting Standards
(c) Market Standards
(d) None
Answer:
(b) Accounting Standards
Question 8.
Business enterprise, is separate from its owner according to ……………… concept.
(a) Money measurement concept
(b) Matching concept
(c) Entity concept
(d) Dual aspect concept
Answer:
(c) Entity concept
Question 9.
The non-financial transactions are not entered because of …………..
(a) Money measurement concept
(b) Matching concept
(c) Entity concept
(d) Dual aspect concept
Answer:
(a) Money measurement concept
Question 10.
Historical cost concept requires the recording of an asset………..
(a) At its cost
(b) At the market value
(c) both (a) and (b)
(d) None of the above
Answer:
(a) At its cost
Question 11.
The rule ‘every transaction affects two or more ledger accounts’ is based on the concept of …………….
(a) Going concern
(b) Double entry system of book-keeping
(c) Money measurement
(d) Periodicity
Answer:
(b) Double entry system of book-keeping
Question 12.
Which of the following is correct about ‘Accounting Concept’?
(a) Accounting concepts are based on accounting conventions
(b) Accounting concepts are established by common accounting practices
(c) Accounting concepts are methods or procedures accepted by general agreement
(d) Personal judgment has no role in the adoption of accounting concepts.
Answer:
(b) Accounting concepts are established by common accounting practices
Question 13.
Which one of the following is not a fundamental accounting assumption?
(a) Going concern
(b) Consistency
(c) Prudence
(d) Accrual
Answer:
(c) Prudence
Question 14.
A businessman purchased goods for Rs. 25, 00,000 and sold 80% of such goods during the accounting year ended 31st March 2015. The market value of the remaining goods was Rs. 4,00,000. He valued the dosing inventory at cost. He violated the concept of
(a) Money measurement
(b) Conservatism
(c) Cost
(d) Periodicity
Answer:
(b) Conservatism
Question 15.
Total sales during the year amount to Rs.70,000; cash sales Rs.10,000; Balance of trade receivables at the end of the year Rs.25,000. Cash received from customers during the year will be ……
(a) Rs. 35,000
(b) Rs. 30,000
(c) Rs. 37,000
(d) None of the above
Answer:
(a) Rs. 35,000
Question 16.
Selection of accounting policies is based on …………..
(a) Prudence
(b) Substance over form
(c) Materiality
(d) All the above
Answer:
(d) All the above
Question 17.
As per dual aspect concept, every business transaction has ………….
(a) Three aspects
(b) One aspect
(c) Two Aspects
(d) Four Aspects
Answer:
(c) Two Aspects
Question 18.
XCAI stands for ……………….
(a) Institute of Chartered Accountants of India
(b) Institute of Cost Accountants of India
(c) International Chartered Accounts Investigation
(d) None of the above
Answer:
(a) Institute of Chartered Accountants of India
Question 19.
if a land is purchased for Rs. 3,00,000 and its market value is Rs. 5,00,000. At the time of preparing final accounts the land value is recorded only for …………
(a) Rs. 5,00,000
(b) Rs. 3,00,000
(c) Rs. 8,00,000
(d) Rs. 2,00,000
Answer:
(b) Rs. 3,00,000
Question 20.
The direct advantage of accounting does not include ………..
(a) Preparation of financial statements
(b) Competitive advantage
(c) Ascertainment of profit or loss
(d) Information to interested groups
Answer:
(b) Competitive advantage
Question 21.
Going concern assumption tell us the life of the business is ……………..
(a) very short
(b) very long
(c) short
(d) none
Answer:
(b) very long
Question 22.
Cost incurred should be matched with the revenues of the particular Period is based on …………….
(a) matching concept
(b) historical cost concept
(c) full disclosure concept
(d) dual aspect concept
Answer:
(a) matching concept
Question 23.
IFRS are …………………
(a) International Financial Reporting Standards
(b) International Final Reporting Standards
(c) India Financial Reporting Standards
(d) India Final Reporting Standards
Answer:
(a) International Financial Reporting Standards
Question 24.
…………… said “Book-keeping is an art of recording business dealings in a set of books”.
(a) J.R. Batliboi
(b) R.N. Carter
(c) Luca Pacioli
(d) Menhar
Answer:
(b) R.N. Carter
II. Very Short Answer Questions
Question 1.
What are the features of book-keeping?
Answer:
Following are the features of book-keeping:
1. It is the process of recording transactions in the books of accounts
2. Monetary transactions only are recorded in the accounts.
3. Book-keeping is the primary stage in the accounting process.
4. Book-keeping includes journalizing and ledger processing.
Question 2.
What are the limitations of book-keeping?
Answer:
Only monetary transactions are recorded in the books of accounts.
1. Effects of price level changes are not considered.
2. Financial data recorded are historical in nature, i.e., only past data are recorded
Question 3.
Define Accounting Standards.
Answer:
According to Kohler, “Accounting standards are codes of conduct imposed by customs, law or professional bodies for the benefit of public accountants and accountants generally”.
Question 4.
what’is meant by IFRS?
Answer:
1. International Financial Reporting Standards (IFRS) are issued by the International Accounting Standard Board (IASB).
2. IFRS is a set of International Accounting Standards stating how particular types of transactions and other events should be reported in financial statements.
3. IFRS are issued to develop Accounting Standards that would be acceptable worldwide and to improve financial reporting internationally.
III. Short Answer Questions
Question 1.
Explain the Objectives of book-keeping.
Answer:
Following are the objectives of book-keeping:
1. To have a complete and permanent record of all business transactions in chronological order and under appropriate headings.
2. To facilitate ascertainment of the profit or loss of the business during a specific period.
3. To facilitate ascertainment of financial position.
4. To know the progress of the business.
5. To find out the tax liabilities.
6. To fulfill the legal requirements.
Question 2.
What are the advantages of Book-Keeping?
Answer:
Book-keeping has the following advantages:
1. 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.
2. Book-keeping is useful to get the financial information.
3. It helps to have control over various business activities.
4. Records provided by business serve as a legal evidence in case of any dispute.
5. Comparison of financial information over the years is possible. Also comparison of financial information of different business units is facilitated.
6. Book-keeping is useful to find out the tax liability.
Question 3.
Differentiate Book-Keeping with Accounting.
Answer:
Question 4.
What is the need for accounting standards?
Answer:
The need for accounting standards is as follows:
1. To promote better understanding of financial statements.
2. To help accountants to follow uniform procedures and practices.
3. To facilitate meaningful comparison of financial statements of two or more entities.
4. To enhance reliability of financial statements.
5. To meet the legal requirements effectively.
IV. Long Answer Questions
Question 1.
Briefly explain the Concepts of Accounting. (Any Five)
Answer:
Business Entity Concept:
1. A business unit is separate from the owner or owners
2. Accounts are prepared from the point of view of the business and not from the owner’s point of view.
3. Only business transactions are recorded.
Money Measurement Concept:
1. Those transactions which can be expressed in terms of money are recorded in the accounts.
2. Money serves as the medium of exchange transactions.
3. Transactions which do not involve money will not be recorded in the books of accounts.
Going Concern Concept:
1. It is the basic assumption that business is a going concern and will continue its operations for a foreseeable future.
2. It influences accounting practices in relation of valuation of assets and liabilities, depreciation of the fixed assets, treatment of outstanding and prepaid expenses and accrued and unearned revenues.
Dual Aspect Concept:
1. Every transaction or event has two aspects
2. This concept recognizes the fact that for every debit, there is a corresponding and equal credit.
3. This the basis of the entire system of double entry book-keeping.
4. This concept arises the basic accounting equation that it:
Capital + Liabilities = Assets.
Realization Concept:
1. Any change in the value of an asset is to be recorded only when the business realizes it.
2. When assets are recorded at historical value, any change in value is to be accounted only when
it realizes.