{"id":44050,"date":"2024-02-19T05:13:41","date_gmt":"2024-02-18T23:43:41","guid":{"rendered":"https:\/\/www.aplustopper.com\/?p=44050"},"modified":"2024-02-19T11:13:26","modified_gmt":"2024-02-19T05:43:26","slug":"plus-one-accountancy-chapter-wise-questions-answers-chapter-2","status":"publish","type":"post","link":"https:\/\/www.aplustopper.com\/plus-one-accountancy-chapter-wise-questions-answers-chapter-2\/","title":{"rendered":"Plus One Accountancy Chapter Wise Questions and Answers Chapter 2 Theory Base of Accounting"},"content":{"rendered":"

Kerala Plus One Accountancy Chapter Wise Questions and Answers Chapter 2 Theory Base of Accounting<\/h2>\n

Plus One Accountancy Theory Base of Accounting One Mark Questions and Answers<\/h3>\n

Question 1.
\nThe rules and guidelines used in preparing accounting reports are called
\n(a) Accounting rules
\n(b) Basic rules
\n(c) Generally Accepted Accounting Principles
\nAnswer:
\n(c) Generally Accepted Accounting Principles.<\/p>\n

Question 2.
\nAn accounting entity is an
\n(a) Accounting concept
\n(b) Accounting convention
\n(c) Modify Principle
\nAnswer:
\n(a) Accounting concept<\/p>\n

Question 3.
\nThe Policy of \u2018anticipate no profit and provide for all possible losses\u2019 arises due to the convention of
\n(a) Matching
\n(b) Conservatism
\n(c) Consistency
\nAnswer:
\n(b) Conservatism.<\/p>\n

Question 4.
\nA business unit is assumed to have an indefinite life comes under
\n(a) Going concern concept
\n(b) Business entity concept
\n(c) Money Measurement Concept
\nAnswer:
\n(a) Going concern concept<\/p>\n

Question 5.
\nContingent liabilities are usually shown as a footnote in the balance sheet as per the following accounting principles.
\n(a) Consistency
\n(b) Disclosure
\n(c) Materiality
\nAnswer:
\n(b) Disclosure<\/p>\n

Question 6.
\nDuring the lifetime of an entity, accounting produce financial statements in accordance with which basic accounting concept.
\n(a) Conservation
\n(b) Matching
\n(c) Accounting period
\n(d) None of these
\nAnswer:
\n(c) Accounting period.<\/p>\n

Question 7.
\nRevenue is generally recognised at the point of sale denote the concept of ……….
\n(a) Consistency
\n(b) Objectivity
\n(c) Revenue Realisation
\n(d) None
\nAnswer:
\n(c) Revenue Realisation<\/p>\n

Question 8.
\nRevenue recognition is an \/a
\n(a) Assumption
\n(b) Principle
\n(c) Accounting standard
\nAnswer:
\n(b) Principle.<\/p>\n

Question 9.
\nAccounting standard deals with depreciation accounting is
\n(a) As-5
\n(b) As-16
\n(c) As-6
\n(d) As-9
\nAnswer:
\n(c) As-6<\/p>\n

Question 10.
\nThe ……….. Principle requires that the same accounting method should be used from one accounting period to the next.
\nAnswer:
\nConsistency.<\/p>\n

Question 11.
\nCompanies must prepare financial statement at least yearly due to the ………….. assumption.
\nAnswer:
\nAccounting Period.<\/p>\n

Question 12.
\nAccounting standards are issued by ………… in India.
\nAnswer:
\nInstitute of Chartered Accounts of India.<\/p>\n

Question 13.
\nAccounting standards in India are formulated and governed by …………. which was set up in ………
\nAnswer:
\nAccounting Standard Board (ASB), 1977.<\/p>\n

Question 14.
\nSEBI stands for
\nAnswer:
\nSecurities and Exchange Board of India.<\/p>\n

Question 15.
\nICAI stands for
\nAnswer:
\nThe Institute of Chartered Accountants of India.<\/p>\n

Question 16.
\n………….. and ………….. generally referred to as the essence of financial accounting.
\nAnswer:
\nThe accounting concepts and accounting standards.<\/p>\n

Question 17.
\nFind the odd one and give a reason,
\n(a) Dual aspect
\n(b) Historical cost
\n(c) Accounting period
\n(d) Verifiability and objectivity.
\nAnswer:
\n(c) Accounting period, it is ah accounting assumption, But all others are accounting principles.<\/p>\n

Question 18.
\nRevenue from sale of products is realized when
\n(a) the sale is made
\n(b) the cash is collected
\n(c) the production is completed
\n(d) the order placed to supply goods.
\nAnswer:
\n(a) The sale is made.<\/p>\n

Question 19.
\nAccounting principles are generally based on
\n(a) Practicability
\n(b) Subjectivity
\n(c) Convenience in recording
\nAnswer:
\n(a) Practicability<\/p>\n

Question 20.
\nNormally assets are recorded at cost price. This because
\n(a) Assets can be realized at the time of winding up.
\n(b) Historical cost concept.
\n(c) Going concern concept
\n(d) All of these
\nAnswer:
\n(d) All of these.<\/p>\n

Plus One Accountancy Introduction to Accounting Two Mark Questions and Answers<\/h3>\n

Question 1.
\nExplain the cash system of accounting and the Mercantile system of accounting.
\nAnswer:
\nCash system or Receipt Basis:- Under this system, only actual cash receipts and payments are considered. Non-cash items such as outstandings, advances, and credit transactions are ignored. Mercantile system or Accrual Basis. Under this system, all items of income and expenditure, both cash items as well as non-cash items, such as outstanding and accrued incomes and expenses are taken into account.<\/p>\n

Question 2.
\n1. Dual aspect concept – Two aspects of a transaction are recorded.
\n________________- Expected loss should be taken in to account.
\n2. Accounting Principles – Principles followed by accountants
\n___________________- Norms to be observed by the accountant
\nAnswer:<\/p>\n

    \n
  1. Principle of prudence or conservatism.<\/li>\n
  2. Accounting Standards.<\/li>\n<\/ol>\n

    Question 3.
    \nExplain IFRS.
    \nAnswer:
    \nInternational Financial Reporting Standards (IFRS) are globally accepted accounting standards developed by the International Accounting Standard Board (IASB). IFRS is a set of accounting standards for reporting different types of business transactions and events in the financial statements. The objective is to facilitate international comparison for the true and fair valuation of a business enterprise.<\/p>\n

    Question 4.
    \nComplete the following circle.
    \n\"Plus
    \nAnswer:
    \n\"Plus<\/p>\n

    Question 5.
    \nWhat is GAAP?
    \nAnswer:
    \nGenerally Accepted Accounting Principles and Practices (GAAP), is a set of rules and practices that are followed while recording transactions and in preparing the financial statements.<\/p>\n

    The accounting assumptions, principles and modifying principles, as well as accounting standards, form the foundation upon which GAAP is built.<\/p>\n

    Question 6.
    \n\u201cInformation delayed is information denied \u201d. State the principle applicable behind this statement.
    \nAnswer:
    \n\u2018Timeliness principle\u2019:
    \nTimeliness implies that the financial statements are to be prepared and published in time. The relevance, dependability, and utility of the financial information depends on the timely publication of financial statements. The users of financial statements needs timely information.<\/p>\n

    Question 7.
    \nFixed Assets are depreciated over their useful life rather than over a shorter period. State the relevant accounting assumption. Explain.
    \nAnswer:
    \n\u2018Going Concern Assumption\u2019:
    \nAccording to this concept, business will continue its operation long enough to allocate the cost of fixed assets over their useful lives against the income.<\/p>\n

    Question 8.
    \nFinancial Information should be neutral and free from bias. Comment on this statement with reference to the relevant accounting Principle.
    \nAnswer:
    \n\u2018Verifiability and objectivity principle\u2019:
    \nThis principle states that the accounting data provided in the books of accounts should be verifiable and dependable.<\/p>\n

    Question 9.
    \nThe sales achieved by a salesman and the commission payable to him is recorded in the books of accounts. But the efficiency and intelligence of salesman is not recorded. Explain the reason with reference to the relevant accounting principle.
    \n\u2018Money Measurement Concept\u2019:
    \nAccording to this concept, transactions that can be measured in terms of money only are recorded in the books of accounts. \u201cThe skill and intelligence of the salesman is not measurable in money terms.<\/p>\n

    Question 10.
    \nTimely information, even if it is not cent percent reliable is better than reliable information which is late. Comment on this statement by quoting the accounting principle.
    \nAnswer:
    \n\u2018Timeliness principle\u2019:
    \nTimeliness implies that the financial statements are to be prepared and published in time. The relevance, dependability, and utility of the financial information depends on the timely publication of financial statements. The users of financial statements need timely information.<\/p>\n

    Question 11.
    \n\u2018Akash\u2019 places an order on 1.1.2005 with Bino for the supply of machinery for Rs. 5,00,000\/-. On receipt of the order, Bino purchases raw materials employ workers, produces machinery and delivers it to Akash on 1.2.2005. Akash makes the payment on 10.02.2005. On which date, the revenue is recognized? Substantiate your answer by quoting the relevant accounting concept. \u2018Revenue Recognition Concept\u2019.
    \nAnswer:
    \nRevenue is recognized on 1.2.2005, i.e. when the title of goods passes from the seller to the buyer.<\/p>\n

    Question 12.
    \nStar trading Co.Ltd. buys a piece of land for Rs. 50,00,000. After 2 years the value of land came to Rs. 70,00,000. But the accountant does not consider the increase in the value of Rs. 20,00,000 in the books of accounts and the land remains at Rs. 50,00,000 in the books. Do you agree with the accountant? If so, on what ground?.
    \nAnswer:
    \nThe accountant\u2019s viewpoint is correct. This is based on the principle \u2018Historical cost\u2019. According to this principle, assets are to be recorded at their cost price and this cost is the basis for all subsequent accounting for those assets.<\/p>\n

    Question 13.
    \nMr. Muhammed, a sole trader, purchased a TV for Rs. 12,000\/- for his domestic use and asks his accountant to record this as a business expense. But the accountant, argues that it is a violation of the accounting principle. Is he right? If so, prove your answer by highlighting the relevant accounting principle.
    \nAnswer:
    \nThe accountant\u2019s viewpoint is correct because the business is separate from the businessmen as per the \u2018\u2018Accounting Entity Concept\u201d.<\/p>\n

    Question 14.
    \nProvision for discount on debtors is accounted and provision for discount on creditors is not accounted. Why? State the relevant accounting principle.
    \nAnswer:
    \nAccountant anticipates no profit but provide for all possible losses while recording business transaction. Conservatism principle or prudence.<\/p>\n

    Question 15
    \nName the systems of recording transactions in the book of accounts.
    \nAnswer:<\/p>\n

      \n
    1. Double Entry System.<\/li>\n
    2. Single Entry System.<\/li>\n<\/ol>\n

      Plus One Accountancy Introduction to Accounting Three Mark Questions and Answers<\/h3>\n

      Question 1.
      \nWhen a Proprietor purchased furniture at Rs. 10,000 for business purposes, he paid transportation and load\u00acing charges of Rs. 1000 for bringing the furniture to the location of business premises. State whether it is possible to add the transportation and loading charges to the purchased price of furniture? What is the underlying principle behind it?
      \nAnswer:
      \n1. Yes, it is possible to add transportation and loading charges to the purchased price of furniture.<\/p>\n

      2. \u201cHistorical cost principle\u201d – This principle requires that all transactions should be recorded at their acquisition cost. The cost of acquisition refers to the cost of purchasing the asset and expenses incurred in bringing the assets to the intended condition and location of use.<\/p>\n

      Question 2.
      \nMr. Rajan Thomas invested Rs. 5,00,000 in his business. He is treated as a creditor to the extent of Rs. 5,00,000 by the business. Write the relevant accounting assumption and explain it.
      \nAnswer:
      \nAccounting Entity Assumption:
      \nThis concept assumes that the entity of business is different from its owners. According to this concept, all the transactions of the business are recorded in the books of the business from the point of view of the business as an entity and even the owner is treated as a creditor to the extent of his capital.<\/p>\n

      Question 3.
      \nAn accountant followed a particular method of accounting in one year and in the next year he changes the method. Is it possible to get a better idea about the operation of the business?
      \nAnswer:
      \nAccording to the Principle of \u201cConsistency\u201d, the frequent change in the accounting policies will adversely affect the reliability and comparability of financial information. The users of the financial statements assume that the business unit follows the same accounting principles and practices in preparing the financial statement.<\/p>\n

      If a change is adopted the business enterprises is required to record the fact as footnotes and to show the impact of such changes on financial affairs.<\/p>\n

      Question 4.
      \nClassify the following into accounting assumptions, principles and modifying principles Accounting entity concept, dual concept, Money Measurement, Matching Principles, going concern concept, Accounting period concept, cost-benefit principle, consistency principle, Full disclosure principle, Timeliness, Historical cost principle.
      \nAnswer:
      \n\"Plus<\/p>\n

      Question 5.
      \n\u201cProprietor is treated as creditor to the extent of his capital.\u201d<\/p>\n

        \n
      1. Write the relevent accounting assumption<\/li>\n
      2. Explain the concerned accounting assumption in relation to the statement given.<\/li>\n<\/ol>\n

        Answer:
        \nAccounting Entity Assumption:
        \nThis concept assumes that the entity of business is different from its owners. According to this concept all the transactions of the business are recorded in the books of the business from the point of view of the business as an entity and even the owner is treated as a creditors to the extent of his capital.<\/p>\n

        Question 6.
        \n\u201cFor every debit, there is an equal and corresponding Credit\u201d.<\/p>\n

          \n
        1. Explain the statement by citing an example.<\/li>\n
        2. State the relevant accounting principle.<\/li>\n<\/ol>\n

          Answer:
          \n1. \u201cEvery transaction has dual aspect i.e. debit and credit\u201d.
          \nFor example Anish started business with Rs. 20,000. The effect of this transaction is that<\/p>\n