RBSE Class 11 Accountancy Important Questions Chapter 2 Theory Base of Accounting

Rajasthan Board RBSE Class 11 Accountancy Important Questions Chapter 2 Theory Base of Accounting Important Questions and Answers. 

RBSE Class 11 Accountancy Important Questions Chapter 2 Theory Base of Accounting

Very Short Answer Type Questions

Question 1. 
Under which accounting principle, quality of manpower is not recommended in the books of accounts?
Answer:
Money measurement concept.

Question 2. 
Name the concept under which the skills or quality of the management team is not disclosed in the financial statements 
Answer:
Money measurement concept.

Question 3. 
Under which concept, Owner of business is treated as creditor to the extent of his capital?
Answer:
Business entity concept.

Question 4. 
Name the concept under which assets are recorded in books at the cost incurred for acquisition of such assets?
Answer:
Historical cost.

Question 5. 
Financial statements of an entity are prepared at regular intervals in accordance with which accounting concept?
Answer:
Accounting period concept.

Question 6. 
Name the concept under which advance received from the supplier is not taken as income or Sale.
Answer:
Revenue recognition concept.

Question 7. 
According to which concept, each accounting transaction has at least two effects?
Answer:
Dual aspect concept.

Question 8. 
Which accounting convention takes into account all prospective losses but ignores all prospective profits?
Answer:
Conservatism / prudence.

Question 9. 
According to which convention, depreciation is being charged as per one particular method year after year?
Answer:
consistency.

Question 10. 
Name the system of accounting.
Answer:
Double entry system and single entry system.

Question 11. 
How many accounting standards have been issued by ICAI so far?
Answer:
32.

Question 12. 
What are the basis of accounting?
Answer:
Cash basis and mercantile basis.

Question 13. 
What is the full form of IFRS?
Answer:
It stands for International Financial Reporting Standards.

Short Answer Type Questions

Question 1.
Define the following terms:
(a) Stock    
(b) Trade receivables    
(c) Drawings
Answer:
(a) Stock: It is current and tangible assets of an enterprise for the purpose of sale and earn profit. It is further classified into three categories, such as raw material, semi-finished goods (work in progress) and finished goods.

(b) Trade Receivables: Trade receivables refer to the group of persons and business firms from whom the amount is receivables due to credit sales. These are further classified into two categories, bills receivables and debtors.

(c) Drawings: It is the amount of cash and other assets withdrawn by the owners for their personal use.

Question 2. 
Write a short note on accounting cycle.
Answer:
It refers to the collective process of recording and processing of accounting information. It starts from the identification of financial transaction till the preparation of financial results. 

Question 3. 
How do accounting standards harmonise the accounting policies and avoid manipulation of accounting results?
Answer:
(a) Harmonise the Accounting Policies: Accounting standards is a selected set of accounting policies related to various principles and methods help to chosen out selected alternatives.

(b) Avoid Manipulation of Accounting Results.: Many accounting scandals result into failure of business due to misuse of accounting, concepts, conventions and.jprinciples. For Example: The choice of different method of treatment of stock may manipulate to show desired results.

Higher Order Thinking Skills Questions
    
Question 1.
A company bought a machinery for ₹ 8,00,000, paid installation charges for ₹ 50,000 and market value of the machinery was ₹ 6,00,000.
(a) Which principle shall be applied while recording the amount of machinery?
(A) At amount the machinery will be recorded.
Answer:
(a) Cost principle
(b) ₹ 8,50,000.

Question 2. 
A business purchased goods for ₹ 1,00,000 and sold 75% of such goods during accounting year ended 31 st March, 2017. The market value of remaining goods was ₹ 46,000. He valued closing stock at cost. Name the concept being violated here?
Answer:
Prudence or conservatism.

Question 3. 
Under which principle, land of a firm is recorded at cost though its market price may be much higher?
Answer:
Historical cost principle.

Question 4. 
“Closing stock is valued either on cost basis or market price basis whichever is lower.” Due to which accounting principle is this process followed
Answer:
Principle of conservatism/prudence.

Question 5. 
“All transactions recorded in the books of accounts of a firm should have evidence and are supported by proper documents.” Mention the accounting principle which is involved in this statement.?
Answer:
Verifiable objective principle.

Question 6. 
“A construction company has taken a large project to be completed in four years. Management has decided to prepare Financial Statements of the company after completion of the project so that exact profit or loss of the project may be ascertained”. Is the decision of management justified₹ Mention the reason.
Answer:
No, the decision of the management is not justified as per the principle of going concern, every organisation must prepare its financial statements at the end of each accounting year.

Question 7. 
“Normally, the value of tools say costing just ₹ 5000 are shown in the Balance Sheet of a small business firm but this type of value is merged with other items in the case of a large business firms.” Why does it so happen? State with reason.
Answer:
It is due to applicability of principle of materiality which emphasizes on the disclosure of material information in the financial statements.

Question 8. 
Mention the reason why value of human resources which are considered to be more important than physical and financial resources are not recorded in books of accounts.
Answer:
According to money measurement concept, the transactions and events which are subject to convert into money or money’s worth can be recorded in the books of accounts. Momentary value of human resources cannot be measures and this is the reason that it cannot be shown in the books of accounts.

Question 9. 
Sachin sold goods worth ₹ 10,000 to Kumble on one month’s credit basis but he recorded this transaction in his books of account on the day of transaction itself. Which accounting assumption is followed by Sachin?
Answer:
Accrual assumption.

Question 10. 
Mention the reason why a business records all those transactions which take place between the business and its owners but not his personal nature transactions.
Answer:
It is due to the reason that business and business owners are treated two different persons and hence no personal transaction can be recorded.

Question 11. 
Identify and explain the accounting concept/principle involved in the following cases:
(a) Capital is a liability for the business
(b) Same method of depreciation is followed year after year
(c) Provision is created for doubtful debts
(d) Expenses incurred in an accounting period should be matched with revenue earned during the period.
Answer:
(a) Business entity concept    
(b) Principle of consistency
(c) Principle of prudence    
(d) Matching Principle

I. Multiple Choice Questions

Question 1. 
As per business entity principle, the business is treated separate from______
(a) owners
(b) debtors 
(c) creditors 
(d) government
Answer:
(a) owners

Question 2. 
Going concern assumption states shall continue for period of time.
(a) short 
(b) long 
(c) definite 
(d) indefinite
Answer:
(d) indefinite

Question 3. 
Cost incurred to produce goods and make it available in the market to sell, must match with the revenue of the same period, this statement is based on ______
(a) matching concept 
(b) historical cost concept
(c) full disclosure concept 
(d) revenue recognition principle
Answer:
(a) matching concept 

Question 4. 
As per principle of duality, every transaction has ______ aspects.
(a) three aspects 
(b) one aspect 
(c) two aspects 
(d) none of the above
Answer:
(c) two aspects 

Question 5. 
The receiving aspect of a transaction is called ______
(a) debit aspect 
(b) credit aspect 
(c) neither of the two
Answer:
(a) debit aspect 

Question 6. 
Sidharth is an example of_________ account.
(a) personal 
(b) real 
(c) expense 
(d) income
Answer:
(a) personal 

Question 7. 
Outstanding expense is the example of______ .
(a) nominal account 
(b) personal account
(c) representative personal account 
(d) real account
Answer:
(c) representative personal account 

Question 8. 
Nominal account having credit balance represents
(a) income! gain 
(b) expenses/losses 
(c) assets
(d) liabilities
Answer:
(a) income! gain 

Question 9. 
Financial Statements are prepared at the end of every year. This is based on which of the following basic principle?
(a) Conservation 
(b) Matching 
(c) Accounting period 
(d) Business Entity
Answer:
(c) Accounting period 

Question 10. 
The concept that the business will not cease to end is based on ____ principle.
(a) Going Concern 
(b) Accounting Period 
(c) Matching 
(d) Revenue Recognition
Answer:
(a) Going Concern 

Question 11. 
The cost of calculator device is not accounted as an asset, it is due to ____ concept.
(a) Consistency 
(b) Periodicity
(c) Materiality 
(d) Cost
Answer:
(c) Materiality 

Question 12. 
The depreciation on the value of fixed assets is charged due to which of the following principle(s).
1. Going Concern
2. Cost Principle
3. Matching Principle
The correct option would be
(a) 1 only 
(b) 1 & 2 only 
(c) 1 & 3 only 
(d) all of the above
Answer:
(c) 1 & 3 only 

Question 13. 
Which of the following is not the fundamental assumption?
(a) Accrual 
(b) Going Concern 
(c) Consistency 
(d) Accounting Entity
Answer:
(d) Accounting Entity

Question 14. 
Jal & Company invested 1 lakh in the shares of Sharekhan & Company Limited. The accountant wants to show the investments at the market value of the shares of 135,000. Which of the following principle prohibits him to do so?
(a) full disclosure
(b) duality 
(c) prudence 
(d) materiality
Answer:
(c) prudence 

Question 15. 
Only the relevant material needs to be disclosed in the financial statements. This is based on ____ principle.
(a) matching 
(b) revenue recognition 
(c) materiality 
(d) full disclosure
Answer:
(c) materiality 
    
II. State whether the following statements are true or false.

1. Under going concern concept, the assets must be revalued at marlet prices at the end of every year.
2. Money measurement assumption distinguishes between the qualitative and quantitative aspect of a transaction.
3. Revenue is matched with the expenses under revenue recognition principle.
4. Due to applicability of principle of prudence, the profits are understated.
5. Assets will be equal to capital if there are no liabilities.
Answers:    
1. False    
2. True    
3. False    
4. True    
5. True

III. Fill in the blanks with correct answer.

1. The value of closing stock is determined on basis of cost price or market price whichever is less, is based on the ............ principle.
2. The assets are recorded at a price at which they are acquired, it is based on ............ principle.
3.The transactions between the owner and business are recorded separately due to ............ principle.
4. Business enterprises must prepare their accounts once in a year, it is based on the principle of ............
5. Principle of ............ requires that the same methods and techniques should be followed from one accounting period to next period.
Answers: 
1. prudence 
2. Cost 
3. Business entity 
4. Accounting period
5. Consistency