Bookkeeping and Accountancy Standard Eleven

Questions and Answers

What is book-keeping?

The art or science of systematic recording, classifying, and summarising the financial transactions of a business for a particular period.

Which of the following are objectives of book-keeping? (Select all that apply)

To forecast future economic trends

To maintain a record of all financial transactions (correct)

To prepare annual financial reports

To know the profit or loss of the business (correct)

Book-keeping only records financial transactions.

True

What is the importance of decision making in book-keeping?

Book-keeping provides financial information to the businessman for decision making. Signup and view all the answers

Who introduced the Double-Entry Book-keeping system?

Luca De Bargo Pacioli Signup and view all the answers

Name one of the features of book-keeping.

It is the method of recording day-to-day business transactions. Signup and view all the answers

The main objective of book-keeping is to keep a complete and accurate record of all the financial transactions in a systematic, orderly, and logical manner.

true Signup and view all the answers

Which statement describes the return on investment from book-keeping?

It helps evaluate business profitability Signup and view all the answers

Match the following items with their categories:

Bank Overdraft = Liability Live Stock = Asset Commission Received = Income Electricity Bill = Expenditure Signup and view all the answers

What is the accounting equation?

Assets = Liabilities + Capital Signup and view all the answers

What happens to assets when a business capital increases?

They increase. Signup and view all the answers

What entry reflects a company starting business with cash of `50,000?

Assets = Liabilities + Capital: <code>50,000 = 0 + </code>50,000 Signup and view all the answers

Rohit Sharma sold goods to Virat on credit for __________.

`20,000 Signup and view all the answers

Which of the following transactions will increase liabilities?

Purchased goods on credit Signup and view all the answers

What is the total assets after Rupali commenced business with a bank balance of `25,000?

`25,000 Signup and view all the answers

What happens to total assets after receiving interest of `200?

It increases by `200 Signup and view all the answers

The accounting equation can also be expressed as Capital = Total Assets – Outsider's Liabilities.

True Signup and view all the answers

What is an asset?

Any physical thing or right owned that has a monetary value. Signup and view all the answers

Which of the following are types of assets? (Select all that apply)

Current Assets Signup and view all the answers

What is the definition of liabilities?

Amounts payable by the business to others. Signup and view all the answers

What are examples of current liabilities? (Select all that apply)

Outstanding Expenses Signup and view all the answers

What is Net Worth?

The excess of assets over liabilities. Signup and view all the answers

What is a contingent liability?

A liability that may arise depending on the occurrence of a certain event. Signup and view all the answers

The Money Measurement concept implies that all transactions, regardless of their monetary value, are recorded in the books.

False Signup and view all the answers

What is the Cost Concept in accounting?

An asset is recorded based on its historical cost. Signup and view all the answers

Match the following accounting concepts:

Going Concern = Assumption that a business will continue operations into the foreseeable future Accrual = Income is recorded when earned, not necessarily when received Conservatism = Anticipate no profit but provide for all possible losses Disclosure = Accounts must disclose all material information Signup and view all the answers

According to the Matching Concept, revenues and expenses are considered for the entire lifetime of a business.

False Signup and view all the answers

What is the purpose of accounting standards?

To promote understanding of financial statements Signup and view all the answers

What does Ind AS stand for?

Indian Accounting Standards Signup and view all the answers

Which of the following is one of the Accounting Standards (AS) issued in India? (Select all that apply)

AS-1 Disclosure of Accounting Policies Signup and view all the answers

What is meant by the term 'materiality' in accounting?

Disclosure of all material items that could influence decisions. Signup and view all the answers

What is the primary objective of Book-Keeping?

To keep records of all financial transactions Signup and view all the answers

Book-Keeping is the final stage of accounting.

False Signup and view all the answers

What is accountancy?

The practice of recording, classifying, and reporting business transactions. Signup and view all the answers

Which basis of accounting recognizes revenue when cash is received?

Cash basis Signup and view all the answers

Match the following accounting principles with their descriptions:

Reliability = Information must be trustworthy and credible. Relevance = Information must influence decisions. Understandability = Information must be clear and easy to understand. Comparability = Information must be consistent across periods or entities. Signup and view all the answers

Which account is affected when cash comes in?

Cash A/c Signup and view all the answers

What is a debtor?

A person who owes money to the business. Signup and view all the answers

A person whose liabilities are more than his assets is called an ______.

insolvent Signup and view all the answers

Who is the giver in the transaction when cash is started with `50,000?

Proprietor Signup and view all the answers

What is the difference between capital expenditure and revenue expenditure?

Capital expenditure is for fixed assets and long-term benefits, while revenue expenditure is for short-term operational costs. Signup and view all the answers

What is the classification of Cash A/c?

Real A/c Signup and view all the answers

Rent is an expense.

True Signup and view all the answers

Which of the following is considered a non-monetary transaction?

Barter exchange of goods Signup and view all the answers

What is goodwill in accounting?

An intangible asset representing the excess value of a business due to its reputation. Signup and view all the answers

A commission received is considered as ______.

income Signup and view all the answers

What is the classification of Purchases A/c?

Nominal A/c Signup and view all the answers

What qualifies a person as solvent?

When a person's assets are equal to or greater than their liabilities. Signup and view all the answers

Match the following accounts with their classifications:

Cash A/c = Real A/c Rent A/c = Nominal A/c Ajay A/c = Personal A/c Sales A/c = Nominal A/c Signup and view all the answers

Cash discounts are recorded in the books of accounts.

True Signup and view all the answers

What is the accounting year for income tax purposes in India?

April 1 to March 31. Signup and view all the answers

What is the two aspects when salary is paid?

<ol> <li>Salary is an expense, 2) Cash goes out.</li> </ol> Signup and view all the answers

What is the outcome of accountancy?

Financial statements and reports Signup and view all the answers

If cash is deposited into the bank, what are the two aspects involved?

<ol> <li>Cash comes out, 2) Bank is the receiver.</li> </ol> Signup and view all the answers

Which of the following is a real account?

Machinery A/c Signup and view all the answers

An increase in Liability is credited.

True Signup and view all the answers

Classify the following accounts:

Stationery A/c = Expenses Mahesh's A/c = Personal Machinery A/c = Real Capital A/c = Capital Loss by Fire A/c = Losses Pune Municipal Corp.A/c = Personal Signup and view all the answers

What is Book-keeping?

The recording of business transactions. Signup and view all the answers

What is meant by Goods?

Items or products that are bought and sold. Signup and view all the answers

What is Capital?

Amount invested in the business by the proprietor. Signup and view all the answers

What is Drawings?

Money taken out from the business by the owner. Signup and view all the answers

What is Goodwill?

Reputation of a business valued in terms of money. Signup and view all the answers

Surplus of income over expenses is ______________.

Profit Signup and view all the answers

In ____________ basis of accounting, actual cash receipts and actual cash payments are recorded.

Cash Signup and view all the answers

Amount which is not recoverable from the customer is known as ______________.

Bad Debts Signup and view all the answers

Accounts must be honestly prepared and they must disclose all material information is known as _________.

Disclosure Concept Signup and view all the answers

A commodity in which a trader deals is known as _______________.

Goods Signup and view all the answers

According to _________ cash flow statement is prepared and presented for the period for which the profit and loss account is prepared.

AS-3 Signup and view all the answers

Book-keeping and accounting are one and the same thing.

False Signup and view all the answers

Conservatism means to follow the safe side.

True Signup and view all the answers

The double entry system is based on the Dual Aspect concept.

True Signup and view all the answers

Bank overdraft is an asset of the business.

False Signup and view all the answers

Solvent person is a person whose assets are more than his liabilities.

True Signup and view all the answers

Cash discount does not appear in the books of accounts.

True Signup and view all the answers

A transaction is concerned with money or money’s worth.

True Signup and view all the answers

Accounting is the language of business.

True Signup and view all the answers

In earlier times of civilization, accounting was done by owners.

True Signup and view all the answers

Book-keeping is useful to find out all tax liabilities.

True Signup and view all the answers

What does AS-12 govern in accounting?

Accounting for Government Grants. Signup and view all the answers

What does AS-13 require concerning investment reporting?

Disclosure of current and long-term investments. Signup and view all the answers

What does AS-22 state about tax reporting?

Tax expenses should include current and deferred tax. Signup and view all the answers

Study Notes

Textbook Approval and Publication

Coordination Committee approved "Book Keeping and Accountancy" for Standard Eleven on June 20, 2019.
Implementation began in the educational year 2019-20.
Published by Maharashtra State Bureau of Textbook Production and Curriculum Research, Pune.
First edition released in 2019, with a reprint in 2020.

Technological Integration

DIKSHA App available for smartphone users for accessing the full textbook and relevant audio-visual materials.
Students can scan QR codes in the textbook for enhanced learning resources.

Preface Highlights

Introduces Book Keeping & Accountancy according to the revised syllabus for Std XI.
Subject vital in the commerce stream, covering business management, finance, and accounting.
Focus on simplifying content for better student comprehension, utilizing charts, diagrams, and tables.

Course Structure and Competency Statements

Students will learn key concepts and applications in Book Keeping & Accountancy:
- Meaning and importance of accounting with basic terminologies.
- Application of fundamental principles and accounting standards.
- Preparation of financial statements and transactions recording.
- Introduction to modern concepts like GST, NEFT, and various banking methods.

Evolution of Accounting

Accounting history traced back to the time of Kautilya and the "Arthashastra."
Double-Entry Bookkeeping system introduced by Luca Pacioli in 1494.
Industrial Revolution led to the need for detailed financial accounting to support joint stock companies.
Emergence of Management Accounting for decision-making in the 20th century.

Book Keeping

Defined as a systematic recording of business transactions, focusing on monetary aspects.
Key definitions include:
- Recording business dealings in a set of accounts (J.R. Batliboi).
- Analyzing and reporting business results for control (Richard E. Strahelm).

Features and Objectives of Book Keeping

Key features include daily transaction recording, focus on financial actions, and systematic record-keeping.
Main objectives are to maintain accurate financial records, monitor profit/loss, and ensure financial transparency.

Importance of Book Keeping

Maintains permanent records for decision-making and evidence in legal contexts.
Helps in tracking financial information, thereby aiding management and strategic planning.
Essential for determining tax liabilities and financial stability for businesses.

Utility

Business owners and management utilize bookkeeping for assessing financial health and planning.
Investors and lenders rely on accurate financial statements for informed decision-making.

Differences Between Book Keeping and Accountancy

Book Keeping focuses on recording and classifying transactions, while Accountancy encompasses analysis and interpretation of financial data.
Accountancy aims to prepare detailed financial statements, unlike the primary record-keeping in Book Keeping.
Responsibilities differ: junior staff handle bookkeeping, whereas senior staff manage accountancy.### Decision Making in Management
Management decisions rely on data provided by accountants; effective decision-making requires reliable data.
Analytical skills are essential for effective management; simple bookkeeping lacks this requirement.

Accountancy: Meaning and Definition

Bookkeeping: Initial stage in accounting, involving recording financial transactions.
Accounting: Encompasses recording, classifying, and reporting business transactions.
Accountancy: Entire theory and practice framework for accounting.
Key definitions:
- Kohler: Accountancy is the theory and process of accounting.
- Prof. Robert N. Anthony: Accounting systems collect, summarize, analyze, and report business transaction information.

Basis of Accounting System

Three main methods:
- Cash basis: Records transactions when cash is received or paid. Common among professionals (e.g., doctors).
- Accrual basis: Records revenues earned and expenses incurred regardless of cash flow.
- Mixed basis: Combines cash and accrual methods; however, its use is restricted by law in India.

Qualitative Characteristics of Accounting Information

Reliability: Information must be dependable for decision-making, varying in reliability by item (e.g., fixed vs. current assets).
Relevance: Information must influence decisions and be timely, avoiding unnecessary details.
Understandability: Information should be clear and presented in an accessible manner.
Comparability: Allows for the evaluation of financial position across organizations or time by maintaining consistency in reporting.

Basic Accounting Terminologies

Transactions: Exchanges involving goods/services for money or equivalent value.
- Monetary transactions: Involve direct or indirect money exchange.
  - Cash transactions: Immediate cash exchanges.
  - Credit transactions: Payment occurs later.
- Non-monetary transactions: No monetary exchange; includes barter.

Key Concepts in Accounting

Capital: Initial investment by owners; derived from the equation: Capital = Assets - Liabilities.
Drawings: Withdrawals from business by the owner for personal use.
Debtors: Individuals/entities owing money to the business.
Creditors: Entities to whom the business owes money.
Expenditure: Money spent by the business for various purposes.
- Types include capital expenditure (long-term benefits) and revenue expenditure (short-term costs).
Goodwill: Intangible asset representing reputation and earning potential of a business.

Profit, Loss, Income, and Revenue

Profit: Occurs when sales exceed costs. Increases business capital.
Loss: Happens when costs exceed sales. Decreases business capital.
Income: Revenue from business operations.
Revenue: Income generated from primary business activities, like selling goods or services.

Assets and Liabilities Overview

Assets: Items of value owned by the business, categorized into:
- Fixed assets (long-term benefits).
- Current assets (easily convertible to cash).
- Fictitious assets (imaginary assets).
Liabilities: Amounts the business owes, classified into:
- Fixed liabilities (long-term).
- Current liabilities (short-term).
Net Worth (Owner’s Equity): Total assets minus liabilities, indicative of a firm’s financial health.

Accounting Concepts, Conventions, and Principles

Contingent Liabilities: Potential liabilities based on uncertain future events; not recorded on the balance sheet but mentioned in footnotes.
Importance of Accounting: Serves as a communication tool regarding business operations to various stakeholders (owners, creditors, investors, government).

Common Business Structures

Trading Concern: A profit-oriented entity, focusing on selling goods.
Not-for-Profit Concern: Organizations operating for societal benefit, like schools and hospitals.### Introduction to Accounting
Accounting encompasses financial recording relevant to businesses and individuals managing monetary transactions.
It includes processes like record-keeping, classification, and summarization of financial data, ensuring systematic organization.

Importance of Accounting Concepts

Reliable Financial Statements: Facilitate informed decision-making by providing accurate financial data.
Uniformity in Presentation: Standardized formats ensure clarity and comparability across different financial reports.
Acceptable Measurement Basis: Consistent methods of valuing transactions enhance reliability.
Proper Information Delivery: Ensures all stakeholders receive pertinent financial insights.
Valid Assumptions: Foundations are based on credible and appropriate concepts guiding financial practices.

Key Accounting Concepts

Business Entity Concept: Treats the business as a separate entity, distinct from its owners; personal transactions of owners are excluded unless directly related to business.
Money Measurement Concept: Only transactions that can be quantified in monetary terms are recorded; non-monetary factors like employee morale are excluded.
Cost Concept: Assets are recorded at their historical cost, regardless of current market value; depreciation is accounted for over time.
Consistency Concept: Requires uniform application of accounting methods over time, maintaining consistency, yet allowing for updates disclosed as necessary.
Conservatism Principle: Encourages recording potential losses while avoiding premature recognition of profits, ensuring a cautious approach.
Going Concern Assumption: Assumes that the business will continue operating indefinitely, influencing asset valuation and long-term liabilities.
Realization Principle: Income is recognized when earned, regardless of cash receipt; sales are recorded even when payment is deferred.
Accrual Concept: Revenue and expenses are recorded when they are earned or incurred, not necessarily when cash changes hands.
Dual Aspect Concept: Every transaction affects two accounts—debit and credit, forming the foundation of double-entry bookkeeping.
Disclosure Principle: Requires transparency of all material information in financial statements, ensuring users are adequately informed.
Materiality Principle: Items significant enough to affect decision-making must be disclosed; less relevant details can be omitted.
Matching Concept: Pairs revenues with related expenses within the same accounting period, enhancing the accuracy of profit measurement.

Accounting Standards and IFRS

Accounting Standards (AS): Frameworks ensuring comparability, consistency, and reliability of financial statements across entities.
International Financial Reporting Standards (IFRS): Developed by the IASB to provide a common global language for business affairs, improving international financial reporting.

Accounting Standards in India

Institute of Chartered Accountants of India (ICAI): Responsible for formulating Accounting Standards through their Accounting Standards Board (ASB).
Ind AS: Indian Accounting Standards that have been adjusted for local practices while adhering to IFRS guidelines.
Significant Accounting Standards:
- AS-1: Disclosure of accounting policies to enhance transparency.
- AS-2: Valuation of inventories at the lower of cost or net realizable value.
- AS-3: Mandates cash flow statements aligning with profit and loss accounts.
- AS-6: Depreciation accounting through systematic allocation.
- AS-9: Revenue recognition guidelines for trades.

Practical Activities

Encourages students to identify examples of economic vs. non-economic activities and list household assets and liabilities as real-world applications of concepts learned.

True/False Statements

Classifies key accounting principles and concepts, allowing students to assess their understanding through assertions about definitions and applications.

Fill-in-the-Blanks and Agreement/Disagreement Prompts

Reinforces understanding of terminologies, definitions, and foundational accounting principles, encouraging critical thinking and comprehension of key concepts.

Fundamental Concepts of Double Entry Bookkeeping

Definition: A method where every financial transaction affects two accounts, maintaining the accounting equation (Assets = Liabilities + Equity).
Recording Methods: Various systems of accounting, such as single-entry and double-entry bookkeeping, emphasize comprehensive financial tracking.
Advantages: Ensures accuracy, prevents errors, and provides a complete overview of financial standing through balanced entries.

Conclusion

Understanding accounting fundamentals, principles, and standards is essential for managing finances effectively within any business or personal context.

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Description

This quiz is based on the textbook for Bookkeeping and Accountancy for Standard Eleven, approved by the Coordination Committee. The content aligns with the Maharashtra State educational curriculum. Test your knowledge of bookkeeping principles and practices!