ACCOUNTING FOR CLASS XI STUDENTS - HOTs

Higher Order Thinking Skill

BASIC ACCOUNTING TERMS 1.      G Ltd imported from Germany one machinery for sale in India and another machinery for production purpose. Will you treat them good or fixed assets?    Ans; First machinery will be treated as goods, and second machinery will be treated as fixed asset. 2.      Mr. Jaspal Singh dealing in electronic goods sold 20 TV sets costing Rs. 30,000 each at Rs. 40,000 each. Out of this Rs.5,00,000 were received in cash and the balance is not yet received. State the amount of revenue.     Ans. Rs. 8,00,000 ( Rs. 40,000 * 20 TV sets ) 3.      Mr. Danesh who owed us Rs. 50,000 became insolvent and paid only 40% of this amount. What is term used for the amount notb received?     Ans; Bad debts

2.Theory base of Accounting

Q  1  Which basis of accounting is recognised under the company act 1956? A     Accrual   basis of  accounting. Q 2    In which basis of accounting outstanding expenses are not recorded? A      Cash basis of accounting. Q 3     Under which accounting principle quality of manpower is not recommend in the books of accounts? A     Money   measurement   concept. Q 4    According to which principle the same accounting method   should be used each year? A     Consistency   principle. Q5   According to which principle even the proprietor of the business is treated as creditor of the business? A    Business entity  principle . Q  5    What is Business Entity Principle? A  Business is treated as an entity separate and distinct from its owners. Q  6   Closing stock is valued at lower of cost or realisable value . which principle of accounting is applied here? A     Principle of Conservatism. Q 7   Which principle states that financial statements should disclose all significant information? A    Principle of full disclosure. Q 8   Due to which principle contingent liability are shown in the balance sheet? A    Principle of Full Disclosure. Q  9   Providing depreciation on fixed assets is in accordance with which principle? A    Going  concern. Q 10   Due to which principle qualitative transactions are not recorded in the books ? A     Money   Measurement Principle.

ACCOUNTING STANDARDS AND INTERNATIONAL FINANCIAL REPORTING STANDARDS 1.      Define accounting standards. Ans. These are the written statements specifying uniform rules and practices for preparing the financial statements. 2.what is the nature of accounting standard? Ans. Accounting standard lays down the normsof accounting policies. 3.whatis the utility of accounting standards? Ans. Accounting standards improves the reliability and credibility of financial statements. 4.which section of Indian Companies Act is applicable to acconting standards? Ans. U/S 211 5.how many Accounting standards are mandatory for companies? Ans. 32 6.which accounting standard is applicable for cash flow statement? Ans. Accounting standard 3 7. Expand  IFRS. Ans. International Financial reporting System. 8.what are the main objectives of IFRS? Ans.same rules or norms for accounting internationally. 9. define GAAP. Ans. Generally accepted Accounting Principles 10. differentiate between IFRS and GAAP. Ans. IFRS is based on principles and GAAP is based on rules. 1.      How many international  accounting standards are  issued by IASB? Ans. 41 out of which 12 have been withdrawn or replaced.

3.Recording of transaction

1.       If total assets of a business are Rs 10,00,000 and capital  is 4,00,000, calculate creditors. Ans. Creditors Rs 6,00,000 2.       Why are rules off debit and credit same for both liability and capital. Ans. Because according to business entity concept capital is treated as liability of the business. 3.       Name the side in which  increase in capital is recorded. Ans. Credit side 4.       What is a transfer voucher? Ans. These vouchers are prepared for non- cash vouchers. 5.       What is journalizing? Ans. The process of recording transactions in the Journal is called Journalising. 6.       Which account should be debited if the wages are paid for installation of a machine. Ans. Machine a/c 7.       Write one different between cash account and cash book. Ans. Cash account is a account in ledger where as cash book is a separate book. 8.       Give two advantages of petty cash book. Ans.   Time saving and easiness in posting. 9.       Give two advantages of sub division of Journal. Ans. Division of work according to ability and easiness in posting. 10.    Mention two transactions which are recorded in Journal Proper. Ans. Opening entries

4.Trial Balance and Bank reconciliation statement

1.What is the reason for agreement of trial balance.   Under the double entry system,each transaction has two sides, debit and credit 2. If the credit side of trial balance falls short by Rs.1000, what will be its treatment? It will be recorded on the credit side of suspense account 3. What will be the effect on trial balance if Rs. 5,000 received as rent and correctlyentered in the cash book are not posted to rent account? Debit of trial balance will exceed by Rs.5,000. 4. Trial balance is an acccount. Do you agree?  No it is a statement prepared with the balances of ledger accounts. 5. When closing stock appears in the Trial balance?  If it has been deducted from purchases. 6. Is trial balance a part of double entry system?  No. 7. Is trial balance prepared for a particular period?  No. It is prepared on a particular date. 8. Are there any accounts which are not considered while preparing trial balance bybalance method? Yes. Acconts which show no balance are not considered 9.  Installation charge of machinery will be debited in which account? Machinery account 10.When bill is dishonoured, what will be the treatment if cash book favourable balance is given? Deducted from the cash book balance

5.Depreciation, Provisions and Reserve

Q. 1 is depreciation cash expenditure? An NO, it is non cash expenditure because it does not involve any cash Q2. Under which matter the value of an assets can never be zero. An. Diminishing balance method. Q3. Name the method of depreciation which assumes that the assets are depreciated more n the earlier and less in the latter years of its life. An. Diminishing balance method Q4. Why depreciation not charge land. A because it use full life is not limited to few years. Q5. Original cost of machinery Rs 500000 scrape value Rs 20000, expected use full is 10 years .what will be the amount of depreciation for 5th according to fixed installment method. An Rs48000. Q6.on 1staprl 2014 Yltd acquired a plant for Rs 600000. Installation expenses worth Rs 40000.scrape value after 5yrs 100000. 0n 1stoct 2014 it is incurred repaire expenses of rs 20000. What will be the annual depreciation under straight line method. An 108000 Q7. Original cost of truck rs 520000, salvage value rs 20000. What will be the amount of depreciation for 2nd year according to reducing balance method @10% pa. An 46800. Q8. A machine was purchase on 1staprl 2008. The balance of this machine on 31st march 2011 is 583200 depreciation is charge @10% pa on written down value method. What was the cost price of the machine on 1st2008. An 800000. Q9. Ram ltd purchase a plant for Rs  780000 and spent Rs 60000. 0n its installation its scrape valve rs 42000 and use full 10years. What will be the rate depreciation as per straight line method. An. 9.5% Q10. X ltd purchased bus on 1staprl 2013 for rs 600000. They charging depreciation on written down method on 31st march 2013 they sold the bus for rs 165000 and incurred a loss  ofrs 75000. What was the rate of depreciation pa. An 60%

6.Accounting for Bill of Exchange

Q  1   What is the date of maturity of a bill of exchange? A     The date on which the bill becomes due for payment is called date of maturity. Q   2    How many days of grace are added to the period of a bill of exchange? A     It is compulsory to add three days to the period of the bill. These three days are called days of grace. Q  3   What is meant by   noting of bills of exchange? A   Noting is the recording of the fact of dishonour by a notary public. Q  4    If the acceptor of a bill refuses to pay the bill on its maturity date, it is called retirement.  Comment. A  It is not retirement of the bill but it is dishonour of the bill. Q 16     What will be date of maturity in case, date of maturity was 5th may 2007 but on that day it was a public holiday? A     4th may 2007,   one day earlier .in case it was a public holiday. Q  17   What do you mean by payable at sight? A   It means  bills are payable on presentation to the drawee. Q 18   I owe you  Rs 40,000 ,  is it a promissory note? A    No,  because it is merely an acknowledgement of debt and there is no promise to pay. Q 19   A  drew a bill on B . B  accepts the same, can B endorse the bill to C  ? A   No,  because B is drawee .  only drawer can  that is A, can endorse the bill. Q  20   Ultimately,  noting charges are borne by whom? A     Drawee.

7.Rectification of Errors

Q1). Sale of old furniture was credited to sales Account, is it an error? Ans: yes Q2). Why is Compensating Error not disclosed by the Trial Balance? Ans: They do not create any difference in the amount columns. Q3). Wages paid to a worker for making additions to machinery amounting to Rs. 5,000 were debited to the Wages Account. Identify the type of error. Ans: Error of principle Q4). If a Trial Balance totals do not agree, the difference must be entered in (i) the Profit and Loss Account, (ii) a Suspense Account, (iii) a Nominal Account and  (iv) the Capital Account. Give reasons.\ Ans: Suspense account Q5). Goods were returned to X for Rs. 351 and his account was credited for Rs. 531. What will be the rectifying entry? Ans: X      Dr.  180 To suspense account Q6). Errors are unintentional Mistakes. True or False . Ans: True Q7). Where Suspense account will be transferred from Trial Balance? Ans: yes Q8). Wages paid RS. 3980 were recorded in the Cash Book as Rs. 3890.What will be the rectifying entry? Ans: Cash       dr. 90 To suspense Q9). Why do accountants value Closing Stock at Lower of cost or net realizable value? Ans: Conservatism principle Q10). Why do you need to provide Outstanding Expenses? Ans: Accrual concept

8.Financial Statements of sole proprietorship

Q11). Why are Prepaid Expenses segregated from current year’s expenses and taken to Balance Sheet as a current asset? Receivable amount. Q12). Why is Accrued Income credited to the Profit and Loss Account and shown as current assets in the Balance sheet? Amount to be received Q13). Unearned Income is credited to Profit and Loss Account. Do you agree with the statement? no Q14). If Depreciation is reduces profit, reduces value of assets and also reduces capital of the proprietor, then why do enterprises provide Depreciation? To calculate the actual financial position of the business. Q15). The debts written o0ff as bad, if recovered subsequently are credited to Debtor Account, Why? Debtor is the giver ( personal account) Q16). Under which accounting concept is provision for doubtful debts made? Prudence Q17). The provision for discount on debtors is calculated before deducting the provision for doubtful debts from debtors.  Comment. To calculate the actual amount of money to be received . Q18). By providing for discount on debtors which accounting concept is followed? Prudence Q19). At what value are goods taken for personal use recorded in the books of Accounts and why? As per business entity concept. Q20). At what value are the goods distributed as free sample accounted and why? For advertisement and to familiarise of their business.

9.Financial statements of not-for-profit organisations

1. State the basis of accounting on which receipts and payments acccount is prepared? Cash basis 2. Is it possible for one hospital to have an income and expenditure account, whileanother one has a profit and loss account? Yes,The objective of first hospital is not  to earn profit and the other once objective is to earn profit. 3. Income and expenditure account is prepared on cash basis. Do you agree?  No on accrual basis 4. State when donatins are capitalised, and yet not shownunder the head donations in the balance sheet of NPO. When donations received for any specific purpose 5.      While preparing the final accounts of NPO, how will you deal with the entrance fee received Rs.10000 if 40% of entrance fees is to be capitalised. Rs.6000 will be recorded on the credit side and Rs.4000 wil be added with the capital fund. 6. In NPO no capital account is maintained, what do they mantain nsted of capital account?     Capital fund 7. Why endowment fund is a capital receipt?  Permanent means of support for any member 8. Will depreciation be shown in receipts and payment account? No, due to non cash expenditure 9. Give the meaning of Honorarium with the help of an example. Payment made to a person for voluntary service. Example payment made to a lecturer for delivering a special lecture. 10. If an insurance company offered a claim which is not accepted, will it be shown in receipts and payments account? No, amount is not yet received.

10.Accounts form incomplete records

1.      Which accounting principle is ignored in single entry system? Ans. Dual aspect principle. 2.      Why is statement of affairs is not called Balance sheet? Ans.the values of assets and liabilities are only estimates and not the actual values. 3.      Which methods are used to ascertain profit or loss? Ans. 1.Statement of Affairs 2. Conversion method 4.      Which principle is followed in single entry system as well as double entry system also? Ans. Money measurement concept. 5.      Can a co. maintain its accounts under single entry system? Give reason also. Ans. No. because it is not based on double entry system and there are certain legal restrictions also. 6.      Why do traders prepare accounts under single entry system? Ans. 1.Less expensive 2. Simple method 7.      Differentiate between double entry system and incomplete records. Ans. Double entry system includes both the aspects of every transaction whereas both aspect transactions are not recorded with all the transactions. For some transaction both aspect are recorded and for others no aspect is recorded at all. 8.      Ram has sundry assets worth Rs. 50,000 and he has to pay about 30,000 to outside persons. Give the balance of capital had he? Ans  RS. 20,000 i.e. capital = sundry assets – outside liabilities 9.      Calculate closing capital: opening capital RS.70,000;Profit for the year Rs.20,000; Drawing Rs.7,000. During the year proprietor sold ornaments of his wife for Rs. 20,000 and invested it in the business. Ans. Closing Capital 10.   Calculate profit or loss for the year.Atul does not keep proper records of his business. The following is the information: Opening capital = 2,00,000 Closing capital = 2,50,000 Drawings made during the year 60,000 Additional Capital= 75,000 Ans : profit = capital at the end+drawings-additional capital-opening capital         Profit= 2,50,000+60,000-75,000+60,000                   = 35,000