In This Post we are providing Chapter – 8 Binomial Theorem NCERT Solutions for Class 11 Maths which will be beneficial for students. These solutions are updated according to 2021-22 syllabus. These Class 11 can be really helpful in the preparation of Binomial Theorem Board exams and will provide you with in depth detail of the chapter.
We have solved every question stepwise so you don’t have to face difficulty in understanding the solutions. It will also give you concepts that are important for overall development of students. Class 11 Maths Binomial TheoremNCERT Written Solutions will be useful in higher classes as well because variety of questions related to these concepts can be asked so you must study and understand them properly.
Expand each of the expressions in Exercises 1 to 5. Ex 8.1 Class 11 Maths Question 1. Solution.
Ex 8.1 Class 11 Maths Question 2. Solution.
Ex 8.1 Class 11 Maths Question 3. Solution.
Ex 8.1 Class 11 Maths Question 4. Solution.
Ex 8.1 Class 11 Maths Question 5. Solution.
Using binomial theorem, evaluate each of the following Ex 8.1 Class 11 Maths Question 6. Solution.
Ex 8.1 Class 11 Maths Question 7. Solution.
Ex 8.1 Class 11 Maths Question 8. Solution.
Ex 8.1 Class 11 Maths Question 9. Solution.
Ex 8.1 Class 11 Maths Question 10. Using Binomial Theorem, indicate which number is larger or 1000. Solution. Splitting 1.1 and using binomial theorem to write the first few terms we have
Ex 8.1 Class 11 Maths Question 11. Find . Hence, evaluate . Solution. By binomial theorem, we have
Ex 8.1 Class 11 Maths Question 12. Find . Hence or otherwise evaluate . Solution. By using binomial theorem, we have
Ex 8.1 Class 11 Maths Question 13. Show that is divisible by 64, whenever n is a positive integer. Solution. We have to prove that
Ex 8.1 Class 11 Maths Question 14. Prove that 8Cr = 4n Solution. We have,
We hope the NCERT Solutions for Class 11 Maths Chapter 8 Binomial Theorem Ex 8.1 help you. If you have any query regarding NCERT Solutions for Class 11 Maths Chapter 8 Binomial Theorem Ex 8.1, drop a comment below and we will get back to you at the earliest.
Ex 8.2 Class 11 Maths Question 1. Find the coefficient of x5 in (x + 3)8 Solution. Suppose x5 occurs in the (r + 1)th term of the expansion (x + 3)8
Ex 8.2 Class 11 Maths Question 2. a5 b7in (a-2b)12 Solution. Suppose a5 b7 occurs in the (r + 1)th term of the expansion (a – 2b)12.
Write the general term in the expansion of Ex 8.2 Class 11 Maths Question 3. (x2 – y)6 Solution.
Ex 8.2 Class 11 Maths Question 4. (x2 – yx)12, x ≠ 0 Solution. We have given, (x2 – yx)12 = (x2 + (- yx))12, x ≠ 0
Ex 8.2 Class 11 Maths Question 5. Find the 4th term in the expansion of (x – 2y)12. Solution.
Ex 8.2 Class 11 Maths Question 6. Find the 13th term in the expansion of , x ≠ 0 Solution.
Find the middle terms in the expansions of Ex 8.2 Class 11 Maths Question 7. Solution. As the exponent 7 is odd, so there will be two middle terms in the expansion
Ex 8.2 Class 11 Maths Question 8. Solution.
Ex 8.2 Class 11 Maths Question 9. In the expansion of (1 + a)m+n, prove that coefficients of am and an are equal. Solution.
Ex 8.2 Class 11 Maths Question 10. The coefficients of the (r – 1)th, rth and (r + 1)th terms in the expansion of (x + 1 )n are in the ratio 1: 3: 5. Find n and r. Solution.
Ex 8.2 Class 11 Maths Question 11. Prove that the coefficient of xn in the expansion of (1 + x)2n is twice the coefficient of xn in the expansion of (1 + x)2n-1. Solution.
Ex 8.2 Class 11 Maths Question 12. Find a positive value of m for which the coefficient of x2 in the expansion (1 + x)m is 6. Solution.
We hope the NCERT Solutions for Class 11 Maths Chapter 8 Binomial Theorem Ex 8.2 help you. If you have any query regarding NCERT Solutions for Class 11 Maths Chapter 8 Binomial Theorem Ex 8.2, drop a comment below and we will get back to you at the earliest.
In This Post we are providing Chapter -7 Permutations and Combinations NCERT Solutions for Class 11 Maths which will be beneficial for students. These solutions are updated according to 2021-22 syllabus. These Class 11 Linear Permutations and Combinations can be really helpful in the preparation of Board exams and will provide you with in depth detail of the chapter.
We have solved every question stepwise so you don’t have to face difficulty in understanding the solutions. It will also give you concepts that are important for overall development of students. Class 11 Maths Permutations and Combinations NCERT Written Solutions will be useful in higher classes as well because variety of questions related to these concepts can be asked so you must study and understand them properly.
Class 11th Chapter -7 Permutations and Combinations| NCERT MATHS SOLUTION |
Ex 7.1 Class 11 Maths Question 1. How many 3-digit numbers can be formed from the digits 1, 2, 3, 4 and 5 assuming that (i) repetition of the digits is allowed? (ii) repetition of the digits is not allowed? Solution. There will be as many ways as there are ways of filling 3 vacant places in succession by the five given digits. (i) When repetition is allowed then each place can be filled in five different ways. Therefore, by the multiplication principle the required number of 3- digit numbers is 5 x 5 x 5 i.e., 125. (ii) When repetition is not allowed then first place can be filled in 5 different ways, second place can be filled in 4 different ways & third place can be filled in 3 different ways. Therefore by the multiplication principle the required number of three digit numbers is 5 x 4 x 3 i.e, 60.
Ex 7.1 Class 11 Maths Question 2. How many 3-digit even numbers can be formed from the digits 1, 2, 3, 4, 5, 6 if the digits can be repeated? Solution. There will be as many ways as there are ways of filling 3 vacant places in succession by the 6 given digits. In this case we start filling in unit’s place, because the options for this place are 2, 4 & 6 only and this can be done in 3 ways. Ten’s and hundred’s place can be filled in 6 different ways. Therefore, by the multiplication principle, the required number of 3-digit even numbers is 6 x 6 x 3 i.e., 108.
Ex 7.1 Class 11 Maths Question 3. How many 4-letter code can be formed using the first 10 letters of the English alphabet, if no letter can be repeated? Solution. There will be as many ways as there are ways of filling 4 vacant places in succession by the first 10 letters of the English alphabet, when repetition is not allowed then first place can be filled in 10 different ways, second place can be filled in 9 different ways, third place can be filled in 8 different ways and fourth place can be filled in 7 different ways. Therefore, by the multiplication principle the required number of 4 letter codes are 10 x 9 x 8 x 7 i.e., 5040.
Ex 7.1 Class 11 Maths Question 4. How many 5-digit telephone numbers can be constructed using the digits 0 to 9 if each number starts with 67 and no digit appears more than once? Solution. The 5 digit telephone numbers of the form can be constructed using the digits 0 to 9. When repetition is not allowed then at first & second place 6 & 7 are fixed respectively. Therefore, third, fourth and fifth place can be filled in 8, 7 and 6 ways respectively. So, by the multiplication principle the required numbers of 5-digit telephone numbers is 8 x 7 x 6 i.e., 336.
Ex 7.1 Class 11 Maths Question 5. A coin is tossed 3 times and the outcomes are recorded. How many possible outcomes are there? Solution. When a coin is tossed there are two possible outcomes i.e. head or tail. When the coin is tossed three times then the total possible outcomes are 2 x 2 x 2 i.e., 8.
Ex 7.1 Class 11 Maths Question 6. Given 5 flags of different colours, how many different signals can be generated if each signal requires the use of 2 flags, one below the other? Solution. There will be as many signals as there are ways of filling in 2 vacant places in succession by the 5 flags of different colours. The upper vacant place can be filled in 5 different ways by anyone of the 5 flags ; following which the lower vacant place can be filled in 4 different ways by anyone of the remaining 4 different flags. Hence by the multiplication principle the required number of signals is 5 x 4 = 20.
We hope the NCERT Solutions for Class 11 Maths Chapter 7 Permutations and Combinations Ex 7.1 help you. If you have any query regarding NCERT Solutions for Class 11 Maths Chapter 7 Permutations and Combinations Ex 7.1, drop a comment below and we will get back to you at the earliest.
Ex 7.2 Class 11 Maths Question 1. Evaluate (i) 8! (ii) 4!-3! Solution. (i) 8! = 1 x 2 x 3 x 4 x 5 x 6 x 7 x 8 = 40320 (ii) 4! – 3! = (1 x 2 x 3 x 4) – (1 x 2 x 3) = 24 – 6 = 18
Ex 7.2 Class 11 Maths Question 2. Is 3! + 4! = 7! ? Solution. 3! + 4! = (1 x 2 x 3) + (1 x 2 x 3 x 4) = 6 + 24 = 30 … (i) 7! = 1 x 2 x 3 x 4 x 5 x 6 x 7 = 5040 ………(ii) From (i) & (ii), we get 3! + 4! ≠ 7!.
Ex 7.2 Class 11 Maths Question 3. Solution.
Ex 7.2 Class 11 Maths Question 4. , findx. Solution. We have,
Ex 7.2 Class 11 Maths Question 5. Evaluate, when (i) n = 6, r = 2 (ii) n = 9, r = 5 Solution. (i)
(ii)
We hope the NCERT Solutions for Class 11 Maths Chapter 7 Permutations and Combinations Ex 7.2 help you. If you have any query regarding NCERT Solutions for Class 11 Maths Chapter 7 Permutations and Combinations Ex 7.2, drop a comment below and we will get back to you at the earliest.
Ex 7.3 Class 11 Maths Question 1. How many 3-digit numbers can be formed by using the digits 1 to 9 if no digit is repeated? Solution. Total digits are 9. We have to form 3 digit numbers without repetition. ∴ The required 3 digit numbers = 9P3
Ex 7.3 Class 11 Maths Question 2. How many 4-digit numbers are there with no digit repeated? Solution. The 4-digit numbers are formed from digits 0 to 9. In four digit numbers 0 is not taken at thousand’s place, so thousand’s place can be filled in 9 different ways. After filling thousand’s place, 9 digits are left. The remaining three places can be filled in 9P3 ways. So the required 4-digit numbers = 9 x 9P3 = 9 x 504 = 4536.
Ex 7.3 Class 11 Maths Question 3. How many 3-digit even numbers can be made using the digits 1, 2, 3, 4, 6, 7, if no digit is repeated? Solution. For 3-digit even numbers unit place can be filled by 2, 4, 6 i.e in 3 ways. Then the remaining two places can be filled in 5P2 ways. ∴ The required 3-digit even numbers = 3 x 5P2 = 60
Ex 7.3 Class 11 Maths Question 4. Find the number of 4-digit numbers that can be formed using the digits 1, 2, 3, 4, 5 if no digit is repeated. How many of these will be even? Solution. The 4-digit numbers can be formed from digits 1 to 5 in 5P4ways. ∴ The required 4 digit numbers = 5P4 = 120 For 4-digit even numbers unit place can be filled by 2,4, i.e., in 2 ways. Then the remaining three places can be filled in 4P3 ways. ∴ The required 4-digit even numbers = 2 x 4P3 = 2 x 24 = 48
Ex 7.3 Class 11 Maths Question 5. From a committee of 8 persons, in how many ways can we choose a chairman and a vice chairman assuming one person cannot hold more than one position? Solution. From a committee of 8 persons, we can choose a chairman and a vice chairman
Ex 7.3 Class 11 Maths Question 6. Find n if n-1P3: nP4 = 1 : 9. Solution.
Ex 7.3 Class 11 Maths Question 7. Find r if (i) 5Pr = 26Pr-1 (ii) 5Pr = 6Pr-1 Solution.
Ex 7.3 Class 11 Maths Question 8. How many words, with or without meaning, can be formed using all the letters of the word EQUATION, using each letter exactly once? Solution. No. of letters in the word EQUATION = 8 ∴ No. of words that can be formed = 8P8 = 8! =40320
Ex 7.3 Class 11 Maths Question 9. How many words, with or without meaning can be made from the letters of the word MONDAY, assuming that no letter is repeated, if (i) 4 letters are used at a time, (ii) all letters are used at a time, (iii) all letters are used but first letter is a vowel? Solution. No. of letters in the word MONDAY = 6 (i) When 4 letters are used at a time. Then, the required number of words = 6P4
(ii) When all letters are used at a time. Then the required number of words = 6P6 = 6! = 720
(iii) All letters are used but first letter is a vowel. So the first letter can be either A or O. So there are 2 ways to fill the first letter & remaining places can be filled in 5P5 ways. ∴ The required number of words = 2 x 5P5 = 2 x 5! =240.
Ex 7.3 Class 11 Maths Question 10. In how many of the distinct permutations of the letters in MISSISSIPPI do the four I’s not come together? Solution. There are 11 letters, of which I appears 4 times, S appears 4 times, P appears 2 times & M appears 1 time. ∴ The required number of arrangements = 10 x 10 x 9 x 7 x 5 = 34650 … (i) When four I’s come together, we treat them as a single object. This single object with 7 remaining objects will account for 8 objects. These 8 objects in which there are 4S’s & 2P’s can be rearranged in ways i.e. in 840 ways … (ii) Number of arrangements when four I’s do not come together = 34650 – 840 = 33810.
Ex 7.3 Class 11 Maths Question 11. In how many ways can the letters of the word PERMUTATIONS be arranged if the (i) words start with P and end with S, (ii) vowels are all together, (iii) there are always 4 letters between P and S? Solution. There are 12 letters of which T appears 2 times (i) When words start with P and end with S, then there are 10 letters to be arranged of which T appears 2 times. ∴ The required words =
(ii) When vowels are taken together i.e E U A I O we treat them as a single object. This single object with remaining 7 objects will account for 8 objects, in which there w are 2Ts, which can be rearranged in ways. Corresponding to each of these arrangements the 5 vowels E, U, A, I, O can be rearranged in 5! = 120 ways. Therefore, by multiplication principle, the required number of arrangements = 20160 x 120 = 2419200.
(iii) When there are always 4 letters between P & S ∴ P & S can be at 1st & 6th place 2nd & 7th place 3rd& 8th place 4th & 9th place 5th & 10th place 6th & 11th place 7th & 12th place. So, P & S will be placed in 7 ways & can be arranged in 7 x 2! = 14 The remaining 10 letters with 2T’s, can be arranged in ways. ∴ The required number of arrangements = 14 x 1814400= 25401600.
We hope the NCERT Solutions for Class 11 Maths Chapter 7 Permutations and Combinations Ex 7.3 help you. If you have any query regarding NCERT Solutions for Class 11 Maths Chapter 7 Permutations and Combinations Ex 7.3, drop a comment below and we will get back to you at the earliest.
Ex 7.4 Class 11 Maths Question 1. lf nC8 = nC2, find nC2. Solution. We have, nC8 = nC2
Ex 7.4 Class 11 Maths Question 2. Determine n if (i) 2nC3: nC3 =12 : 1 (ii) 2nC3: nC3= 11 : 1 Solution.
Ex 7.4 Class 11 Maths Question 3. How many chords can be drawn through 21 points on a circle? Solution. A chord is formed by joining two points on a circle. ∴ Required number of chords = 2nC2
Ex 7.4 Class 11 Maths Question 4. In how many ways can a team of 3 boys and 3 girls be selected from 5 boys and 4 girls? Solution. 3 boys can be selected from 5 boys in 5C3 ways & 3 girls can be selected from 4 girls in 4C3 ways. ∴ Required number of ways of team selection = 5C3 x 4C3 =
Ex 7.4 Class 11 Maths Question 5. Find the number of ways of selecting 9 balls from 6 red balls, 5 white balls and 5 blue balls if each selection consists of 3 balls of each colour. Solution. No. of ways of selecting 3 red balls =6C3 No. of ways of selecting 3 white balls = 5C3 No. of ways of selecting 3 blue balls = 5C3 ∴ Required no. of ways of selecting 9 balls
Ex 7.4 Class 11 Maths Question 6. Determine the number of 5 cards combinations out of a deck of 52 cards if there is exactly one ace in each combination. Solution. Total no. of cards = 52 No. of ace cards = 4 No. of non-ace cards = 48 ∴ One ace card out of 4 can be selected in 4C1 ways. Remaining 4 cards out of 48 cards can be selected in 48C4ways. ∴ Required no. of ways of selecting 5 cards
Ex 7.4 Class 11 Maths Question 7. In Kbw many ways can one select a cricket team of eleven from 17 players in which only 5 players can bowl if each cricket team of 11 must include exactly 4 bowlers? Solution. Total players = 17, No. of bowlers = 5, No. of non-bowlers = 12 No. of ways of selecting 4 bowlers = 5C4 No. of ways of selecting 7 non-bowlers = 12C7 ∴ Required no. of ways of selecting a cricket team
Ex 7.4 Class 11 Maths Question 8. A bag contains 5 black and 6 red balls. Determine the number of ways in which 2 black and 3 red balls can be selected. Solution. No. of ways of selecting 2 black balls = 5C2 No. of ways of selecting 3 red balls = 6C3 ∴ Required no. of ways of selecting 2 black & 3 red balls = 5C2 x 6C3
Ex 7.4 Class 11 Maths Question 9. In how many ways can a student choose a programme of 5 courses if 9 courses are available and 2 specific courses are compulsory for every student? Solution. Total no. of courses = 9 No. of compulsory courses = 2 So, the student will choose 3 courses out of 7 courses [non compulsory courses]. ∴ Required no. of ways a student can choose a programme = 7C3 =
We hope the NCERT Solutions for Class 11 Maths Chapter 7 Permutations and Combinations Ex 7.4 help you. If you have any query regarding NCERT Solutions for Class 11 Maths Chapter 7 Permutations and Combinations Ex 7.4, drop a comment below and we will get back to you at the earliest.
Question 1. If a spherical balloon grows to twice its radius when inflated, then the ratio of the volume of the inflated balloon to the original balloon is (a) 8 : 1 (b) 4 : 1 (c) 5 : 1 (d) 6 : 1
Answer: (a) 8 : 1
Question 2. The length of the longest rod that can fit in a cubical vessel of side 10 cm, is (a) 10 cm (b) 10√2 cm (c) 10√3 cm (d) 20 cm
Answer: (c) 10√3 cm
Question 3. A right circular cone has an altitude of 40 cm and a diameter of 60 cm. The slant height of the cone is (a) 25 cm (b) 100 cm (c) 75 cm (d) 50 cm
Answer: (d) 50 cm
Question 4. If the diameter of the base of a cylindrical pillar is 4 m and its height is 21 m, then the cost of construction of the pillar at Rs. 1.50 per cubic metre is: (a) Rs. 396 (b) Rs. 400 (c) Rs. 410 (d) Rs. 420
Answer: (a) Rs. 396
Question 5. The height of a right circular cone of radius 5 cm and slant height 13 cm is (a) 8 cm (b) 14 cm (c) 6 cm (d) 12 cm
Answer: (d) 12 cm
Question 6. The curved surface area of a right circular cone whose slant height is 14 cm and base radius is 21 cm is (a) 308 cm2 (b) 924 cm2 (c) 232 cm2 (d) 446 cm2
Answer: (b) 924 cm2
Question 7. The perimeter of one face of a cube is 40 cm. The volume of the cube (in cm3) is : (a) 1600 (b) 1000 (c) 800 (d) 160
Answer: (b) 1000
Question 8. The volume of the cylinder whose height is 14 cm and diameter of base 4 cm is: (a) 176 cm3 (b) 196 cm3 (c) 276 cm3 (d) 352 cm3
Answer: (a) 176 cm3
Question 9. A beam 9 m long, 40 cm wide and 20 cm deep is made up of iron which weighs 50 kg per cubic metre. The weight of the beam is (a) 27 kg (b) 36 kg (c) 48 kg (d) 56 kg
Answer: (b) 36 kg
Question 10. The area surrounded by a conical tent is 4526 m2. If the cost of canvas is Rs. 17 per square meter, then find the total cost ofcanvas. (a) ₹52100 (b) ₹76942 (c) ₹65000 (d) ₹85246
Answer: (b) ₹76942
Question 11. The surface area of cuboid-shaped box having length=80 cm, breadth=40cm and height=20cm is: (a) 11200 sq.cm (b) 13000 sq.cm (c) 13400 sq.cm (d) 12000 sq.cm
Answer: (a) 11200 sq.cm
Question 12. The volume of a sphere is 38808 cu.cm. The curved surface area of the sphere (in cm2) is : (a) 5544 (b) 1386 (c) 8316 (d) 4158
Answer: (a) 5544
Question 13. The height of a right circular cone of radius 3.5 cm and volume 77 cm3 is (a) 9 cm (b) 11 cm (c) 4 cm (d) 6 cm
Answer: (d) 6 cm
Question 14. The ratio of the radii of two spheres whose volumes are in the ratio 64 : 27 is (a) it is 8 : 3. (b) it is 16 : 9. (c) it is 10 : 7. (d) it is 4 : 3.
Answer: (d) it is 4 : 3.
Question 15. If the diameter of a cylinder is 28 cm and its height is 20 cm, then total surface area (in cm2) is : (a) 2993 (b) 2992 (c) 2292 (d) 2229
Question 1. If a, b and c are the lengths of the three sides of a triangle, then which of the following is true? (a) a + b < c (b) a – b < c (c) a + b = c
Answer: (b) a – b < c
Question 2. With the help of a ruler and compasses, which of the following is not possible to construct? (a) 70° (b) 60° (c) 135°
Answer: (a) 70°
Question 3. Which of the following sets of angles can be the angles of a triangle? (a) 30°, 60°, 80° (b) 40°, 60°, 70° (c) 50°, 30°, 100°
Answer: (c) 50°, 30°, 100°
Question 4. The construction of the triangle ABC is possible if it is given that BC = 4 cm, ∠C = 60° and the difference of AB and AC is (a) 3.5 cm (b) 4.5 cm (c) 3 cm (d) 2.5 cm
Answer: (b) 4.5 cm
Question 5. Which of the following can be the length of BC required to construct the triangle ABC such that AC = 7.4 cm and AB = 5 cm? (a) 3.5 cm (b) 2.1 cm (c) 4.7 cm
Answer: (b) 2.1 cm
Question 6. If we want to construct a triangle, given its perimeter, then we need to know: (a) Sum of two sides of triangle (b) Difference between two sides of triangle (c) One base angles (d) Two base angles
Answer: (c) One base angles
Question 7. To construct a bisector of a given angle, we need: (a) A ruler (b) A compass (c) A protractor (d) Both ruler and compass
Answer: (d) Both ruler and compass
Question 8. Which of the following set of lengths can be the sides of a triangle? (a) 2 cm, 4 cm, 1.9 cm (b) 1.6 cm, 3.7 cm, 5.3 cm (c) 5.5 cm, 6.5 cm, 8.9 cm (d) None of the above
Answer: (c) 5.5 cm, 6.5 cm, 8.9 cm
Question 9. Which of these angles cannot be constructed using ruler and compasses? (a) 120 (b) 60 (c) 140 (d) 135
Answer: (c) 140
Question 10. Which of the following angles can be constructed using ruler and compasses? (a) 35 (b) 45 (c) 95 (d) 55
Answer: (b) 45
Question 11.
On a ray AB with initial point A, Taking A as centre and some radius, draw an arc of a circle, which intersects AB, say at a point D. Taking D as centre and with the same radius as before, draw an arc intersecting the previously drawn arc, say at a point E. Draw the ray AC passing through E. Then, the measure of ∠CAB is
(a) 30°
(b) 60°
(c) 45°
(d) 15°
Answer: (b) 60°
Question 12.
The bisectorof an angle lies in its
(a) Interior
(b) On the arms of the angle
(c) Any where in the plane
(d) Exterior
Answer :(a) Interior
Question 13.
If two circles touches internally then distance between their centres is equal to
(a) sum of radii
(b) difference of radii
(c) not possible to determine
(d) none
Answer: (b) difference of radii
Question 14.
Two radii of same circle are always :
(a) may inchired at any angle
(b) perpendicular
(c) parallel
(d) parallel and may inchired at any angle
Answer:(d) parallel and may inchired at any angle
Question 15. Which of these angles cannot be constructed using ruler and compasses?
Question 1 : What is the purpose of posting J.F numbers that are entered in the journal at the time entries are posted to the accounts?
ANSWER:
J.F. number is the number that is entered in the ledger at the time of posting entries into their respective accounts. It helps in determining whether all transactions are properly posted in their accounts. It is recorded at the time of posting and not at the time of recording the transactions.
The purpose of entering the J.F. number in the ledger is because of the below-given benefits.
J.F. number helps in locating the entries of accounts in the journal book. In other words, J.F number helps to locate the position of the related journal entry and subsidiary book in the journal book.
J.F. number in accounts ensures that recording in the books of original entry has been posted or not.
Question 2 : Describe how debits and credits are used to analyse transactions.
ANSWER:
Debit originated from the Italian word debito, which in turn is derived from the Latin word debeo, which means ‘owed to proprietor’ and credit comes from the Italian word credito, which is derived from the Latin word credo, which means belief, i.e., ‘owed by proprietor’.
According to the dual aspect concept, all the business transactions that are recorded in the books of accounts, have two aspects- debit and credit. The dual aspect can be better understood with the help of an example; bought goods worth Rs 500 on cash. This transaction affects two accounts with the same amount simultaneously. As goods are brought in exchange of cash, so the cash balances in the business reduce by Rs 500, i.e. why the cash account is credited. Simultaneously, the amount of goods increases by Rs 500, so the purchases account will be debited. Debit and credit depend on the nature of accounts involved; such as assets, expenses, income, liabilities, and capital. There are five types of Accounts.
Assets– These include all properties or legal rights owned by a firm for its operations, such as cash in hand, plant and machinery, bank, land, building, etc. All assets have debit balance. If assets increase, they are debited and if assets decrease, they are credited.
For example, furniture purchased and payment made by cheque. The journal entry is:
Furniture A/c
Dr.
To Bank A/c
Here, furniture and bank balance, both are assets to the firm. As furniture is purchased, so furniture account will increase and will be debited. On the other hand, payment of furniture is being made by cheque that reduces the bank balance of the business, so bank account will be credited.
Expense− It is made to run business smoothly and to carry day to day business activites.
All expenses have a debit balance. If an expense is incurred, it must be debited.
For example, rent paid. The journal entry is:
Rent A/c
Dr.
To Cash A/c
Here, rent is an expense. All expenses have a debit balance. Hence, rent is debited. On the other hand, as rent is paid in cash that reduces the cash balances, so the cash account is credited.
Liability− Liability is an obligation of business. Increase in liability is credited and decrease in liability is debited.
For example, a loan taken from the bank. The journal entry is:
Bank A/c
Dr.
To Bank Loan A/c
Here, a loan from the bank is a liability to the firm. As all liabilities have a credit balance, so loan from the bank has been credited because it increases the liabilities.
Income− Income means profit earned during an accounting period from any source. Income also means excess of revenue over its cost during an accounting period. Income has credit balance because it increases the balance of capital.
For example, rent received from the tenant. The journal entry is:
Cash A/c
Dr.
To Rent A/c
Here, rent is an income; hence, the rent account has been credited and cash has been debited, as rent received increases the cash balances.
Capital− Capital is the amount invested by the proprietor in the business. Capital has credit balance. Increase in capital is credited and decrease in capital is debited
For example, additional capital is introduced by the owner. The journal entry is:
Cash A/c
Dr.
To Capital A/c
As additional capital is introduced, so the amount of capital will increase, i.e. why, the capital account is credited. On the other hand, as capital is introduced in form of cash, so the cash balances decrease, i.e. why, the cash account is debited.
Question 3 : Differentiate between source documents and vouchers.
ANSWER :
Basis of Difference
Source Documents
Vouchers
Meaning
It refers to the documents in writing, containing the details of events or transactions.
When a source document is considered as evidence of an event or transaction, then it is called a voucher.
Purpose
It is used for preparing accounting vouchers.
It is used for analyzing transactions.
Recording
It acts as a basis for preparing an accounting voucher that helps in the recording.
It acts as a basis for recording transactions.
Preparation
It is prepared at the time when an event or a transaction occurs.
It can be prepared either when an event or a transaction occurs, or later on.
Legality/Validity
It can be used as evidence in a court of law.
It can be used for assessing the authentication of transactions.
Prepared By
It is prepared by the persons who are directly involved in the transactions, or who are authorized to prepare or approve these documents.
It is prepared by authorized persons or by accountants.
Examples
Cash memo, invoice, and pay-in-slip, etc.
Cash memo, invoice, pay-in-slip (if used as evidence), debit note, credit note, cash vouchers, transfer vouchers, etc.
Question 4:
Prepare accounting equation on the basis of the following:
(a) Harsha started the business with cash of Rs 2,00,000
(b) Purchased goods from Naman for cash Rs 40,000
(c) Sold goods to Bhanu costing Rs 10,000/- Rs 12,000
(d) Bought furniture on credit Rs 7,000
ANSWER :
S.No.
Explanation
Assets
=
Liabilities
+
Capital
Cash
+
Stock
+
Debtors
+
Furniture
Creditors
(a)
Increase in cash
2,00,000
=
Increase in capital
2,00,000
2,00,000
=
NIL
+
2,00,000
(b)
Increase in stock
40,000
Decrease in cash
(40,000)
1,60,000
+
40,000
=
NIL
+
2,00,000
(c)
Increase in debtors
12,000
Decrease in stock
(10,000)
Profit
2,000
1,60,000
+
30,000
+
12,000
=
NIL
2,02,000
(d)
Increase in furniture
7,000
Increase in creditors
7,000
1,60,000
+
30,000
+
12,000
+
7,000
=
7,000
+
2,02,000
Question 5 :
Show the accounting equation on the basis of the following transaction:
(a)
Udit started business with:
Rs
(I) Cash
5,00,000
(ii) Goods
1,00,000
(b)
Purchased building for cash
2,00,000
(c)
Purchased goods from Himani
50,000
(d)
Sold goods to Ashu (Cost Rs 25,000)
36,000
(e)
Paid insurance premium
3,000
(f)
Rent outstanding
5,000
(g)
Depreciation on building
8,000
(h)
Cash withdrawn for personal use
20,000
(i)
Rent received in advance
5,000
(j)
Cash paid to Himani on account
20,000
(k)
Cash received from Ashu
30,000
ANSWER :
S.No.
Explanation
Assets
=
Liabilities
+
Capital
Cash
+
Stock
+
Building
+
Debtors
Creditors
+
Outstanding Expenses
+
Unaccrued Income
(a)
Increase in cash
5,00,000
Increase in stock
1,00,000
Increase in capital
6,00,000
5,00,000
+
1,00,000
=
NIL
+
6,00,000
(b)
Increase in building
2,00,000
Decrease in cash
(2,00,000)
=
3,00,000
+
1,00,000
+
2,00,000
=
NIL
+
6,00,000
(c)
Increase in stock
50,000
Increase in creditors
=
50,000
3,00,000
+
1,50,000
+
2,00,000
=
50,000
+
6,00,000
(d)
Increase in debtors
36,000
Decrease in stock
(25,000)
Increase in the capital (Profit)
11,000
3,00,000
+
1,25,000
+
2,00,000
+
36,000
=
50,000
+
6,11,000
(e)
Decrease in cash
(3,000)
Decrease in the capital (Expense)
(3,000)
2,97,000
+
1,25,000
+
2,00,000
+
36,000
=
50,000
+
+
6,08,000
(f)
Decrease in the capital (Expense)
5,000
Increase in liabilities
(5,000)
2,97,000
+
1,25,000
+
2,00,000
+
36,000
=
50,000
+
5,000
+
6,03,000
(g)
Decrease in building
(8,000)
Decrease in capital
(8,000)
2,97,000
+
1,25,000
+
1,92,000
+
36,000
=
50,000
+
5,000
+
5,95,000
(h)
Decrease in cash
(20,000)
Decrease in capital
(20,000)
2,97,000
+
1,25,000
+
1,92,000
+
36,000
=
50,000
+
5,000
+
5,75,000
(i)
Increase in cash
5,000
Increase in liability
5,000
2,82,000
+
1,25,000
+
1,92,000
+
36,000
=
50,000
+
5,000
+
5,000
+
5,75,000
(j)
Decrease in creditors
(20,000)
Decrease in cash
(20,000)
2,62,000
+
1,25,000
+
1,92,000
+
36,000
=
30,000
+
5,000
+
5,000
+
5,75,000
(k)
Increase in cash
30,000
Decrease in debtors
(30,000)
2,92,000
+
1,25,000
+
1,92,000
+
6,000
=
30,000
+
5,000
+
5,000
+
5,75,000
Question 6: Describe the events recorded in accounting systems and the importance of source documents in those systems?
ANSWER :
It is beyond human capabilities to memorize each financial transaction and that is why source documents have their own importance in the accounting system. They are considered as evidence of transactions and can be presented in a court of law. Transactions supported by evidence can be verified. Source documents also ensure that transactions recorded in the books are free from personal biases. A few events that are supported by the source document are given below. 1. Sale of goods worth Rs 200 on credit, supported by sales invoice/bill 2. Purchase of goods worth Rs 500 on credit, supported by purchase invoice/bill 3. Cash sales worth Rs 1,000, supported by cash memo 4. Cash purchase of goods worth Rs 400, supported by cash memo
5. Goods worth Rs 100 returned by the customer, supported by credit note 6. Return of goods purchased on credit worth Rs 200, supported by debit note 7. Payment worth Rs 1,200 through the bank, supported by cheques 8. Deposits into bank worth Rs 500, supported by pay-in slips. Out of the above events, only those events that can be expressed in monetary terms, are recorded in the books of accounts. However, the non-monetary events are not recorded in accounts; for example, the promotion of the manager cannot be recorded but an increment in salary can be recorded at the time when salary is paid or due. Source document in accounting is important because of the below-given reasons. 1. It provides evidence that the transaction has actually occurred. 2. It provides information about the date, amount and parties involved, and other details of a particular transaction. 3. It acts as evidence in a court of law. 4. It helps in verifying the transaction during the auditing process.
Question 7 :
Journalise the following transactions is the journal of M/s. Goel Brothers and post them to the ledger.
2017
Rs
Jan. 01
Started business with cash
1,65,000
Jan. 02
Opened bank account in PNB
80,000
Jan. 04
Goods purchased from Tara
22,000
Jan.05
Goods purchased for cash
30,000
Jan.08
Goods sold to Naman
12,000
Jan.10
Cash paid to Tara
22,000
Jan.15
Cash received from Naman
11,700
Discount allowed
300
Jan. 16
Paid wages
200
Jan. 18
Furniture purchased for office use
5,000
Jan. 20
Withdrawn from the bank for personal use
4,000
Jan. 22
Issued cheque for rent
3,000
Jan. 23
Goods issued for household purpose
2,000
Jan. 24
Drawn cash from the bank for office use
6,000
Jan. 26
Commission received
1,000
Jan. 27
Bank charges
200
Jan. 28
Cheque is given for insurance premium
3,000
Jan. 29
Paid salary
7,000
Jan. 30
Cash sales
10,000
ANSWER:
Books of M/s Goel Brothers
Journal
Date
Particulars
L.F.
Debit Amount Rs
Credit Amount Rs
2017
Jan.01
Cash A/c
Dr.
1,65,000
To Capital A/c
1,65,000
(Started business with cash)
Jan.02
Bank A/c
Dr.
80,000
To Cash A/c
80,000
(Bank account opened with PNB)
Jan.04
Purchases A/c
Dr.
22,000
To Tara
22,000
(Goods purchased from Tara)
Jan.05
Purchases A/c
Dr.
30,000
To Cash A/c
30,000
(Goods purchased for cash)
Jan.08
Naman
Dr.
12,000
To Sales A/c
12,000
(Sale of goods to Naman)
Jan.10
Tara
Dr.
22,000
To Cash A/c
22,000
(Cash paid to Tara)
Jan.15
Cash A/c
Dr.
11,700
Discount Allowed A/c
Dr.
300
To Naman
12,000
(Cash received from Naman and discount allowed)
Jan.16
Wages A/c
Dr.
200
To Cash A/c
200
(Wages paid)
Jan.18
Furniture A/c
Dr.
5,000
To Cash A/c
5,000
(Furniture purchased for cash)
Jan.20
Drawings A/c
Dr.
4,000
To Bank A/c
4,000
(Cash drawn from bank for personal use)
Jan.22
Rent A/c
Dr.
3,000
To Bank A/c
3,000
(Rent paid through cheque)
Jan.23
Drawings A/c
Dr.
2,000
To Purchases A/c
2,000
(Goods drawn for household purpose)
Jan.24
Cash A/c
Dr.
6,000
To Bank A/c
6,000
(Cash drawn from the bank)
Jan.26
Cash A/c
Dr.
1,000
To Commission A/c
1,000
(Commission received)
Jan.27
Bank Charges A/c
Dr.
200
To Bank A/c
200
(Bank charged charges)
Jan.28
Insurance A/c
Dr.
3,000
To Bank A/c
3,000
(Insurance paid through cheque)
Jan.29
Salaries A/c
Dr.
7,000
To Cash A/c
7,000
(Salary paid)
Jan.30
Cash A/c
Dr.
10,000
To Sales A/c
10,000
(Cash received for the sale of goods)
Total
3,84,400
3,84,400
Ledger
Cash Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
AmountRs
2017
2017
Jan.01
Capital
1,65,000
Jan.02
Bank
80,000
Jan.15
Naman
11,700
Jan.05
Purchases
30,000
Jan.24
Bank
6,000
Jan.10
Tara
22,000
Jan.26
Commission
1,000
Jan.16
Wages
200
Jan.30
Sales
10,000
Jan.18
Furniture
5,000
Jan.29
Salaries
7,000
Jan.31
Balance c/d
49,500
1,93,700
1,93,700
Capital Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.01
Cash
1,65,000
Jan.31
Balance c/d
1,65,000
1,65,000
1,65,000
Bank Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.02
Cash
80,000
Jan.20
Drawings
4,000
Jan.22
Rent
3,000
Jan.24
Cash
6,000
Jan.27
Bank charges
200
Jan.28
Insurance
3,000
Jan.31
Balance c/d
63,800
80,000
80,000
Tara’s Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.10
Cash
22,000
Jan.04
Purchases
22,000
22,000
22,000
Purchases Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.04
Tara
22,000
Jan.23
Drawings
2,000
Jan.05
Cash
30,000
Jan.31
Balance c/d
50,000
52,000
52,000
Sales Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.08
Naman
12,000
Jan.31
Balanced c/d
22,000
Jan.30
Cash
10,000
22,000
22,000
Naman’s Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.08
Sales
12,000
Jan.15
Cash
11,700
Jan.15
Discount Allowed
300
12,000
12,000
Discount Allowed Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.15
Naman
300
Jan.31
Balance c/d
300
300
300
Wages Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.16
Cash
200
Jan.31
Balance c/d
200
200
200
Furniture Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.18
Cash
5,000
Jan.31
Balance c/d
5,000
5,000
5,000
Drawings Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.20
Bank
4,000
Jan.23
Purchases
2,000
Jan.31
Balance c/d
6,000
6,000
6,000
Rent Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.22
Bank
3,000
Jan.31
Balance c/d
3,000
3,000
3,000
Commission Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.26
Cash
1,000
Jan.31
Balance c/d
1,000
1,000
1,000
Bank Charges Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.27
Bank
200
Jan.31
Balance c/d
200
200
200
Insurance Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
AmountRs
2017
2017
Jan.28
Bank
3,000
Jan.31
Balance c/d
3,000
3,000
3,000
Salaries Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.29
Cash
7,000
Jan.31
Balance c/d
7,000
7,000
7,000
Question 8:
Journalize the following transaction in the books of Sanjana and post them into the ledger:
January 2017
Rs
1
Cash in hand
6,000
2
Cash at bank
55,000
3
Stock of goods
40,000
4
Due to Rohan
6,000
5
Due from Tarun
10,000
6
Sold goods to Karuna
15,000
7
Cash sales
10,000
8
Goods sold to Heena
5,000
9
Purchased goods from Rupali
30,000
10
Goods returned from Karuna
2,000
11
Cash received from Karuna
13,000
12
Cheque given to Rohan
6,000
13
Cash received from Heena
3,000
14
Cheque received from Tarun
10,000
15
Cheque received from to Heena
2,000
16
Cash given to Rupali
18,000
17
Paid cartage
1,000
18
Paid salary
8,000
19
Cash sale
7,000
20
Cheque given to Rupali
12,000
21
Sanjana took goods for Personal use
4,000
22
Paid General expense
500
ANSWER:
Books of Sanjana
Journal Entries
S.No.
Particulars
L.F.
Debit Amount Rs
Credit Amount Rs
2017
Jan.01
Cash A/c
Dr.
6,000
Bank A/c
Dr.
55,000
Stock A/c
Dr.
40,000
Tarun
Dr.
10,000
To Rohan
6,000
To Capital A/c
1,05,000
(Balance brought from the last month)
Jan.03
Karuna
Dr.
15,000
To Sales A/c
15,000
(Goods sold to Karuna)
Jan.04
Cash A/c
Dr.
10,000
To Sales A/c
10,000
(Goods sold for cash)
Jan.06
Heena
Dr.
5,000
To Sales A/c
5,000
(Goods sold to Henna)
Jan.08
Purchases A/c
Dr.
30,000
To Rupali
30,000
(Goods purchased from Rupali)
Jan.10
Sales Return A/c
Dr.
2,000
To Karuna
2,000
(Goods returned by Karuna)
Jan.14
Cash A/c
Dr.
13,000
To Karuna
13,000
(Cash received from Karuna)
Jan.15
Rohan
Dr.
6,000
To Bank A/c
6,000
(Cheque issued to Rohan)
Jan.16
Cash A/c
Dr.
3,000
To Heena
3,000
(Cash received from Heena)
Jan.20
Bank A/c
Dr.
10,000
To Tarun
10,000
(Cheque received from Tarun)
Jan.22
Bank A/c
Dr.
2,000
To Heena
2,000
(Cheque received from Heena)
Jan.25
Rupali
Dr.
18,000
To Cash A/c
18,000
(Payment made to Rupali)
Jan.26
Cartage A/c
Dr.
1,000
To Cash A/c
1,000
(Cartage paid)
Jan.27
Salaries A/c
Dr.
8,000
To Cash A/c
8,000
(Salaries paid)
Jan.28
Cash A/c
Dr.
7,000
To Sales A/c
7,000
(Goods sold for cash)
Jan.29
Rupali
Dr.
12,000
To Bank A/c
12,000
(Cheque issued to Rupali)
Jan.30
Drawings A/c
Dr.
4,000
To Purchases A/c
4,000
(Goods drawn for personal use)
Jan.31
General Expenses A/c
Dr.
500
To Cash A/c
500
Total
2,57,500
2,57,500
Ledger
Cash Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.01
Balance b/d
6,000
Jan.25
Rupali
18,000
Jan.04
Sales
10,000
Jan.26
Cartage
1,000
Jan.14
Karuna
13,000
Jan.27
Salaries
8,000
Jan.16
Heena
3,000
Jan.31
General Expenses
500
Jan.28
Sales
7,000
Jan.31
Balance c/d
11,500
39,000
39,000
Capital Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
AmountRs
2017
2017
Jan.01
Balance b/d
1,05,000
Jan.31
Balance c/d
1,05,000
1,05,000
1,05,000
Bank Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.01
Balance b/d
55,000
Jan.15
Rohan
6,000
Jan.20
Tarun
10,000
Jan.29
Rupali
12,000
Jan.22
Heena
2,000
Jan.31
Balance c/d
49,000
67,000
67,000
Stock Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.01
Balance b/d
40,000
Jan.31
Balance c/d
40,000
40,000
40,000
Rohan’s Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.15
Bank
6,000
Jan.01
Balance b/d
6,000
6,000
6,000
Tarun’s Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.01
Balance b/d
10,000
Jan.20
Bank
10,000
10,000
10,000
Sales Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.03
Karuna
15,000
Jan.04
Cash
10,000
Jan.06
Heena
5,000
Jan.31
Balance c/d
37,000
Jan.28
Cash
7,000
37,000
37,000
Karuna’s Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.03
Sales
15,000
Jan.10
Sales Return
2,000
Jan.14
Cash
13,000
15,000
15,000
Heena’s Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.06
Sales
5,000
Jan.16
Cash
3,000
Jan.22
Bank
2,000
5,000
5,000
Purchases Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.08
Rupali
30,000
Jan.30
Drawings
4,000
Jan.31
Balance c/d
26,000
30,000
30,000
Rupali’s Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.25
Cash
18,000
Jan.08
Purchases
30,000
Jan.29
Bank
12,000
30,000
30,000
Sales Return Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.10
Karuna
2,000
Jan.31
Balance c/d
2,000
2,000
2,000
Cartage Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.26
Cash
1,000
Jan.31
Balance c/d
1,000
1,000
1,000
Salaries Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.27
Cash
8,000
Jan.31
Balance c/d
8,000
8,000
8,000
Drawings Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.30
Purchases
4,000
Jan.31
Balance c/d
4,000
4,000
4,000
General Expenses Account
Dr.
Cr.
Date
Particulars
J.F.
Amount Rs
Date
Particulars
J.F.
Amount Rs
2017
2017
Jan.31
Cash
500
Jan.31
Balance c/d
500
500
500
Question 9: What entry (debit or credit) would youmake to
increase revenue,
decrease in expense
record drawings,
record the fresh capital introduced by the owner.
ANSWER :
The following entry will be made in the above case
Increase Revenue-Revenue account have always credit balance so credit entry will be made to record increase in revenue.
Decrease in Expense- Expense account always have a debit balance so credit entry will be made to record decrease in expenses.
Record Drawings- Drawings is a reduction of capital balance so debit entry will be made in capital account to record drawings.
Record the fresh Capital Introduced by the Owner- Capital account always have a credit balance so credit entry will be made to record increase in capital.
Question 10: Describe the events recorded in accounting systems and the importance of source documents in those systems?
Answer: It is beyond human capabilities to memorize each financial transaction and that is why source documents have their own importance in the accounting system. They are considered as evidence of transactions and can be presented in the court of law. Transactions supported by evidence can be verified. Source documents also ensure that transactions recorded in the books are free from personal biases. A few events that are supported by the source document are given below. 1. Sale of goods worth Rs 200 on credit, supported by sales invoice/bill 2. Purchase of goods worth Rs 500 on credit, supported by purchase invoice/bill 3. Cash sales worth Rs 1,000, supported by cash memo 4. Cash purchase of goods worth Rs 400, supported by cash memo
5. Goods worth Rs 100 returned by the customer, supported by credit note 6. Return of goods purchased on credit worth Rs 200, supported by debit note 7. Payment worth Rs 1,200 through the bank, supported by cheques 8. Deposits into bank worth Rs 500, supported by pay-in slips. Out of the above events, only those events that can be expressed in monetary terms, are recorded in the books of accounts. However, the non-monetary events are not recorded in accounts; for example, the promotion of the manager cannot be recorded but an increment in salary can be recorded at the time when salary is paid or due. Source document in accounting is important because of the below-given reasons. 1. It provides evidence that the transaction has actually occurred. 2. It provides information about the date, amount and parties involved, and other details of a particular transaction. 3. It acts as evidence in a court of law. 4. It helps in verifying the transaction during the auditing process.
Question 1: What is matching concept? Why should a business concern follow this concept? Discuss?
ANSWER:
Matching Concept states that all expenses incurred during the year, whether paid or not and all revenues earned during the year, whether received or not, should be taken into account while determining the profit of that year. In other words, expenses incurred in a period should be set off against revenues earned in the same accounting period for ascertaining profit or loss. For example, insurance premium paid for a year is Rs1200 on July 01 and if accounts are closed on March 31, every year, then the insurance premium of the current year will be ascertained for nine months (i.e. from July to March) and will be calculated as,
Rs 1200 − Rs 900 = Rs 300
Thus, according to the matching concept, the expense of Rs 900 will be taken into account and not Rs 1200 for determining profit, as the benefit of only Rs 900 is availed in the current accounting period.
The business entities follow this concept mainly to ascertain the true profit or loss during an accounting period. It is possible that in the same accounting period, the business may either pay or receive payments that may or may not belong to the same accounting period. This leads to either overcasting or undercasting of the profit or loss, which may not reveal the true efficiency of the business and its activities in the concerned accounting period. Similarly, there may be various expenditures like purchase of machinery, buildings, etc. These expenditures are capital in nature and their benefits can be availed over a period of time. In such cases, only the depreciation of such assets is treated as an expense and should be taken into account for calculating profit or loss of the concerned year. Thus, it is very necessary for any business entity to follow the matching concept.
Question 2:What is the money measurement concept? Which one factor can make it difficult to compare the monetary values of one year with the monetary values of another year?
Answer:
Money Measurement Concept states that only those transactions and events are recorded in accounting that is capable of being expressed in terms of money. An event even though may be very important for business, will not be recorded in the books of accounts unless its effect can be measured in terms of money. For Example, a business has 5 machines then this thing cannot be added up unless expressed in terms of money. In order to record this item, we must have to express it in monetary terms say Rs. 1,00,000. Thus, the money measurement concept enables consistency in maintaining accounting records. But on the other hand, the adherence to the money measurement concept makes it difficult to compare the monetary values of one period with that of another. It is because of the fact that the money measurement concept ignores the changes in the purchasing power of the money, i.e. only the nominal value of money is concerned with and not the real value. What Rs 1 could buy 10 years back cannot buy today; hence, the nominal value of money makes comparison difficult. In fact, the real value of money would be a more appropriate measure as it considers the price level (inflation), which depicts the changes in profits, expenses, incomes, assets, and liabilities of the business.
Globalization has unified different economies of the world. Enterprises are carrying on business worldwide. As accounting is the language of business, different enterprises around the world should not be speaking different languages in their financial statements. It will be very difficult to understand and compare these statements. International Financial Reporting Standards (IFRS) are issued by the International Accounting Standard Board (IASB). IASB replaced International Accounting. Standard Committee (LASC) in 2001.LASC was formed in 1973 to develop accounting standards that have global acceptance and make different accounting statements of different countries similar and comparable. Assumptions in IFRS:- The underlying assumptions in IFRS are as follows:
Measuring Unit Assumption:- Current purchasing power is the measuring unit which means that assets in the balance sheet are shown at current or fair value and not at historical cost.
Constant Purchasing Power Assumption:- It means that the value of capital is to be adjusted for inflation at the end of the financial year.
Accrual Assumption:- Transactions are recorded as and when they occur and the date of settlement is irrelevant.
Going Concern Assumption:- It is assumed that the life of the business is infinite.
Question 4 : What is the money measurement concept? Which one factor can make it difficult to compare the monetary values of one year with the monetary values of another year?
ANSWER:
Money Measurement Concept states that only those events that can be expressed in monetary terms are recorded in the books of accounts. For example, 12 television sets of Rs10,000 each are purchased and this event is recorded in the books with a total amount of Rs 1,20,000. Money acts a common denomination for all the transactions and helps in expressing different measurement units into a common unit, for example rupees. Thus, money measurement concept enables consistency in maintaining accounting records. But on the other hand, the adherence to the money measurement concept makes it difficult to compare the monetary values of one period with that of another. It is because of the fact that the money measurement concept ignores the changes in the purchasing power of the money, i.e. only the nominal value of money is concerned with and not the real value. What Rs 1 could buy 10 years back cannot buy today; hence, the nominal value of money makes comparison difficult. In fact, the real value of money would be a more appropriate measure as it considers the price level (inflation), which depicts the changes in profits, expenses, incomes, assets and liabilities of the business.
Question 5 :When should revenue be recognised? Are there exceptions to the general rule?
Answer
Revenue is recognised only when it is realised i.e., when a legal right to receive it arises. Thus credit sales are treated as revenue on the day sales are made and not when cash is received from the buyers. Similarly, rent for the month of March even if received in April month will be treated as revenue of the financial year ending 31st March. There are two exceptions to this rule: → In case of sales on installment basis, only the amount collected in installments is treated as revenue. → In case of long-term construction contracts, proportionate amount of revenue, based on part of the contracted completed by the end of the financial year is treated as realised.
Question 6 :‘Only financial transactions are recorded in accounting’. Explain the statement.
Answer :
According to this principle, only those transactions and events are recorded in accounting which are capable of being expressed in terms of money are recorded in the books of accounts, such as the sale of goods or payment of expenses or receipt of income, etc. An event may be important for the business (such as dispute among the owners or managers, the appointment of a manager, etc.), but it will not be recorded in the books of accounts simply because it can not be converted or recorded in terms of money. For instance, strike by workers may adversely affect the business but it cannot be recorded in the books of accounts unless its effect can be measured in terms of money with a fair degree of accuracy. Another aspect of this principle is that the transactions that can be expressed in terms of money have to be converted in terms of money before being recorded.It should be remembered that money is the only measurement which enables various things of diverse nature to be added up together and dealt with. The money measurement assumption is not free from limitations. Due to the changes in price, the value of money does not remain the same over a period of time. The value of rupee today on account of rising in price is much less than what it was, say ten years back. As the change in the value of money is not reflected in the book of accounts, the accounting data does not reflect the true and fair view of the affairs of an enterprise. As, such, to make accounting records relevant, simple, understandable and homogeneous, they are expressed in a common unit of measurement,i.e., money.
Question 7 :What are the advantages of Book‐Keeping?
Answer :
1. To the Management of a Business (a) In evaluating various alternative proposals so as to take maximum benefit from the best alternative.
(b) In deciding matters such as elimination of an unprofitable activity, department or product, replacement of fixed assets, expansion of business etc.
(c) Planning the various activities and planning of revenues and expenses and arranging for finance in case of need.
(d) Comparing various year’s account to know the progress or deterioration of the business and take actions to improve the business.
(e) Accounting information helps in providing evidence in a court of law in case of legal action taken by others.
(f) Accounting information helps in assessing the income tax, sales tax and property tax of the business.
(g) Accounting information constitutes one of the basis for borrowing loans from external source.
(h) It helps to detect errors and frauds that have taken place in the business.
2. To the Investors: (a) Types of property owned by the business.
(b) Sources and amount of earnings made or losses incurred by the business.
(c) Particulars such as stock position, debts owed, debts due etc.
(d) Whether rate of earnings is high or low.
3. To the Employees: It provides information to employees so as to claim fair wages, bonus, and other welfare facilities.
4. To the Government: (a) Accounting information helps Government to extend subsidies and incentives and other exemptions to certain types of business.
(b) The industrial progress can be known by the Government of the country. It can formulate industrial policies for further growth and development of industries.
(c) It enables the Government to assess the income from the industrial sector.
(d) It helps in amending various laws or enacting laws governing the functioning of business enterprises.
(e) It helps the Government in deciding price control, wage fixation, excise duties, sales tax etc.
5. To the Consumers: Customers are not overcharged as selling price is fixed on the total expenses incurred by adding a reasonable rate of profit.
6. To the Prospective Investors: It helps the prospective investors in choosing the right type of investment depending upon the profit earning capacity of the business enterprises and the profit earned during past few years.
7. To the Creditors and Suppliers: Creditors can decide the solvency position of the business through the accounting information. Similarly, suppliers can also decide whether goods can be sold in future on credit basis.
Question 8 :Discuss the concept-based on the premise ‘do not anticipate profits but provide for all losses’.
Answer :
According to the Conservatism Principle, profits should not be anticipated; however, all losses should be accounted (irrespective whether they occurred or not). It states that profits should not be recorded until they get recognised; however, all possible losses even though they may happen rarely, should be provided. For example, stock is valued at cost or market price, whichever is lower. If the market price is lower than the cost price, loss should be accounted; whereas, if the former is more than the latter, then this profit should not be recorded until unless the stock is sold. There are numerous provisions that are maintained based on the conservatism principle like, provision for discount to debtors, provision for doubtful bad debts, etc. This principle is based on the common sense and depicts pessimism. This also helps the business to deal uncertainty and unforeseen conditions.
Question 9 : Why is it important to adopt a consistent basis for the preparation of financial statements? Explain.
Answer :
It is important to adopt a consistent basis for the preparation of financial statements because it helps in comparability of financial statements. For Example: if a firm choose straight line method for showing depreciation but in the next accounting period switched over to written down method then the results of this year cannot be compared to that of the previous years. However, it does not mean that firm cannot changes its accounting policies. A better method, if available which will lead to better presentation and better understanding of the financial results, the firm may adopt but it must be stated clearly by way of footnotes to enable the users of the financial statements to be aware of the changes.
Question 10 : What is Book-Keeping?
Answer :
Book‐Keeping is a systematic manner of recording transactions related to business in the books of accounts. In Book‐Keeping, transactions are recorded in the order of the dates. An Accountant is a person who records the transactions in the books of the business and is expected to show the financial results of a business for every financial year. A financial year in India is followed from 1st April to 31st March.
According to J. R. Batliboi :
“Book‐Keeping is an art of recording business dealings in a set of books.”
According to R.N Carter:
“Book‐Keeping is an art of recording in the books of accounts, all those business transactions that result in transfer of money’s worth”
11.If there are two separate circles drawn apart from each other,then the maximum number of common points they have: (i) 0 (ii) 1 (iii) 2 (iv) 3
Answer: (i) 0
12.D is diameter of a circle and AB is a chord. If AD = 50 cm, AB = 48 cm, then the distance of AB from the centre of the circle is (i) 6 cm (ii) 8 cm (iii) 5 cm (iv) 7 cm
Answer: (iv) 7 cm
13.In a circle with centerO and a chord BC, points D and E lie on the same side of BC. Then, if ∠BDC=80°, then ∠BEC = (i) 80° (ii) 20° (iii) 160° (iv) 40°
Answer: (i) 80°
14.The center of the circle lies in______ of the circle. (i) Interior (ii) Exterior (iii) Circumference (iv) None of the above
Answer: (i) Interior
15.If chords AB and CD of congruent circles subtend equal angles at their centers, then: (i) AB = CD (ii) AB > CD (iii) AB < AD (iv) None of the above
Question 1. What is the area of a parallelogram? (a) 12 × Base × Altitude (b) Base × Altitude (c) 14 × Base × Median (d) Base × Base
Answer: (b) Base × Altitude
Question 2. AE is a median to side BC of triangle ABC. If area(ΔABC) = 24 cm, then area(ΔABE) = (a) 8 cm (b) 12 cm (c) 16 cm (d) 18 cm
Answer: (b) 12 cm
Question 3. In the figure, ∠PQR = 90°, PS = RS, QP = 12 cm and QS = 6.5 cm. The area of ΔPQR is (a) 30 cm2 (b) 20 cm2 (c) 39 cm2 (d) 60 cm2
Answer: (a) 30 cm2
Question 4. BCD is quadrilateral whose diagonal AC divides it into two parts, equal in area, then ABCD ABCD is quadrilateral whose diagonal AC divides it into two parts, equal in area, then ABCD (a) is a rectangles (b) is a parallelogram (c) is a rhombus (d) need not be any of (a), (b) or (c).
Answer: (d) need not be any of (a), (b) or (c).
Question 5. In ΔPQR, if D and E are points on PQ and PR respectively such that DE || QR, then ar (PQE) is equal to (a) ar (PRD) (b) ar (DQM) (c) ar (PED) (d) ar (DQR)
Answer: (a) ar (PRD)
Question 6. If Diagonals AC and BD of a trapezium ABCD with AB || DC intersect each other at O. Then, (a) ar (AOD) = ar (BOC) (b) ar (AOD) > ar (BOC) (c) ar (AOD) < ar (BOC) (d) None of the above
Answer: (a) ar (AOD) = ar (BOC)
Question 7. For two figures to be on the same base and between the same parallels, one of the lines must be.
(a) Making an acute angle to the common base (b) The line containing the common base (c) Perpendicular to the common base (d) Making an obtuse angle to the common base
Answer: (b) The line containing the common base
Question 8. Two parallelograms are on equal bases and between the same parallels. The ratio of their areas is:
(a) 1 : 3 (b) 1 : 2 (c) 2 : 1 (d) 1 : 1
Answer: (d) 1 : 1
Question 9. If a triangle and a parallelogram are on the same base and between same parallels, then the ratio of the area of the triangle to the area of parallelogram is (a) 1 : 3 (b) 1 : 2 (c) 3 : 1 (d) 1 : 4
Answer: (b) 1 : 2
Question 10 . The median of a triangle divides it into two (a) isosceles triangle (b) congruent triangles (c) right angled triangle (d) triangles of equal areas
Answer: (d) triangles of equal areas
Question 11. PQRS is a parallelogram and A and B are any points on PQ and QR. If ar(PQRS) = 48 cm², then ar(ΔPBS) + ar(ΔASR) is equal to (a) 96 cm² (b) 36 cm² (c) 48 cm² (d) 24 cm²
Answer: (c) 48 cm²
Question 12. A, B, C and D are the mid-points of sides of parallelogram PQRS. If ar(PQRS) = 36 cm², then ar(ABCD) is (a) 24 cm² (b) 18 cm² (c) 30 cm² (d) 36 cm²
Answer: (b) 18 cm²
Question 13. ABCD is a trapezium in which AB || DC. If ar(ΔABD) = 24 cm² and AB = 8 cm, then height of ΔABC is (a) 3 cm (b) 6 cm (c) 8 cm (d) 4 cm
Answer: (d) 4 cm
Question 14. PQRS is a parallelogram. If X and Y are the mid-points of PQ and SR and diagonal SQis joined, then ar(XQRY) : ar(ΔQSR) is
(a) 1 : 2 (b) 1 : 4 (c) 1 : 1 (d) 2 : 1
Answer: (c) 1 : 1
Question 15 . In quadrilateral PQRS, Mis the mid-point of PR. If ar(SMQR) = 18 cm², then ar(PQMS) is
Question 1:Distinguish between debtors and creditors; Profit and Gain.
ANSWER: The difference between Debtors and Creditors is given below.
Basis of difference
Debtors
Creditors
Meaning
Persons or organizations that are liable to pay money to a firm are called debtors.
Persons or organizations to whom the firm is liable to pay money are called creditors.
Nature
They have a debit balance to the firm.
They have a credit balance to the firm.
Payment
Payments are received from them.
Payments are made to them.
Shown
They are shown as assets in the Balance sheet under Current Assets.
They are shown as liabilities in the Balance Sheet under Current Liabilities.
The difference between Profit and Gain is given below.
Gain− Gain is incidental to the business. They arise from irregular activities or non-recurring transactions; for example, profit on sale of fixed assets, appreciation in value of asset, profit on sale of investment, etc.
Profit− This refers to the excess of revenue over the expense. It is normally categorised into gross profit or net profit. Net profit is added to the capital of the owner, which increases the owner’s capital. For example, goods sold above its cost
Question 2: What is accounting? Define its objectives.
ANSWER:
Accounting is a process of identifying the events of financial nature, recording them in the journal, classifying in their respective accounts and summarising them in profit and loss account and balance sheet and communicating results to users of such information, viz. owner, government, creditor, investors, etc.
According to the American Institute of Certified Accountants, 1941, “Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions, and events that are, in part at least, of financial character and interpreting the results thereof.”
In 1970, the American Institute of Certified Public Accountants changed the definition and stated, “The function of accounting is to provide quantitative information, primarily financial in nature, about economic entities, that is intended to be useful in making economic decisions.”
Objectives of Accounting:
Recording business transactions systematically− It is necessary to maintain systematic records of every business transaction, as it is beyond human capacities to remember such large number of transactions. Skipping the record of any one of the transactions may lead to erroneous and faulty results.
Determining profit earned or loss incurred− In order to determine the net result at the end of an accounting period, we need to calculate profit or loss. For this purpose trading and profit and loss account are prepared. It gives information regarding how much of goods have been purchased and sold, expenses incurred and amount earned during a year.
Ascertaining financial position of the firm− Ascertaining profit earned or loss incurred is not enough; proprietor also interested in knowing the financial position of his/her firm, i.e. the value of the assets, amount of liabilities owed, net increase or decrease in his/her capital. This purpose is served by preparing the balance sheet that facilitates in ascertaining the true financial position of the business.
Assisting management− Systematic accounting helps the management in effective decision making, efficient control on cash management policies, preparing budget and forecasting, etc.
Assessing the progress of the business− Accounting helps in assessing the progress of business from year to year, as accounting facilitates the comparison both inter-firm as well as intra-firm.
Detecting and preventing frauds and errors− It is necessary to detect and prevent fraud and errors, mismanagement and wastage of the finance. Systematic recording helps in the easy detection and rectification of frauds, errors and inefficiencies, if any.
Communicating accounting information to various users− The important step in the accounting process is to communicate financial and accounting information to various users including both internal and external users like owners, management, government, labour, tax authorities, etc. This assists the users to understand and interpret the accounting data in a meaningful and appropriate manner without any ambiguity.
Question 3: What do you mean by an asset and what are different types of assets?
ANSWER:
Any valuable thing that has monetary value, which is owned by a business, is its asset. In other words, assets are the monetary values of the properties or the legal rights that are owned by the business organizations.
Fixed Assets− These are those assets that are held for the long term and increase the profit earning capacity and productive capacity of the business. These assets are not meant for sale, for example, land, building machinery, etc.
Current Assets− Assets that can be easily converted into cash or cash equivalents are termed as current assets. These are required to run day-to-day business activities; for example, cash, debtors, stock, etc.
Tangible Assets− Assets that have a physical existence, i.e., which can be seen and touched, are tangible assets; for example, car, furniture, building, etc.
Intangible Assets− Assets that cannot be seen or touched, i.e. those assets that do not have a physical existence, are intangible assets; for example, goodwill, patents, trademark, etc.
Liquid Assets− Assets that are kept either in cash or cash equivalents are regarded as liquid assets. These can be converted into cash in a very short period of time; for example, cash, bank, bills receivable, etc.
Fictitious Assets− These are the heavy revenue expenditures, the benefit of whose can be derived in more than one year. They represent loss or expense that is written off over a period of time, for example, if advertisement expenditure is Rs 1,00,000 for 5 years, then each year Rs 2,00,000 will be written off.
Question 4: Describe the role of accounting in the modern world.
Answer:
The role of accounting has been changing over the period of time. In the modern world, the role of accounting is not only limited to record financial transactions but also to provide a basic framework for various decision making, providing relevant information to various users, and assists in both short-run and long-run planning. The role of accounting in the modern world are given below.
→ Assisting management- Management uses accounting information for short-term and long-term planning of business activities, to predict the future conditions, prepare budgets, and various control measures.
→ Comparative study- In the modern world, accounting information helps us to know the performance of the business by comparing the current year’s profit with that of the previous years and also with other firms in the same industry.
→ Substitute of memory- In the modern world, every business incurs a large number of transactions and it is beyond human capability to memorize each and every transaction. Hence, it is very necessary to record transactions in the books of accounts.
→ Information to end-user- Accounting plays an important role in recording, summarising, and providing relevant and reliable information to its users, in form of financial data that helps in decision making.
Question 5: Explain the qualitative characteristics of accounting information.
Answer:
The qualitative characteristics of accounting information are:
→ Reliability: Accounting information must be reliable so that business owners can be reasonably assured that accounting information presents an accurate picture of the company. All accounting information is verifiable and can be verified from the source document (voucher), via cash memos, bills, etc. Hence, the available information should be free from any errors and unbiased.
→ Relevance: It means that essential and appropriate information should be easily and timely available and any irrelevant information should be avoided. The users of accounting information need relevant information for decision making, planning, and predicting future conditions.
→ Understandability: Accounting information should be presented in such a way that every user is able to interpret the information without any difficulty in a meaningful and appropriate manner.
→ Comparability: It allows business owners to compare accounting information of a current year with that of the previous years. Comparability enables intra-firm and inter-firm comparisons. This assists in assessing the outcomes of various policies and programs adopted in different time horizons by the same or different businesses. Further, it helps to ascertain the growth and progress of the business over time and in comparison to other businesses.
Question 6: Accounting information refers to financial statements. The information provided by these statements can be categorized into various types. Briefly describe them.
Answer:
Types of Accounting Information Accounting information refers to the information provided in financial statements of the business, generated through the process of book keeping and summarising. By using the accounting information, the users are in a position to take the correct decision. The financial statements so generated are the income statement i.e., profit and loss account and the position statement i.e., balance sheet and a Cash Flow Statement. The information made available by these statements can be categorised into the following categories:
Information Related to Profit or Loss during the year: Information about the profit earned or loss incurred by the business during an accounting period is made available through the income statement of the business i.e., the profit and loss account. Trading account provides information about gross profit or gross loss whereas the profit and loss account provides information about the net profit or net loss during the year. It also gives details of all the expenses and incomes during the year.
Information Related to Financial Position of the business : Information about the financial position of the enterprise is determined through its position statement i.e., the balance sheet. It provides information about the assets and liabilities of a business on a particular date. The difference between the two is represented by capital i.e., amount due to owners. In the case of not-for-profit organisation, difference between assets and liabilities is termed as general fund.
Information about Cash Flow during the year : Cash flow statement is a statement that shows inflow and outflow of cash during a specific period. It helps in making various decisions such as payment of liabilities, payment of dividend and expansion of business, etc., as all these are based on availability of cash. It gives a clear picture of the liquidity of the business.
Question 7:
Giving examples, explain each of the following accounting terms:
Fixed assets
Revenue
Expenses
Short-termliability
Capital
ANSWER:
Fixed assets− These are held for long term and increase the profit earning capacity of the business, over various accounting periods. These assets are not meant for sale; for example, land, building, machinery, etc.
Revenue− It refers to the amount received from day to day activities of business, viz. amount received from sales of goods and services to customers; rent received, commission received, dividend, royalty, interest received, etc. are items of revenue that are added to the capital.
Capital− It refers to the amount invested by the owner of a firm. It may be in form of cash or asset. It is an obligation of the business towards the owner of the firm, since business is treated separate or distinct from the owner.
Capital = Assets − Liabilities.
Expenses− Expenses are those costs that are incurred to maintain the profitability of business, likerent, wages, depreciation, interest, salaries, etc. These help in the production, business operations and generating revenues.
Short term liabilities− Those liabilities that are incurred with an intention to be paid or are payable within a year; for example, bank overdraft creditors, bills payable, outstanding wages, short-term loans, etc.
Question 8: Describe the informational needs of external users.
Answer:
The various external users and their needs are:
• Investors and potential investors: information on the risks and return on investment;
• Unions and employee groups: information on the stability, profitability, and distribution of wealth within the business;
• Lenders and financial institutions: information on the creditworthiness of the company and its ability to repay loans and pay interest;
• Suppliers and creditors-information on whether amounts owed will be repaid when due, and on the continued existence of the business;
• Customers-information on the continued existence of the business and thus the probability of a continued supply of products, parts, and after-sales service;
• Government and other regulators- information on the allocation of resources and the compliance to regulations;
• Social responsibility groups, such as environmental groups-information on the impact on the environment and its protection;
• Competitors: information on the relative strengths and weaknesses of their competition and for comparative and benchmarking purposes.
Question 9:Distinguish between financial accounting, costaccounting, and management accounting.
Answer:
Basis
Financial Accounting
Cost Accounting
Management Accounting
Meaning
Financial accounting is a specialized branch of accounting that keeps track of a company’s financial transactions. Using standardized guidelines, the transactions are recorded, summarized, and presented in a financial report or financial statements such as an income statement or a balance sheet.
Cost accounting is an accounting method that aims to capture a company’s costs of production by assessing the input costs of each step of production as well as fixed costs, such as the depreciation of capital equipment. Cost accounting will first measure and record these costs individually, then compare input results to output or actual results to aid company management in measuring financial performance.
Management accounting also called managerial accounting or cost accounting is the process of analyzing business costs and operations to prepare an internal financial report, records, and account to aid managers’ decision-making process in achieving business goals. In other words, it is the act of making sense of financial and costing data and translating that data into useful information for management and officers within an organization.
Objects
Record transaction and determine financial position & profit or loss
Ascertainment, allocation, accumulation, and accounting for the cost
To assist the management in decision making & policy formulation
Nature
Concerned with historical data
concerned with both past and present recorded( historical in nature)
Deals with a projection of data for the future( futuristic in nature)
Principle followed
Governed by GAAP
certain principles followed for recording cost
No set principles are followed in it
Data Used
Qualitative aspects are not recorded
Only quantitative aspects are recorded
Uses both qualitative and quantitative concepts
Question 10: What are the functions or steps of the accounting process?
Answer:
Following attributes or major steps that can be drawn from the definition of Accounting:
① Identifying and Measurement ② Recording ③ Classifying ④ Summarizing ⑤ Analysis, Interpretation, and Communication
(1) Identifying financial transactions and events
Accounting records only those transactions and events which are of financial nature. So, first of all, such transactions and events are identified.
The first step in accounting is to determine what to record, i.e., to identify the financial events which are to be recorded in the books of accounts. It involves observing all business activities and selecting those events or transactions which can be considered as financial transactions.
(2) Measuring the transactions
Accounting measures the transactions and events in terms of money which are considered as a common unit.
In Accounting, we record only those transactions which can be measuredin terms of money or which are of financial nature. If a transaction or event cannot be measured in monetary terms, it is not considered for recording in financial accounts.
There are few events directly or indirectly make an effect on the working of a business firm but cannot be recorded in the books of accounts because they cannot be measured in terms of money. For example, the appointment of a new managing director, signing of contracts, strikes, death of an employee etc is not shown in the books of accounts.
(3) Recording of transactions
Accounting involves recording the financial transactions of inappropriate books of accounts such as journals or Subsidiary Books.
A transaction will be recorded in the books of accounts only if it is considered an economic event and can be measured in terms of money. Once the economic events are identified and measured in financial terms, these are recorded in books of account in monetary terms and in chronological order. The recording should be done in a systematic manner so that the information can be made available when required.
(4) Classifying the transactions
Transactions recorded in the books of original entry – Journal or Subsidiary books are classified and grouped according to nature and posted in separate accounts known as ‘Ledger Accounts’.
Once the financial transactions are recorded in journal or subsidiary books, all the financial transactions are classified by grouping the transactions of one nature at one place in a separate account. This is known as the preparation of Ledger.
(5) Summarising the transactions
It involves presenting the classified data in a manner and in the form of statements, which are understandable by the users.
It includes Trial balance, Trading Account, Profit and Loss Account, and Balance Sheet.
It is concerned with the presentation of data and it begins with a balance of ledger accounts and the preparation of trial balance with the help of such balances. A trial balance is required to prepare the financial statements i.e. Trading Account, Profit & Loss Account, and Balance Sheet.
(6) Analysing and interpreting financial data
Results of the business are analyzed and interpreted so that users of financial statements can make a meaningful and sound judgment.
The main purpose of accounting is to communicate the financial information to the users who analyze them as per their individual requirements.
(7) Communicating the financial data or reports to the users
Communicating the financial data to the users on time is the final step of Accounting so that they can make appropriate decisions. Providing financial information to its users is a regular process.