Monthly Archives: January 2022

NCERT Most important question:

Q1. Name the elements of computer system. 

Ans: The elements of computer system are as follows:

i. People

ii. Hardware

iii. Software

iv. Procedure

v. Data

vi. Connectivity

Q2. What are the capabilities of a computer? 

Ans: The capabilities of a computer are as follows:

i. Speed

ii. Accuracy

iii. Reliability

iv. Versatility

v. Data Storage

Q3. What do you understand by internal and external transactions? 

Ans: If material is provided from the shop to any department of the same company it’s thought of as internal dealings. Whereas if a department purchases any material from outside it’s thought of as external dealings.

Q4. What are the limitations of a computer system? 

Ans: The limitations of a computer system are as follows:

i. It doesn’t have any good judgment and it’s zero intelligence quotients (IQ)    

ii. It isn’t able to make decisions on its own.

Q5. State the activities involve in business process in the marketing department. 

Ans: The activities involve in business method within the marketing department are:

i. Contact creation

ii. Inquiry

iii. Entry of orders

iv. Billing to customers

v. Dispatch of goods

Q6. What are the advantages of computer accounting? 

Ans: The advantages of computer over accounting are as follows:

i. All calculations are done mechanically by a computer.

ii. It is more correct in minute details so it is more reliable.

iii. Computer storage is more secure.

iv. Through web connectivity, information will be accessed from anyplace.

v. It reduces human effort so it is also cost-effective.

Q7. State the features of computerized accounting system. 

Ans: The features of computerized accounting system are:

i. Printing sales and buying invoices.

ii. Storing accounting information online.

iii. Coding each account and transaction using unique code.

iv. Reporting all finances instantly.

v. Filing tax, return, GST, stock valuation and payroll report.

Q8. State the activities involve in business process in the production department. 

Ans: The activities involve in business method within the production department are:

i. Getting ready schedules and plans.

ii. Provision job cards and material requisition forms.

iii. Provision inventory.

iv. Issue orders for acquisition of raw materials.

v. Releasing payment of vendors.

Q9. What is the process of designing accounting reports from accounting data? 

Ans: The process of designing accounting reports from accounting data is:

i. Process the objective: Like the decision to be made from the report and who will be the user of the report.

ii. Report structure: the fashion of presenting the report, the knowledge that is needed within the report.

iii. Querying with the database: Queries associated with the accounting and methodology needed whereas interacting the database and.

iv.  Finalising the report.

Q10. What are the relationship between decision and information? 

Ans: Information is the fundamental necessity in facilitating the selection so information is one of the most valued resources of any organization. 

The management information system provides data for decision making and the decision support system helps in supporting decisions of the company.

Every organisation receives inputs and turns them into outputs like a system. Via a process of resource allocation, which is done through the process of management decision-making, every organisation system strives to achieve a certain goal. Information aids an organization’s pursuit of its goal by assisting decision-making on resource allocation.

Q11. Describe Management Information System and Accounting Information System. 

Ans: Management information system (MIS) may be a tool that helps the manager in higher cognitive processes by recording, gathering, coordinating, dominant, analysing, and visualizing info in a corporation. MIS is a computer-based system. MIS aids the company, particularly managers, in organising and evaluating data and information, as well as providing information in a timely and efficient manner. This also aids managers in making choices based on the data and analysis provided by the MIS.

Accounting Information System (AIS), like MIS, is a computer-based system that allows a company to make critical financial decisions. An AIS will gather, process, analyse, and store a company’s financial data. And it will extract and disclose such data to its users, such as accountants, consultants, financial officers, CFO, auditors, government tax authorities, and so on, as called upon.

MIS works in making a piece of information for future use by providing its accessibility to authorised persons whereas an accounting information system (AIS) may be a system the helps the organization in grouping, gathering, storing, managing, processing, consulting and retrieving accounting and monetary knowledge in order that the accountants, business analysts, consultants, chief money officers (CFOs), managers, auditors, tax agencies, and regulators will use it for higher cognitive process.

Q12. Why computerized accounting is needed? 

Ans: The various needs of computerized accounting is as follows:

i. Large corporations need varied transactions in common place with high speed and accuracy.

ii. Instant coverage of accounts is required for deciding computerised accounting to give instant coverage of information.

iii. It needs a computer therefore reducing paper work.

iv. Making charts, graphs and tables instantly.

v. Accounting queries associated with some external parameters like client due are often reported simply.

vi. Information is often unbroken confidential in an extremely secured system which may solely be accessed by a licensed person solely.

vii. Its requirement stems from the advantages of increased speed, accuracy, and decreased transaction costs. 

viii. It also has the capacity to accurately and quickly record a huge number of transactions. Because of its speed and precision, it provides for rapid and high-quality reporting.

Q13. Define the various types of Management information system report.

Ans: The various types of Management information system report are:

i. Summary report: It reports the whole summary of the corporate like profit and loss account and balance sheet.

ii. Client and provider report: Report of individual client and provider relating to sales and get account/ invoice, client reminder letters, purchase analysis.

iii. Demand report: it’s ready on condition that management needs it like stock valuation report, debt report.

iv. Exception report: Report like inventories, stock standing etc.

v. Management control reports: Budgets, cost centre reports, scenario reports, and other tools will be used to keep track of operations.

Q14. Describe the various component of the computer system. 

Ans: The Central Processing Unit, Input Devices, and Output Devices are the three components of a computer system. Input devices send data to the processor, which processes it and creates meaningful information for the user to see via output devices.

The various components of computer system in details:

i. Input unit: Input unit is the device to computer file into the pc system like keyboard, mouse, scanner, pen-drive, code and QR code scanner etc.

ii. Central process unit: it is the brain of the computer. It performs all the activities within a computer like reworking knowledge into helpful info. It consists of 3 units as management Unit Memory Unit Arithmetic Logic Unit (ALU).

iii. Output unit: once the info in the method by central process unit output is accessible to the finished user by the help of hardware devices like monitor, printer etc.

Q15. What are the roles of computer in accounting? 

Ans: The role of computer in accounting is as follows:

i. Recording transaction: It records daily transactions by either getting in it manually or by the help of a code or QR code scanner. It in addition assigns distinctive code to every account thus it’ll merely be better-known .

ii. Preparing accounting documents: It prepares bills, cash memos, sales invoice consumer vouchers etc. The manual method of documenting accounting transactions necessitates the keeping of account books such as three journals, a casebook, special purpose books, and a ledger, among others.

iii. Preparing budget: It transfers data into ledger automatically and prepares trial balance, profit and loss account and record .

iv. Storing data: It stores data for future use into a knowledge base management system.  With computerised accounting, it is now easier to keep track of accounting records.

NCERT Most important question:

Q1.What do you mean by Incomplete Record?

Answer: Incomplete record refers to those records which are not arranged according to the principles of double-entry.

Q2.Give two features of Incomplete Record?

Answer: The two features of incomplete record are.

• Lack of uniformity in the records.
• It is a mixed system of recording transactions of the business.

Q3.Give two reasons for keeping Incomplete Record?

Answer: The two reasons for keeping incomplete record are.

• Convenient Method- It is an easy and uncomplicated method of registering the company’s transactions as it does not demand any individual knowledge of the principles of double-entry
• Limited resources required – Since only cash book and few ledger accounts are recorded in this system, the staff required for support is also smaller as compared to the double-entry system.

Q4.Give two limitations of keeping Incomplete Record?

Answer: The two limitations of keeping incomplete record are.

• Trial Balance preparation is not possible- This system does not record both the debit and credit aspect of a transaction. Due to which the trial balance cannot be prepared, and the accuracy of the financial transaction cannot be rectified.
• Incomplete system- It is incomplete because of the fact that this system does not record both the aspect of a transaction (credit & debit). Also, this system does not follow any set of rules.

Q5.State two account maintained in an account from incomplete records.

Answer: The two account maintained in an account from incomplete records are.

• Cash account
• Personal Account

Q6.What is the common objective of single entry system and the double-entry system?

Answer: The common objective of single entry system and double entry system is to determine the net profit or loss of the company.

Q7.Which accounting principle is followed under single entry and also in double entry system?

Answer: Monetary unit principle

Q8.Which accounting principle is neglected under single entry and followed in double entry system?

Answer: Dual Aspect Concept

Q9.Which two methods are used in determining profit and loss in a single entry system?

Answer: The two methods are used in determining profit and loss in a single entry system are.

• Statement of Affairs Method
• Conversation Method

Q10.The single entry system account is maintained by.

1. Sole Trader

2. Company

3. Society

4. Government

Answer: Sole Trader

Q11.Single entry system of bookkeeping is.

1. Inaccurate

2. Unsystematic

3. Unscientific

4. All of these

Answer: All of these

Q12.When closing capital is more than opening capital, it denotes.

1. Profit

2. Loss

3. No Loss, No Profit

4. Profit, if there is no introduction of fresh capital

Answer: Profit, if there is no introduction of fresh capital

Q13.Can a limited company maintain its account under single entry system?

Answer: No, a limited company maintain its account under single entry system

Q14.What does it mean if closing capital is less than opening capital?

1. Profit

2. Loss

3. Loss, if there is no drawing

4. None of the above

Answer: Loss, if there is no drawing

NCERT Most important question:

Q1. Why adjustments are necessary for financial accounting?

Ans: A single transaction might have an impact on the cost and income of multiple financial periods. As a result, accounting adjustments are used to comply with the accrual concept. 

It can also be utilized if a transaction occurred during the period but was not recorded. Only a few incomes and costs from the current year need to be recorded in the company’s books of accounts.

Q2. Give details of few items which need adjustments.

Ans: The following are the things in the books of accounts that need to be adjusted:

• Defaulted debts
• Depreciation is the second type of depreciation.
• Earnings that have been accumulated
• Capital interest
• Earnings of the manager
• Closing the stock market

Q3. Pass the adjustment entry of the following items:

a. Closing stock

b. Outstanding expenses

c. Prepaid expenses

d. Accrued income

e. Income received in advance

Ans: Adjustment entries for the following items are as follows:

a. Closing stock :

Particular	Amount	Amount
Closing Stock A/c                       Dr.To Trading A/c	–	–

b. Outstanding expenses:  

Particular	Amount	Amount
Concerned Expenses A/c              Dr.To Outstanding expenses A/c	–	–

c. Prepaid expenses:

Particular	Amount	Amount
Prepaid expenses A/c               Dr. To Concerned  Expenses A/c	–	–

d. Accrued income:

Particular	Amount	Amount
Accrued income A/c          Dr. To Concerned income A/c	–	–

e. Income received in advance :

Particular	Amount	Amount
Concerned income A/c                  Dr.To Income received in advance  A/c	–	–

Q4. Give an example of Provision for bad and doubtful debts.

Ans: Provision for doubtful debts is shown on the balance sheet and deducted from the company’s debtors on the asset side. Rishi, for example, believes that 6% of his creditors from March will default on their payments in the coming year. The current year’s bad debts total Rs 13,000. This indicates that bad debts total Rs. 780 (13,000 * 6%).

Q5. What will be the adjustment entry of rent received in advance of Rs. 5,000?

a. Credit the rent account and debit the rent received in the advance account.

b. Debit rent account and credit rent received in the advance

account.

c. Debit profit and loss account and credit rent account.

d. All of the above.

Ans: The correct answer is b, which debits the rent account and credits the rent received in the advance account.

Q6. Explain the following items with adjustments entry:

a. Closing Stock

b. Outstanding expenses

c. Income earned but not received

d. Income received in advance

e. Depreciation

f. Manager’s commission

Adjustment Entry Treatment in

Ans: 

Adjustment	Adjustment Entry	Treatment in the balance sheet
Closing stock	Closing stock A/c          Dr.  To trading A/c	Shown on the asset side
Outstanding expenses	Expenses A/c                 Dr. To outstanding A/c  Expenses	Shown on the liabilities side
Income earned but not received	Accrued Income A/c     Dr. To Income A/c	Shown on the asset side
Income received in advance	Income A/c                   Dr. To Income received in Advance A/c	Shown on the liabilities side
Depreciation	Depreciation A/c        Dr. To Assets A/c	Deduction from the value of assets
Managers commission	Manager commission A/c To  o/s commission A/c	Shown on the liabilities side

Q7. From the following balances prepare a Profit and loss account.

Debit Balance	Amount	Credit balance	Amount
PurchaseWagesFuel andpowerOpeningstockSalariesGeneralexpensesInsurance	2,5842,35421,48824,20012,412 4,124 12,900	SalesRent	65,00070,000

Ans:

Expenses/ losses	Amount	Profit/gain	Amount
OpeningstockPurchaseWagesFuel andpowerGross profitc/d SalariesGeneralexpensesInsuranceNet profit	24,200 2,5842,35421,48814,374 65,000 12,4124,124 12,90054938	Sales Gross profitb/d Rent	a
	84,374

Q8. From the following balances, prepare the Profit and loss account and balance sheet.

Debit Balance	Amount	Credit Balance	Amount
PurchaseWagesOpening stockSalariesPostagePrinting andstationeryBills receivables	90,0007,88021,60012,4126,35412,900 5,640	SalesClosing stockOffice expensesSundry debtorsSundry creditorsCash at Bank	165,00070,0001,24714,50021,02013,487

Ans:

Trading Profit and loss A/c

Expenses/profit	Amount	Profit /gain	Amount
Opening stockPurchaseWagesGross profit c/dSalariesOffice expensesPostagePrinting andstationeryNet profit	21,60090,0007,8801,15,5202,35,000 12,4121,2476,35412,90082,607	SalesClosing stockGross profit b/d	165,00070,0002,35,000 1,15,520
	1,15,520		1,15,520

Balance sheet as of March 31

liabilities	Amount	Asset	Amount
Sundry creditorsAdd: Net profit	21,02082,607	Cash at bankBills receivablesSundry debtorsClosing stock	13,4875,64014,50070,000
	1,03,627		1,03,627

Q9. From the following balances, prepare the Profit and loss account and balance sheet.

Debit Balance	Amount	Credit Balance	Amount
PurchaseWagesOpening stockSalariesPostageBad debtsPrinting andstationeryBuildingBills receivablesRate and insurance	70,0005,98011,20021,1008,7991,99015,500 30,00015,0002,900	SalesOffice expensesSundry debtorsSundry creditorsCash at BankRent (Cr.)	198,0006,21415,85715,21015,2006,530

Prepare profit and loss account and Balance sheet keeping in regards the following adjustment:

a. Write off further bad debts with Rs. 780.

b. Rent receivables of Rs. 650.

c. Unexpired insurance Rs. 390.

Ans: Trading Profit and loss A/c

Expense/profit	Amount	Profit/gain	Amount
Opening stockPurchaseWagesGross profit c/d SalariesOffice expensesPostagePrinting andstationeryRate and insurance2,900 Less: unexpired insurance 390 Bad debts 1,990 Add: Further bad debts 780 Net profit	11,20070,0005,9801,10,820 1,98,000 21,1006,2148,79915,500 2,510 2,770  61,107	Sales Gross profit b/dRent 6,530Add: Accruedrent 650	198,000 1,98,000 1,10,820 7,180
	1,18,000		1,18,000

Balance sheet as of March 31

Liabilities	Amount	Assets	Amount
Sundry creditors Add: Net profit	15,210 61,107	Cash at bank Bills receivables Building Sundry debtors 15,857 Less: Bad debts 780 Accrued rent Unexpired insurance	15,200 15,000 30,000 15,077 650 390
	76,317		76,317

Q10. Define following terms with adjustment entries : 

Ans: Following terms are defined with their adjustment entries:

A. Provisions for bad and doubtful debts. 

Provision for bad and doubtful debts occurs when there is a possible reason for debtors who are doubtful that they will not pay the debts on time.

Particular	Amount
Profit and loss A/c                                                      Dr	–
To provision for doubtful debts          A/c	–

B. Depreciation:

Depreciation means the value of an asset is declined due to its usage in the passage of time +9*or wear and tear. It is usually treated as business expenses and is debited in profit and loss account. 

Particular	Amount
Depreciation A/c                                    Dr. To Concerned Asset A/c	–       –

C. Accrued income: The items of income that are earned during the accounting year but actually it is not received at the end of the same year.

Particular	Amount
Accrued income A/c                              Dr. To Concerned Income A/c	–     –

D. Prepaid expenses: Prepaid expenses are the expense need to be paid in future but they are paid in advance.

Particular	Amount
Prepaid expenses A/c                           Dr.   To Concerned Expenses A/c	–    –

E. Outstanding expenses: Prepaid expenses are the expense need to be paid in future but they are paid in advance.

Particular	Amount
Expenses A/c (Required)                      Dr. To Outstanding expenses A/c	–    –

NCERT Most important question:

Q1. Describe fixed assets

Ans: Fixed assets are assets that are expected to stay with the company for a long time and are not likely to be transformed into cash quickly. They are employed to generate capital revenue for the company. Land development, plant, machinery, equipment, furniture, and automobiles are only a few examples.

Q2. What are the needs to prepare a trading account?

Ans: The following are the reasons for keeping a trading account: 

i. To keep track of the company’s gross profit and gross loss.

ii. To obtain information on the company’s equity.

iii. It contains information about factory expenses.

iv. It also informs the company about the direct costs associated with the activity.

Q3. Why it is necessary for the company to prepare a profit and loss account.

Ans: The company must create a profit and loss account for the following reasons: i. It provides information on the company’s administrative expenses.

ii. The profit and loss statement determines the firm’s profitability.

iii. It aids in determining the company’s earnings per share.

Q4.  What do you mean by current liabilities and how they are treated in the financial statement?

Ans: The amount due to the creditor within a year is referred to as current liabilities. It could include a short-term loan, an account receivable, an advance, an unclaimed dividend, a variety of creditors, and income tax due, among other things. On the liabilities side of the balance sheet, current liabilities are added

Q5. Describe Earnings before interest and tax (EBIT).

Ans:  The difference between operating revenue and operating expense is known as operating profit. In other words, operating profit is the profit generated by business operations.

EBIT, or earnings before interest and taxes, is another term for operating profit. Net profit is added to non-operating expenses, and then non-operating income is subtracted to arrive at EBIT.

Q6.  State the purpose of preparing the financial statement in a business.

Ans: The objective of preparing a financial statement in a business is to:

i. Aid in the presentation of the true and fair value of the company’s performance.

ii. It aids the stakeholder in determining the company’s genuine position.

iii. It aids in determining the company’s overall profitability.

iv. It serves as the foundation for determining the annual dividend paid to shareholders.

v. It alerts the company to its flaws.

Q7. Differentiate between Capital Expenditure and Revenue Expenditure

Ans: Differentiate between Capital Expenditure and Revenue Expenditure. Given below:

Sr. No	Capital Expenditure	Revenue Expenditure
1.	It boosts the company’s earnings.	It helps to keep the company’s earning capability.
2.	It’s used to get the job done. for the fixed assetsCompany.	It is utilised for the company’s day-to-day expenses.
3.	It’s usually a one-time expense.	It is a recurrent company expense that provides advantages for one
4.	It is beneficial in more ways than one. one year or longer an era of accounting	It is a recurrent company expense that provides advantages for one accounting period.
5.	They’re written down ina financial statement	It is documented in the trading and profit and loss accounts.

Q8. Describe briefly the types of financial statements.

Ans: The two forms of financial statements created by any firm are

i. Trading and Profit & Loss Account – This account is also known as the company’s income statement since it shows the profit and loss earned by the company during a financial year. The trade account indicates the company’s gross profit from operations, whereas the profit and loss account shows the company’s net profit.

ii. The financial statement. A balance sheet is used to determine the financial position of a company’s assets and liabilities. I also assist in estimating the rate of return and reviewing the company’s capital structure.

Q9. Explain any five items of a trading account

Ans: The following are the five relative items in a trading account:

i.Opening stock: The opening stock is the previous year’s closing stock that can be used in the current year.

ii. Purchase: The gods are the things that the corporation buys from the supplier, whether on credit or in cash.

iii. Purchase return: Purchase return refers to goods that are returned to the provider.

iv. Freight inward: This refers to the expense of carriage or transportation to the company’s factory or warehouse.

v. Wages: Wages are the remuneration paid to factory workers.

Q10. Explain any five items of a profit and loss account

Ans: The five relative items in a profit and loss account are:

i. Salaries: The salaries paid to the office employee for administrative purposes. It

includes the cash salary and it is also paid in kind for accommodation, rent, transportation, medical etc.

ii. Commission paid: Commission paid to the agent for selling the goods.

iii. Electricity and power: power and electricity charges for an office building

iv. Rent: Rent paid on the office building 

v. Miscellaneous: A few little expenses are grouped together to save money.

referred to as Miscellaneous Expense.

NCERT Most important question:

Q1. Name any two types of commonly used negotiable instruments.
Ans
Cheques and Bills of exchange are the commonly used negotiable instruments.

Q2. Write two points of distinction between bills of exchange and promissory note.
Ans

Q3. State any four essential features of bill of exchange.
Ans
Essential features of bills of exchange are as follows:

1. A bill of exchange is a written order to make payment.
2. It is an unconditional order to make payment by a person i.e. drawee.
3. The amount of bill of exchange and the date of payment are certain.
4. It is signed by the drawer of the bill.
5. It is accepted by the drawee by signing on it.
6. The amount specified in the bill of exchange is payable either on demand or on the expiry of a fixed period.
7. The amount specified in the bill is payable either to a certain person or to his order or to the bearer of the bill.
8. It is stamped as per legal requirements.

Q4. State the three parties involved in a bill of exchange.
Ans
There are three parties in a bill of exchange:

1. Drawer is the person who makes the bill of exchange. She/he is a person who has granted credit to the person on whom the bill of exchange is drawn. The drawer is entitled to receive money from the drawee (acceptor).
2. Drawee is the person on whom the bill of exchange is drawn for acceptance and to whom credit has been granted by the drawer. He/she is liable to pay money to the creditor/drawer.
3. Payee is the person who receives the payment from the drawee. Usually the drawer and the payee are the same person.

Q5. What is meant by maturity of a bill of exchange?
Ans
The date calculated after adding 3 days of grace to the due date of a bill is called the date of maturity of a bill. It is to be noted that when a bill is to be payable on demand/at sight, then days of grace is not applicable. When the period of a bill is mentioned in days, the maturity of bill is calculated in days. Similarly, when the period of a bill is mentioned in months, the maturity of bill is calculated in months. In certain cases, when the maturity date of any bill falls on a public holiday, then the maturity date of the bill will be the previous business day.

Q6. What is meant by dishonour of a bill of exchange?
Ans
When the drawee of the bill fails to make the payment on the maturity date of the bill, then the bill is said to have been dishonoured. Hence, liability of the acceptor is restored. Entries made for recording dishonour of the bill of exchange are as follows:
In the books of drawer

Q7. Name the parties to a promissory note
Ans
There are two parties to a promissory note:

1. Maker- The person who makes the note and undertakes to pay the amount.
2. Payee- The person who receives the payment.

Q8. What is meant by acceptance of a bill of exchange?
Ans
A bill of exchange is a written instrument which contains an unconditional order directing a person to pay a certain amount on an agreed date. In other words, it is drawn by the creditor on her/his debtors to make a payment of a certain amount on the mentioned date. Such a bill comes into existence after the consent of both the parties. A bill cannot come into existence without the acceptance of a debtor. Hence, the debtor of the bill has to accept the terms of the bill, sign the same and make it a legal document.

Q9. What is noting of a bill of exchange?
Ans
When the drawee of the bill fails to make the payment on the maturity date of the bill, then the bill is said to have been dishonoured. To have a legal proof of the dishonour, the bill gets noted by the notary public who is approved by the central/state government. The notary public charges fees called the noting charges for noting and protesting the bill of exchange of its dishonour.

Q10. What is meant by renewal of a bill of exchange?
Ans
When the drawee does not have enough funds to make the payment, he may approach the drawer and ask for an extension of time for the payment. If the drawer agrees, then a new bill is drawn which is known as renewal of bill. The new bill may include interest for the extended period.

Q11. Give the performa of a Bills Receivable Book.
Ans

Q12. Give the performa of a Bills Payable Book.
Ans

Q13. What is retirement of a bill of exchange?
Ans
When the drawee of the bill pays off the amount of the bill before the maturity of the bill it is called retirement of the bill. Holder of the bill may give discount for such earlier payment which is called as ‘rebate’.
Entry in the books of the holder of the bill

Q14. Give the meaning of rebate.
Ans
If the drawee wishes to pay the bill before the due date of the bill to the holder and the holder accepts such request, then due to the early payment, the holder may give some discount to the drawee. Such a discount is termed as rebate.

Q15. Give the performa of a Bill of Exchange.
Ans
Performa of a Bill of exchange is given below.

 

NCERT Most important question:

Q1. Explain the reasons of depreciation in an asset

Ans: The reasons of depreciation in an assets are as explained below:

1. Depreciation in an asset can occur for a variety of reasons, including wear and tear from use or the passage of time.
2. Assets become obsolete after a specific amount of time due to obsolescence.
3. Assets’ legal rights may expire after a predetermined period. 
4. Depreciation may occur due to unusual circumstances such as an accident, fire, or natural disaster..

Q2. Define provision. What are the examples of provision?

Ans: The expenses or losses related to the present accounting period which are still not incurred cannot be recorded as their amount is not known with certainty are recorded in provision. The examples of provisions are:

1. Provision for Depreciation.
2. Provision for taxation.
3. Provision for doubtful and bad debt.
4. Provision for discount of debtors.
5. Provision for repair and renewal.

Q3. Differentiate between specific and general reserve.

Ans: The difference between specific and general reserve are:

S.no	General Reserve	Specific Reserve
1. 2. 3.	It was established as a free reserve.It can be utilised as a source of funding anything.It improves the financial situation of the firm’s position.	It was designed with a specific objective in mind.It is used purely for the purpose  for which it was designed.It has no effect on the company’s financial situation.

Q4. Differential between capital Reserve and revenue reserve

Ans: The difference between capital Reserve and revenue reserve are:

S.no	Capital Reserve	Revenue Reserve
1. 2. 3.	They arise as a result of the company’s day-to-day operations.They are accessible for dividend distribution.They’re made for unique objectives or unforeseeable circumstances.	They are not a result of the company’s day-to-day operations.They are not eligible for dividend distribution.They’re made to fit every situation as a legal necessity or as an example of accounting practice.

Q5. How provisions are shown in balance sheet ?

Ans: In the balance sheet, provisions are handled in the following ways:

1. On the asset side of the balance sheet, it is deducted from the concerned assets, and in the case of provision for doubtful debt, it is deducted from the amount of various debtors.
2. Provision for taxes and provision for repairs and renewals are recorded on the liabilities side of the balance sheet, alongside current liabilities.

Q6. The cost of truck is 1100000 and net salvage value after 15 years is 60000. Calculate the appropriate rate of depreciation using written down method.

Ans: Formula for Rate of Depreciation (R): R={1-n√S/C} ×100

r = Rate of depreciation

n = Expected useful life

s = Scrap value

c = Cost of an asset

By putting the values in formula

R= 1-15√60000/1100000 ×100 = 16.77%

Q7. Differentiate between straight line and written down methods of depreciation.

Ans: The difference between straight line and written down methods of depreciation are:

S.No	Straight Line Method	Written Down Method
1. 2. 3. 4.	Depreciation is charged according to the original cost or historical cost ofthe asset. Annual Depreciation amount is constant They are not recognised under Income Tax Law Best suited for assets which have low repair and maintenance cost	Depreciation is charged according to the Net book value of the asset Depreciation is highest in the first year then it reduces every year They are recognised under Income Tax Laws Best suited for assets which require highrepair and maintenance cost.

Q8. The initial cost of the truck is Rs. 2,60,000 and the useful life of the asset is 10 years and net scrap value is estimated to Rs. 60,000. Calculate the amount of depreciation to be charged every year using straight line method

Ans: Formula for calculating depreciation:Depreciation=Cost of asset- Estimated net residential valueEstimated useful life of the assetDepreciation=Cost of asset- Estimated net residential valueEstimated useful life of the asset

By putting value in formulaDepreciation=260,000- 60,000  10=20000Depreciation=260,000- 60,000  10=20000

Q9. Describe the advantage of straight line method and written down value method.

Ans: The straight line approach has the following advantages:

1. It is very basic and simple to grasp.
2. It allows for asset depreciation up to net scrap value or zero value.
3. Because depreciation is constant year after year, comparing profits from two or more years will be simple.
4. It is employed when the assets’ life expectancy can be determined.

The Written Down Method has the Following Advantages:

1. Its assumptions are more plausible.
2. It is recognised by tax legislation.
3. Because the first year has the biggest depreciation, the loss from obsolescence is minimised.

Q10. Explain the various types of reserve

Ans: The Reserves are Divided into Two Categories: 

1. General reserve and specific reserve: General reserve was developed as a free reserve, allowing the corporation to use it for any purpose. While a specific reserve is set aside for certain purposes such as workers’ compensation, dividend equalisation, and so on.
2. Capital reserve and revenue reserve: Capital reserve is formed from capital profit and does not emerge from the business’s running activities. They are not eligible for dividend distribution. Revenue reserve is formed through the business’s operating activities. They can be used to write off capital losses or to distribute bonuses.

Q11. What is ‘Depreciation’?
Solution:
Depreciation means fall in book value of depreciable fixed asset because of

1. wear and tear of the asset
2. passage/efflux of time
3. obsolescence
4. accident

A machinery costing ₹ 1,00,000 and its useful life is 10 years; so, depreciation is calculated as:
Annual Depreciation per annum
= Cost of Asset-Estimated Scrap Value/Expected or Estimated life of Asset
= 100000/10 = ₹ 10,000

Q12. State briefly the need for providing depreciation.
Solution:
The needs for providing depreciation are given below.

1. To ascertain the correct profit or loss: Correct profit or loss can be ascertained when all the expenses and losses incurred for earning revenues are charged to Profit and Loss Account. Assets are used for earning revenues and its cost is charged in form of depreciation from Profit and Loss Account.
2. To show true and fair view of financial statements: If depreciation is not charged, assets will be shown at higher value than their actual value in the balance sheet. Consequently, the balance sheet will not reflect true and fair view of financial statements.
3. For ascertaining the accurate cost of production: Depreciation on the assets, which are engaged in production, is included in the cost of production. If depreciation is not charged, the cost of production is underestimated, which will lead to low selling price and thus leads to low profit.
4. To provide funds for replacement of assets: Unlike other expenses, depreciation is non cash expense. So, the amount of depreciation debited to the profit and loss account will be retained in the business. These funds will be available for replacement of fixed assets when its useful life ends.
5. To meet the legal requirement: To comply with the provisions of the Companies Act and Income Tax Act, it is necessary to charge depreciation.

Q13. What are the causes of depreciation?
Solution:

1. Use of asset: Because of constant use of the fixed assets there exists a normal wear and tear which leads to fall in the value of the assets.
2. Passage of time: Whether assets are used or not, with the passage of time, its effective life will decrease.
3. Obsolescence: Because of new technologies, innovations and inventions, assets purchased currently may become outdated later which leads to the obsolescence of fixed assets.
4. Accident: An asset may lose its value due to mishaps such as a fire accident, theft or by natural calamities and they are permanent in nature.

Q14. Explain basic factors affecting the amount of depreciation.
Solution:

1. Original cost of asset: The total cost of an asset is taken into consideration for ascertaining the amount of depreciation. The total cost of an asset include all expenses incurred up to the point the asset is ready for use like freight expenses and installation charges.
   Total Cost= Purchase Price+ Freight Expenses+ Installation Charges.
2. Estimated useful life: Every asset has its useful life other than its physical life in terms of number of years and units used by a business. The asset may exist physically but may not be able to produce the goods at a reasonable cost. For example, an asset is likely to lose its useful value within 15years, its useful life, i.e., life for purpose of accounting should be considered as only 15 years
3. Estimated scrap value: It is estimated as the net realisable value of an asset at the end of its useful life. It is deducted from the total cost of an asset and the difference is written off over the useful life of the asset. For example, Furniture acquired at ₹ 1,30,000, its useful life is estimated to be 10 years and it is estimated scrap value ₹ 10,000.
   Depreciation per annum= 1,30,000-10,000/10 years= 12,000

Q15. Distinguish between straight line method and written down value method of calculating depreciation.
Solution:

Straight Line Method	Written Down Value Method
Depreciation is calculated on the original cost of an asset.	Depreciation is calculated on the reducing balance, i.e., the book value of an asset.
Equal amount of depreciation is charged each year over the useful life of the asset.	Diminishing amount of depreciation is charged each year over the useful life of the asset.
Book value of the asset becomes zero at the end of its effective life.	Book value of the asset can never be zero.
It is suitable for the assets such as patents, copyright, land and buildings which have lesser possibility of obsolescence and lesser repair charges.	It is suitable for assets which needs more repair in the later years such as plant and machinery and car.
As depreciation remains same over the years but repair cost increases in the later years, there will be unequal effect over the life of the asset.	As depreciation cost is high and repairs are less in the initial years but in the latter years the repair costs increase and depreciation cost decreases, there will be equal effect over the life of the asset.
It is not recognised under the income tax act.	It is recognised under the income tax act.

Q16. “In case of a long term asset, repair and maintenance expenses are expected to rise in later years than in earlier year”. Which method is suitable for charging depreciation if the management does not want to increase burden on profits and loss account on account of depreciation and repair.
Solution:
The written down value method is most appropriate to overcome the burden of the profit and loss account because of high depreciation and repair costs over the years of the asset. The cost of depreciation reduces and the repair and maintenance expenses increase over the yea₹ However, the entire burden will not get ease to the management.

Q17. What are the effects of depreciation on profit and loss account and balance sheet?
Solution:
The effects of depreciation on Profit and Loss Account are as follows:

1. An increase in depreciation will be debited in the profit and loss account which reduces net profit.
2. Hence total expenses increase which leads to an excess of debit over credit balance.

The effects of depreciation on Balance Sheet are as follows:

1. The original cost or book value of the concerned asset gets reduced.
2. The overall balance of asset’s column in the balance sheet gets reduced.

Q18. Distinguish between ‘provision’ and ‘reserve’.
Solution:

Provision	Reserve
It is charge against profit.	It is an appropriation of profit.
It is created to meet a specific liability or contingencies.	It is made for strengthening the financial position of the business. Some reserves are also mandatory under law.
It is recorded on the debit side of profit and loss account.	It is recorded on the credit side of the profit and loss appropriation account.
It can be shown either (i) by way of deduction from the item on the assets side for which it is created, or (ii) in the liabilities side along with the current liabilities.	It is shown on the liabilities side after capital.
It cannot be utilized for dividend distribution.	It can be utilized for dividend distribution.
It is never invested outside the business.	It can be invested outside the business.
It reduces net profits.	It reduces only divisible profit.

Q19. Give four examples each of ‘provision’ and ‘reserves’.
Solution:
Four examples of provision are given below.

1. Provision for bad and doubtful debts
2. Provision for discount on debtors
3. Provision for depreciation
4. Provision for tax

Four examples of reserve are given below.

1. General reserve
2. Capital redemption reserve
3. Dividend equalisation reserve
4. Debenture redemption reserve

Q20. Distinguish between ‘revenue reserve’ and ‘capital reserve’.
Solution:

Revenue Reserve	Capital Reserve
It is formed out of revenue profit which is earned from normal activities of business operations.	It is formed out of capital profit which is a gain from other than normal activities of business operations, such as sale of fixed assets.
It can be used for distribution of dividend.	It cannot be used for distribution of dividend.
It is created for increasing the financial position of the business.	It is created for the purpose of the Companies Act.

Q21. Give four examples each of ‘revenue reserve’ and ‘capital reserve’.
Solution:
Examples of revenue reserve are as follows:

1. General reserve
2. Investment equalisation reserve
3. Dividend equalisation reserve
4. Debenture reserve

Examples of capital reserve are as follows:

1. Issues of shares at premium
2. Profit on forfeiture of shares
3. Profit on sale of fixed assets
4. Profit on redemption of debentures

Q22. Distinguish between ‘general reserve’ and ‘specific reserve’.
Solution:

Specific Reserve	General Reserve
It is created for specific purpose.	It is not created for specific purpose.
It is not available for any future contingencies or expansion of business. It is utilised only for that purpose for which it is created.	It is available for any future contingencies or expansion of business. It strengthens the financial position.
Dividend equalisation reserve, debenture redemption reserve, development rebate reserves.	Contingency reserve and general reserve

Q23. Explain the concept of ‘secret reserve’.
Solution:
Secret reserves are created by overstating liabilities or understating assets which are not shown in the balance sheet. This will reduce tax liabilities, because the liabilities are overstated. It is created by management to avoid competition by reducing profit. Creation of secret reserve is not allowed by Companies Act, 1956 which requires full disclosure of all material facts and accounting policies while preparing final statements.

NCERT Most important question:

Q1. What are the objectives of preparing a trial balance?

Ans: The following are the three main goals of trial balance preparation:

• Verify that the ledger account is arithmetically correct.
• It aids in the detection of account mistakes.
• It aids in the preparation of the firm’s final account.

Q2. How rectification of errors is done.

Ans: If the error affects just one account, it can be corrected either by creating a journal entry or by providing an explanatory note, however if the error affects many accounts, it can only be corrected by submitting a journal entry.

Q3. What is the purpose of suspense accounts?

Ans: Even if the trial balance does not match the ledger, the suspense account aids in the preparation of the company’s financial statement. They are temporary accounts since they are prepared for a limited length of time and for a specific occasion.

Q4. What is the process of preparing trial balance?

Ans: The following is the procedure for preparing trial balance:

• Determine the balance of each ledger account. 
• Enter the balances of all debit and credit accounts in the appropriate columns.
• Add up the amounts on both the debit and credit sides.
• Balance the trial balance on the debit and credit sides.

Q5. What are the significance of agreement of trial balance?

Ans: The trial balance should balance, meaning the credit and debt sides should be equal. It will demonstrate that transaction inputs are correct and ledger calculations are arithmetically correct. It does not, however, prove that the transactions were accurately recorded.

Q6. Rectify the following errors in journal entry:

Cash sales Rs. 12,000

i) Were posted as 5,000 in sales account.

ii) Were posted to purchase account.

iii) Were not posted to sales account

Ans:

Particular	Debit	Credit
(i) Suspense A/c                          Dr. To Sales A/c       (Cash sales of 12,000 were recorded as 5,000 in the sales account, which has since been corrected.)(ii) Purchase A/c                            Dr.  To Sales A/c                 (Cash sales were posted to the purchase account instead of the sales account, which has already been addressed.)(iii) Suspense A/c                        Dr. To Sales A/c  (Cash sales that were not posted to the sales account have now been corrected.)	7,000 12,000 12,000	7,000 12,000 12,000

Q7. What are the ways of locating accounting errors by an accountant?

Ans: An accountant’s procedure for discovering accounting problems is as follows:

i. Determine whether the totals on both the debit and credit sides are equal.

ii.The ledger account balance should be compared to the trial balance balance.

iii. Compare the total of the debtor’s and creditor’s accounts to the trial balance and balance them.

iv. Compare the sum of the journal entry book to the ledger.

v. Double-check that all transactions are correctly and accurately recorded in the journal entry book.

vi.Compare the current year’s trial balance to the previous year’s trial balance prior year’s trial balance to see whether any figures are incorrect. Omitted

Q8. Explain the Various classifications of errors:

Ans:  The Various classifications of errors are explained below:

i. Commission errors: If transactions are recorded incorrectly, transaction totaling is incorrect, transactions are casted incorrectly, or transaction balancing is incorrect.

ii. Omission Inaccuracies: Omission of recording can result in errors in an account; these omissions in transactions might affect the account totally or partially.

iii. Principle Errors: Misplacement of payments and receipts between revenue and capital receipts and revenue and capital expenditure causes errors.

iv. Compensating errors: When two or more errors are reported in such a way that the effect of both is negated.

Q9. Explain the different methods of preparation of trial balance.

Ans:  A trial balance can be prepared in one of three ways:

i. Totals method: On the same side of the trial balance, the totals of each side as debit and credit of the ledger are indicated. As a result, the debit and credit sides of the trial balance must be balanced.

ii. Account balance: The credit and debit sides of the trial balance reflect the balances of all ledger accounts.

iii. Total-cumulative-balance account: This method combines the total and balance methods. This approach creates four columns, two of which contain debit and credit from the total method while the other two columns contain debit and credit from the balance method.

Q10. Define the various limitations of trial balance?

Ans:  The following are some of the trial balance’s limitations:

i. An entry that is not made in the journal will not appear in any of the ledge accounts. As a result, there will be no variation in trial balance.

ii. If an entry is made in the wrong account but on the proper side, the trial balance is unaffected.

iii. If an incorrect amount is written in the journal, the trial balance cannot be used to identify it.

iv. There will be no difference in the trial balance if the entry is not allocated to the correct account.Is this page helpful?

Q11. State the meaning of a Trial Balance.
Ans

Trial balance is a statement prepared to check the arithmetical accuracy of transactions recorded in the journal, posted into the ledger and balanced in the ledger accounts.  The balance of ledger accounts shows the difference between the total of the debit items and credit items in an account. Personal, real and nominal accounts are considered for preparing the trial balance. Generally, it is prepared at the end of an accounting year. However, it may be prepared at the end of any chosen period, which may be monthly, quarterly, half yearly or annually depending upon when it is required. It helps in the preparation of the financial statements.

Q12. Give two examples of errors of principle?
Ans

 Generally accepted accounting principles are to be followed to record the accounting entries. When accounting entries are recorded in contravention of accounting principles, it is known as an error of principle.

1. Wages paid for installation of new machinery debited to wages account:
2. Wages paid for installation of new machinery is a capital expenditure and accordingly machinery account should have been debited. But, here it is treated as revenue expenditure and is debited to wages account. Thus, it violates the accounting principle.
3. Amount spent on repair of building debited to machinery account: Expense on repair is revenue expenditure and not a capital expenditure. The amount should have been debited to repairs account and to the machinery account which is a capital account. Thus, it violates the accounting principle.

Q13. Give two examples of errors of commission?
Ans

 Errors of commission are committed because of wrong recording, wrong posting, wrong balancing and wrong casting of subsidiary books. Such errors affect the accuracy of the trial balance.

1. Cash received from a creditor worth Rs.5,000 is recorded in the cash book as Rs.500.
   The transaction is recorded in the cashbook as Rs.500 instead of Rs.5,000. This is an error because of the wrong recording of amount in the cash book.
2. Amount received from Arun Rs.2,000, is wrongly posted in Tarun’s account.
   In this transaction, Tarun’s A/c is credited instead of Arun’s A/c. This is referred to as an error of wrong posting of transactions.

Q14. What are the methods of preparing trial balance?
Ans

A trial balance can be prepared in the following three ways :

1. Totals Method: In this method, the total of the debit and the credit side of the ledger is determined and presented separately in the trial balance. The total of both the sides should match as the accounts are based on double entry system.
2. Balances Method: In this method, the balances of all ledger accounts are presented in their respective debit and credit columns of the trial balance. The total of both the sides should match as the accounts are based on double entry system and this method of preparing a trial balance is widely used because it helps in the preparation of financial statements.
3. Totals-cum-balances Method: This method is a blend of the totals and balances method. This method has four columns. The first two columns are to write the totals of the debits and credits of the various accounts and the other two columns are to write the debit or the credit balances of these accounts. This method is time consuming, and hence are not used widely.

Q15. What are the steps taken by an accountant to locate the errors in the trial balance?
Ans

Steps to identify the errors:

1. Recast the totals of the debit and credit columns of the trial balance.
2. Compare each account head and its amount appearing in the trial balance with that of the ledger to detect any difference in amount or omission of any account.
3. Compare the trial balance of the current year with that of the previous year to check the additions or deletions to any accounts and to verify if there is any unexplained difference in amounts.
4. Re-check the correctness of balances of individual accounts in their respective ledgers.
5. Re-check the accuracy of the postings in individual accounts from the transactions entered in the books of original entry.
6. If the difference between the debit and credit columns is of `1, `10, `100 or `1000, the casting of the subsidiary books should be re-checked.
7. If the difference between the debit and credit columns is divisible by 2, then there is a possibility that an amount equal to half the difference may have been posted to the wrong side of another ledger account.
8. The above point may also indicate a complete omission of a posting.
9. If the difference is divisible by 9, the mistake could be because of transposition of figures.
10. Still, if it is not possible to locate the errors, the difference in the trial balance for that moment is transferred to the suspense account. All the one-sided errors detected are rectified through this account.

Q16. What is a suspense account? Is it necessary that suspense account will balance off after rectification of the errors detected by the accountant? If not, then what happens to the balance still remaining in suspense account?
Ans
In certain cases, when the debit column and the credit column of a trial balance do not agree, then the difference of the trial balance is transferred to a temporary account which is called a suspense account. This account is created to avoid any delay in creation of the financial statements. If the debit column falls short of the credit column, then the suspense account is debited and if the credit column falls short of the debit column then the suspense account is credited.

When all the errors are detected and rectified, then the suspense account automatically gets balanced. However, when errors still exist and are not rectified, the suspense account will not balance off and the balance amount of the suspense account will have to be transferred to the balance sheet. The debit balance of the suspense account is shown on the assets side and the credit balance is shown on the liabilities side of the balance sheet.

Q17. What kinds of errors would cause difference in the trial balance? Also list examples that would not be revealed by a trial balance? 
Ans
One-sided errors are the errors which when committed affect the agreement of the trial balance. These errors affect only one account and any one side i.e. debit or the credit side of the account. Errors of partial omission, recording transactions with wrong amount, casting, posting of incorrect amount are examples of one-sided errors.
Two-sided errors do not affect the agreement of the trial balance. Here, are a few examples which would not be revealed in a trial balance:

1. Purchases from Mr. Shah, completely omitted to be recorded in the purchase book.
2. Purchases made from Vijesh, recorded in Ritesh’s account who is another creditor.
3. Stationary purchased for office use recorded in the purchase book.

NCERT Most important question: 

Q1. Prepare the proforma of bank reconciliation statement.

Ans: The proforma of bank reconciliation statement:

	Particular	Amount
Add: Less:	Balance as per cash bookCheques issued but not presentedInterest credited by the bank Cheques deposited but not credited by the bankBank charges no recorded in the cash bookBalance as per passbook

Q2. Bank Reconciliation Statement is prepared by:

A. Bank

B. Creditor

C. Debtor

D. Account holder in bank

Ans: D. Account holder in bank prepares Bank Reconciliation Statement.

Q3. What do you understand by bank overdraft?

Ans: The term “bank overdraft” refers to withdrawing funds from bank accounts in excess of their limits, resulting in the available amount falling below zero. Interest will be applicable only for the amount actually used from the overdraft account.

Q4. State true and false:

Qa. The amount in bank statement should tally with the balance shown in the cash book.

Ans:  The above statement is True. It must tally with each other for a period end.

b. Deposit exceeds the withdrawals it shows a debit balance.

Ans: The above statement is False. When deposits exceed withdrawals, a credit balance is displayed.

Q5. Why do we need reconciliation?

Ans: When two different statements are made, and the bank statement and the cash book kept by the users are compared, they frequently do not match. We also need to keep track of or create reconciliation statements for the same reason.

Q6. Explain what difference is caused by errors.

Ans: The following are two primary differences that are produced by bank reconciliation statement errors:

a. Errors made by the business when registering the transaction.

b. Errors committed by the bank during the transaction’s recording.

Q7. How to prepare Bank Reconciliation Statement?

Ans: There are two ways to make a bank reconciliation statement:

a. It is possible to prepare a Bank Reconciliation Statement without modifying the balance in the cash book.

b. After the cash book has been adjusted, a bank reconciliation statement is prepared.

Q8. How to deal with overdraft?

Ans: When an excess amount is removed from a bank account that exceeds its limit, it is referred to as a bank overdraft. Because businesses occasionally require more funds, they obtain an overdraft from the bank. The bank overdraft is treated as a negative amount on the bank reconciliation statement in this case.

Q9. What do you understand by correct cash balances?

Ans: Receipts and payments in the books may have errors that must be corrected. To repair these inaccuracies that occur during the recording of revenues and payments, a proper cash balance is computed before the statement is reconciled.

Q10. How we can deal with favourable balance?

Ans: The steps below will assist you in dealing with a favourable balance:

i. The first item on the statement is the balance in the cash book, which can also be the balance in the passbook.

ii. The top of the statement has Date written on it.

iii.  Amounts directly deposited in a bank account and cheques issued but not present for payment are added.

iv. All bank credits, such as dividends and interest, as well as direct bank deposits, are included.

v. Adjustments for errors are made using the rectification of errors principle.

vi. At this point, the net amount reported in the statement should match the balance in the passbook.

Q11. When the timing difference is created?

Ans: When a cash book and a bank passbook are compared, a temporal gap occurs, which is referred to as a timing difference. 

The temporal gap is caused by the following factors:

a. Cheques that have been paid into the bank but not yet collected cause a time lapse.

b. A cheque has been issued by the bank, but it has yet to be presented in order to receive payment

c. Amounts deposited straight into a bank account without using a debit card. Being noted in the company’s cash book

d. A direct debit (deduction) is made on your behalf by the bank and the customer, which the vast majority of customers are completely unaware of. As a result, a time gap has developed.

Q12. Prepare a bank reconciliation statement as on July 31, 2018 from the following details of Rachna & Co.

a. Balance as per the cash book Rs. 55,000.

b. Cheques for Rs 5,300 is deposited in the bank but not yet collected by the bank.

c. R.s 200 bank incidental charges debited to Rachna & Co. account, which is not recorded in cash book.

d. A cheque for Rs 20,000 is issued by Rachna & Co. not presented for payment.

Ans: In the books of Rachna & Co.
Bank reconciliation statement
as on July 31, 2018 

S.No.	Particular	Dr. Amt (+)	Cr. Amt (-)
	Balance as per Cash book Cheque issued but not presented for payment Cheques deposit but not credited by the bank Bank incidental charges debited by the bank Balance as per passbook (b/f)	55,000 20,000	5,300 200 69,500
		75,000	75,000

Q13. On March 31, 2018 the bank column of the cash book of Namrata & Co. showed a credit balance of Rs. 1,17,100 (Overdraft). From the following cash and bank statement particulars: Prepare bank reconciliation statement as on March 31, 2018.

a. Payment received from a customer directly by the bank Rs. 28,500 but no entry was made in the cash book.

b. Cheques received and recorded in the cash book but not sent to the bank of collection Rs. 13,400.

c. Cheques issued for Rs. 1,80,400 not presented for payment. Interest of Rs. 8,800 charged by the bank was not entered in the cash book. Prepare bank reconciliation statement

Ans:   In the Books of Namrata & Co
Bank reconciliation statement
    as on March 31, 2018 

S.No.	Particular	Dr. Amt (+)	Cr. Amt (-)
	Overdraft as per cash book Cheques received and recorded in cash book but not sent to the bankfor collection Interest on bank overdraft debited by the bank but not entered inthe cash book Payment received from the customer directly Credit in the bank A/c but not entered in the cash book cheque issued but not presented for payment Balance as per the passbook (b/f)	28,500 1,80,400	1,17,100 13,400 8,200 7,000 63,200
		2,08,900	2,08,900

Q14. Prepare bank reconciliation statement for Swarnim for March 31, 2018, from the following particulars Swarnim had on overdraft of Rs. 7,000 as shown by her cash book. Cheques amounting to Rs 1,500 had been paid in by her but were not collected by the bank. She issued cheques of Rs 750 which were not presented to the bank for payment. There was a debit in her passbook of Rs. 50 for interest and Rs. 150 for bank charges. 

Ans:                                         In the Books Swarnim
Bank reconciliation statement
    as on March 31, 2018   

S.No.	Particular	Dr. Amt (+)	Cr. Amt (-)
	Overdraft as per cash book Cheques received but not yet collected charged by the bank  Bank Charge   Cheque issued but not presented for payment   Balance as per the passbook	750 7,950	7,000 1,500 50 150
		8,700	8,700

Q15. What is a bank reconciliation statement?

Ans:

Just like the bank organisations maintain a cash book in order to record the bank and cash transactions, similar to this the bank also maintains an account for each customer in its book where all the deposits made by the customer are recorded. The deposits are recorded on the credit side of the account and the withdrawals are recorded on the debit side of the account. A copy of this is sent to the customer address is called the passbook. The bank balance presented by the cash book and the passbook does not always match. Thus,  the entries in them are compared and the differences that arise are rectified, and to reconcile the balances in the cash books and the passbook a statement is prepared, which is known as the reconciliation statement.

NCERT Most important Question:

Q1. Define day book in the process of recording transaction.

Ans: The day book contains all of the many types of transactions that are recorded in different books that are kept by the accountant.

Q2. Which special purpose book records all type of cash receipt and cash payment.

Ans: The cash book is a special purpose book that keeps track of all types of cash receipts and payments.

Q3. ______________is a subsidiary journal. Fill in the blank

Ans: Cash book is a subsidiary journal.

Q4. What type of transactions does double column cash book records?

Ans: Only cash and bank transactions are recorded in the double column cash book.

Q5. State the following statement is True or False :

a. More than one credit account and single debit account in an entry is known as compound entry.

Ans: The above statement is True. More than one credit  and single debit in an entry will have two credit accounts and one debit entry. This is called compound entry as it consists of more than two accounts.

b. Subsidiary book is also known as ledger.

Ans: The above statement is False, Subsidiary book is a part of ledger account.

c. Credit purchase of machinery is entered in purchase journal.

Ans: The above statement is False, As the purchase of machinery should be recorded in the journal proper account.

Q6. Discuss all types of special purpose book or day book.

Ans: The following are the special purpose books or special diaries that accountants keep:

• Purchase book
• Sales return book(Return inwards)
• Journal paper
• Purchase return book (Return outwards)
• Sales book
• Cash book

Q7. Differentiate between single and double column cash book.

Ans:  The difference between single column cash book and double column cash book are as follow:

Single Column Cash Book	Double Column Cash Book
Only one amount column is prepared.	Two columns are prepared.
Transactions are recorded in chronological order.	Transactions need not to be recorded in chronological manner.

Q8. Give names of four types of crossed cheques.

Ans: There are four different types of crossed checks:

i. Parallel crossed cheques

ii. Crossed cheques with company name

iii. Crossed cheques not negotiable

iv. Crossed cheques with bank name

Q9. What is a purchase book

Ans: It’s a book that keeps track of all transactions involving the purchase of goods or services, whether cash or credit. It records all the operations purchases along with the discounts received treatments from the suppliers.  

Q10. What is the need of contra entry?
Ans: Contra entry refers to a single transaction that is entered on both sides of the cash book. A contra entry is required to to offset receivables and payables between 2 non identical legal entities/subsidiary of a firm so that one final amount remains used in intercompany netting.

Q11.  Give the meaning of the following terms

i. Sales journal

Ans: Sales Journal: This is a journal that exclusively records credit sales.

ii. Purchase journal

Ans: Purchase Journal: This is a journal that solely records credit purchases

iii. Journal

Ans: Journal: A basic book in which all initial entry transactions are documented.

iv. Petty cash book

Ans: Petty cash book: This is a book that is used to keep track of small cash transactions.

Q12. What do you mean by single column cash book?

Ans: A single column cash book is a cash book that solely records a business’s cash transactions. It functions similarly to a typical cash account, with all cash receipts recorded on the left hand (debit) side and all cash payments recorded on the right hand (credit) side in chronological sequence. There is only one column. Cash is a debit and credit book with simply one column on each side. It solely keeps track of transactions involving cash receipt and payment. All transactions are recorded in the sequence in which they take place. The cash receipts are recorded on the debit side, while the cash payments are recorded on the credit side.

Q13. Give detailed explanation of the format of petty cash account.

Ans: Small transactions, such as postage, conveyance, cartage expenditures, and other expenses, are common in large corporations. Because all of these transactions are typically repetitious, the cashier is unable to record them in the main cash book. As a result, these transactions are kept in a separate book called the petty cash book.

Amount Received	Date	Particular	Voucher No.	Amount paid	Postage Charges	Conveyance Charges	Miscellaneous Charges

Q14. Describe the double-column transaction books

Ans: On both the debit and credit sides, the double column cash book (also known as two column cash book) includes two money columns – one for cash transactions and one for bank transactions. To put it another way, a single column cash book becomes a double column cash book when a bank column is added to both sides. The cash column records all cash transactions and acts as a cash account, while the bank column records all cheques receipts and payments and acts as a bank account. At the end of an appropriate time, which is generally one month, both columns are totalled and balanced like a regular T-account.

Q15. Describe three column cash book

Ans: On both the debit and credit sides of a three-column cash book, there are three columns of amounts. One column is for cash, another is for discounts, and a third is for bank transactions. Because the corporation uses a bank instead of cash, it has an additional column for bank transactions.

Q16. Enter the following transactions into cash book for the month of Jan 2018

i. Cash received from Ravi 4,000

ii. Rent Paid in cash 2,000

iii. Purchased goods from Mahesh for cash 6,000

iv. Sold goods for cash 9,000 

Ans : Cash book for the month of Jan 2018

Date	Particular	Amount	Date	Particular	Amount
i.	To Ravi	4,000	ii.	By Rent	2,000
iv.	To sales	9,000	iii.	By Purchase	6,000
			iii.	By Balance c/d	5,000
		13,000			13,000

Working Notes:

Journal entries

Date	Particular	Dr	Cr
i.	Cash A/c           Dr.	4,000
	To Ravi		4,000
	(being cash received from ravi)
ii.	Rent A/c           Dr.	2,000
	To Cash A/c		2,000
	(being rent paid on cash)
iii.	Purchase A/c       Dr.	6,000
	To Cash A/c		6,000
	(being purchased goods on cash from mahesh)
iv.	Cash A/c             Dr.	9,000
	To sale		9,000
	(being goods sold in cash)

Q17. What are the advantages of maintaining a petty cash book? 

Ans:  The following are some of the benefits of keeping a petty cash book:

i. The time of the chief cashier is spared because these small transactions are too enormous for a single cashier to handle, thus a petty cashier is hired.

ii. Because the task is split between the chief cashier and the petty cashier, both of them are responsible for the proper distribution of petty cash and big sums.

iii. It is easier to handle such tiny transactions separately if you keep a separate cash book for them. Bulkiness is avoided, and the situation is more managed.

iv. It simplifies the production of the main cash book by reducing the number of small cash transactions. 

v. It accurately and systematically tracks all of the business’s minor costs and gives information immediately when needed.

Q18. What do understand by petty cash book? 

Ans: Small transactions, such as postage, conveyance, cartage expenditures, and other expenses, are common in large corporations. Because all of these transactions are typically repetitious, the cashier is unable to record them in the main cash book. As a result, these transactions are kept in a separate book called the petty cash book.

As a result, the cashier keeps a petty cash book to keep track of these recurrent transactions in one area. Because the volume of small transactions is too much for a single cashier to handle, a petty cashier is hired.

Q19. What do you mean by balancing of cash book? 

Ans: All cash transactions relating to cash receipts and cash payments are recorded date-wise when they are recorded in cash books. When a cash book is kept, there is no need to open a separate cash book in the ledger. Because cash revenues cannot be less than cash payments, there is always a debit balance in the cash book.

The principal document for cash receipts is essentially a duplicate copy of the receipt that the cashier issues. Any invoice, bill, or other document used to make payments will be regarded as the source or principal document for documenting transactions.

Q20. Define the types of cash book. Explain 

Ans: There are four different kinds of cash books, They are explained below:

i. Single-column cash book: Each debit and credit side contains a single amount column.

ii. Double column cash book: On both the debit and credit sides, it has two columns of amounts.

iii. Three-column cash book: On both the debit and credit sides, it has three columns of amounts. One column is for cash, another is for discounts, and a third is for bank transactions.

iv. A nice cash book: Large corporations have a lot of little transactions. As a result, all little transactions are grouped together to produce a nice cash book.

In This Post we are  providing  CHAPTER 7 FEDERALISM NCERT MOST IMPORTANT QUESTION for Class 11 POLITICAL SCIENCE which will be beneficial for students. These solutions are updated according to 2021-22 syllabus. These MCQS  can be really helpful in the preparation of Board exams and will provide you with a brief knowledge of the chapter.

NCERT MOST IMPORTANT QUESTION ON FEDERALISM

Question 1.
Define federalism. Why it is needed in a plural society?
Answer:
Federalism is a system of government in which powers are divided between the centre and the states. In a true federation, the states surrender their certain powers and create a centre to administer on the issues which are of national and international importance. On local issues the states Government administrate. Such a system of Governance becomes necessary in a plural society because a number of states are formed on the basis of administration convince.’The regional aspirations and centres of the people of such formed states are realised in federal aspirations of the people remain unfulfilled and unrealised. Therefore for a fuller development of linguistic and cultural aspirations, the federal system is necessary.

Question 2.
Compare the federal system of India with a federal system of the United States of America.
Answer:
India and the United States of America both are the federal systems of Government but both have a different system. The USA is said to be a true federal system while different people say differently about the nature of the Indian federal system. Followings are the difference between India and USA

1. In America centre is the creation of states while in India states are the creation of the centre.
2. In the Constitution of India, the USA is described as a federation. In the Indian Constitution, India is described as Union of States.
3. In the USA more powers are given to states. In India, the centre is given more powers.
4. In USA residual powers are with states. In India, residual powers are given to the centre.

Question 3.
Explain the unity in diversity in India.
Answer:
It is rightly said about India that India is not a country, it is a continent. There are more than 20 major languages and several hundred minor ones. It has several major regions of different geography and Culture. In climate changes after every twenty kilometres. In spite of all such diversities, we share many common values, history and ethos. We all fought for national independence jointly in which Hindu, Muslim, Sikh and Christians participated. We do not share common part only we cherish common hopes and aspirations. This has led to national leaders to visualise India as a country where there is unity in diversity. India in its last 60 years of journey of the post-independent period has stood the test of this slogan ie, unity in diversity.

Question 4.
Write the main features of a federal system.
Answer:
Federalism, as a principle of Government, has evolved differently in different situations yet there are some basic features which are generally considered essential for a federal system. These areas under.

1. Written Constitution & double Constitution
2. Rigid Consitution
3. The institutional mechanism to accommodate two sets of politics.
4. Two sets of identities and loyalties of the people to their region as well as their nation.
5. Distribution of powers between two sets of Government one at centra! level and other at the state level.
6. Bicameral legislative
7. Independent Judiciary
8. Double Citizenship
9. Supremacy of Constitution
10. Residual powers with the states

Question 5.
Write federal features of the Indian constitution.
Answer:
Indian society is a plural society so there is a plural polity in India. Followings are the main dominant features in the Indian Constitution on the basis of which we can term the Indian Constitution as a federal system:

1. Written Constitution
2. Rigid Constitution
3. Supremacy of Constitution
4. Divisions of Powers between centre and states.
5. Double sets of polity
6. Double set of loyalties of the people. One for their regions and others for the nation
7. Bicameral Legislature
8. Independent judiciary to settle the dispute between the centre and states.

Question 6.
Write the main unitary features of Indian constitution.
Answer:
Structurally Indian Constitution appears to be federal but there are some features in Indian Constitution which make it unitary. These are as under:

1. There is no word federation in the Indian constitution. Rather it is the union of states.
2. Unequal distribution of powers between the centre and states.
3. Unequal representation of the states in the upper House.
4. Emergency powers of the President
5. Integrated judiciary
6. President Rule in the states
7. Important appointment by the President
8. Governor as the agent of centre in States.
9. Single Constitution
10. Single Citizenship
11. The dominance of centre on Election Commission, Planing commission and NDC
12. The increasing role of All India Government Service

Question 7.
Write Legislative relations between the centre and states.
Answer:
Subjects are divided between the centre and states for this purpose three lists are formed which areas:

1. Central list 96 subjects (Parliament Legislates on their subjects)
2. State list 66 subjects (State legislative legislates these subjects
3. Concert List 47 subjects (on these issues central Parliament, as well as the state legislature, can legislate on their issue but in case of conflict central view will prevail)
4. Residual powers rest with the centre.
5. In Emergency Parliament can Legislate on any subject of state list
6. In President Rule, Parliament will make law for a state w. which President Rule is in force.
7. To fulfil international commitment Parliament can make law on a state subject.
8. Governor can refer to President any bill which is passed by the State Assembly.

Question 8.
What is President Rule?
Answer:
Under Art 356 of the Indian Constitution Governor can recommend President Rule in the state in the following circumstances:

1. If the law and order is broke down in the state
2. There is political instability in the state
3. No party has secured a majority for the formation of a Government and there is political hoarding
4. If the constitutional machinery has failed and the government is not being run according to the provisions of the Constitution.

It is the discretionary power of the Governor to see that such a situation has arisen or not as to warrant the imposition of President Rule.

Question 9.
Explain the executive relations between the centre and states.
Answer:

1. Art 257 of the Constitution says that the executive power of every state shall be so exercised as not to implode or prejudice the exercise of the executive powers of the union and the executive powers of the Union shall extend to the giving of such directions to a State as may appear to- the government of India to be necessary for that purpose.
2. States will make their policies as per in tune with the policies of the central government.
3. During an emergency, the President may give any direction to the states as seems necessary. During an emergency, the administration of the states comes in the hands of President Rule because it becomes unitary in Emergency.
4. Governor is the agent of the centre and he can recommend imposition of President Rule in the state in the given circumstances.
5. All India Service (IAS and IPS other) control the states development and law and order.

Question 10.
Explaining the measuring bf federalism, discuss the features and nature of Indian federalism.
Answer:
Federalism is a system of government where powers are divided between the centre and states. It involves the territorial distribution of powers.

It is very much needed for a divine plural society. Since India is also a plural society, the Indian constitution-makers also introduced dominant features of a federal Government like the written constitution, division of powers between the centre and states, bicameral legislature and independent judiciary. At /the same time many threats were emerging for national integration. Therefore they introduced the provision for national integration and a strong centre.

They adopted the concept of the union of states which crates federal structure with the strong unitary feature. The concept of the union of states was adopted from Canada. The most important unitary, the feature is:

1. Unequal distribution of powers between the centre and states.
2. Residual powers are with the centre
3. Provision of Emergency powers for the President (Art 352)
4. Provision of President rule in the states Art 356
5. Integrated judiciary
6. Integrated bureaucracy and dominance of All India Services in the states.
7. Appointment of Governor by the President
8. Governor’s role as the agent of the centre.
9. Amendment powers are with the centre.
10. The dominance of centre over NDC, planing commission UPSC and Finance Commission and Election Commission;

Therefore India is a federal system with strong unitary feature^ on the basis of its working during the last 60 years. K.C. Where has termed as the co-operative federal system and Morris Jones has termed it a Bargaining system.