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Chapter 1: Introduction To Book - Keeping and Accountancy: Exercise 1 (Page 16)

Book

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183 views157 pages

Chapter 1: Introduction To Book - Keeping and Accountancy: Exercise 1 (Page 16)

Book

Uploaded by

Pappu

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Download as PDF, TXT or read online on Scribd

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Chapter 1: Introduction to Book - Keeping and

Accountancy
EXERCISE 1 [PAGE 16]

Exercise 1 | Q 1 | Page 16

Answer in One Sentence:

QUESTION

What is Book-keeping?

Book-keeping is the science and art of correctly recording in the books of accounts, all
those business transactions that result in the transfer of money or money’s worth.

SOLUTION

What is Drawings?

SOLUTION

The amount of cash or value of goods, assets, etc. withdrawn from the business by the
owner for personal use is known as Drawings.

Exercise 1 | Q 5 | Page 16

QUESTION

Answer in One Sentence:

Book-keeping is providing all required financial information to the businessman.

SOLUTION

Book-keeping is providing all required financial information to the businessman.

- Decision making

Exercise 2 | Q 8 | Page 16

QUESTION

Give the word term or phrase which can substitute the following statement:

Property of any description owned by Proprietor.

SOLUTION

Property of any description owned by Proprietor. - Assets

Exercise 2 | Q 9 | Page 16

QUESTION

Give the word term or phrase which can substitute the following statement:

Assets which remain in the business for only for short time and can be converted into cash
very easily.

SOLUTION

Assets which remain in the business for only for short time and can be converted into cash
very easily. - Current assets

Select the most appropriate alternative from the given below and rewrite the
statement.

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

Accrual

Hybrid

Cash

Mercantile

SOLUTION

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

Exercise 3 | Q 3 | Page 17

QUESTION
Select the most appropriate alternative from the given below and rewrite the
statement.

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

Bad Debts

Debts

Debtors

Doubtful debts

SOLUTION

Amount which is not recoverable from customer is known as Debts.

Exercise 3 | Q 4 | Page 17

QUESTION

Select the most appropriate alternative from the given below and rewrite the
statement.

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

Entity Concepts

Dual Aspect Concept

Disclosure Concept

Cost Concept

SOLUTION

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

Exercise 3 | Q 5 | Page 17

QUESTION

Select the most appropriate alternative from the given below and rewrite the
statement.

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

Goods

Income
Property

Expenditure

SOLUTION

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

Exercise 3 | Q 6 | Page 17

QUESTION

Select the most appropriate alternative from the given below and rewrite the
statement.

_________ means a reputation of a business valued in terms of money.

Trademark

Assets

Patents

Goodwill

SOLUTION

Goodwill means a reputation of a business valued in terms of money.

Exercise 3 | Q 7 | Page 17

QUESTION

Select the most appropriate alternative from the given below and rewrite the
statement.

Cash flow statement is prepared and presented for the period for which the profit and loss
account is prepared

AS-3

AS-10

AS-6

AS-2

SOLUTION

AS-3

Exercise 3 | Q 8 | Page 17
QUESTION

Select the most appropriate alternative from the given below and rewrite the
statement.

The immediate recognition of loss is supported by principle of __________.

Conservatism

Objective

Matching

Consistency

SOLUTION

The immediate recognition of loss is supported by the principle of Conservatism.

Exercise 3 | Q 9 | Page 17

QUESTION

Select the most appropriate alternative from the given below and rewrite the
statement.

Brief explanation of an entry is called as _________.

Folio

Narration

Posting

Journalising

SOLUTION

Brief explanation of an entry is called as Narration.

Exercise 3 | Q 10 | Page 17

QUESTION

Select the most appropriate alternative from the given below and rewrite the
statement.

An act of exchange of things or services between the two parties is termed as______.

Ledger

Transfer
Transaction

Business

SOLUTION

An act of exchange of things or services between the two parties is termed

as Transaction.

EXERCISE 4 [PAGE 17]

Exercise 4 | Q 1 | Page 17

QUESTION

State whether the following statement is true or false with reasons:

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

True

False

SOLUTION

This statement is False.

Bookkeeping and accounting are not one and the same thing. Book-keeping is the art of
recording business transactions in a set of books whereas accounting refers to analysis
and interpretation of book-keeping records. Book-keeping itself is a part and parcel of
accounting.

Exercise 4 | Q 2 | Page 17

QUESTION

State whether the following statement is true or false with reasons:

Conservatism means to follow the safe side.

True

False

SOLUTION

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

True

False

SOLUTION

This statement is True.

SOLUTION
Bills Payable is an asset of the business. - Disagree

Exercise 5 | Q 4 | Page 18

QUESTION

Do you agree or disagree with the following statements :

In Book-keeping and Accountancy, only non-monetary transactions are recorded.

Agree

Disagree

SOLUTION

In Book-keeping and Accountancy, only non-monetary transactions are recorded.

- Disagree

Exercise 5 | Q 5 | Page 18

QUESTION

Do you agree or disagree with the following statements :

Totalling of Journal or Ledger is called as casting.

Agree

Disagree

SOLUTION

Totalling of Journal or Ledger is called as casting. - Agree

EXERCISE 6 [PAGE 18]

Exercise 6 | Q 1 | Page 18

QUESTION

Complete the following sentence:

Revenue arising as a result of business transactions is known as ____________

SOLUTION

Revenue arising as a result of business transactions is known as Income

Exercise 6 | Q 2 | Page 18
QUESTION

Complete the following sentence:

Excess of gross profit over operating expenses is______

SOLUTION
A person to whom business owes money for the goods or services is known as
the creditor.
Chapter 2: Meaning & Fundamentals of Double Entry
Book-Keeping
EXERCISE 1 [PAGE 38]

Exercise 1 | Q 1 | Page 38

QUESTION

Answer in one sentence only:

What is Double Entry System?

SOLUTION

Double entry system is the most scientific method of recording all business transactions in
the books of accounts by giving double or two fold effects of each transaction.

Exercise 1 | Q 2 | Page 38

QUESTION

Answer in one sentence only:

What is an Account?

SOLUTION

An account is a summarized record of transactions relating to a particular person, asset,

liability, particular head of expense or income recorded at one place.

Exercise 1 | Q 3 | Page 38

QUESTION

Answer in one sentence only:

State the meaning of the Single Entry System.

SOLUTION

A single entry system of accounting records only cash books and personal accounts and
thus does not provide accurate information about the financial position of a business.

Exercise 1 | Q 4 | Page 38

QUESTION
Answer in one sentence only:

What is Personal Account?

Accounts represent assets and properties owned by the business having monetary value
are known as Real Account.
Exercise 1 | Q 8 | Page 38

QUESTION

Answer in one sentence only:

Give two examples of income and gains.

SOLUTION

Examples of income and gains are:

(1) Discount received,

(2) Rent received,
(3) Profit on sale of furniture.

Exercise 1 | Q 9 | Page 38

QUESTION

Answer in one sentence only:

State the rule of Personal Account.

SOLUTION

As per Golden Rules, rule of Personal account is as follows:

(1) Debit the receiver,
(2) Credit the giver.

Exercise Q.1 | Q 10 | Page 38

QUESTION

Answer in one sentence only:

How many methods of recording accounting information are there?

SOLUTION

(1) Indian system (Mahajani Deshinama system)

(2) English system:

1. Single Entry System.

EXERCISE Q.2 [PAGE 39]

Exercise 2 | Q 1 | Page 39

QUESTION
Write one word/term or phrase which can substitute the following statement.

Method of Accounting which records both aspects of the transaction.

SOLUTION

Method of Accounting which records both aspects of the transaction. - Double entry
system

Exercise 2 | Q 2 | Page 39

QUESTION

Write one word/term or phrase which can substitute the following statement.

Right hand side of an account.

SOLUTION

Right hand side of an account. - Credit (Cr.) side

Exercise 2 | Q 3 | Page 39

QUESTION

Write one word/term or phrase which can substitute the following statement.

Name of the account which is debited when proprietor uses business money for personal
use.

SOLUTION

Name of the account which is debited when proprietor uses business money for personal
use. - Drawings A/C

Exercise 2 | Q 4 | Page 39

QUESTION

Write one word/term or phrase which can substitute the following statement.

Accounts of Assets and Properties.

SOLUTION

Exercise 2 | Q 5 | Page 39

QUESTION

Write one word/term or phrase which can substitute the following statement.

Accounts of Expenses and Losses and Incomes and Gains.

SOLUTION

Accounts of Expenses and Losses and Incomes and Gains. - Nominal A/c

Exercise 2 | Q 10 | Page 39
QUESTION

Write one word/term or phrase which can substitute the following statement.

Scientific system of recording business transactions.

SOLUTION

Scientific system of recording business transactions. - Double entry system

EXERCISE 3 [PAGES 39 - 40]

Exercise 3 | Q 1 | Page 39

QUESTION

Select the most appropriate alternatives from the given below and rewrite the
statement:

International Accounting day is observed on ______

10th November

12th November

10th December

15th December

SOLUTION

International Accounting day is observed on 10th November.

Exercise 3 | Q 2 | Page 39

QUESTION

Select the most appropriate alternatives from the given below and rewrite the
statement:

Conventional system of accounting is ______

English entry system

Double entry system

Indian system

None of these

SOLUTION
Conventional system of accounting is Indian system.

Exercise 3 | Q 6 | Page 39

QUESTION

Select the most appropriate alternatives from the given below and rewrite the
statement:

Goodwill is ______ asset.

Tangible

Current

an intangible

None of these

SOLUTION

Exercise 3 | Q 7 | Page 39

QUESTION

Select the most appropriate alternatives from the given below and rewrite the
statement:

Prepaid expenses is ______ account.

Real

Personal

Nominal

Income

SOLUTION

Prepaid expenses is a Personal account.

Exercise 3 | Q 8 | Page 40
QUESTION

Select the most appropriate alternatives from the given below and rewrite the
statement:

Debit the receiver, Credit the ____________

Goes out

Giver

Income and gains

Comes in

SOLUTION

Debit the Receiver, Credit the Giver.

Exercise 3 | Q 9 | Page 40

QUESTION

Select the most appropriate alternatives from the given below and rewrite the
statement:

Debit what comes in, Credit what ______

Giver

Expenses and losses

Goes out

Income and gains

SOLUTION

Debit what comes in, Credit what Goes out.

Exercise 3 | Q 10 | Page 40

QUESTION

Select the most appropriate alternatives from the given below and rewrite the
statement:

Debit all ______ and Credit all income and gains.

Giver

Expenses and losses

Goes out

None of these

SOLUTION

Debit all expenses and losses and Credit all income and gains.

EXERCISE 4 [PAGE 40]

Exercise 4 | Q 1 | Page 40

QUESTION

State whether the following statement is True or False with reasons:

Outstanding expense is a nominal account.

True

False

SOLUTION

This statement is False.

The amount payable to a person is known as an outstanding expense in the business. As a

person is involved, the outstanding expense is nothing but a personal account.

Exercise 4 | Q 3 | Page 40

QUESTION

State whether the following statement is True or False with reasons:

Every debit has equal and corresponding credit.

True

False

SOLUTION

This statement is True.

Exercise 4 | Q 9 | Page 40

QUESTION

State whether the following statement is True or False with reasons:

Trade discount account is a nominal account.

True

False
SOLUTION

This statement is False.

When a discount is allowed on catalogue price or list price, it is known as a Trade discount,
which is a general discount to be allowed to every customer. From the accounting view
point, it is not to be recorded in the books. So, we can say that the trade discount itself is
not an account.

Exercise 4 | Q 10 | Page 40

QUESTION

State whether the following statement is True or False with reasons:

Personal transactions of proprietor are recorded in the books of account of the business.

True

False

SOLUTION

This statement is False.

As per the Business entity concept, business is a separate and distinct unit from the
owner/s. So, personal transactions of proprietor are not to be recorded in the books of
account of the business.

Exercise 4 | Q 11 | Page 40

QUESTION

State whether the following statement is True or False with reasons:

Motor car account is a Real Account.

True

Capital amount of a proprietor is a liability of the business and asset of the proprietor.
Therefore, the total liabilities of the business are capital plus other liabilities. The
accounting equation signifies that the assets of a business are always equal to the total of
its liabilities and capital. Therefore, the equation is expressed as Assets = Liabilities +
Capital.
Exercise 4 | Q 15 | Page 40

QUESTION

State whether the following statement is True or False with reasons:

Trademark account is a personal account.

True

False

SOLUTION

Scientific and complete system of recording is known as ______

SOLUTION

Scientific and complete system of recording business transactions is known as double

Land and Building account is a real account.

Exercise 5 | Q 7 | Page 40
QUESTION

Fill in the blank:

Cash Book and Personal Accounts are only maintained under ______ system.

SOLUTION

Cash book and Personal accounts are only maintained under Single entry system.

Exercise 5 | Q 8 | Page 41

QUESTION

Fill in the blank:

Debit what comes in and credit what goes out is the rule of ______ account.

SOLUTION

Laptop account is a real account.

Chapter 3: Journal
EXERCISE 1 [PAGE 81]

Exercise 1 | Q 1 | Page 81

QUESTION

Answer in One Sentence:

What is Journal ?

SOLUTION

A journal is a book prepared to classify or sort out transactions in a form convenient for
their subsequent entry in the ledger.

Exercise 1 | Q 2 | Page 81

QUESTION

Answer in One Sentence:

What is Narration?

SOLUTION

Exercise 1 | Q 3 | Page 81

QUESTION

Answer in One Sentence:

What is GST?

SOLUTION

What is the meaning of Combined Entry?

SOLUTION

A journal entry which contains more than one debit or more than one credit or both effects
of a transaction is known as a combined/compound journal entry.

Exercise 1 | Q 7 | Page 81

QUESTION

Answer in One Sentence:

Which account is debited, when rent is paid by debit card?

SOLUTION

When rent is paid by debit card, Rent A/c is debited.

Exercise 1 | Q 8 | Page 81

QUESTION

Answer in One Sentence:

Which discount is not recorded in the books of account?

SOLUTION

Trade discount is not recorded in the books of account.

Exercise 1 | Q 9 | Page 81
QUESTION

Answer in One Sentence:

In which order monthly transactions are recorded in a journal?

SOLUTION

In the order of their occurrence, monthly transactions are recorded in a journal.

Exercise 1 | Q 10 | Page 81

QUESTION

Answer in One Sentence:

Which account is credited, when goods are sold on credit?

SOLUTION

When goods are sold on credit, Sales account is credited.

EXERCISE 2 [PAGE 81]

Exercise 2 | Q 1 | Page 81

QUESTION

Give one word/term or phrase for the following statement:

A book of prime entry.

SOLUTION

Journal

Exercise 2 | Q 2 | Page 81

QUESTION

Give one word/term or phrase for the following statement:

The tax imposed by Central Government on Goods and Services

SOLUTION

GST Goods and Service Tax

Exercise 2 | Q 3 | Page 81
QUESTION

Give one word/term or phrase for the following statement:

Brief explanation of an entry.

journalising

SOLUTION
Recording of transaction in Journal is called journalising

[Exercise Q3 | Q 5 | Page 81

QUESTION

Select the most appropriate alternative from the alternatives given below and
rewrite the statement.

The ______ column of the Journal is not recorded at the time of journalising

date

particulars

ledger folio

amount

SOLUTION

The ledger folio column of the Journal is not recorded at the time of journalising.

[Exercise 3 | Q 9 | Page 82

QUESTION

Select the most appropriate alternative from the alternatives given below and
rewrite the statement.

Loan taken from Dena Bank should be credited to ________

Capital A/c

Dena Bank A/c

Cash A/c

Dena Bank Loan A/c

SOLUTION

Loan taken from Dena Bank should be credited to Dena Bank Loan A/c.
[Exercise 3 | Q 10 | Page 82

QUESTION

Select the most appropriate alternative from the alternatives given below and
rewrite the statement.

Purchase of animals for cash should be debited to ________

Live stock A/c

Goods A/c

Cash A/c

Bank A/c

SOLUTION

Purchase of animals for cash should be debited to Live stock A/c.

[EXERCISE 4 [PAGE 82]

[Exercise 4 | Q 1 | Page 82

QUESTION

State whether the following statement is True or False with reasons.

Narration is not required for each and every entry.

True

False

SOLUTION

This statement is False.

Narration is nothing but brief explanation of entry/transaction, based on that one Can pass
journal entry. Therefore, narration is required for each and every entry.

[Exercise 4 | Q 2 | Page 82

QUESTION

True

False

SOLUTION

This statement is False.

Trade discount is a general discount, allowed on catalog price or on the price list price. For
increasing the sale or to give sufficient margin to retailers, generally trade discount is
allowed. Therefore, the trade discount is not to be recorded in the books of accounts.

[Exercise 4 | Q 6 | Page 82

QUESTION

State whether the following statement is True or False with reasons.

Goods lost by theft is debited to goods A/c.

True

False

SOLUTION

This statement is False.

As per Real A/c rule, debit what comes in and credit what goes out. Here, goods lost by
theft means goods goes out. Therefore, goods lost by theft is to be credited to Goods A/c.

[Exercise 4 | Q 7 | Page 82

QUESTION

State whether the following statement is True or False with reasons.

If rent is paid to landlord, landlord's A/c should be debited.

True

False

SOLUTION

This statement is False.

Rent paid is an expense and Rent paid A/c should be debited, not Landlord A/c be debited.
[Exercise 4 | Q 8 | Page 82

QUESTION

State whether the following statement is True or False with reasons.

Book Keeping records monetary and non-monetory transactions

True

False

SOLUTION

This statement is False.

In the books of accounts, only financial transactions are to be recorded. Means non-
monetary transactions are not be recorded.

[Exercise 4 | Q 9 | Page 82

QUESTION

State whether the following statement is True or False with reasons.

Drawings made by the proprietor increases his capital

True

False

SOLUTION

This statement is False.

Drawings means, anything withdrawn by proprietor in the form of cash, goods, assets or
services from the business for personal use. And it decreases the capital of proprietor.

[Exercise 4 | Q 10 | Page 82

QUESTION

State whether the following statement is True or False with reasons.

GST paid on purchase of goods Input tax A/c should be debited.

True

False

___________ discount is not recorded in the books of accounts.

SOLUTION
Trade discount is not recorded in the books of accounts.

[Exercise 5 | Q 5 | Page 82

QUESTION

Fill in the blank:

___________ is concession allowed for bulk purchase of goods or for immediate payment.

SOLUTION

Cash discount is concession allowed for bulk purchase of goods or for immediate
payment.

[Exercise 5 | Q 6 | Page 82

QUESTION

Fill in the blank:

Every Journal Entry requires ________.

SOLUTION

Every Journal Entry requires voucher.

[Exercise 5 | Q 7 | Page 82

QUESTION

Fill in the blank:

___________ discount is always recorded in the books of accounts.

SOLUTION

Cash discount is always recorded in the books of accounts.

[Exercise 5 | Q 8 | Page 82

QUESTION

Fill in the blank:

___________ is the document on the basis of which the entry is recorded in journal.

SOLUTION

Voucher is the document on the basis of which the entry is recorded in journal.

[Exercise 5 | Q 9 | Page 82
QUESTION

Fill in the blank:

There are _______ parties to a cheque

SOLUTION

There are three parties to a cheque

[Exercise 5 | Q 10 | Page 82

QUESTION

Fill in the blank:

The _______ cheque is more safe than other cheques as it cannot be encashed on the
counter of the bank.

SOLUTION

The crossed cheque is more safe than other cheques as it cannot be encashed on the
counter of the bank.

EXERCISE 6 [PAGE 83]

Exercise 6 | Q 1 | Page 83

QUESTION

Prepare specimen of Tax Invoice

SOLUTION
Exercise 6 | Q 2 | Page 83

QUESTION

Prepare specimen of Receipt

SOLUTION
Exercise 6 | Q 3 | Page 83

QUESTION

Prepare specimen of Crossed cheque

SOLUTION

Exercise 6 | Q 4 | Page 83
QUESTION

Prepare specimen of Cash voucher.

SOLUTION

[EXERCISE 7 [PAGE 83]

[Exercise 7 | Q 1 | Page 83

QUESTION

Correct the following statement and rewrite the statement:

All business transactions are recorded in the Journal.

SOLUTION

Only monetary transactions are recorded in the Journal.

[Exercise 7 | Q 2 | Page 83

QUESTION

Correct the following statement and rewrite the statement:

Cash discount is not recorded in the books of accounts

Machinery purchased by the proprietor increases his Capital.

Chapter 4: Ledger
EXERCISE 1 [PAGE 114]

Exercise 1 | Q 6 | Page 114

QUESTION

Answer in one sentence only

Why Proprietor’s Capital Account is a liability for the business?

SOLUTION

Amount invested by proprietor in the business is supposed to be returned by business in

its life span, therefore it is known as liability for the business.

Exercise 1 | Q 7 | Page 114

QUESTION

Answer in one sentence only

Why Proprietor’s Capital Account is a liability for the business?

SOLUTION

Business can’t spend more cash amount than the cash amount business has. Therefore,
cash account never shows a credit balance.

Exercise 1 | Q 8 | Page 114

QUESTION

Answer in one sentence only

What is Trial Balance?

SOLUTION

A trial balance is a list of balances of all ledger accounts as on specific date showing
debit or credit balances of an account in the ledger.

SOLUTION

Ledger folio

Exercise 2 | Q 4 | Page 114

QUESTION

Write the word, term, phrase, which can substitute the statement.

The process of extracting the balance and inserting it on lesser side of an account.

SOLUTION

Balancing
Exercise 2 | Q 5 | Page 114

QUESTION

Write the word, term, phrase, which can substitute the statement.

A Trial Balance in which only net balances of all ledger accounts are transferred.

SOLUTION

EXERCISE 3 [PAGE 115]

Exercise 3 | Q 1 | Page 115

QUESTION
Select appropriate alternatives from those given below and rewrite the
sentence.

In case of a credit transaction one of the account must be a …………….account

Cash

Credit

Personal

Debit

SOLUTION

In case of a credit transaction one of the account must be a Personal account

Exercise 3 | Q 2 | Page 115

QUESTION

Select appropriate alternatives from those given below and rewrite the
sentence.

‘c/d’ indicates _______ balance

Opening

Closing

Positive

Negative

SOLUTION

‘c/d’ indicates Closing balance

Exercise 3 | Q 3 | Page 115

QUESTION

Select appropriate alternatives from those given below and rewrite the
sentence.

__________ Column of ledger is used for writing page number of Journal.

False

SOLUTION

This statement is False.

Ledger is a book of final/secondary entry, as all the transactions from journal are to be
transferred to ledger in their respective account. As such journal is a book of original
entry.

Exercise 4 | Q 2 | Page 115

QUESTION

State whether the following statements are ‘True or False’ with reasons.

The process of recording a transaction in the Journal is called Posting.

True

False

SOLUTION

This statement is False.

The process of transferring entries from the journal into appropriate account is called
posting, which is a necessary or basic process of accounting to know the balance of each
account.
Exercise 4 | Q 3 | Page 115

QUESTION

State whether the following statements are ‘True or False’ with reasons.

A cash withdrawal from the business by the trader should be credited to Drawings A/c.

True

False

SOLUTION

This statement is False.

A cash withdrawal from the business by the trader should be debited to Drawings No as
it is a personal transaction.

Exercise 4 | Q 4 | Page 115

QUESTION

State whether the following statements are ‘True or False’ with reasons.

Balances of Nominal Accounts are carried forward to the next year.

True

False

SOLUTION

This statement is False.

Balances of Personal Accounts and Real Accounts are to be carried forward to the next
year.

Exercise 4 | Q 5 | Page 115

State whether the following statements are ‘True or False’ with reasons.

Trial balance is based on the double entry principle that for every debit there is equal
amount of corresponding credit.

True

False

SOLUTION

This statement is True.

EXERCISE 5 [PAGES 115 - 116]

Exercise 5 | Q 1 | Page 115

QUESTION

Fill in the blank:

________ balance on Nominal Account shows expenses or loss.

SOLUTION

L.F. Journal

J.F. Ledger

Exercise 6 | Q 3 | Page 116

QUESTION

Complete the following table:

Sales Return Return Inward

Purchase Return ?

SOLUTION

Sales Return Return Inward

Purchase Return Return Outward

Exercise 6 | Q 4 | Page 116

QUESTION
Complete the following table:

Assets Debit Balance

Liabilities ?

SOLUTION

Assets Debit Balance

Liabilities Credit Balance

Exercise 6 | Q 5 | Page 116

QUESTION

Complete the following table:

Land & Building Real Account

Commission Received ?

SOLUTION

Land & Building Real Account

SOLUTION

Petty Cash Book in which the payment side is ruled in suitable columns. - Analytical
petty cash book

Exercise 2 | Q 4 | Page 169

QUESTION
Give word/term or phrase for the following statement:

Name the bank account on which overdraft facility is given to Account holder.

SOLUTION

Name the bank account on which overdraft facility is given to Account holder. - Current
Account

EXERCISE 3 [PAGE 169]

Exercise 3 | Q 1 | Page 169

QUESTION

Select the most appropriate answer from the alternatives given below and
rewrite the sentence:

Cash column of Cash Book can never have ______ balance.

credit

debit

zero

none of the above

SOLUTION

Cash column of Cash Book can never have a credit balance.

Exercise 3 | Q 2 | Page 169

QUESTION

Select the most appropriate answer from the alternatives given below and
rewrite the sentence:

Any entry recorded on both sides of Cash Book is known as ______ entry

opening

rectifying

transfer

contra

SOLUTION

Any entry recorded on both sides of Cash Book is known as contra entry

Exercise 3 | Q 3 | Page 169

QUESTION

Select the most appropriate answer from the alternatives given below and
rewrite the sentence:

The source document for recording in Sales book is ______

Inward Invoice

Outward Invoice

Voucher

Cash Memo

SOLUTION

The source document for recording in Sales book is Outward Invoice.

Exercise 3 | Q 4 | Page 169

QUESTION

Select the most appropriate answer from the alternatives given below and
rewrite the sentence:

Credit purchase of Machinery is recorded in the ______

A fixed amount is deposited for a fixed period in ______ deposit account.

Current

Savings

Fixed

Recurring

SOLUTION

A fixed amount is deposited for a fixed period in Fixed deposit account.

EXERCISE Q.4 [PAGE 170]

Exercise Q.4 | Q 1 | Page 170

QUESTION

State whether the following statement is True or False with reasons:

Journal is a book of secondary entry.

True

False

SOLUTION

This statement is False.

All the business transactions are recorded in the journal in chronological order of their
occurrence. therefore journal is known as the book of original entry or primary entry.

Exercise 4 | Q 2 | Page 170

State whether the following statement is True or False with reasons:

Cash Book records transactions relating to receipts and payments of cash.

True

False

SOLUTION

This statement is True.

The purpose of preparing a cash book, a subsidiary book, is to record cash transactions
of business relating to receipts and payments of cash.

EXERCISE Q.5 [PAGE 170]

Exercise 5 | Q 1 | Page 170

QUESTION

Do you agree with the following statement:

Trade discount is recorded in Cash Book.

Agree

Disagree

SOLUTION

Trade discount is recorded in Cash Book. - Disagree

Exercise 5 | Q 2 | Page 170

QUESTION

Do you agree with the following statement:

Petty Cash Book is a book having a record of big payments.

Agree

Disagree
SOLUTION

Exercise 5 | Q 3 | Page 170

QUESTION

Do you agree with the following statement:

Cash received is entered on the debit side of Cash Book.

Agree

Disagree

SOLUTION

Cash received is entered on the debit side of Cash Book. - Agree

Exercise 5 | Q 4 | Page 170

QUESTION

Do you agree with the following statement:

Transactions recorded on both debit and credit side of Cash Book is known as Contra
Entry.

Agree

Disagree

SOLUTION

Transactions recorded on both debit and credit side of Cash Book is known as Contra
Entry. - Agree

Exercise 5 | Q 5 | Page 170

QUESTION

Do you agree with the following statement:

Credit purchase of machinery is entered in Purchase Journal.

Agree

Disagree

SOLUTION

Credit purchase of machinery is entered in Purchase Journal. - Disagree

EXERCISE 6 [PAGE 170]

return.

Exercise 6 | Q 4 | Page 170

QUESTION

Complete the following sentence:

Assets sold on credit are entered in ______

SOLUTION

Assets sold on credit are entered in journal proper.

Exercise 6 | Q 5 | Page 170

QUESTION

Complete the following sentence:

Double column Cash Book records transactions relating to cash and ______

SOLUTION

Double column cash book records transactions relating to cash and bank.

Exercise 1 | Q 9 | Page 204

QUESTION

Answer in one sentence:

On which side is interest on bank deposit recorded in Pass Book?

SOLUTION

Interest on bank deposit is recorded on the credit side of pass book.

Exercise 1 | Q 10 | Page 204

QUESTION

Answer in one sentence:

Why is the Bank Reconciliation Statement prepared?

SOLUTION

Bank Reconciliation Statement is prepared to explain the causes of disagreement

between the balances shown by the cash book under the bank column and the balance
shown in the pass book.

EXERCISE 2 [PAGE 204]

Exercise 2 | Q 1 | Page 204

QUESTION

Give one word/term/phrase which can substitute the following statement:

The account on which overdraft facility is allowed by bank.

SOLUTION

The account on which overdraft facility is allowed by bank. - Current account

Exercise 2 | Q 2 | Page 204

QUESTION

Give one word/term/phrase which can substitute the following statement:

Extract of ledger account of account holder in the books of bank.

- Bank balance (favourable balance)

EXERCISE 3 [PAGES 204 - 205]

Exercise 3 | Q 1 | Page 204

QUESTION

Do you agree or disagree with the following statement:

The bank column of Cash Book represents bank account.

Agree

Disagree

SOLUTION

The bank column of Cash Book represents bank account. - Agree

Exercise Q3 | Q 2 | Page 204

QUESTION

Do you agree or disagree with the following statement:

Do you agree or disagree with the following statement:

Bank Reconciliation Statement is similar to bank statement.

Agree

Disagree

SOLUTION

Bank Reconciliation Statement is similar to bank statement. - Disagree

Exercise 3 | Q 6 | Page 205

QUESTION

Do you agree or disagree with the following statement:

Bank balance as per Cash Book is always equal to bank balance as per Pass Book.

Agree

Disagree

SOLUTION

Bank balance as per Cash Book is always equal to bank balance as per Pass Book.
- Disagree

Exercise 3 | Q 7 | Page 205

QUESTION

Do you agree or disagree with the following statement:

Bank advice is sent by the businessman to bank.

Agree
Disagree

SOLUTION

Bank advice is sent by the businessman to bank. - Disagree

Exercise 3 | Q 8 | Page 205

QUESTION

Do you agree or disagree with the following statement:

Pay-in-slip is used for depositing cheque into bank.

Agree

Disagree

SOLUTION

Pay-in-slip is used for depositing cheque into bank. - Agree

Exercise 3 | Q 9 | Page 205

QUESTION

Do you agree or disagree with the following statement:

Difference in Cash Book balance and Pass Book balance may arise due to errors
committed while recording.

Agree

Disagree

SOLUTION

Difference in Cash Book balance and Pass Book balance may arise due to errors
committed while recording. - Agree

Exercise 3 | Q 10 | Page 205

QUESTION

Do you agree or disagree with the following statement:

Payment and receipt of cash through internet banking generates automatic proof.

Agree

Disagree

SOLUTION
Payment and receipt of cash through internet banking generates automatic proof.
- Agree

EXERCISE 4 [PAGE 205]

Exercise 4 | Q 1 | Page 205

QUESTION

Select the most appropriate alternative from those given and rewrite the
following statement:

Overdraft means _______ balance of Cash Book.

closing

debit

opening

credit

SOLUTION

Overdraft means credit balance of Cash Book.

Exercise 4 | Q 2 | Page 205

QUESTION

Select the most appropriate alternative from those given and rewrite the
following statement:

When a cheque is deposited and collected by bank Pass Book is _________.

dishonoured

debited

credited

written

SOLUTION

When a cheque is deposited and collected by bank Pass Book is credited.

Exercise 4 | Q 3 | Page 205

QUESTION
Select the most appropriate alternative from those given and rewrite the
following statement:

A __________ is a summary of financial transactions that take place over a period of

time on a bank account.

withdrawal slip

bank advice

bank statement

Pay-in-slip

SOLUTION

A bank statement is a summary of financial transactions that take place over a period
of time on a bank account.

Exercise 4 | Q 4 | Page 205

QUESTION

Select the most appropriate alternative from those given and rewrite the
following statement:

Debiting an entry in Cash Book ___________ cash balance.

increases

decreases

nullifies

none of the above

SOLUTION

Debiting an entry in Cash Book increases cash balance.

Exercise 4 | Q 5 | Page 205

QUESTION

Select the most appropriate alternative from those given and rewrite the
following statement:

Bank Reconciliation Statement is prepared by _________.

student

businessman
bank

none of the above

SOLUTION

Bank Reconciliation Statement is prepared by businessman.

Exercise 4 | Q 6 | Page 205

QUESTION

Select the most appropriate alternative from those given and rewrite the
following statement:

Bank balance as per Pass Book means ___________ balance of Pass Book.

credit

opening

debit

closing

SOLUTION

Bank balance as per Pass Book means credit balance of Pass Book.

Exercise 4 | Q 7 | Page 205

QUESTION

Select the most appropriate alternative from those given and rewrite the
following statement:

Bank gives overdraft facility to __________ account holder.

savings

recurring

current

fixed

SOLUTION

Bank gives overdraft facility to current account holder.

Exercise 4 | Q 8 | Page 205

QUESTION
Select the most appropriate alternative from those given and rewrite the
following statement:

Debit balance as per Cash Book is also known as ___________ balance.

favourable

overdraft

abnormal

unfavourable

SOLUTION

Debit balance as per Cash Book is also known as favourable balance.

Exercise 4 | Q 9 | Page 205

QUESTION

Select the most appropriate alternative from those given and rewrite the
following statement:

When extracts of Cash Book and Pass Book are given for uncommon periods, only
________ items are considered for preparation of Bank Reconciliation Statement.

uncommon

normal

favourable

common

SOLUTION

When extracts of Cash Book and Pass Book are given for uncommon periods,
only common items are considered for preparation of Bank Reconciliation Statement.

Exercise 4 | Q 10 | Page 205

QUESTION

Select the most appropriate alternative from those given and rewrite the
following statement:

When extract of Cash Book and Pass Book are given for common period, only _________
items are considered for preparation of Bank Reconciliation Statement.

uncommon
common

favourable

unfavourable

Interest on overdraft charged by bank is ____________ in Pass Book.

SOLUTION

Interest on overdraft charged by bank is debited in Pass Book.

Exercise 5 | Q 8 | Page 206

QUESTION
Complete the following statement:

Normally the Cash Book shows debit balance and Pass Book shows ________ balance.

SOLUTION

Normally the Cash Book shows debit balance and Pass Book shows credit balance.

Exercise 5 | Q 9 | Page 206

QUESTION

Complete the following statement:

The form filled for withdrawing cash from bank is known as __________.

SOLUTION

The form tilled for withdrawing cash from bank is known as withdrawal slip.

Exercise 5 | Q 10 | Page 206

QUESTION

Complete the following statement:

A businessman can update his records on receiving __________.

SOLUTION

A businessman can update his records on receiving bank advice.

EXERCISE 6 [PAGE 206]

Exercise 6 | Q 1 | Page 206

QUESTION

State whether the following statement is True or False with reasons:

Cheques deposited into bank but not yet cleared appears in the Pass Book only.

True

False

SOLUTION

This statement is False.

Cheques deposited into bank should be recorded first on the debit side of cash book and
after receiving the amount by bank, bank will credit it. Thus, uncleared cheques appear
in the cash book only.

Exercise 6 | Q 2 | Page 206

QUESTION

State whether the following statement is True or False with reasons:

Direct deposit made by debtors into businessman's bank account is recorded on the
credit side of Pass Book.

True

False

SOLUTION

This statement is True.

As businessman is unaware of any amount directly deposited by debtors into a

businessman‘s bank account. He is not in a position to record it in cash book while it is
already recorded on the credit side of pass book.

Exercise 6 | Q 3 | Page 206

QUESTION

State whether the following statement is True or False with reasons:

Businessman can prepare Bank Reconciliation statement only with Cash Book Balance.

True

False

SOLUTION

This statement is False.

Bank Reconciliation Statement can be prepared with cash book balance or pass book
balance or with overdraft by a businessman at the end of a specified period.

Exercise 6 | Q 4 | Page 206

QUESTION

State whether the following statement is True or False with reasons:

When overdraft as per Cash Book is given, bank charges debited in Pass Book only, is to
be added.
True

False

SOLUTION

This statement is True.

When overdraft as per cash book is given. It means that it is a debt for a businessman to
bank and bank charges increase the debt towards bank. Therefore it is to be added in
the overdraft amount.

Exercise 6 | Q 5 | Page 206

QUESTION

State whether the following statement is True or False with reasons:

Bank Statement is sent by Bank to businessman.

True

False

SOLUTION

This statement is True.

Machinery account is to be debited when expenses are paid on installation of machinery.

EXERCISE 2 [PAGES 241 - 242]

Exercise 2 | Q 1 | Page 241

QUESTION

Write the word/term/phrase which can substitute the following statement:

A continuous, gradual and permanent reduction in the value of a fixed asset.

SOLUTION

SOLUTION

The period for which the asset remains in working condition. - Life period of asset

Exercise 2 | Q 5 | Page 241

QUESTION

Write the word/term/phrase which can substitute the following statement:

The method of depreciation in which the total depreciation is equally spread over the life
of the asset.

SOLUTION

The method of depreciation in which the total depreciation is equally spread over the life
of the asset. - Fixed Instalment method

Exercise 2 | Q 6 | Page 242

QUESTION
Write the word/term/phrase which can substitute the following statement:

The method of depreciation in which the rate of depreciation is fixed but the amount of
depreciation reduces every year.

SOLUTION

The method of depreciation in which the rate of depreciation is fixed but the amount of
depreciation reduces every year. - Reducing balance method

Exercise 2 | Q 7 | Page 242

QUESTION

Write the word/term/phrase which can substitute the following statement:

The type of asset on which depreciation is charged.

SOLUTION

The type of asset on which depreciation is charged. - Fixed asset

Exercise 2 | Q 8 | Page 242

QUESTION

Write the word/term/phrase which can substitute the following statement:

Expenses incurred for fixation of the new asset to bring it in working condition.

SOLUTION

Expenses incurred for fixation of the new asset to bring it in working condition.
- Installation charges

Exercise 2 | Q 9 | Page 242

Write the word/term/phrase which can substitute the following statement:

Excess of Selling price of fixed asset over its Written Down Value.

SOLUTION

Excess of Selling price of fixed asset over its Written Down Value. - Profit on sale of
asset

Exercise 2 | Q 10 | Page 242

QUESTION

Write the word/term/phrase which can substitute the following statement:

Capital

Deferred Revenue

Income

SOLUTION

The amount spent on installation of new machinery is a Capital expenditure.

Exercise 3 | Q 4 | Page 242

QUESTION

Select the most appropriate answer from the alternatives given below and
rewrite the sentence:

The amount that a fixed asset is expected to realise on its disposal is known as ______

Book value

Scrap value

Market value

Original value

SOLUTION

The amount that a fixed asset is expected to realise on its disposal is known as Scrap
value.

Exercise 3 | Q 5 | Page 242

QUESTION

Select the most appropriate answer from the alternatives given below and
rewrite the sentence:

The amount of depreciation reduces year after year under ______

Fixed Instalment Method

Written Down Value Method

Depreciation Fund Method

Revaluation Method

SOLUTION

The amount of depreciation reduces year after year under Written Down Value
Method.

Exercise 3 | Q 6 | Page 242

QUESTION

Select the most appropriate answer from the alternatives given below and
rewrite the sentence:

The amount of depreciation remains constant every year under ______

Straight Line Method

Diminishing Balance Method

Revaluation Method

Insurance Policy Method

SOLUTION

The amount of depreciation remains constant every year under Straight Line Method.

Exercise 3 | Q 7 | Page 242

QUESTION

Select the most appropriate answer from the alternatives given below and
rewrite the sentence:

The balance of depreciation account is transferred to ______

Manufacturing A/c

Trading A/c

SOLUTION

This statement is False.

Depreciation is charged as an element of cost. If an asset is not in use, even though its
value reduces due to the passage of time. Therefore, we can say that it is compulsory to
depreciate an asset if it is not in use.

Exercise 4 | Q 7 | Page 243

QUESTION

State whether the following statement is True or False with reasons:

Depreciation is charged on Current Assets only.

True

False

SOLUTION

This statement is False.

Depreciation is charged on fixed assets only because it is necessary to apportion the cost
over a number of years during the useful life of an asset and there is no question of
useful life for current assets.

Exercise 4 | Q 8 | Page 243

QUESTION

State whether the following statement is True or False with reasons:

Depreciation need not be charged when business is making losses.

True

QUESTION

Complete the following sentence:

Under ______ system, the amount of depreciation changes every year.

SOLUTION

Under reducing balance system, the amount of depreciation changes every year.

Exercise 5 | Q 4 | Page 243

QUESTION

Complete the following sentence:

The amount spent on installation of machinery is a capital expenditure.

Exercise 5 | Q 8 | Page 243

QUESTION

Complete the following sentence:

______ is the value which an asset realises at the end of its useful life.

SOLUTION
Scrap value is the value which an asset realises at the end of its useful life.

Exercise 5 | Q 9 | Page 243

QUESTION

Complete the following sentence:

Depreciation Account is a ______ account.

SOLUTION

Depreciation Account is nominal account.

Exercise 5 | Q 10 | Page 243

QUESTION

Complete the following sentence:

Depreciation is derived from a Latin word ______.

SOLUTION

Depreciation is derived from a Latin word depreciation.

EXERCISE 6 [PAGE 243]

Exercise 6 | Q 1 | Page 243

QUESTION

Do you agree or disagree with the following statement:

Depreciation is non-cash expense.

Agree

Disagree

SOLUTION

Depreciation is non-cash expense. - Agree

Exercise 6 | Q 2 | Page 243

QUESTION

Do you agree or disagree with the following statement:

Under written down value method the Depreciation curve slopes parallel to 'X' axis.

Agree
Disagree

SOLUTION

Under written down value method the Depreciation curve slopes parallel to 'X' axis..
- Disagree

Exercise 6 | Q 3 | Page 243

QUESTION

Do you agree or disagree with the following statement:

The rate of depreciation depends upon the life of fixed asset.

Agree

Disagree

SOLUTION

The rate of depreciation depends upon the life of fixed asset. - Agree

Exercise 6 | Q 4 | Page 243

QUESTION

Do you agree or disagree with the following statement:

The terminal value of assets never affects the annual amount of depreciation.

Agree

Disagree

SOLUTION

The terminal value of assets never affects the annual amount of depreciation.
- Disagree

Exercise 6 | Q 5 | Page 243

Do you agree or disagree with the following statement:

By charging depreciation on fixed assets ascertainment of true and fair financial position
is possible.

When two or more errors, identified from books of accounts are in such a way that the
net effect of these errors, on the debit and on the credit sides of accounts is nil, such
errors are known as compensating errors.

EXERCISE 2 [PAGES 266 - 267]

Exercise 2 | Q 1 | Page 266

QUESTION

Give one word/term or phrase for the following statement:

Errors which affect the agreement of Trial Balance.

SOLUTION

Errors which affect the agreement of Trial Balance. - One-sided errors

Exercise 2 | Q 2 | Page 266

QUESTION

Give one word/term or phrase for the following statement:

Transactions recorded due to violating the accounting principles. - Error of principle

Exercise 2 | Q 5 | Page 267

QUESTION

Give one word/term or phrase for the following statement:

Accounts to which difference in Trial Balance is transferred.

SOLUTION

Accounts to which difference in Trial Balance is transferred. - Suspense account

Exercise 2 | Q 6 | Page 267

SOLUTION

Rectification entries are passed in Journal Proper.

Exercise 3 | Q 2 | Page 267

QUESTION

Select the most appropriate alternative from those given below and rewrite the
sentence:

The type of error for which journal entry is always required for rectification ______

over casting

one sided error

under casting

two sided error

SOLUTION

The type of error for which journal entry is always required for rectification two sided
error.

Exercise 3 | Q 3 | Page 267

QUESTION

Select the most appropriate alternative from those given below and rewrite the
sentence:

Errors occurred due to wrong posting are called as errors of______

principle

commission

compensating

omission

SOLUTION

Errors occurred due to wrong posting are called as errors of commission.

Exercise 3 | Q 4 | Page 267

QUESTION

Select the most appropriate alternative from those given below and rewrite the
sentence:

If transaction is totally omitted from the Books, it is called ______

Error of recording

Error of omission
Error of principle

Error of commission

SOLUTION

If transaction is totally omitted from the Books, it is called Error of omission.

Exercise 3 | Q 5 | Page 267

QUESTION

Select the most appropriate alternative from those given below and rewrite the
sentence:

Suspense Account is opened when ____ does not tally

Balance sheet

Trading account

Profit and Loss

Trial Balance

SOLUTION

Suspense Account is opened when Trial Balance does not tally

EXERCISE 4 [PAGE 267]

Exercise 4 | Q 1 | Page 267

QUESTION

State whether the following statement is True or False with reason:

Trial Balance is prepared from the balance of ledger accounts.

True

False

SOLUTION

This statement is True.

Basic aim of preparing a trial balance is to check arithmetic accuracy of transactions

recorded in a journal, posting them into the ledger and balancing of the ledger accounts.

Exercise 4 | Q 2 | Page 267

QUESTION

State whether the following statement is True or False with reason:

A Trial Balance can agree in spite of certain errors.

True

False

Solution

This statement is True.

Certain errors, like Error of Complete omission, Error of principle, or Compensating error,
due to which a trial balance can agree because there are two sided errors.

Exercise 4 | Q 3 | Page 267

QUESTION

State whether the following statement is True or False with reason:

Rectification entries are passed in Cash Book.

True

False

Solution

This statement is False.

In a special subsidiary book known as journal proper, rectification entries are to be

passed.

Exercise 4 | Q 4 | Page 267

QUESTION

State whether the following statement is True or False with reason:

There is no need to open a Suspense Account if the Trial Balance agrees.

True

False

Solution

This statement is True.

When the trial balance agrees, it means debit side total is equal to the credit side total of
balances of Ledger accounts. So, we can say that there is no need to open a Suspense
Account if the trial balance agrees.

Exercise 4 | Q 5 | Page 267

QUESTION

State whether the following statement is True or False with reason:

All the errors can be rectified only through Suspense Account.

True

False

Solution

This statement is False.

When the debit side total is not equal to the credit side total of balances of ledger
accounts, one side errors are identified and its rectification is completed through
suspense account. So, we can say that all the errors can’t be rectified only through
suspense account.

EXERCISE 5 [PAGES 267 - 268]

Exercise 5 | Q 1 | Page 267

QUESTION

Do you agree or disagree with the following statement:

The unintentional omission or commission of amounts and accounts while recording the
transactions are known as an error.

Agree

Disagree

Solution

The unintentional omission or commission of amounts and accounts while recording the
transactions are known as an error. - Agree

Exercise 5 | Q 2 | Page 267

QUESTION

Do you agree or disagree with the following statement:

The errors committed due to wrong recording, wrong posting, wrong totalling, wrong
balancing, wrong calculations are known as Arithmetical errors.

as Compensating errors.

Agree

Disagree
SOLUTION

When a transaction is not recorded according to the principles of accounting it is known

as Compensating errors. - Disagree

EXERCISE 6 [PAGE 268]

Exercise 6 | Q 1 | Page 268

QUESTION

Complete the following sentence:

______ is assured only when there are no errors in the books of accounts.

SOLUTION

Accuracy is assured only when there are no errors in the books of accounts.

Exercise 6 | Q 2 | Page 268

QUESTION

Complete the following sentence:

Transactions recorded in contravention of the accounting principles are known as ______

SOLUTION

Chapter 9: Final Accounts of a Proprietary Concern
EXERCISE 1 [PAGE 316]

Exercise 1 | Q 9 | Page 316

QUESTION
Answer in One Sentence:

What is Depreciation?

SOLUTION

Continuous, gradual and permanent decrease in the value of a fixed assets due to factors
like wear and tear, passage of time, etc. is known as Depreciation.

Exercise 1 | Q 10 | Page 316

QUESTION

Answer in One Sentence:

What do you mean by Prepaid Expenses?

SOLUTION

The expenses which are paid before they are not partly or fully due for payment during
the current accounting year are known as Prepaid Expenses.

EXERCISE 2 [PAGE 316]

Exercise 2 | Q 1 | Page 316

QUESTION

Give a word, term, or phrase which can substitute the following statement:

Expenses paid before it is due.

SOLUTION

Prepaid expenses

Exercise 2 | Q 2 | Page 316

QUESTION

Give a word, term, or phrase which can substitute the following statement:

Income due but not yet received

SOLUTION

Accrued income

Exercise 2 | Q 3 | Page 316

QUESTION

Select the most appropriate alternatives given below and rewrite the sentence :

____________ is excess of assets over liabilities

Goodwill

Capital

Investments

Drawings

Solution

Capital is excess of assets over liabilities

Exercise 3 | Q 2 | Page 316

QUESTION

Select the most appropriate alternatives given below and rewrite the sentence :

Discount earned is transferred to credit side of ___________ account

Current A/c

Profit & Loss

Trading

Capital

Solution

Discount earned is transferred to credit side of Profit and Loss Account.

Exercise 3 | Q 3 | Page 316

QUESTION

Select the most appropriate alternatives given below and rewrite the sentence :

______________ is a statement which shows the financial position of business on a

specific date.

Trading account

Trial Balance

Profit & Loss A/c

Balance Sheet

Solution
Balance Sheet is a statement which shows the financial position of business on a
specific date.

Exercise 3 | Q 4 | Page 316

QUESTION

Select the most appropriate alternatives given below and rewrite the sentence :

Outstanding expenses are shown on the ____________ side of Balance Sheet.

Assets

Liability

Both Assets and Liability

None of these

Solution

Outstanding expenses are shown on the liability side of Balance Sheet.

Exercise 3 | Q 5 | Page 316

QUESTION

Select the most appropriate alternatives given below and rewrite the sentence :

Interest on Drawing is credited to __________ Account.

Trading

Profit & Loss

Profit & Loss A/c

Balance Sheet

Solution

Interest on Drawing is credited to Profit and Loss Account.

Exercise 3 | Q 6 | Page 317

QUESTION

Select the most appropriate alternatives given below and rewrite the sentence :

Debit balance of Trading Account means ______,.

Gross Loss
Net Loss

Net Profit

Gross Profit

Solution

Debit balance of Trading Account means Gross Loss.

Exercise 3 | Q 7 | Page 317

QUESTION

Select the most appropriate alternatives given below and rewrite the sentence :

Carriage Inward is debited to __________ Account

Trading

Profit & Loss

Capital

Bank

Solution

Carriage Inward is debited to Trading Account.

Exercise 3 | Q 8 | Page 317

QUESTION

Select the most appropriate alternatives given below and rewrite the sentence :

Excess of credit over to debit in Profit and Loss Account indicates ________

Net Profit

Gross Profit

Gross Loss

Net Loss

Solution

Excess of credit over to debit in Profit and Loss Account indicates Net Profit.

Exercise 3 | Q 9 | Page 317

QUESTION

Select the most appropriate alternatives given below and rewrite the sentence :

Closing stock is always valued at cost or market price which is __________

less

zero

equal

Solution

Closing stock is always valued at cost or market price which is less.

Exercise 3 | Q 10 | Page 317

QUESTION

Select the most appropriate alternatives given below and rewrite the sentence :

When Specific date is not given, in that case interest on drawing is charged for
__________ month.

Four

Six

Eight

Nine

Solution

When Specific date is not given, in that case interest on drawing is charged
for six month.

EXERCISE 4 [PAGE 317]

Exercise 4 | Q 1 | Page 317

QUESTION

State True or False with reasons :

In every adjustment atleast there are three effects.

False

Solution

Profit and Loss account is prepared to find out ___________ results of the business.

Solution

Profit and Loss account is prepared to find out net working results of the business.

Exercise 5 | Q 6 | Page 317

QUESTION
Fill in the blank :

All indirect / operating expenses are transferred to ________ account.

QUESTION

Find the odd one :

Purchases

Cash in Hand

Debtors

Outstanding Income

Reserve for Doubtful Debts

Solution

Reserve for Doubtful Debts

EXERCISE 7 [PAGE 318]

Exercise 7 | Q 1 | Page 318

QUESTION

Capital is excess of Liabilities over Assets.

Agree

Disagree

Solution

Capital is excess of Liabilities over Assets- Agree

SOLUTION
Capital

Exercise 2 | Q 5 | Page 355

QUESTION

Write a word, term, or phrase which can substitute the following statement.

Excess of closing capital over opening capital of proprietor under Single Entry System.

SOLUTION

Profit

Exercise 2 | Q 6 | Page 355

QUESTION

Write a word, term, or phrase which can substitute the following statement.

Name of method of accounting suitable to firms to having limited transactions.

SOLUTION

Single entry system

Exercise 2 | Q 7 | Page 355

QUESTION

Write a word, term, or phrase which can substitute the following statement.

A System of accounting which is unscientific.

SOLUTION

Single entry system

Exercise 2 | Q 8 | Page 355

QUESTION

Write a word, term, or phrase which can substitute the following statement.

Further capital introduced by the proprietor in the business concern over and above his
existing capital.

SOLUTION

Additional capital

EXERCISE 3 [PAGES 355 - 356]

Exercise 3 | Q 1 | Page 355

QUESTION

Select the most appropriate answer from the alternatives given below and rewrite the
sentence.

The capital balances are ascertained by preparing ________

Statement of affairs

Cash Account

Drawings Accounts

Debtors Accounts

SOLUTION

The capital balances are ascertained by preparing Statement of Affairs.

Exercise 3 | Q 2 | Page 355

QUESTION

Select the most appropriate answer the alternatives given below and rewrite
the Sentence.

Under Single Entry System Opening Capital = Opening Assets Less _____________.

Closing Assets

Opening Liabilities

Opening Assets

Closing Liabilities

SOLUTION

Under Single Entry System Opening Capital = Opening Assets Less Opening Liabilities.

Explanation: Opening Capital is calculated by deducting the total opening liabilities from
the total opening assets.

Exercise 3 | Q 3 | Page 355

QUESTION

Select the most appropriate answer from the alternatives given below and
rewrite the sentence.
Additional Capital introduced during the year is __________ from closing capital in
order to find out the correct profit

Added

Deducted

Divided

Ignored

SOLUTION

Additional Capital introduced during the year is deducted from closing capital in order to
find out the correct profit.

Exercise 3 | Q 4 | Page 355

QUESTION

Select the most appropriate answer from the alternatives given below and
rewrite the sentence.

Single Entry System may be useful for ________.

Sole traders

Company

Government

None of these

SOLUTION

Single Entry System may be useful for sole traders.

Exercise 3 | Q 5 | Page 355

QUESTION

Select the most appropriate answer from the alternatives given below and
rewrite the sentence.

In order to find out the correct profit, drawings is __________ from closing capital

Multiplies

Divided

Deducted
Added

SOLUTION

In order to find out the correct profit, drawings is to added closing capital.

Exercise 3 | Q 6 | Page 356

QUESTION

Select the most appropriate answer from the alternatives given below and
rewrite the sentence.

The difference between assets and liabilities is called ____________.

Capital

Drawings

Income

Expenses

SOLUTION

The difference between assets and liabilities is called Capital.

Exercise 3 | Q 7 | Page 356

QUESTION

Select the most appropriate answer from the alternatives given below and
rewrite the sentence.

When Closing Capital is greater than the Opening Capital, the difference is
____________.

Profit

Loss

Assets

Liabilities

SOLUTION

When Closing Capital is greater than the Opening Capital, the difference is Profit.

Exercise 3 | Q 8 | Page 356

QUESTION
Select the most appropriate answer from the alternatives given below and
rewrite the sentence.

Opening Capital is ₹ 30,000; Closing Capital is ₹ 60,000; Withdrawals are ₹ 5,000; and
further capital brought in is ₹ 3,000; Profit is _______.

₹ 45,000

₹ 35,000

₹ 32,000

₹ 22,000

SOLUTION

Opening Capital is ₹ 30,000; Closing Capital is ₹ 60,000; Withdrawals are ₹ 5,000 and
further capital brought in is ₹ 3,000; .Profit is = ₹ 32,000

EXERCISE 4 [PAGE 356]

Exercise 4 | Q 1 | Page 356

QUESTION

State True or False with reasons:

Double Entry System of Book-keeping is scientific method of books of accounts

True

False

SOLUTION

This statement is True.

In Double Entry System, for every monetary transaction, at least two effects are to be
passed and every type of accounts are to be considered for preparing books of accounts.
Therefore, Double Entry System of bookkeeping is the scientific method of books of
accounts.

Exercise 4 | Q 2 | Page 356

QUESTION

State True or False with reasons:

Preparation of Trial Balance is not possible under Single Entry System

True
False

SOLUTION

This statement is True.

In the Trial Balance we require a ledger balance of every account from business
transactions which is not possible in the Single Entry System. Therefore, the preparation
of Trial Balance is not possible under a single Entry system.

Exercise 4 | Q 3 | Page 356

QUESTION

State True or False with reasons:

Statement of Affairs and Balance Sheet are one and the same.

True

False

SOLUTION

This statement is True.

A statement of affairs is a statement of assets and liabilities. In a statement of affairs,

right hand side is used for recording assets and left side is used for recording liabilities.
Therefore, we can say that statement of affairs and balance sheet are one and the same.

Exercise 4 | Q 4 | Page 356

QUESTION

State True or False with reasons:

Single Entry System is not useful for large organization.

True

False

SOLUTION

This statement is True.

In a Single Entry System, cash book and personal accounts of debtors and creditors are
maintained and real and nominal accounts are not maintained. In a large organization it
is necessary to maintain every type of accounts. Therefore Single Entry System is not
useful for large organization.
Exercise 4 | Q 5 | Page 356

QUESTION

State True or False with reasons:

Only Cash and Personal accounts are maintained under Single Entry System.

True

False

SOLUTION

This statement is True.

In the small organization where the number of business transactions are limited and they
have very few assets and liabilities and also they do not want to bear the expenses for
the accounting system. Therefore, they prefer the Single Entry System in which only
cash and personal accounts are maintained.

EXERCISE 5 [PAGE 356]

Exercise 5 | Q 1 | Page 356

QUESTION

Do you agree with the following statement?

Further capital introduced during the year increases profit.

Agree

Disagree

SOLUTION

Further capital introduced during the year increases profit.-Disagree.

Exercise 5 | Q 2 | Page 356

QUESTION

Statement of Profit is just like Profit and Loss Account.

Agree

Disagree

SOLUTION

Statement of Profit is just like Profit and Loss Account.-Disagree.

EXERCISE 6 [PAGE 356]

Exercise 6 | Q 1 | Page 356

QUESTION

Fill in the blank:

Statement of Affairs is just like a ______________.

SOLUTION

Single Entity System is suitable for small business.

Stock in Trade

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