Gujarat Board GSEB Class 11 Commerce Accounts Important Questions Part 1 Chapter 1 Accounting and its Terminology Important Questions and Answers.

GSEB Class 11 Accounts Important Questions Part 1 Chapter 1 Accounting and its Terminology

Very Short Questions

Question 1.
Which type of currency is used in the form of money in present time?
Answer:
In present time coins, currency notes and plastic currency is used in the form of money.

Question 2.
By whom have described economics of Chanakya and explained the existence and significance of accounting?
Answer:
Indian historians have described economics of Chanakya and explained the existence and significance of accounting.

Question 3.
How many different branches of accounting are there? Which are they?
Answer:
There are three main branches of accounting :

1. Financial accounting,
2. Cost accounting and
3. Management accounting.

Question 4.
What does transaction and event disclose for the business?
Answer:
Transaction discloses an act done by the business while event represents situation or result created from transaction.

Question 5.
What is internal liability of a business ?
Answer:
Amount payable by the business to the owner is called internal liability of a business.

Question 6.
What is called revenue ?
Answer:
Revenue is recognized when the goods or services are sold to the customers.

Question 7.
What is stock ?
Answer:
Stock means surplus of goods from purchase.

Question 8.
What is creditor?
Answer:
A person to whom the amount is payable is known as creditor.

Question 9.
What is called cost ?
Answer:
To produce any product or to provide any service whatever expenses are required, the sum of these expenses is called cost.

Question 10.
Answer:
There are three different bases are used for maintaining the accounts :

1. Mercantile base,
2. Cash base and
3. Mixed base or Hybrid method.

Question 11.
How many steps are there to prepare accounts ?
Answer:
There are six steps to prepare accounts.

Question 12.
Which type of transactions and which type of discount are not recorded in the books of accounts?
Answer:
Non-economic transactions and trade discount are not recorded in the books of accounts.

Question 13.
Which asset is not including in liquid asset?
Answer:
Stock is not including in liquid asset.

Question 14.
Which assets cannot be converted into cash?
Answer:
Fictitious assets cannot be converted into cash.

Question 15.
What does drawings indicate ?
Answer:
Drawings indicates capital reduction.

Question 16.
Give the example of internal liability of business.
Answer:
Capital is an internal liability of business.

Question 17.
What is the full form of SEBI ?
Answer:
Securities and Exchange Board of India is the full form of SEBI.

Question 18.
Explain the full form of IRDA.
Answer:
Insurance Regulatory Development Authority is the full form of IRDA.

Question 19.
Which term is used as synonym of Bookkeeping ?
Answer:
Accounting term is used as synonym of Book-keeping.

Question 20.
What is the full form of AICPA?
Answer:
American Institute of Certified Public Accountants is the full form of AICPA.

Question 21.
Explain the full form of ASC.
Answer:
American Standards Council is the full form of ASC.

Question 22.
Which type of science accounting is ?
Answer:
Accounting is a social science.

Question 23.
Which term is used as synonym of profit ?
Answer:
Gain is used as synonym of profit.

Question 24.
How is cash discount determined ?
Answer:
After deduction of trade discount from sales / purchase price, cash discount is determined.

Question 25.
According to historians, who is considered as the father of the Double Entry System ?
Answer:
According to historians, the mathematician of Italy Luca Pacioli is considered as the father of the Double Entry System.

Question 26.
Which is the second step to prepare accounts ?
Answer:
Indentification of transaction is the second step to prepare accounts.

Question 27.
Which is very popular base to prepare accounts under Double Entry System?
Answer:
Mercantile base is very popular to prepare accounts under Double Entry System.

Question 28.
Generally, from where does the Bills receivable and Bills payable emerge?
Answer:
Generally, Bills receivable emerges from debtors while Bills payable emerges from creditors.

Question 29.
Which is non-cash expense of the business ?
Answer:
Depreciation is non-cash expense of the business.

Question 30.
Give the example of receivables.
Answer:
Debtors, bills receivable, outstanding incomes, pre-paid expenses, given loan, advances, etc. are examples of receivables.

Question 31.
Which word is popular for loss in practice ?
Answer:
Deficit word is popular for loss in practice.

Question 32.
Which is non-recurring expense ?
Answer:
Fictitious asset is non-recurring expense.

Question 33.
Explain the types of accounting systems.
Answer:
There are two types of accounting systems / methods in practice :

1. Deshi Nama System and
2. Double Entry System.

Short Questions
Explain the following terms (Take any three terms in one question): [3 marks each]

Question 1.
Business transaction
Answer:
Business transaction means exchange of product or service of business between two or more than two persons in the form of cash and / or on credit. The prerequisite condition of business transaction is to have its economic value, i.e., financial value.

Question 2.
Event
Answer:
Event means situation or result created, from transaction. Event is also recognized as an incidence.

Question 3.
Solvent
Answer:
In accounting, a person who pays his financial obligations regularly and whose assets are more than his liabilities, that person is known as solvent person.

Question 4.
Insolvent
Answer:
In accounting a person who does not pay his financial obligations regularly it means he is not in a position to pay his obligations and whose assets are less than his liabilities, that person is known as insolvent person.

Question 5.
Liability
Answer:
Amount payable by the business for credit purchase of goods/asset or amount payable for borrowed money is known as liability. There are two types of liabilities in the business : (1) Internal liability and (2) External liability.

Question 6.
Internal liability
Answer:
Amount payable by the business to the owner of the business is internal liability. Capital is an internal liability of business.

Question 7.
External liability
Answer:
The amount payable by the business to the third party for credit purchase of goods / assets / services or payable amount for borrowed money is known as external liability. Bank loan, creditors, provident fund, etc. are external liabilities.

Question 8.
Current liability
Answer:
A liability, which is to be paid within one year by the business, is known as current liability. Current liability is treated as short-term liability also. Creditor is treated as current (short¬term) liability.

Question 9.
Non-current liability
Answer:
A liability, which is to be paid during the period of more than one year by the business, is known as non-current liability. Non-current liability is treated as long-term liability also. Bank loan is treated as non-current (long-term) liability.

Question 10.
Assets
Answer:
Assets means any such tangible or intangible products or items which are of ownership of business and has economic value. In short, products or items having realizable value owned by the business, are known as assets. Cash, land & building, computers, stock, furniture, goodwill, patent, etc. are assets of the business.

Question 11.
Tangible assets
Answer:
Tangible assets are those assets which are having physical existence. Tangible assets are sub-category of non-current assets. Land & Building, computers, stock, furniture, etc. are tangible assets.

Question 12.
Intangible assets
Answer:
Intangible assets are those assets which are not having physical existence. Intangible assets are also sub-category of non-current assets. Goodwill, patent, trade mark, copyright, symbol of business, etc. are intangible assets.

Question 13.
Current assets
Answer:
Assets whose time duration is of less than one year and can be converted into cash easily are known as current assets. For day to day transactions of business, these assets are used. In current assets cash and bank balance, debtors, bills receivable, raw material stock, finished stock, etc. are included. Current assets are also known, as short-term assets.

Question 14.
Non-current assets
Answer:
The assets which are purchased with an intention to use it for a long period in the business are known as non-current assets. In other word, the assets held by business for more than one year period are known as non-current assets. They are known as long-term assets or fixed assets or immovable assets. Land & Building, computers, furniture, trade mark, copyright, patent, goodwill, franchises, etc. are included in non-current assets.

Question 15.
Liquid assets
Answer:
All current assets excluding stock are recognized as liquid assets. These assets can be converted into cash quickly. Debtors, bill receivable, etc. are liquid assets.

Question 16.
Real assets
Answer:
Real assets means assets that have realizable value, it means market price. In these assets, tangible, intangible and current assets are included.

Question 17.
Fictitious assets
Answer:
Fictitious assets means assets do not have physical form (existence), do not have any realizable value (it means zero value) and cannot be converted into cash, are known as fictitious assets. Establishment expenses or Preliminary expenses, issue cost of shares and debentures, share or debenture discount, etc. are fictitious assets.

Question 18.
Receipts
Answer:
When money is received due to consequence of business transactions, it is known as receipt. Receipts are categorized into two categories :

1. Regular receipts and
2. Capital receipts.

Question 19.
Depreciation
Answer:
Every year the value of assets is reduced by certain rate. Amount which is reduced, is called as depreciation. Depreciation is non-cash expense of the business. Before making tax payment to the government depreciation is deducted.

Question 20.
Posting
Answer:
Economic or financial transaction of the business are first recorded in the journal book or in the subsidiary book. The process of recording the debit or credit effect of a transaction in the account is known as posting.

Question 21.
Payments
Answer:
Money paid due to consequence of business transactions is known as payments. Like Salary. Payments (expenses) are also classified into two categories :(1) Capital expenditure (Payment) and (2) Revenue expenditure (Payment).

Question 22.
Capital expenditure
Answer:
The expenditure usually of huge amount spent by the business on the purchase of the fixed assets is called capital expenditure. Purchase of machine, redemption of debenture, etc. are capital expenditure.

Question 23.
Revenue expenditure
Answer:
The expenditure usually of small amount incurred by the business to acquire or produce s goods or services for resale, to maintain the fixed assets in the working condition, etc. is called revenue expenditure. The flow of these payments would remain constant. In this category payment of salary, wages, telephone expense, advertisement l expense, etc. are included.

Question 24.
Deferred revenue expenses
Answer:
Heavy expenditure incurred by the business to get the benefits from it for the following two or more years is called deferred revenue expenses. These expenses are also known as fictitious assets. Issue cost of shares and debentures, preliminary expenses, share or debenture discount, etc. are illustrations of deferred s revenue expenses.

Question 25.
Expense
Answer:
If the benefit of the amount spent is available to the business for the accounting year (normally one year) only, then it is known as expense or revenue expense, e.g., salary expense, wages expense, brokerage expense, commission
expense, discount expense, etc.

Question 26.
Revenue
Answer:
Revenue is recognized when the goods or services are sold to the customers. In credit sales also, though the amount is yet to be ? received, it is recognized as revenue. Besides other incomes – interest, rent, commission, dividend ? received for the respective period and even outstanding are included in revenue.

Question 27.
Profit
Answer:
The excess of day to day revenue incomes over revenue expenses of the business is called profit. There are two types of profit:
(1) Revenue S profit and
(2) Capital profit.

Question 28.
Loss
Answer:
The excess of day to day revenue expenses over revenue incomes of the business is called loss. There are two types of loss :
(1) Revenue loss and
(2) Capital loss.

Question 29.
Stock
Answer:
Goods purchased by businessman for trading purpose, goods remained unsold from that goods is called as stock. In brief stock means surplus of goods from purchases. Closing stock is current asset.

Question 30.
Debtors
Answer:
When the goods are sold or services are rendered to customers on credit and the amount is to be collected from the customers than these customers are known as debtors of the business. Debtors are treated as current assets.

Question 31.
Creditors
Answer:
The persons to whom the amount is payable are known as creditors. Creditors are treated as current liability.

Question 32.
Cost
Answer:
To produce any product or to provide any service whatever expenses are required, the sum of these expenses is cost. Generally, in cost; raw material cost, labor cost and other costs are included.

Question 33.
Discount
Answer:
At the time of purchase or sell of goods, when a specific rate of reduction is allowed in the quoted price of goods or less amount is received then the amount shown in the bill, then difference of amount is known as discount. TWo types of discount are there ; (1) Trade discount and (2) Cash discount.

Question 34.
Trade discount
Answer:
At the time of sales, a business person deducts certain percentage / amount from sales price, it is known as trade discount. Trade discount is not recorded in the books of accounts.

Question 35.
Cash discount
Answer:
To attract the customers with the purpose to receive quick collection of credit sales, the amount which is deducted from receivable amount is known as cash discount. Cash discount is recorded in the books of accounts. After deduction of trade discount, cash discount is determined.

Question 36.
Allowance
Answer:
Sometimes in the settlement of accounts figures are rounded off. Thus, negligible amount which is to be forgone is known as allowance or kasar. Entry for allowance In the books of accounts are made as the entry of discount in the books are made.

Question 37.
Bad debts
Answer:
Where the amount receivable from a debtor is not recoverable totally or partly, the amount which is to be forgone is known as bad debts. Bad debts is not an expense of business but it is a loss.

Question 38.
Gain
Answer:
Gain means profit made in the course of business transactions. For example, profit on sale of an asset is a gain. In the context of profit and loss account, excess of revenue income over revenue expenses is also known as gain.

Question 39.
Bills receivable
Answer:
Bills receivable Is a written document. Where, there are two parties, one is the bill writer and other is the bill acceptor. Where bill writer acquires right to receive certain amount as per predetermined date in the future, it becomes receivable. Bill is a bills receivable for the bill writer.

Question 40.
Bills payable
Answer:
Bills payable is a written document. Where,

Write the correct option from those given below each question : [1 mark each]

Question 1.
Which system was prevailing in economy due to the absence of money as medium of exchange ?
(a) Chop system
(b) Cater system
(c) Barter system
(d) Deshi system
Answer:
(c) Barter system

Question 2.
Which information is known as quantitative information ?
(a) Economical information
(b) Statistical information
(c) Historical information
(d) Financial information
Answer:
(d) Financial information

Question 3.
In accounting, which transactions are recorded in the books of accounts ?
(a) Present transactions
(b) Scientific transactions
(c) Future transactions
(d) Historical transactions
Answer:
(d) Historical transactions

Question 4.
How many categories (branches) of Accounting are there ?
(a) TWo
(b) Three
(c) Four
(d) Five
Answer:
(b) Three

Question 5.
What duration of Current Liability is ?
(a) Less than 1 year
(b) More than I year
(c) More than 5 years
(d) More than 10 years
Answer:
(a) Less than 1 year

Question 6.
What kind of asset, Goodwill is ?
(a) Real asset
(b) Tangible asset
(c) Current asset
(d) Liquid asset
Answer:
(a) Real asset

Question 7.
Expenses, which are not incurred repeatedly and regularly in the business, what are called these expenses?
(a) Revenue expenses
(b) Deferred Revenue Expenditure
(c) Capital expenses
(d) None of these
Answer:
(c) Capital expenses

Question 8.
What is Bad Debts for the business ?
(a) An expense
(b)An income
(c)A profit
(d)A loss
Answer:
(d) A loss

Question 9.
Which discount is not recorded in the books of accounts ?
(a) Trade discount
(b) Cash discount
(c) Discount received
(d) Discount given
Answer:
(a) Trade discount

Question 10.
Out of the following which asset is a non¬current asset?
(a) Stock of raw material
(b) Bills receivables
(c) Debenture discount
(d) Franchises
Answer:
(d) Franchises

Question 11.
Which term is used as synonym of book¬keeping ?
(a) Accounts
(b) Accountancy
(c) Accounting
(d) Account
Answer:
(c) Accounting

Question 12.
Which one of the following is not advantage of accounting?
(a) To know profitability
(b) To know financial status of business
(c) To know non-financial transactions
(d) To know value of business
Answer:
(c) To know non-financial transactions

Question 13.
Which one is internal liability of the business ?
(a) Bank overdraft
(b) Capital
(c) Debenture
(d) Creditor
Answer:
(b) Capital

Question 14.
Out of the following, which is not tangible asset ?
(a) Dead stock
(b) Preliminary expense
(c) Tools
(d) Trade mark
Answer:
(d) Trade mark

Question 15.
Which are two important aspects in business?
(a) Gain and Loss
(b) Income and Expense
(c) Gross profit and Net profit
(d) Liability and Asset
Answer:
(d) Liability and Asset

Question 16.
Short-term liability is treated as ………………. .
(a) Non-current liability
(b) Internal liability
(c) External liability
(d) Current liability
Answer:
(d) Current liability

Question 17.
Drawings indicates ……………….. .
(a) cash reduction
(b) asset reduction
(c) profit reduction
(d) capital reduction
Answer:
(d) capital reduction

Question 18.
Which assets are recognized as sub-category of current assets?
(a) Fictitious assets
(b) Real assets
(c) Liquid assets
(d) Intangible assets
Answer:
(c) Liquid assets

Question 19.
What is called the excess of day to day incomes over expenses of the business ?
(a) Gross profit
(b) Net profit
(c) Revenue profit
(d) Capital profit
Answer:
(c) Revenue profit

Question 20.
Which type of loss ‘loss on sale of asset’ is ?
(a) Gross loss
(b) Net loss
(c) Revenue loss
(d) Capital loss
Answer:
(d) Capital loss

Question 21.
Which is a written document of business transaction ?
(a) Voucher
(b) Notes
(c) Statement
(d) Receipt
Answer:
(a) Voucher

Question 22.
Which is non-cash expense of the business ?
(a) Royalty
(b) Trade discount
(c) Donation
(d) Depreciation
Answer:
(d) Depreciation

Question 23.
What is donation for the business?
(a) Income
(b) Expense
(c) Loss
(d) Profit
Answer:
(b) Expense

Question 24.
In accounting a person who pays his financial obligations regularly, that person is known as …………………. .
(a) creditable person
(b) gentleman
(c) solvent person
(d) insolvent person
Answer:
(c) solvent person

Question 25.
How many types / methods of accounting in practice are there?
(a) Only one
(b) Two
(c) Three
(d) Four
Answer:
(b) Two

Question 26.
Who is considered as the father of the Double Entry System?
(a) Chankya
(b) Luca Pacioli
(c)J. R. Batliboi
(d)R. N. Carter
Answer:
(b) Luca Pacioli

Question 27.
How many steps to prepare accounts are there ?
(a) Four
(b) Five
(c) Six
(d) Seven
Answer:
(c) Six

Question 28.
Which method is an ancient method of writing accounts ?
(a) Barter System
(b) Deshi Nama System
(c) Single Entry System
(d) Double Entry System
Answer:
(b) Deshi Nama System

Question 29.
Which is the prior stage of the preparation of final accounts?
(a) Adjustments
(b) Posting
(c) Trial balance
(d) Bank balance
Answer:
(c) Trial balance

Question 30.
For which type of asset realizable value is zero (0) ?
(a) Liquid asset
(b) Intangible asset
(c) Fictitious asset
(d) None of these
Answer:
(c) Fictitious asset