What is meant by Grouping and Marshalling of assets and liabilities. Explain the ways in which a balance sheet may be marshalled.
Grouping In a balance sheet, assets and liabilities should be properly grouped and classified under appropriate headings. The individual balance of each Debtors and Creditors account need not be shown. Debtors and creditors should be shown in total. The grouping together of dissimilar assets will make the balance sheet misleading. Hence, it can be said that grouping means putting together the items of similar nature under a common heading.
Marshalling The term marshalling means the order in which assets and liabilities are stated on the balance sheet as the balance sheet exhibits the financial position of a concern even to a non-technical observer. It is of great importance that the different assets and liabilities should be arranged in the balance sheet on certain principles. The balance sheet is generally marshalled in three ways.
(i) The order of Liquidity or Realisability According to this method, assets are entered up in the balance sheet following the order in which they can be converted into cash and the liabilities in the order in which they can be paid off. The following is a format of a balance sheet based on this order.
(ii) The order of Performance This method is the reverse of the first method. Under this method, the assets are stated according to their permanency, i.e., permanent assets are shown first and less permanent are shown one after another. Similarly, the fixed liabilities are stated first and the floating liabilities follow. The following is a specimen of a balance sheet based on this order.
(iii) Mixed Order of Arrangement This method is the combination of the first two methods. Under this method, the assets are arranged in order realisability and liabilities are arranged in order of performance.
- The first method is adopted by sole proprietors, firms and partnership concerns.
- The second method is adopted by companies and the third method is adopted by banking concerns.
Popular Questions of Class 11 Accountancy
- Q:- Explain the qualitative characteristics of accounting information.
- Q:-
Mr. Sunrise started a business for buying and selling of stationery with ₹ 5,00,000 as an initial investment. Of which he paid ₹ 1,00,000 for furniture, ₹ 2,00,000 for buying stationery items. He employed a sales person and clerk. At the end of the month he paid ₹ 5,000 as their salaries. Out of the stationery bought he sold some stationery for ₹ 1,50,000 for cash and some other stationery for ₹ 1,00,000 on credit basis to Mr. Ravi. Subsequently, he bought stationery items of ₹ 1,50,000 from Mr. Peace. In the first week of next month there was a fire accident and he lost ₹ 30,000 worth of stationery. A part of the machinery, which cost ₹ 40,000, was sold for ₹ 45,000.
From the above, answer the following :
1. What is the amount of capital with which Mr. Sunrise started business?
2. What are the fixed assets he bought?
3. What is the value of the goods purchased?
4. Who is the creditor and state the amount payable to him?
5. What are the expenses?
6. What is the gain he earned?
7. What is the loss he incurred?
8. Who is the debtor? What is the amount receivable from him?
9. What is the total amount of expenses and losses incurred?
10. Determine if the following are assets, liabilities, revenues, expenses or none of the these: sales, debtors, creditors, salary to manager, discount to debtors, drawings by the owner. - Q:- Describe the role of accounting in the modern world.
- Q:- What do you mean by an asset and what are different types of assets?
- Q:-
Differentiate between source documents and vouchers.
- Q:-
Complete the following sentences with appropriate words:
(a) Information in financial reports is based on .....................
(b) Internal users are the ..................... of the business entity.
(c) A ..................... would most likely use an entities financial report to determine whether or not the business entity is eligible for a loan.
(d) The Internet has assisted in decreasing the ..................... in issuing financial reports to users.
(e) ..................... users are groups outside the business entity, who uses the information to make decisions about the business entity.
(f) Information is said to be relevent if it is ......................
(g) The process of accounting starts with ............ and ends with ............
(h) Accounting measures the business transactions in terms of ............ units.
(i) Identified and measured economic events should be recording in ............ order. - Q:-
What is a journal? Give a specimen of journal showing at least five entries.
- Q:-
Define accounting and state its objectives.
- Q:-
Enumerate informational needs of management.
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Complete the following work sheet:
(i) If a firm believes that some of its debtors may ′default′, it should act on this by making sure that all possible losses are recorded in the books. This is an example of the ___________ concept.
(ii) The fact that a business is separate and distinguishable from its owner is best exemplified by the ___________ concept.
(iii) Everything a firm owns, it also owns out to somebody. This co-incidence is explained by the ___________ concept.
(iv) The ___________ concept states that if straight line method of depreciation is used in one year, then it should also be used in the next year.
(v) A firm may hold stock which is heavily in demand. Consequently, the market value of this stock may be increased. Normal accounting procedure is to ignore this because of the ___________.
(vi) If a firm receives an order for goods, it would not be included in the sales figure owing to the ___________.
(vii) The management of a firm is remarkably incompetent, but the firms accountants can not take this into account while preparing book of accounts because of ________ concept.
Recently Viewed Questions of Class 11 Accountancy
- Q:-
Tick the Correct Answer
Which of the following is not a business transaction?
a. Bought furniture of ₹ 10,000 for business
b. Paid for salaries of employees ₹ 5,000
c. Paid sons fees from her personal bank account ₹ 20,000
d. Paid sons fees from the business ₹ 2,000 - Q:-
Read the following transactions and identify the cause of difference on the basis of time gap or errors made by business firm/bank. Put a sign (✓) for the correct cause.
S. No. Transactions Time Gap Errors
made by
business/
bank1.
2.
3.
4.
5.
Cheque issued to customer but not presented for payment.
Cheque amounting to Rs. 5,000 issued to
M/s. XYZ but recorded as Rs. 500 in the cash book.Interest credited by the bank but yet not recorded by
the bank.Cheque deposited into the bank but not yet collected
by the bank.Bank charges debited to firm's current account by the
bank. - Q:-
Trial balance is:
(a) An account.
(b) A statement.
(c) A subsidiary book.
(d) A principal book. - Q:-
Mr. Sunrise started a business for buying and selling of stationery with ₹ 5,00,000 as an initial investment. Of which he paid ₹ 1,00,000 for furniture, ₹ 2,00,000 for buying stationery items. He employed a sales person and clerk. At the end of the month he paid ₹ 5,000 as their salaries. Out of the stationery bought he sold some stationery for ₹ 1,50,000 for cash and some other stationery for ₹ 1,00,000 on credit basis to Mr. Ravi. Subsequently, he bought stationery items of ₹ 1,50,000 from Mr. Peace. In the first week of next month there was a fire accident and he lost ₹ 30,000 worth of stationery. A part of the machinery, which cost ₹ 40,000, was sold for ₹ 45,000.
From the above, answer the following :
1. What is the amount of capital with which Mr. Sunrise started business?
2. What are the fixed assets he bought?
3. What is the value of the goods purchased?
4. Who is the creditor and state the amount payable to him?
5. What are the expenses?
6. What is the gain he earned?
7. What is the loss he incurred?
8. Who is the debtor? What is the amount receivable from him?
9. What is the total amount of expenses and losses incurred?
10. Determine if the following are assets, liabilities, revenues, expenses or none of the these: sales, debtors, creditors, salary to manager, discount to debtors, drawings by the owner. - Q:-
Which of the following is correct :
(i) Operating Profit = Operating profit – Non-operating expenses – Non-operating incomes
(ii) Operating profit = Net profit + Non-operating Expenses + Non-operating incomes
(iii) Operating profit = Net profit + Non-operating Expenses – Non-operating incomes
(iv) Operating profit = Net profit – Non-operating Expenses + Non-operating incomes - Q:- What do you mean by an asset and what are different types of assets?
- Q:-
Tick the Correct Answer
Agreement of trial balance is affected by:
(a) One sided errors only.
(b) Two sided errors only.
(c) Both (a) and (b).
(d) None of the above. - Q:-
Deepti wants to buy a building for her business today. Which of the following is the relevant data for his decision?
a. Similar business acquired the required building in 2000 for ₹ 10,00,000
b. Building cost details of 2003
c. Building cost details of 1998
d. Similar building cost in August, 2005 ₹ 25,00,000 - Q:-
Describe the brief history of accounting.
- Q:-
Define accounting.
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