Explain the double entry mechanism with an illustrative example.
Double Entry mechanism is the most progressive, scientific and complete system of recording the financial transactions of a business. According to this system there are two accounts involved in every business transaction.One account receiving a benefit and the other account yielding a benefit. The person or the account receiving a benefit is debited and the person or the account who gives something to the business is credited.
For example- we received ₹20,000 from Mohan. This transaction affects two accounts- Cash Account and the Johan's Account.
Cash account is receiving a benefit (as cash is coming in) and hence Cash account will be debited, whereas Mohan is yielding a benefit and hence his account will be credited.
Differentiate between source documents and vouchers.
Define accounting and state its objectives.
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.
Giving examples, explain each of the following accounting terms:
* Fixed assets * Revenue * Expenses
* Gain * Profit * Capital
* Short-term liabilities
Discuss the concept-based on the premise do not anticipate profits but provide for all losses.
When should revenue be recognised? Are there exceptions to the general rule?
'Accounting information should be comparable'. Do you agree with this statement? Give two reasons.
Fill in the blanks:
(i) A bill of exchange is a __________ instrument.
(ii) A bill of exchange is drawn by the __________ upon his __________.
(iii) A promissory note is drawn by __________ in favour of his __________.
(iv) There are __________ parties to a bill of exchange.
(v) There are __________ parties to a promissory note.
(vi) Drawer and __________ can not be the same parties in case of a bill of exchange.
(vii) Bill of exchange in India languages is called __________.
(viii) __________ days of grace are added in terms of the bill to calculate the date of its __________.
Are debits or credits listed first in journal entries? Are debits or credits indented?
If the insurance premium paid Rs. 1,000 and prepaid insurance Rs. 300. The amount of insurance premium shown in profit and loss account will be :
(a) Rs. 1,300 (b) Rs. 1,000
(c) Rs. 300 (d) Rs. 700
List the distinctive advantages of a computer system over a manual system.
List any five users who have indirect interest in accounting.
Describe the brief history of accounting.
Why is the evidence provided by source documents important to accounting?
If a transaction is properly analysed and recorded:
(a) Only two accounts will be used to record the transaction.
(b) One account will be used to record transaction.
(c) One account balance will increase and another will decrease.
(d) Total amount debited will equals total amount credited.
The book in which all accounts are maintained is known as:
(i) Cash Book
(ii) Journal
(iii) Purchases Book
(iv) Ledger
Choose the correct chronological order of ascertainment of the following profits from the profit and loss account :
(i) Operating Profit, Net Profit, Gross Profit
(ii) Operating Profit, Gross Profit, Net Profit
(iii) Gross Profit, Operating Profit, Net Profit
(iv) Gross Profit, Net Profit, Operating Profit