|| SHREE SHARADA ||

¥ÀæxÀªÀÄ ¦AiÀÄĹ

accountancy
Sources For Studies
(As per NCERT Syllabus)
2017-18 Onwards
(Including Practical Oriented Questions)

¸ÀA¥ÁzÀPÀgÀÄ
Sunil K M.com, B.Ed, PGDBA
Commerce Lecturer
Nagamangala

Use E-Papers, Save Trees

Above line hide when print out
 CHAPTER-1
INTRODUCTION TO ACCOUNTING

1. What is Book keeping?

Book keeping is the art of recording business transactions in a systematic manner.

2. Give the meaning of Accounting?

Accounting is the process of identifying, Measuring and communicating financial
information to end users.

3. What is Accountancy?
Accountancy is the theory and practices of accounting.

4. What are transactions? Mention its types?

A transaction means an event, activity or dealing involving the exchange of money or
money’s worth between the persons.
a) Cash Transaction
b) Credit Transaction

5. Explain the following terms.

a) Capital: The amount of money or money’s worth invested or introduced by the

proprietor into his business at the time of commencement of business.

b) Drawings: Refers to cash or goods withdrawn by the proprietor from his business for
his personal, private or domestic use.

c) Assets: The valuable things owned by the business.

d) Liabilities: The obligations or debts payable by the enterprise in future in form of

money or goods,

e) Debtor: Is a person who owes money to the business.

f) Creditor: Is a person to whom the business owes money.

g) Stock: The goods available with the business for sale on a particular date.

h) Profit: Excess of revenue over expenses.

i) Loss: Excess of expenses over revenue.

j) Voucher: the documentary evidence in support of a transaction.

Use E-Papers, Save Trees

Above line hide when print out
 CHAPTER-2
THEORY BASE OF ACCOUNTING

1. Expand GAAP and ICAI.

GAAP: Generally Accepted Accounting Principles
ICAI: Institute of Charted Accounts of India
2. Give the meaning of accounting concepts.
The assumptions and ideas which are fundamental to accounting practice.
3. Give the meaning of accounting conventions.
The customs and practices which are followed to prepare Financial Statements of a
business concern.

4. Explain any two Accounting conventions.

a) Convention of consistency: It signifies that the accounting practices and methods
should practices and methods should remain consistent from one accounting year to another
b) Convention of conservatism: It meansThose business transactions should be recorded
in such a way that profit should not be over stated and future loss should be considered.
c) Convention of full disclosure: Accounting must disclose all material information.
d) Convention of materiality: It means record only of those business transactions which
are significant (material) and insignificant transaction are ignored.
5. What is Double Entry system of book keeping?
Double entry system is a complete and scientific method of book keeping as both
(Dr and Cr) aspects of transactions is recorded.
6. What are Accounting Standards?
The policy documents issued by recognized accounting body.

7. Write any two Accounting Standards accepted under IAS.

AS-2 –Valuation of Inventory
AS-3- Cash flow statement
AS-6- Depreciation Accounting
AS-10 Accounting for fixed assets

8. Explain any five Accounting concepts?

a) Business Entity Concept: Under this concept the business transaction should be
separated from the personal transaction of the proprietor.
b) Money Measurement Concept: It means that in accounting a record is made only of
those transactions which can be measured and expressed in the terms of money.
c) Going Concern Concept: It means that a business enterprise will continue to operate
for a fairly long period of time.
d) Accounting Period Concept: Means that to measure the financial results of business,
the business working life is split into convenient short periods of 12 months time.

e) Dual Aspect Concept: It is related to every transaction which is split up into

Dr and Cr aspect.

Use E-Papers, Save Trees

Above line hide when print out
 CHAPTER-3
RECORDING OF BUSINESS TRANSACTIONS-I

1. What is Accounting Equation?

The equation between the total assets and total liabilities with owner’s capital is stated
in the form of an equation.
i. ASSETS=LIABILITIES+CAPITAL
ii. CAPITAL=ASSETS-LIABILITIES
iii. LIABILITIES=ASSETS-CAPITAL

2. What is Accounting cycle?

The process in which accounting transactions pass through a cyclical process of
journalising, ledger posting, drafting trial balance and preparing financial statement.

3. What is journal?
In journal each transaction is classified into debit and credit aspect.

4. What is Narration?
A brief explanation to the journal given in brackets start with Being.

5. Explain Debit and credit rule under English system of accounting

English system of accounting
Personal A/c Debit the Receiver Credit the Giver
Real A/c Debit what comes in Credit what goes out
Nominal A/c Debit all expenses and losses Credit all incomes and Gain

6. What is Ledger?
Ledger is a book which contains a summarised, classified and permanent form of
recording all transactions.

7. What is Posting?
Posting is the process of transferring the entries from Journal to the ledger.

8. What is Debit and Credit Balance?

Debit Balance: If the debit side total of an account is greater than the credit side total
, the balance is Debit Balance.
Credit Balance: If the credit side total of an account is greater than the debit side total,
the balance is Credit Balance.

Use E-Papers, Save Trees

Above line hide when print out
 CHAPTER-4
RECORDING OF BUSINESS TRANSACTIONS – I

1. Give the meaning of Subsidiary Book.

Subsidiary books are the special journals maintained for recording all the business
transactions under modern system of accounting.

2. What is an Invoice?
It is the written statement giving the particulars of the quantity quality and the price of
goods purchased on credit. This same invoice is known as inward invoice for the purchaser
and outward invoice for the seller.

3. What is Purchase book?

Purchase book is a subsidiary book in which only credit purchases of goods are recorded.

4. What is Sales book?

It is a subsidiary book in which only credit sale of goods are recorded.

5. What is Debit note?

At the time of return of goods a document is prepared showing goods returned to suppliers.
The document is called Debit note.

6. What is Credit note?

Credit note is the document prepared to record the quantity and value of goods returned
by customers.

7. What is Trade Discount?

Trade discount is allowed by the seller to the buyer. It is allowed when a customer
purchases goods above a certain quantity or amount.

CHAPTER - 5
BANK RECONCILIATION STATEMENT

1.What is Bank Reconciliation Statement?

A statement prepared to reconcile the bank balance as per cash book with the balance
as per passbook or bank statement, by showing the items of difference between the two accounts.

2 What are the Causes of difference?

– timing of recoding the transaction
– error made by business or by the bank.

Use E-Papers, Save Trees

Above line hide when print out
 CHAPTER - 6
TRIAL BALANCE & RECETIFICATION OF ERRORS
1. What is Trial Balance?
A statement showing the abstract of the balance of various accounts in the ledger.

2. Mention any two Objectives of Trial Balance?

i) To ascertain the arthmetical accuracy of the ledger accounts

ii) To help in locating errors iii) To help in the preparation of the final accounts

3. Mention the Types of Errors?

1. Errors of Commission 2. Errors of Omission
3. Errors of Principle 4. Compensating Errors

4. What is Rectification of Errors?

Errors affecting only one account can be rectified by giving an explanatory note or by
passing a journal entry. Errors which affect two or more accounts are rectified by
passing a journal entry.

5. Define Suspense Account?

An account in which the difference in the trail balance is pull till such time that
errors are located and rectified. It facilitates the preparation of financial statements even
when the trail balance does not tally.

Use E-Papers, Save Trees

Above line hide when print out
 CHAPTER - 7
DEPRECIATION, PROVISIONS & RESERVES

1. What is Depreciation?
Depreciation is decline in the value of a tangible fixed asset. In accounting, depreciation
is the process of allocating depreciable cost over useful life of a fixed asset.

2. What are the Factors affecting Depreciation?

i) Wear and Tear due to use or passage of time
ii) Expiration of Legal Rights iii) Obsolescence

3. What are the methods of charging Depreciation?

i) Straight Line Method ii) Written Down Value Method
iii) Annuity Method iv) Revalution Method v) Sinking Fund Method

4. What are the Factors affecting the amount of Depreciaton?

i) Orginal Cost ii) Salvage Value iii) Useful life of the asset

5. What is Provisions & Reserves?

A provision is a charge against profit. It is created foe a known current liability the
amount of which is uncertain. Reserve on the other hand, is an appropriation of profit.
It is created to strenghten the financial position of the business.

6. Mention the types of Reserves?

i) General reserve & specific reserve ii) Revenue reserve & capital reserve

7. Define Secret Reserve?

When total depreciation charged is higher than the total depreciable cost, Secret
reserve is created. Secret reserve is not explicitly shown in the balance sheet.

Use E-Papers, Save Trees

Above line hide when print out
 CHAPTER - 8
ACCOUNTING FOR BILLS OF EXCHANGE

1. What is Bill of exchange?

A bill of exchange is an acknowledgement of debt given by one person to
another, incorporating all the terms and conditions of payments.

2. What is a Promissory Note?

A promissory note is an undertaking in writing given by the debtor to the creditor to
pay the latter a certain sum of money in accordance with the conditions stated therein.

3. State any four essential features of bill of exchange.

• A bill of exchange must be in writing. • It is an order to make payment.
• The order to make payment is unconditional. • The maker of the bill of exchange
must sign it.
• It must be stamped as per the requirement of law.

4. State the three parties involved in a bill of exchange.

i) Drawer: drawer is the maker of the bill of exchange. A seller/creditor who is
entitled to receive money from the debtor can draw a bill of exchange upon the buyer/debtor.
ii) Drawee: drawee is the person upon whom the bill of exchange is drawn.
Drawee isthe purchaser or debtor of the goods upon whom the bill of exchange is drawn.
iii) Payee: payee is the person to whom the payment is to be made. The drawer of the
bill himself will be the payee if he keeps the bill with him till the date of its payment.

5. What are the featutes of Promissory note?

• It must be in writing • It must contain an unconditional promise to pay.
• The sum payable must be certain. • It must be signed by the maker.
• The maker must sign it. • It must be payable to a certain person.
• It should be properly stamped.

6. What are the difference between a bill and a note.

(a) A bill is prepared by the creditor and accepted by the debtor; a note is prepared
by the debtor.
(b) There are three parties to a bill; there are only two parties to a note.
(c) A bill requires acceptance to

Use E-Papers, Save Trees

Above line hide when print out
 CHAPTER - 9
FINANCIAL STATEMENTS - I & II

1. What do you mean by final accounts and why do we prepare final accounts?
Final accounts are summaries of ledger accounts prepared to show the profit or loss
of the business and financial position of the business at the end of the accounting year.
It consist of Trading A/c, Profit and loss A/c and Balance sheet. It is prepared to
ascertain the true financial position of the business.

2. What is Balance sheet?

It is a statement of assets and liabilities of a business prepared at the end of the
accounting period with the object of ascertaining the financial position of the business.

3. What is trading account?

An account which shows only the result of trading with all direct expenses and direct incomes
called Gross Profit (G. P = Credit side>Debit side) or Gross Loss( G.L = Debit side >Credit side).

4. What is profit and loss account?

It is an account prepared with all the indirect expenses and indirect incomes to ascertain
Net profit or Net loss of the firm in a particular period.

Use E-Papers, Save Trees

Above line hide when print out
 CHAPTER - 11
INCOMPLETE RECORDS OF TRANSACTIONS

1. What is Incomplete of Record Transactions?

Incomplete records refer to, lack of accounting records according to the double entry
system. Degree of incompleteness may vary from highly disorganised records to organised,
but still not complete.

2. What are the features of Incomplete Records?

(a) It is an unsystematic method of recording transactions.
(b) Personal transactions of owners may also be recorded in the cash book.
(c) Different organisations maintain records according to their convenience and needs,
and their accounts are not comparable due to lack of uniformity.

3. Mention the Limitations of Single Entry System?

a) As double entry system is not followed, a trial balance cannot be prepared and
accuracy of accounts cannot be ensured.
(b) Correct ascertainment and evaluation of financial result of business operations can
not be made.
(c) Analysis of profitability, liquidity and solvency of the business cannot be done. This
may cause a problem in raising funds from outsiders and planning future business activities.
(d) The owners face great difficulty in filing an insurance claim with an insurance
company in case of loss of inventory by fire or theft.

10

Use E-Papers, Save Trees

Above line hide when print out
 CHAPTER - 12 & 13
Applications of Computers in Accounting & Computerised Accounting System

1. What is Computer / Computer System?

computer is an electronic device, which is capable of performing a variety of operations as
directed by a set of instructions. This set of instructions is called a computer programme.

2. What are the Elements of Computer System?

Software, Hardware, People, Procedures, Data, Connectivity

3. What are the Characteristics of Computer System?

Speed, Accuracy, Reliability, Versatility, Storage

4. What are the Features of Computerised Accounting System?

• Online input and storage of accounting data.
• Printout of purchase and sales invoices.
• Logical scheme for codification of accounts and transactions. Every account and
transaction is assigned a unique code.
• Grouping of accounts is done from the very beginning.

5. What are the Components of Computer?

Input Unit, Central Processing Unit, Output Unit
6. What is MIS?
A management information system provides information necessary to take decisions
and manage an organisation effectively.
7. What is AIS?
Accounting information system on the other hand identifies, collects, processes
and communicates economic information about an entity to a wide variety of users.

8. What is Computerised Accounting System?

A computerised accounting system is an accounting information system that processes
the financial transactions and events to produce reports as per user requirements. It is
based on the concept of database and has two basic requirements: (a) Accounting
framework and (b) Operating Procedure.

9. What are the Advantages of Computerised Accounting System?

• Speed • Accuracy • Reliability • Up-to-date
• Scalability • Legibility • Efficiency • Quality Report

10. What are the Limitations of Computerised Accounting System?

• Cost of training • Staff Opposition • Disruption • System failure
• Breache of security • Ill-effects on health • Inability to check unanticipated errors

11

Use E-Papers, Save Trees

Above line hide when print out
 ACCOUNTING DICTIONARY
1) Book keeping: An art as well as science of recording all the financial transactions
and dealing in a set of books is called book keeping.

2) Accounting: Accounting is a process of recoding, classifying and summarizing of

financial data into a systematic form and interpreting them.
Accounting Equations: Assets = Liabilites + Capital

3) Accountancy: It is an application of accounting principles & accounting conventions to

solve the accounting problems it includes both book-keeping and accounting.

4) Branches OR Phases of Accounting: * Financial Accounting * Management Accounting

* Cost Accounting * Mechanical Accounting

5) Financial Accounting: An Accounting for all financial transactions of an enterprise

with the objective of ascertaining profit or loss made during period is called financial A/C

6) Objectives and Advantages of Accounting: *To maintain accounting records

* To Ascertain profit or loss for a period * To present true and fair view
* To know the inflow and outflow of cash

7) Cash transactions: The transaction which involve the immediate payment of cash these
do not create any obligation on the parties to the same

8) Credit transaction: The transaction or activities in which payment of cash is postponed

such transactions create the relationship of debtor and creditor

9) Goods: The term goods includes all commodities, articles or products which are
purchased for the purpose of resale

10) Folio: It shows the page number of the other book from where the entry has been
transferred or posted

11) Carried down: The process of taking a balance an account to the next period at time
closing of the account

12) Brought down: The process of bringing down the closing of previous period to the
next period in the same account

13) Journal: The book of original entry or prime entry is called journal it is the first
step of accounting process

14) Ledger: Ledger is a book of final entry containing accounts like personal a/c, real a/c
nominal a/c.

12

Use E-Papers, Save Trees

Above line hide when print out
15) Posting: Posting is a process of transferring the entries of transaction from journal
is called posting

16) Accounting concepts: * Business entity concept * Going concern concept

* Dual aspect concept * Realization of concept * Ownership entity concept

17) Double Entry system: Double entry system means the method of recording of two
fold aspects of a transaction. The every transaction affects the financial position in two ways

18) Advantages of double entry system: Complete record, Arithmetic accuracy , up to

date information ,reliability, helps for reporting and interpretation

19) Types of accounts:

a) Personal accounts: The accounts opened in the name of person, places and
institutions are called personal accounts Eg: Ram a/c , Gokak a/c . Bank a/c
b) Real accounts: The accounts opened for properties, assets and possessions with
which we carry business are called real accounts Eg: cash a/c, assets a/c
c) Nominal accounts: The accounts opened for expenses and incomes are called
nominal accounts Eg: salary a/c , rent a/c ,interest a/c

20) The three rules of accounts

Personal accounts – Debit the receiver Credit the giver
Real accounts - Debit what comes in Credit what goes out
Nominal accounts - Debit expenses and losses Credit incomes and gains

21) Features and objectives of Journal:

a. Journal is written every day b. It is book of original entry
c. Complete record at one place d. Best for cross checking

22) Narration: It is short explanation of transaction regarding the reason for

debiting and crediting

23) Balancing of accounts: The process of closing the account by taking the total of side
which has the amount

24) Subsidiary books: Subsidiary book is a book of original entry which substitute for
journal Eg: sales book, purchase book, sales return book and purchase return book

25) Cash book: It is an important book of account in which all cash transactions are
recorded. It can also be prepared with two columns & three columns like
cash, discount & bank columns

26) Petty cash book: The cash book which is prepared for record the petty transactions
like tea exp, stationery exp etc.

13

Use E-Papers, Save Trees

Above line hide when print out
27) Types of petty cash book:
a) Analytical petty cash book – The cash book opened to record the petty
transactions in explained manner with separate columns is called analytical petty cash book
b) Simple petty cash book – It is opened with single column

28) Bank reconciliation statement: The statement prepared at the end of every month to
explain the causes for difference between balances of pass book and cash book

Practical Oriented Questions

1. Draw a diagram of Accounting Process

2. Write the Accounting Equation and find the missing figures

3. Pass Journal Entries from Ledger Accounts with five entries

14

Use E-Papers, Save Trees

Above line hide when print out
4. Draft a Specimen of Debit Voucher

5. Draft a Specimen of Credit Voucher

6. Prepare a Simple Cash Book with five imaginary figures

15

Use E-Papers, Save Trees

Above line hide when print out
7. Prepare a Trial Balance with 10 imaginary figures

8. Prepare Machinery A/c for 2 years with imaginary figures under SLM

9. Prepare Machinery A/c for 2 years with imaginary figures under WDVM

10. Prepare a Specimen of Bill of Exchange

16

Use E-Papers, Save Trees

Above line hide when print out
11. Prepare a Specimen of Promissory Note

12. Prepare Trading A/c with five imaginary figures

13. Prepare Balance Sheet with five imaginary figures

17

Use E-Papers, Save Trees

Above line hide when print out
14. Prepare Opening/Closing Statement of Affairs with five imaginary figures

15. Draw a Block Diagram of Main Components of Computer

Important Note : Out of 3 POQs to be asked, Choose First POQ from Sr. No. 1 to 5,
Second POQ from Sr. No. 6 to 10 and Third POQ from Sr. No. 11 to 15.

Life is like Accounting,

Every thing must be Balance…
- Unknown

18

Use E-Papers, Save Trees

Above line hide when print out
 “ Education is the most powerful weapon
which you can use to change the world”
- Nelson Mandela

For Details

SHARADA COMMERCE COACHING CENTRE

( Tuition for 1st & 2nd PUC, B.Com & BBA)
Mulakatte Road, T.B. Extension,
Nagamangala – 571432

Contact Details: 9535760322, 9844957931

19

Use E-Papers, Save Trees

Above line hide when print out