Q1. Define accounting. Q2. State what is end product of financial accounting? Q3. Enumerate main objectives of
accounting. Q4 . List any five users who have indirect interest in accounting. Q5. State the
nature of accounting information required by long-term lenders. Q6. Who are the external users of information? Q7. Enumerate informational needs of management. Q8 . Give any three examples of revenues. Q9. Distinguish between debtors and creditors. Answer: Q10. ‘Accounting information should be comparable’. Do you agree with this statement? Give two reasons. Answer : Accounting information should be comparable because of the following reasons. 1. Comparable accounting information helps in inter-firm comparisons. This helps in assessing viability and advantages of various policies adopted by different firms. 2. It also helps in intra-firm comparisons that help in determining the changes and also to ascertain the results of various policies and plans adopted in different time periods. This also helps to figure out the errors, ascertain growth and assist in management planning. Q11. If the accounting information is not clearly presented, which of
the qualitative characteristic of the accounting information is violated? Q12. The role of
accounting has changed over the period of time”- Do you agree? Explain. Q13. Giving examples, explain each of the following accounting terms: Q14. How will you define revenues and expenses? Q15. What is the primary reason for the business students
and others to familiarise themselves with the accounting discipline? Long Answer Type Questions:Q1. Explain the factors, which necessitated systematic accounting. Q2. Describe the brief history of accounting. Q3. Explain the development of and role of accounting. Role of accounting- While in the earlier times accounting was merely concerned with recording the financial events (i.e. record-keeping activity); however, now-a-days, accounting is done with the rationale of not only maintaining records, but also providing an information system that provides important and relevant information to various accounting users. Q4. Define accounting and state its objectives. Q5. Describe the informational needs of external users. Q6. What do you mean by an asset and what are different types of assets? Fixed Assets- These are those assets that are hold for the long term and increase the profit earning capacity and productive capacity of the business. These assets are not meant for sale, for example, land, building machinery, etc. Current Assets- Assets that can be easily converted into cash or cash equivalents are termed as current assets. These are required to run day to day business activities; for example, cash, debtors, stock, etc. Tangible Assets- Assets that have physical existence, i.e., which can be seen and touched, are tangible assets; for example, car, furniture, building, etc. Intangible Assets- Assets that cannot be seen or touched, i.e. those assets that do not have physical existence, are intangible assets; for example, goodwill, patents, trade mark, etc. Liquid Assets- Assets that are kept either in cash or cash equivalents are regarded as liquid assets. These can be converted into cash in a very short period of time; for example, cash, bank, bills receivable, etc. Fictitious Assets- These are the heavy revenue expenditures, the benefit of whose can be derived in more than one year. They represent loss or expense that are written off over a period of time, for example, if advertisement expenditure is Rs 1,00,000 for 5 years, then each year Rs 2,00,000 will be written off. Q7. Explain the meaning of gain and profit. Distinguish between these two terms. Answer : Profit- Excess of revenue over expense is known as profit. It is normally categorised into gross profit or net profit. It increases the owner’s capital as it is added to the capital at the end of each accounting period. For example, goods costing Rs 1, 00,000 is sold at Rs 1,20,000, then the sale proceeds of Rs 1,20,000 is the revenue and 1,00,000 is the expense to generate this revenue. Hence, accounting profit of Rs 20,000 (i.e. Rs 1,20,000 – Rs 1,00,000) is the difference between the revenue and expense that is earned by the business. Gain- It arises from irregular activities or non-recurring transactions. In other words, a gain is a result of transactions that are incidental to the business, other than operating transactions. For example, an old machinery of book value Rs 20,000 is sold at Rs 25,000. Hence, the gain is Rs 5,000 (i.e. Rs 25,000 – Rs 20,000). Here, the sale of the old machinery is an irregular activity; so, the difference is termed as gain Thus, in other words the only difference between profit and gain is that profit is the excess of revenue over expense and gain arises from other than operating transactions. Q8. Explain
the qualitative characteristics of accounting information. The following are the qualitative characteristics of accounting information: 1. Reliability- It means that the user can rely on the accounting information. All accounting information is verifiable and can be verified from the source document (voucher), viz. cash memos, bills, etc. Hence, the available information should be free from any errors and unbiased. 2. Relevance- It means that essential and appropriate information should be easily and timely available and any irrelevant information should be avoided. The users of accounting information need relevant information for decision making, planning and predicting the future conditions. 3. Understandability- Accounting information should be presented in such a way that every user is able to interpret the information without any difficulty in a meaningful and appropriate manner. 4. Comparability- It is the most important quality of accounting information. Comparability means accounting information of a current year can be comparable with that of the previous years. Comparability enables intra-firm and inter-firm comparison. This assists in assessing the outcomes of various policies and programmes adopted in different time horizons by the same or different businesses. Further, it helps to ascertain the growth and progress of the business over time and in comparison to other businesses. Q9. Describe the role of accounting in the modern world. NCERT SolutionsAccountancyBusiness StudiesIndian Economic DevelopmentCommerce Which qualitative characteristic of accounting information is depicted by verification of documents a understandability b reliability c relevance D comparability?Therefore, Understandability is a characteristic of accounting information Which is reflect accounting information clearly.
What are the qualitative characteristics of an accounting information?Enhancing (Secondary) Qualitative Characteristics
Verifiability. Timeliness. Understandability. Comparability.
Which qualitative characteristic is reflected when it is said that accounting information should be verifiable '?Understandibility qualitative characteristics of accounting information is reflected when accounting information is clearly presented. As understandibility means that the information provided through the financial statements be presented in a manner that the users are able to understand it in the manner it should be.
What is the qualitative characteristic of verifiability?The enhancing qualitative characteristics:
Verifiability – if information can be verified (e.g. through an audit) this provides assurance to the users that it is both credible and reliable. Timeliness – information should be provided to users within a timescale suitable for their decision making purposes.
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