PREPARED BY: MADHURIMA GUPTA
MOBILE NUMBER:9831511394
For
Class- 11
Board: cbse, isc, wb board 2020-2021
1 MARKS QUESTION
1. What is Capital?
Ans: It refers to the amount invested by the proprietor in a business enterprise. It can be expressed
as Capital = Assets – External Liabilities
2. What are Drawings?
Ans: Drawings refers to any cash or value of goods withdrawn by the owner for personal use.
3. What are Liabilities?
Ans: It refers to the amount which the firm owes to outsiders. They represent creditors’ claims on
the firm’s assets.
4. What are Assets?
Ans: Assets are material things or possessions or properties of the business including the amounts
due to it from others. Assets help to generate income. Example: Furniture, Plant and building
5. What are the Current Assets?
Ans: Current assets are those assets which are meant for sale or which can be converted into cash
within a year. For example, goods are purchased with a purpose to resell and earn profit, debtors
can be converted into cash within a short period. Example-debtors, stock, bills receivable, cash in
hand and cash at bank.
6. Give two examples of current assets.
Ans: The two examples of current assets are cash and stock.
7. Give two examples of tangible assets.
Ans: The two examples of tangible assets are land and building and stock
8. Give two examples of intangible assets.
Ans: The two examples of intangible assets are goodwill and prepaid expense
9. What are fictitious assets?
Ans: These are the assets which cannot be realised in cash or no further benefit can be derived
from those assets. Such assets include a debit balance of profit and loss A/c and the expenditure
not yet written off such as advertising expenses etc.
10. What are the current liabilities?
Ans: Current liabilities refer to those liabilities which are to be paid in the near future(normally
within one year) .
11. Give two examples of current liabilities.
Ans: The two examples of current liabilities are creditors and bill payable.
12. What are the internal liabilities?
Ans: All amounts which a business entity has to pay to the proprietor or owners are internal
liabilities such as capital and accumulated profits.
13. What is the expense?
Ans: Expense is the cost incurred in producing and selling goods and services.
14. What are the revenue?
Ans: The proceeds received by the business, through its diverse sources is known as revenue. E.g:
All sources of income, i.e. sales, interest, dividend, royalty and so on.
15. What is income?
Ans: Excess of revenue over expenses is called income. Income = Revenue – Expenses.
16. What is a voucher?
Ans: A voucher is a document on the basis of which transactions are first recorded in the
book. They are also called source documents as they help in identifying the source of a
transaction. A few examples of vouchers include bill receipts, cash memos, pay-in-slips, checks, an
invoice, a debit or credit note.
17. What is a trade discount?
Ans: When a discount is allowed by a seller to its customers at a fixed percentage on the list or
catalogue price of the goods it is called a trade discount. It is not recorded in the books of account.
18. What is a cash discount?
Ans: When a discount is allowed to the customers for making prompt payment it is called cash
discount. It is always recorded in the books of account.
19. What is meant by sales?
Ans: The term sales is used for the amount of the sale of goods and services rendered. The term
sales include both cash and credit sales.
20. Define merchandise.
Ans: Merchandise means goods for sale.
21. Profit is earned on the sale of a fixed asset. What should be the
accounting treatment of this profit?
Ans: It is a capital profit. Hence, it should be transferred to the capital reserve.
22. Give two examples of revenue expenditure.
Ans: The two examples of revenue expenditure are the cost of goods sold and salary.
23. Define basic accounting terms.
Ans: Basic accounting terms refers to the accounting terms that are used daily in the world of
business.
24. Give three examples of revenues.
Ans: The three examples of revenues are
(i) Amount received from the sale of goods
(ii) Amount received from providing service to customers
(iii) Receipts of commission, interest, rent, etc.
25. Distinguish between profit and gain.
Ans:
BASIS PROFIT GAIN
Definition Profit is the excess of revenues Gain is the proceeds received
over expenses during an from the sale of fixed or
accounting period. financial assets.
Generation It is generated within the It arises from events or
regular and usual business transactions which are
operations incidental to business such as
a sale of a fixed asset or
winning a lottery prize.
26. Distinguish between expenses and losses.
Ans: If the benefit of expenditure is exhausted within a year it is called expense, whereas, excess
of expenses of a period over its related revenues is termed as a loss.
3-4 marks
1. Distinguish between fixed assets and current assets
Ans:
BASIS FIXED ASSETS CURRENT ASSETS
Definition Fixed assets refer to those Current assets are either
assets which are held for meant for sale or which are
continued use in the business expected to be converted into
and are not meant for resale cash within one year.
Convertibility Not easily convertible to cash Easily converted to cash
Valuation It’s value is calculated by It’s value is calculated on the
subtracting depreciation from lesser value between cost and
the cost market value
Financing For financing of fixed assets For current assets financing
long term funds are used short term funds are used
Sale of asset Will result in capital profit or Will result in revenue profit or
loss. loss.
Holding period More than a year Less than a year
2. Distinguish between revenue expenditure and capital expenditure
Ans:
BASIS CAPITAL EXPENDITURE REVENUE EXPENDITURE
Definition Expenditure incurred for The expense incurred for
acquiring assets, to enhance the maintaining the day to day
capacity of an existing asset that activities of a business
results in increasing its lifespan.
The expenditures that are
incurred by an organisation for
long term benefits are known as
capital expenditures.
Tenure Long Term Short term
Exhaustion of benefit Lasts more than a year Exhausted within a year
Physical existence Have a physical presence except Do not have a physical presence
for intangible assets
Occurrence Non-recurring in nature Recurring in nature
3. Distinguish between expense and expenditure
Ans:
BASIS EXPENSE EXPENDITURE
Meaning Expenses are those costs that Expenditure is the cost that is
incur to earn revenues. spent on the purchase or
growth of fixed assets.
Term An expense is generally for Expenditure is usually the
short-term costs of the long-term costs of the
organization. organization.
Occurrence An expense incurs multiple Expenditure is incurred once
times. in a period.
Purpose Expenses are done by an Expenditures are done by an
organization so that it can run organization to establish it so
on a day to day basis. that it can operate.
Examples Salary paid, rent paid, wages, Purchase of new land,
etc. are expenses. purchase of new plants for
business, etc. are examples.
4. Give two characteristics of a business transaction.
Ans: The two characteristics of a business transaction are.
(i) It results in a change in the financial position of the firm,i.e. A change in the values of some of
the assets, liabilities or capital.
(ii) The change must be capable of being expressed in terms of money.
HOTS
1. Godrej Ltd. imported from Germany one machinery for sale in India and other
machinery for production purposes. Will you treat them goods or fixed assets?
Ans: Machinery purchased for sale in India is treated as goods.
Machinery purchased for production is treated as fixed asset
Reason: Assets are goods held in the business for the purpose of long-term benefits. Goods are
items held for trading purpose. Imported machinery for "sale" is to be treated as goods and
machinery for "Production" purposes is to treated as Asset.
2. Mr. Jaspal Singh dealing in electronic goods sold 20 TV sets costing ₹30,000 each
at ₹40,000 each. Out of this ₹, 5,00,000 were received in cash and the balance is not
yet received. State the amount of revenue.
Ans: Revenue will be ₹8,00,000(i.e 20TV sets X ₹40,000) Revenue is the amount either received
or receivable from sale of goods and services. Both cash sales and credit sales are included in
revenue.
3. Mr. Dinanath who owed us ₹50,000 became insolvent and paid only 40% of this
amount. What is the term used for the amount not received?
Ans: Bad debt
4. What is the value involved in classifying the assets into current and non-current?
Ans: Classification of assets into current and non-asset helps in ascertaining the liquidity position
of the business entity. Non-current assets are held for continued use in the business whereas
current assets are expected to be converted into cash within one year.
5. What is the value involved in classifying the assets into current and non-current?
Ans: Classification of assets into current and non-asset helps in ascertaining the liquidity position
of the business entity. Non-current assets are held for continued use in the business whereas
current assets are expected to be converted into cash within one year.
6. Discuss the value involved in classifying the receipts into capital and revenue?
Ans: Classification of receipts into capital receipts and revenue receipts is essential for the
preparation of financial statements since revenue receipts are shown on the credit side of trading
and profit and loss account whereas capital receipts are shown in the balance sheet.
7. Identify the value involved in classifying the expenditure into capital and revenue.
Ans: Financial statements cannot be prepared without classifying the expenditure into capital and
revenue. Capital expenditure is written in the balance sheet whereas revenue expenditure is
written on the debit side of trading or profit and loss account.
8. What is the reason that the capital expenditure is shown in the balance sheet?
Ans: Amount spent on acquiring or erection of fixed assets is termed as capital expenditure. Such
expenditure is shown in the assets because it yields benefit over a long period of time.
