HIMAYAM MATRICULATION HIGHER SECONDARY SCHOOL

XII ACCOUNTANCY
Very Short Answer Questions (2 Marks)

OFFICIALLY PREPARED BY MR. MURALIMOHAN

1. What is meant by incomplete records?

When accounting records are not strictly maintained according to double entry system, these
records are called incomplete records.

2. State the accounts generally maintained by small sized sole trader when double entry
accounting system is not followed.
 Generally cash and personal accounts are maintained fully.
 Real and Nominal accounts are not maintained.

3. What is a statement of affairs?

 It is a statement showing the balances of assets and liabilities on a particular date.
 It is prepared under single entry system to find out capital. Capital = Assets – Liabilities

4. State the meaning of not–for–profit organisation.

 Some organisations are established for the purpose of rendering services to the public
without any profit motive.
 These organisations are called not–for–profit organisation.
 Examples: Art, Culture, Education, Sports, etc.

5. What is receipts and payments account?

 It is a summary of cash and bank transactions of not–for–profit organisations prepared at
the end of each financial year.
 It is a real account in nature.
 It begins with the opening of cash and bank balances.

6. What is legacy?
 A gift made to a not–for–profit organisation by a will, is called legacy.
 It is a capital receipt.

7. Write a short note on life membership fees.

 Amount received towards life membership fee from members.
 It is a capital receipt
 It is non-recurring in nature.

8. Give four examples for capital receipts of not–for–profit organisation.

i) Sale of fixed assets ii) Legacy
iii) Life member fees iv) Endowment fund
9. Give four examples for revenue receipts of not–for–profit organisation.
i) Interest on fixed deposit ii) Sale of old sports material
iii) Interest on investment iv) Subscription

10. Give four examples for Capital Expenditure of not–for–profit organization

i) Purchase Of Sport Equipments ii) Purchase Furniture
iii) Investment Made iv) Purchased Computer

11. Give four examples for revenue Expenditure of not–for–profit organization

i) Salary ii) Rent Paid iii) Advertisement
iv) Wages v) Postage vi) Repairs

12. Define partnership.

The relation between persons who have agreed to share the profits of a business carried on by
all or any of them acting for all. - Indian Partnership Act, 1932

13. What is a partnership deed?

 It is a document in writing that contains the terms of the agreement among the parents.
 It is also called Articles of Partnership.

14. What is meant by fixed capital method?

 The capital of the partners is not altered and remains generally fixed.
 Two accounts are maintained for each partner
i) Capital account ii) Current account

15. What is the journal entry to be passed for providing interest on capital to a partner?
Date Particulars L.F Debit Credit
Rs. Rs.
Interest on capital a/c Dr XXX
XXX
To Partners capital a/c
(Being interest on capital provided)

16. Why is Profit and loss appropriation account is prepared?

It is prepared for the purpose of adjusting the transaction relating to the amount due to and
amount due from partners.

17. What is goodwill?

 It is the Reputation or Good name of the business.
 Which brings benefit to the business
 It is the present value of a firm’s future excess earning
 It is an intangible assets
 It has no physical existence

18. What is acquired goodwill?

 Goodwill acquired by making payment in cash or kind is called acquired goodwill.
 It is also called purchased goodwill.
19. What is super profit?
 It is the excess of average profit over the Normal profit of a business.
 Super Profit = Average Profit - Normal Profit

20. What is Self Generated Goodwill?

 It is the Goodwill which is self generated by a firm based on features of the business such
as favourable location, loyal customer , etc.,
 It is Not Recorded in the books of accounts

21. List The Tools Of Financial Statement Analysis ?

Tools Of Financial Statement Analysis
 Comparative Statement
 Common Size Statement
 Trend Analysis
 Fund Flow Analysis
 Cash Flow Analysis

22. What is normal rate of return?

It is the rate at which profit is earned by similar business entities in the industry under normal
circumstances

23. State any two circumstances under which goodwill of a partnership firm is valued.
 Change in profit sharing ratio
 Admission of a partner
 Retirement or death of a partner
 Dissolution of partnership firm

24. What is sacrificing ratio?

 It is the proportion of the Profit which is Sacrificed by the old partner in favour of a new
partner
{ Share Sacrificed = Old Share – New Share }

25. What is meant by retirement of a partner?

 When a partner leaves from a partnership firm, it is known as retirement.
 It is also called outgoing or retiring partner.

26. What is gaining ratio?

 It is the proportion of the Profit which is Gained By the Continuing Partners from the
Retiring partner
{ Share Gained = New Share – Old Share }

27. What is a share?

 The capital of a company is divided into small units of fixed amount.
 These units are called shares.
28. What Is Working Capital?
 The Term “Fund” Refers To Working Capital
 Working Capital refers to the excess of current assets over liabilities
{ Working Capital = Current Assets – Current Liabilities }

29. What is over-subscription?

 When the number of shares applied for is more than the number of shares offered for
subscription.
 It is said to be over subscription.

30. What is meant by calls in arrear?

 Sometimes shareholders may fail to pay the amount due on calls.
 The amount called up but not paid is called calls in arrears.

31. Write a short note on securities premium account.

 When a company issues shares at a price more than the face value, the shares are said to
be issued at premium.
 The excess is called as premium.

32. Why are the shares forfeited?

If the shareholders fail to pay the amount due on calls, shares will be forfeited.

33. What is automated accounting system?

Automated accounting is an approach to maintain up-to-date accounting records with the aid
of accounting software.

34. What are accounting reports?

It is a completion of accounting information that is derived from the accounting records of a
business concern.
 Routine Reports
 Special Purpose Reports.

35. State any five accounting reports.

i) Day books / Journal ii) Income statement iii) Ledger
iv) Balance sheet v) Trial balance vi) Cash flow statement

36. What is Accounting Information System (AIS)?

Accounting Information System (AIS) collects financial data, processes them and provides
information to the various user

37. What is group in [Link] 9?

1. In Tally, a Group is a collection of ledgers of the same nature.
2. There are predefined groups of accounts which are widely used in accounts of many
organizations.

38. What Are Financial Statements ?

Financial Statements are the statements prepared by the business concerns at the end of the
accounting period to ascertain the operating results and the financial position
 Short Answers Questions (3 Marks)

1. What are the features of incomplete records?

(i) Nature:
It is an unscientific and unsystematic way of recording transactions.
Accounting principles and Accounting Standards are not followed properly.
(ii) Type of accounts maintained:
Only cash and personal accounts are maintained fully.
Real and nominal accounts are not maintained properly.
(iii) Lack of uniformity:
Different organisations record their transactions according to their needs and conveniences.
(iv) Suitability:
It Is Suitable For Small Sized Sole Traders And Partnership firm

2. What are the limitations of incomplete records?

(i) Lack of proper maintenance of records:
It is an unscientific and unsystematic way of maintaining records.
Real and nominal accounts are not maintained properly.
(ii) Difficulty in preparing trial balance:
The accounting records are incompleted.
Hence, it is difficult to prepare trial balance.
(iii) Errors and Frauds:
Errors and frauds cannot be easily detected from partial records.

3. What is income and expenditure account?

 It is nominal account.
 It is prepared to find out Surplus or Deficit relating to a particular year.
 It is just like preparing profit and loss account.
 Only revenue income and expenditure items are recorded.
 Depreciation and Outstanding expenses are also recorded.

4. How the following items are dealt with in the final accounts of not–for–profit
organisation?
a) Sale of sports materials b) Life membership fees c) Tournament fund

(i) Sale of sports materials:

 Consumable items such as sports material, stationary medicines etc., consumed during the year.
 Consumption = opening stock + Purchase - Closing Stock
(ii) Life membership fees:

 Amount received towards life membership fee from members.

 It is a capital receipt.
 It is non-recurring in nature.
(iii) Tournament fund:
 If there are any specific funds such as tournament fund, prize fund etc…
 5. State the features of partnership.
(i) It is an association two or more person.
(ii) Minimum 2 and Maximum number of members 50 limited.
(iii) They agreement may be oral or written.
(iv) It’s carried on by all or any of them acting for all.

6. State any six contents of a partnership deed.

 Name of the firm and nature and place of business
 Date of commencement and duration of business
 Names and addresses of all partners
 Capital contributed by each partner
 Profit sharing ratio
 Amount of drawings allowed to each partner
 Rate of interest to be allowed on capital
 Rate Of Interest On Drawings

7. Write a brief note on the applications of the provisions of the Indian Partnership
Act, 1932 in the absence of partnership deed.
(i) Remuneration to partners:
No salary or remuneration is allowed to any partner. [Section 13(a)]
(ii) Profit sharing ratio:
Profits and losses are to be shared equally. [Section 13(b)]
(iii) Interest on capital:
No interest is allowed on the capital. [Section 13(c)]
(iv) Interest on loans advanced by partners to the firm:
Interest on loan is to be allowed at the rate of 6%. [Section 13(d)]
(v) Interest on drawings:
No interest is charged on the drawings of the partner

8. List out the adjustments made at the time of retirement of a partner in a partnership
firm.
 Distribution of accumulated profits, reserves and losses
 Revaluation of assets and liabilities
 Determination of new profit sharing ratio and gaining ratio
 Adjustment for goodwill
 Adjustment for current year’s profit or loss upto the date of retirement
 Settlement of the amount due to the retiring partner

9. What are the adjustments required at the time of admission of a partner.

 Distribution of accumulated profits, reserves and losses

 Revaluation of assets and liabilities
 Determination of new profit-sharing ratio and sacrificing ratio
 Adjustment for goodwill
 Adjustment of capital on the basis of new profit sharing ratio
10. What is reissue of forfeited shares?
 Shares forfeited can be reissued by the company.
 The shares can be reissued at any price.
 But, the reissue price cannot be less than the amount unpaid on forfeited shares.

11. Write a short note on (a) Authorised capital (b) Reserve capital
1. Authorized Capital:
 It means such capital as is authorized by the memorandum of association.
 It is the maximum amount which can be raised as capital.
 It is also known as Registered capital or Nominal capital.
2. Reserve Capital:
 The company can reserve a part of its subscribed capital to be called up only
at the timeof winding up.
 It is called Reserve Capital.

12. What is meant by issue of shares for consideration other than cash?
A company may issue shares for consideration other than cash when the company
aquires fixed assets such as land and buildings, machinery etc.

13. Write a brief note on accounting vouchers.

 Voucher is a document which contains details of transactions.
 Transactions are to be recorded through voucher entries.
 Tally has a set of predefined vouchers such as Purchase, Sales, Payment, Receipt
and Contra.
To view the list of voucher types:
Gateway of Tally > Masters > Accounts Info > Voucher Types > Display

14. What are the pre-defined ledgers available in [Link] 9?

Tally has two predefined ledgers,
i) Cash ii) Profit & Loss A/c

15. Explain how to view profit and loss statement in [Link] 9.

To view Profit and Loss Account:
F10: A/c Reports > Profit & Loss A/c > Alt F1 (detailed)
(Or)
Gateway of Tally > Reports > Profit & Loss A/c > AltF1 (detailed)
 Long Answer Questions (5 Marks)

1. State the differences between double entry system and incomplete records.

[Link]. Basis Double Entry System Incomplete Records

1 Transactions Both debit and credit aspects Debit and credit aspects of all the
of all the transations are transactions are not recorded
recorded. completely
2 Reliability It is reliable. It is not reliable.
3 Accounts Personal, real and nominal Only cash and personal accounts are
Maintained accounts are maintained. maintained.
4 Suitable It is suitable for all types of It is only suitable for small sized
organisations. sole trading and partnership Firms.
5 Trial balance It can be prepared easily. It is difficult to prepare it.

2. Differentiate between statement of affairs and balance sheet.

[Link]. Basis Statement of Affairs Balance Sheet

1 Purpose To Findout the Capital Of the To know the financial Position of
Business the Business
2 Reliable It is not reliable. It is reliable.
3 Accounting It is prepared from single It is prepared by double entry
System entry system system.
4 Missing items It is very difficult to trace it. It trace very easily
5 Basis It is not fully based ledger. It is based fully ledger.

3. State the differences between Receipts and Payments Account and Income and
Expenditure Account.

[Link]. Basis Receipt and Payment Income and Expenditure

Account Account
1 Nature of It is real account It is nominal account
account
2 Basis It is based on cash system It is based on accrual system
3 Opening and It commence opening and There is no opening and closing
Closing closing balance. balance
balance
4 Nature of items It contains actual receipt and It contains only revenue expenses
payment and incomes.
5 Period It contains the past period, It contains only the items relating
current period and subsequent to the current period.
period are recorded.
 4. State the differences between fixed capital method and fluctuating capital method.

Basis Fixed Capital Method Fluctuating Method

Number of Two accounts are maintained Only one account maintained.
Accounts i) capital account ii) current account Is capital account
Change in The amount of capital not changes The amount of capital changes from
Capital from period to period period to period
Closing It always show the credit balance It always show the debit or credit
Balance balance
Adjustments All adjustments done in current All adjustments done in capital
account account

5. Distinguish between sacrificing ratio and gaining ratio.

Basis Sacrificing ratio Gaining ratio

Meaning A share of profit sacrificed by the A share of profit gained by continuing
old partner to new partner. partner from retiring partner.
Purpose It is calculated to determine the It is calculated to determine the
amount to be adjusted towards amount to be adjusted towards
goodwill for the sacrificing goodwill for the gaining partners.
partners.
Time Admission of a partner Retirement of a partner
Formula Sacrificing Ratio Gaining Ratio
= old ratio – new ratio = New ratio – Old ratio

6. State the differences between preference shares and equity shares.

[Link]. Basis Preference shares Equity Shares

1 Rights Preference shares are those Equity shares are those shares
shares which have preferential which have no preferential
rights rights
2 Rate of Fixed Variable
dividend
3 Voting They can vote on any resolutions They can vote on are
rights affecting the Rights. resolutions.
4 Convertibility Preference shares can be Equity shares can never be
converted into equity shares. converted.
5 Payment of Priority in payment of dividend The dividend is paid after the
dividend over equity shareholders payment of all liabilities
7. State Any Six Factors Determining Goodwill .

i) Profitability of the Firm

 The Profit Earning Capacity of the firm determines the value of its goodwill
 A firm earning higher profits and having potential to generate higher profits in future
will have higher value of goodwill
ii) Degree Of Competition
 In the case of business enterprise having no competition or negligible competition, the
value of goodwill will be high
iii) Efficiency Of Management
 A Firm Having efficient management will earn more profits and the value of its goodwill
will be higher compared to a firm with less efficient managerial personnel
iv) Other Factors
 Popularity of the proprietor, impressive, advertisement, publicity, good relations with
customers etc.,
 Add to the value of Goodwill of a Business
v) Good Quality Of Goods or Sevices Offered
 If A Firm Enjoys good Reputation among the customers and general public for the good
quality of its products or services, the value of goodwill for the firm will be high

8. Mention the commonly used voucher types in [Link] 9.

(i) Receipt Voucher

All transactions related to receipt either in cash or through bank are recorded using receipt
voucher.
To record receipt:
Gateway of Tally > Transactions > Accounting Vouchers > F6:Receipt
(ii) Payment Voucher
All transactions related to payments either in cash or through bank are recorded using
payment voucher.
To record payment:
Gateway of Tally > Transactions > Accounting Vouchers > F5:Payment
(iii) Contra Voucher
A transaction involving both cash account and bank account is recorded using contra voucher.
To record contra:
Gateway of Tally > Transactions > Accounting Vouchers > F4:Contra
(iv) Purchase Voucher
Purchase vouchers are used for recording both cash and credit purchases of goods.
To record purchases:
Gateway of Tally > Transactions > Accounting Vouchers > F9:Purchase
(v) Sales Voucher
Sales vouchers are used for recording both cash and credit sales of goods.
To record sales:
Gateway of Tally > Transactions > Accounting Vouchers > F8:Sales
(vi) Journal Voucher
Journal vouchers are used for recording transactions involving other than cash, bank,
purchases and sales such as depreciation, provision for bad debts.
To record journal:
Gateway of Tally > Transactions > Accounting Vouchers > F7:Journal
9. Explain any five applications of computerized accounting system.

i) Maintaining accounting records:

 It can be maintained easily and efficiently for long time period.
 It facilitates fast and accurate retrieval of data and information.
ii) Inventory management:
 CAS facilitates efficient management of inventory.
 Fast moving, slow moving and obsolete inventory can be identified.
iii) Report generation:
 CAS helps to generate various routine and special purpose reports.
iv) Data import/export:
 Accounting data and information can be imported from or exported to other users within
the organisation.
v) Taxation:
 CAS helps to compute various taxes and to deduct these and deposit the same to the
Government account.

!! ALL THE BEST !!

OFFICIALLY PREPARED BY MR. MURALIMOHAN