Answer the following questions in one sentence each.
1.
What is partnership?
Ans. Partnership is a
form of business organisation in which two or more persons enter into an
agreement, contribute certain capital, undertake certain lawful business to
earn profit and share the profits or losses in agreed proportion.
2.
What is partnership deed?
Ans. A partnership deed is a written agreement
duly stamped and signed document containing the terms and conditions of the
partnership.
3.
State the meaning of a Balance Sheet.
Ans. A balance sheet
is a statement showing the financial position of the business in the form of
its assets and liability on a particular date.
4.
When are partners’ current accounts opened?
Ans. When partnership
form adopts fixed capital method, it opens partners’ current accounts to record
dealing of partners with partnership firm.
5.
Write the meaning of bad debts?
Ans. The debt or its
part which cannot be recovered from a debtor is called bad debts.
6.
State the meaning of closing stock.
Ans. The unsold goods
remained in the business at the end of the accounting year is known as closing
stock.
2.
How is closing stock valued?
Ans. Closing stock is
valued at cost price or market price whichever is less.
3.
What is Trial Balance?
Ans. Trial balance is
a statement showing the list debit and credit balances of all the ledger
accounts on a particular date.
4.
What do you mean by Fluctuating Capital Method?
Ans. Fluctuating
capital method is one in which capital balances of the partners go on changing
every year due to entries for adjustments like drawings, interest on capital and
drawings, salaries, commission, allowances, etc. Recorded in their capital
accounts.
5.
If the partnership deed is silent, what is the profit sharing of the
partners?
Ans. If the
partnership deed is silent, partners will share profits and losses in equal
ratio.
6.
Which account shows Net Profit or Net Loss of the business?
Ans. Profit and Loss
account shows Net Profit or Net Loss of the business.
7.
What do you mean by direct expenses?
Ans. The expenses
which are directly related with production or purchase of goods or services are
called direct expenses.
8.
What do you mean by accrued income?
Ans. The income which
is due but not yet received is called accrued income.
9.
To which account is gross profit transferred?
Ans. Gross profit is
transferred to Profit and Loss account.
10.
A person who is engaged in day – to – day activities of the business.
Ans. Active or
Working Partner.
11.
What type of institutions / concerns prepares Income and Expenditure
Account?
Ans. ‘Not for profit’
concerns such as Sports clubs, Charitable Hospitals, Schools, Colleges,
Universities, Welfare Associations, Religious Concerns, Professional Institutions,
etc. Prepare Income and Expenditure Account.
12.
What do you mean by non – recurring expenses?
Ans. Non – recurring
expenditure is any capital expenditure which is spent for acquisition of fixed
assets like purchase of land or furniture, in order to run the concern and it
gives benefits for a long period say more than 3 years.
13.
What do you mean by recurring expenses?
Ans. Recurring
expenditure is that expenditure of which benefit lasts for a maximum period of
one year and is incurred on purchase of goods or services, in order to carry
out the main activity of the concern.
14.
Which ‘ Final Accounts’ do the ‘Not for Profit’ Concerns prepare?
Ans. The ‘Not for
Profit’ concerns prepare Income and Expenditure Account and Balance sheet in
their final accounts.
15.
Which account is prepared by the ‘Not for Profit’ concerns for finding
out surplus or deficit of the financial year?
Ans. Income and
expenditure Account is prepared by the ‘Not for Profit’ concerns to find out
surplus or deficit of the financial year.
16.
Which account ‘Not for Profit’ concerns prepares instead of Cash
account?
Ans. ‘Not for profit’
concerns prepare ‘Receipts and Payments’ Account instead of Cash account.
17.
What do you mean by ‘Not for Profit’ concern?
Ans. A concern or an
organisation which is formed and established to serve society or general public
by undertaking various activities without any profit motive is called a ‘not
for profit’ concerns.
18.
State the meaning of Capital Receipts.
Ans. Capital Receipts
are those receipts which are non – recurring in nature and not forming a part
of regular flow of income of a concern. E.g. specific donation received for
construction of a building.
19.
Write the meaning of Revenue Receipts.
Ans. Revenue Receipts
are those receipts which are recurring in nature and such receipts give a
regular flow of income of a concern, e.g. subscriptions received from members.
20.
State the meaning of Revenue expenditure.
Ans. An expenditure
which is incurred for carrying day – to – day business activities and
maintaining fixed assets in working condition is called revenuer expenditure.
21.
What do you mean by Capital expenditure?
Ans. An expenditure
which is non – recurring in nature and incurred to purchase new fixed assets to
increase earning capacity, efficiency and working life of the existing fixed
assets and to achieve economy of operation of an existing fixed assets is
called capital expenditure.
22.
What is Legacy?
Ans. Any asset,
property or amount of cash which ‘Not for Profit’ concern receives as per the
provisions made in the will of the donor after his death is called legacy.
23.
What do you mean by capital fund?
Ans. Capital fund
consists of contributions, entrance fees, surplus income, legacies and
donations specifically received for capital fund.
24.
State the meaning of Entrance Fees.
Ans. Specific amount
received from the member only once usually at the time of his entry into ‘Not
for profit’ concern is called entrance fees.
25.
What do mean by ‘Special donation’?
Ans. Donations which
are given for a specific purpose like donation for building fund are called as
special donations and such donations are to be utilised for the same purpose
for which they have been collected.
26.
What is an ‘Endowment Fund’?
Ans. A fund created
by ‘Not for profit’ concern from the gift or donation given by the donor, the
income of which is used or devoted for specific purpose is called endowment
fund.
27.
What is ‘Life Membership Fee’?
Ans. The fee paid by
a person who desired to become a member of the organisation for his whole life
is called as ‘Life Membership Fee’.
28.
What do you mean by Single Entry System?
Ans. A book – keeping
system that only records one aspect of each business transaction. i.e. either
debit or credit is called single entry system.
29.
Which accounts are normally kept under the single entry system?
Ans. Generally, the
personal accounts relating to debtors and creditors and cash – book are kept
under the single entry system.
30.
Which statement is prepared under the single entry system to ascertain
the capital?
Ans. Statement of
Affairs is prepared under the single entry system to ascertain the capital.
31.
What is Statement of Affairs?
Ans. A statement
which is prepared under the single entry system on the basis of estimated
balances of various assets and liabilities is called ‘Statement of Affairs’.
32.
Which statement is prepared under the single entry system to ascertain
profit?
Ans. Statement of
Profit or Loss is prepared under the single entry system to ascertain profit.
33.
What is depreciation?
Ans. Continuous,
gradual and permanent reduction in the value of fixed assets brought about by
the factors like wear and tear, passage of time or similar other factors, etc
is called depreciation.
34.
What is fixed instalment method of depreciation?
Ans. The method of
depreciation in which depreciation is charged at a fixed percentage on the
original cost of a fixed asset every year and as a result the amount of
depreciation charged every year remains constant is called Fixed Instalment
Method.
35.
What is Reducing Balance method?
Ans. The method of
depreciation under which depreciation is charged at a fixed percentage on the
written down value of the fixed asset at the beginning of each year, is called
the Reducing Balance Method of Depreciation.
36.
To which account an amount of depreciation is transferred?
Ans. At the end of
every financial year, the amount of depreciation is transferred to Profit &
Loss account.
37.
What do you mean by scarp value?
Ans. The net amount which is expected to be
realised on the final disposal of a fixed asset is called ‘scrap value’.
38.
Which account is credited when depreciation is charged?
Ans. When
depreciation is charged, relevant fixed asset account is credited.
39.
What do you mean by qualified acceptance?
Ans. If the drawee of
a bill of exchange accepts it on condition that the time or amount of the bill
be changed or adds some other conditions to the bill, his acceptance is called a qualified
acceptance.
40.
What is the term of the bill of exchange?
Ans. The period for
which the bill of exchange is drawn and accepted is called the term of the bill
of exchange.
41.
What is Joint venture?
Ans. A Joint venture
is a temporary partnership for carrying out a specific business without the use
of the firm name.
42.
Who is called Co – venturer?
Ans. Members or
partners in a joint venture are individually called coventurer.
43.
What is Joint Venture Account?
Ans. An account
operated by co – venturers to record joint venture transactions and to find out
profit or loss made on joint venture is called joint venture account.
44.
To which account discount of discounted bill transferred in joint
venture business?
Ans. Discount of
discounted bill is transferred to Joint venture A/c in joint venture business.
Set II
1.
Write word/term/phrase which can
substitute each of the followings:
1.
Reputation of a firm expressed in terms of money. (Goodwill)
2.
Payment of expenses before they have become due. (Prepaid
expenses)
3.
Payment of bill of exchange before its due date at rebate. (Retirement of bill of exchange)
4.
The person on whom the bill of exchange is drawn. (Drawee)
5.
The account that is credited when depreciation is charged. (Respective Asset A/c)
6.
A bill before acceptance. (Draft)
7.
Amount by which book value of fixed assets exceeds its selling price. (Loss on sale of asset)
8.
Expenses due but not paid. (Outstanding
Expenses)
9.
Partners of joint venture business. (Co
– venturers)
10.
Normal Rate of Return x Capital employed. (Normal Profit)
11.
Which types of expenses are debited to Trading Account? (Direct expenses related to production)
12.
What are ‘Not for Profit’ Concerns? (A
concern or an organisation which is formed and established to serve society or
general public by undertaking various activities without any profit motive is
called a ‘not for profit’ concern.)
13.
A partnership for
specific purpose and for temporary period. (Joint
venture)
14.
List of debit and
credit balances of the ledger accounts. (Trial
Balance)
15.
A person who accepts
the bill. (Acceptor)
16.
Written agreement
among the partners. (Partnership deed)
17.
The balance which
cannot be recovered from the debtors. (Bad
debts)
18.
The account that serves the purpose of P&L A/c for non trading
organisation. (Income and expenditure
account)
19.
The system of book keeping under which only one aspect of the
transactions is recorded. (Single entry
accounting system)
20.
The person on whom the bill of exchange is drawn. (Drawee)
21.
The account that is credited when depreciation is charged. (Respective Asset A/c)
22.
The present value of tangible trading assets less all the liabilities,
which is required for valuation of goodwill. (Capital employed)
23.
Goods returned to the supplier. (Purchase
Return)
24.
It is a stick or lever used to change the position of the cursor on a
screen. (Joystick)
25.
A bill in which the period of the bill is counted from the date of the
bill accepted. (After acceptance bill)
26.
The receipts that are an unusual nature not arising through named
activities of the business. (Capital
Receipts)
27.
A fixed asset which is not essential for conduct of business. (Goodwill)
28.
Debit balance of trading account. (Gross
loss)
29.
Written terms of agreement between the partners. (Partnership deed)
30.
Summary of actual cash receipts and cash payments. (Receipts & Payment A/c)
31.
A system in which accounts are prepared from incomplete records. (Single entry accounting system)
32.
An account opened by covertures in the bank for recording cash
transactions. (Joint Bank A/c)
33.
A
statement showing financial position of the business. (Balance sheet)
34.
Making
the payment of bill before its due date. (Retirement
of Bill of exchange)
35.
Summary
of actual cash receipts and cash payments. (Receipts
and Payment A/c)
36.
The
relationship between persons who have agreed to share profit or loss in Joint
Venture Business. (Coventurers’)
37.
A Partner
who only lends his name to the firm. (Nominal Partner)
38.
Concerns
established for providing services. (Not
for profit concern)
39.
Profit
earned over and above normal profit. (Super
profit)
40.
A
temporary partnership without firm name. (Joint
venture)
41.
A person
who endorses the bill. (Endorser)
42.
The
balance which cannot be recovered from the debtors. (Bad debts)
43.
An
accounting system where rules of debit and credit are not followed. (Single entry accounting system)
44.
Money
value of business reputation. (Goodwill)
45.
A person
entered into a joint venture. (Coventurers)
46.
The Gifts
received from legal representative as per the will of a deceased person. (Legacies)
2.
Match the following:
Group A
|
Group B
|
1.
Opening Stock
2.
Fixed instalment method
3.
Software
4.
Joint Bank Account
5.
Subscription
|
a.
Amount
of depreciation remains constant.
b.
Trading
account
c.
Revenue
income
d.
Capital
income
e.
Balance
sheet
f.
Converting
symbolic language
g.
Separate
set of books
h.
Utility
programme
|
Group A
|
Group B
|
1.
Unpaid
expenses
2.
Single Entry System
3.
Computer
4.
Co – Venture
5.
Maker of a bill
|
a.
Electronic
device
b.
Partnership
firm
c.
Drawee
d.
Asset
side
e.
Unscientific
f.
Liability
side
g.
Drawer
h.
Joint
venture
|
Group A
|
Group B
|
1.
Not for profit concerns
2.
Fixed capital method.
3.
Unexpired expenses
4.
Temporary Partnership
5.
Pure Single Entry System
|
a.
Capital
A/c. of partner.
b.
Current
A./c of Partner.
c.
Joint
venture
d.
Asset
e.
Liability
f.
Only
personal A/cs.
g.
Profit
& Loss A/c.
h.
Income
and Expenditure A/c.
|
Group A
|
Group B
|
1.
Goodwill
2.
Discount to customers
3.
Statement of Affairs
4.
Income and Expenditure account
5.
Fixed Instalment Method.
|
a.
Book
Debts
b.
Sundry
Creditors
c.
Tangible
Asset
d.
Intangible
Asset
e.
Single
Entry System
f.
Double
Entry System
g.
Original
Cost
h.
Not
for Profit concerns
|
Group A
|
Group B
|
1. Partner’s Salary
2. Subscription received in advance for the current
year.
3. Dishonour of bill.
4. Cash in hand.
5. Unsold goods taken over by co – ventures
|
a.
Balance
sheet asset side.
b.
Current
asset.
c.
Deducted
from gross profit.
d.
Credited
to joint venture account.
e.
Credited
to covertures A/c
f.
Noting
Charges.
g.
Closing
balance sheet liability side.
h.
Fixed
assets.
|
Group A
|
Group
B
|
1. RAM
2. Co – Ventures
3. Goodwill
4. Receipts & Payment A/c
5. Single Entry System of Book – Keeping.
|
a.
Intangible
Asset
b.
Records
all cash transactions
c.
Trading
A/c can’t be prepared
d.
Current
asset
e.
Temporary
memory
f.
Uniformity
maintaining accounts.
g.
Temporary
partners
h.
Nominal
A/c
|
Group A
|
Group B
|
1.
Co - Venture
2.
Rebate
3.
Credit balance of Income & Expenditure Account
4.
Dormant Partner
5.
Trading Account
|
i.
Limited
liability
ii.
Surplus
iii.
Temporary
partner
iv.
Retirement
of a bill
v.
Deficit
vi.
Does
not take active part in the business
vii.
Account
showing the net profit / net loss
viii.
Power
and Fuel / Gross profit.
|
A Group
|
B Group
|
|
a.
Capital
account of partner
b.
Current
account of partner
c.
Joint
venture
d.
Asset
e.
Liability
f.
Only
Personal account
g.
Profit
and Loss account.
h.
Income
and expenditure account.
|
A
|
B
|
||
1.
2.
3.
4.
5.
|
Interest on partners loan
Excess of income over expenditure
Legal due date
Printing and Stationery
Goods sold by consignee
|
1.
2.
3.
4.
5.
6.
7.
8.
|
Deficit
Before adding three grace days
Not Exceeding 6%
After adding three grace days.
Surplus
Trading Account
Debited to Consignee’s Account.
Profit / loss account.
|
A
|
B
|
||
1.
2.
3.
4.
5.
|
Depreciation
Dishonour of bill
Joint Venture
Goodwill
Co – Venturers
|
1.
2.
3.
4.
5.
6.
|
Temporary Partners
Intangible Asset
Wear and tear
Notary public
Temporary partnership
Tangible Asset
|
SET III
3.
Select the most appropriate alternative
from those given below
1.
Debit Balance in Profit and Loss Account shows _______________
a.
Net profit
b.
Gross profit
c.
Net loss
d.
Gross loss
2.
A bill of exchange must be accepted by _______________
a.
A drawer
b.
A payee
c.
An endorsee
d.
A drawee
3.
At the end of the financial year balance of Depreciation account is
transferred to _______
a.
Depreciation account
b.
Asset account
c.
Trading account
d.
Profit and loss account.
4.
In the absence of partnership deed the partners share the profit and
loss of the firm ____
a.
In the ratio of capital
b.
Equally
c.
As per rights in management
d.
On the basis of experience.
5.
____________ has to ultimately bear the noting charges.
a.
Drawer
b.
Drawee
c.
Endorser
d.
Bank
6.
The Indian Partnership Act came into force in ____________________.
a.
1942
b.
1932
c.
1953
d.
1956
7.
Excess of assets over liabilities is termed as ___________________.
a.
Endowment Fund
b.
Capital Fund
c.
Special Fund
d.
None of these
8.
Fixed Instalment method of depreciation is also called as
_______________
a.
Straight Line Method.
b.
Reducing Balance Method.
c.
Written down value method.
d.
Depreciation Fund Method.
9.
Drawing a fresh bill in cancellation of old bill is called as
_________________.
a.
Retirement of Bill.
b.
Discounting of bill.
c.
Endorsement of Bill.
d.
Renewal of bill.
10.
When the co – ventures incur the joint venture expenses from his pocket
_________ A/c is credited.
a.
Joint Venture A/c
b.
Joint Bank A/c
c.
Co – venture’s A/c
d.
Consignees A/c
11.
The Indian Partnership Act is in
force since ____________
a. 1932 b. 1942 c. 1952 d. 2002
12.
Normally, Receipts and payments
account shows ____________ balance.
a. Debit b. Credit c. Nil d.
Overdraft
13.
Excess of opening capital over
the closing capital is considered as
a. Income b.
Profit c. Gain d. Loss
14.
Making payment of the bill before
the due date is known as ____________ of a bill.
a. Retirement b. Honouring c. Dishonouring d.
Renewal
15.
If two or more persons come
together to carry on a business activity for a short period, it is known as
____________
a. Joint
venture b. Consignment c. Partnership firm. d. Co – operative society.
16.
The interest on capital of a partner is _______ to profit & loss
account.
a.
Credited
b. Added
c.
Debited
d. Divided
17.
If fixed capital method is adopted, Net profit is transferred to _______
account of the partner.
a.
Current
b. Capital
c.
Balance sheet
d. Trading
18.
Not for profit organisation prepares _________ to find out its financial
position.
a.
Balance sheet
b.
Receipts & payments accounts.
c.
Trading account
d.
Income & Expenditure account.
19.
Wages paid for Installation of Machinery should be debited to the
____________ account.
a.
Installation
b.
Wages
c.
Salaries
d.
Machinery.
20.
There are ___________Parties to a bill of exchange.
a.
Four
b.
Three
c.
Two
d.
One.
21.
Persons entering into a joint venture are called _______________
a.
Partners
b.
Co – partners
c.
Co – venturers
d.
Consignees
22.
The _________ has to ultimately bear the noting charges.
a.
Drawer
b.
Endorser
c.
Bank
d. Drawee
23.
The component of CPU that controls the various input output devices is
___________
a.
Memory unit,
b. Control unit,
c.
arithmetic logical unit
d.
Key board
24.
Loss on sale of asset is debited to _______________
a.
Assets A/c
b. P&L A/c
c.
Depreciation A/c
d.
Trading A/c
25.
In the absence of partnership deed the partners share profit & loss
of the firm ___________
a.
In the ratio of capital
b. Equally
c.
As per rights in management
d.
On the basis of experience
26.
Partner’s drawings are transferred to his __________ a/c under fixed
capital method.
a.
Capital
A/c
b. Current
A/c
c.
Trading
A/c
d.
Profit
and loss A/c
27.
Sale of
old materials must be shown on credit side of ____________
a.
Cash book
b. Income
and expenditure account
c.
Balance
sheet
d.
Receipt
and Payments account
28.
Cost of
asset = _____________
a.
Purchase
price + scrap value
b.
Purchase
price + depreciation
c.
Purchase price + incidental cost
d.
None of
the above
29.
A person
in whose favour the bill is endorsed is called ___________
a. Endorsee
b.
Endorser
c.
Drawer
d.
None of
the above
30.
Expenses
incurred by covertures is debited to ___________
a.
None of
the below
b.
Consignee’s
account
c.
Co
venturers account
d.
Joint venture account.
31.
Reserve
for discount on ______________ has a debit balance.
a.
Debtors
b. Creditors
c.
Bills
Receivable
d.
Loan
advanced.
32.
Income
and Expenditure Account is a _______________
a.
Personal
account
b.
Real
account
c.
Nominal account
d.
Asset
account
33.
Under
____________ single entry system, no records are kept separately for impersonal
accounts.
a.
Quasi
b. Pure
c.
Simple
d.
Modern
34.
There are
___________ parties to a bill of exchange.
a.
Two
b. Three
c.
Four
d.
Five
35.
Persons
who enter into Joint Venture are called ___________
a. Co –
ventures
b.
Partners
c.
Shareholders
d.
Loan
holders
36.
Income
Statements and Balance Sheet are prepared in a systematic and scientific manner
under ________________
a. Double
Entry System.
b.
Single
Entry System
c.
Partial
Entry System.
d.
Indian
System.
37.
Before
accepting a bill, it is called a _________
a.
Note
b. Draft
c.
Hundi
d.
Request.
38.
Valuation
of goodwill depends upon ________ capacity of business.
a.
Normal
b.
Repaying
c.
Earning
d.
Capital
39.
If two or
more persons come together to carry on a business activity for a short period,
it is known as ___________
a. Joint
venture
b.
Consignment
c. Partnership
d. Stock exchange
40.
Subscription received in advance during the
accounting year is ____________
a.
an income
b.
an
expense
c.
an asset
d. a
liability
41.
Depreciation
is charged only on the ____________
a.
Current
asset
b.
Intangible
assets
c.
Immovable
assets
d. Fixed
assets
42.
Brain of
computer is _____________
a.
Micro processor (march 2008)
b.
RAM
c.
DRAM
d.
DOS
43.
Unsold
stock of Joint Venture taken over by Co – venture is credited to ___________
a.
Co – ventures’
A/c
b.
Joint Venture A/c
c.
Joint
Bank A/c
d.
Stock A/c
44.
A one
month’s bill drawn on 31st January, 2007 will be matured on
___________
a.
3rd March, 2007
b.
28th
February, 2007
c.
29th
February, 2007
d.
2nd
March, 2007
45.
Interest
on the capital of partner is debited to _______________
a.
Trading
account
b.
Profit and loss account
c.
Partner’s
capital account
d.
Partner’s
current account
46.
Computer
is a / an ______________
a.
Mechanical
device
b.
Automation
device
c.
Electronic device
d.
Electric
device
47.
Joint
venture is a ________________
a.
Trading concern
b.
Non –
trading concern
c.
Religious
concern
d.
Public
concern
48.
A
donation received for a specific purpose is
a _______________
a.
Capital receipt
b.
Revenue
receipt
c.
Liability
d.
Asset
49.
A bill
drawn and accepted on 12th June 2007 for two months will be due for
payment on ___________
a. 12th August, 2007
b. 15th August, 2007
c.
16th
August, 2007
d. 14th
August, 2007
1. There is no maximum limit to the number of partners in a firm.
This statement is False.
This is because there is a limit to the maximum number of partners. A partnership carrying on banking business cannot have more than ten members and a partnership carrying on other than banking business can not have more than twenty members.
2. Each partner has a right to take part in the conduct of the business.
This statement is True.
This is because as per the provision of the Indian partnership Act 1932 every partner has a right to take part in the conduct of business except minor partner.
3. Partnership is a non - trading concern.
This statement is False.
This is because partnership is a type of business organisation carried on by partners for earning profit, therefore it conducts trading activities such as manufacturing of gods or buying of goods with an aim to sell them at profit.
4. According to partnership Act, partners should get interest on capital.
This statement is false.
This is because as per the provisions of the Indian Partnership Act 1932, in the absence of agreement no partner is allowed interest on the capital invested by him.
5. Interest on Capital of partner is debited to Profit and Loss account.
This statement is True.
This is because interest on capital is debited to profit and loss account as an expense of partnership firm just like interest is paid to outsiders on the loans taken.
6. In the absence of agreement, partners share profit in capital ratio.
This statement is False.
This is because in the absence of Partnership deed the provision of Indian partnership Act, 1932 are applicable according to which the partners share profit equally and not in the proportion of capitals.
7. Under fixed capital method the amount of capital remains constant.
This statement is true.
This is because under fixed capital method two accounts are maintained namely capital accounts and current accounts. the capital account records capital introduced by partners and it remains fixed, on the other hand current account records all other transactions related to partner and its balanced goes on fluctuating.
8. Balance sheet is an account.
This statement is false.
This is because balance sheet is not an account but it is a statement of the financial position of business as on a particular day.
9. The capital accounts of partners always show credit balance.
This statement is false.
This is because the capital accounts of partners is personal account its balance fluctuate as per the entries recorded in it, hence it is not certain that it has debit balance or credit balance.
10. Not for profit concern never undertakes trading activities.
This statement is true
This is because not for profit concern is established to serve the society by providing various types of non - trading activities without making any profit. It never undertakes trading activities to earn profit.
11. Not for profit concern prepares Profit and Loss account.
This statement is False.
This is because not for profit concern being non - trading organisation. Prepare Income and expenditure account instead of profit and loss account. Income and expenditure account is prepared to know surplus or deficit.
12. Receipt and payment account is nominal account.
This statement is false.
This is because Receipt and payment account is not nominal account but it is real account. it is a real account because it records receipts of cash and payment of cash during the year.
13.. Income and Expenditure account is a real account.
This statement is false.
This is because Income and expenditure account is not real account but it is a nominal account. It is prepared to know the surplus or deficit by comparing the income and expenditure of not for profit concern.
14. Purchase of sports equipment is a revenue expenditure.
This statement is false.
This is because sports equipment is an asset of organisation and the amount paid for purchase of sports equipment is capital expenditure and not revenue expenditure.
15. Legacies are generally capitalized.
This statement is true.
This is because the gift given by the legal representative as per the will of deceased member is known as legacy and it is not recurring but received once, hence it is generally capitalized,.
16. Under single entry system both aspects of transaction are recorded in the books of accounts.
This statement is false.
This is because single entry system records only one aspect of transaction and ignores the other aspect of transaction. It is not scientific and hence only records that aspect of transaction, which is important to owner.
17. A joint venture is a non trading concern.
This statement is false.
This is because a joint venture is a temporary business undertaken for the productive or commercial activities with an aim of making profit. Thus it is a trading concern.
18. Goodwill has monetary value.
This statement is true.
This is because goodwill refers to the money value of its reputation which business is enjoying. It is calculated on the basis of its earning capacity and is paid in cash therefore it has monetary value.
1.
If the partnership
deed is silent, partners share profits and losses in their capital ratio.
Ans. This statement is False.
Reason:
i.
The partners share profit and loss in their capital ratio, if such
clause is included in the partnership deed.
ii.
In the absence of agreement or when partnership deep remains silent, the
partners have to share profit and loss in equal ratio. This is as per the
provisions of Partnership Act 1932.
2. The balance of capital account remains constant under fixed capital
method.
Ans. This
statement is False.
Reason:
i.
Under fixed capital method, along with partner’s capital account, a
separate personal account, called current account is opened and operated for
every partner.
ii.
Since all the entries for the transactions between partners and
partnership form are passed through the respective partner’s current account
under the fixed capital method, the balances show by their respective capital
accounts remains constant.
3. All indirect expenses are debited to Trading Account.
Ans. This statement is False.
Reason:
i.
All the expenses relating to manufacturing and purchases are termed as
direct expenses, e.g. cost of raw materials, cost of power and fuel consumed,
cost of carriage, wages paid, etc. All direct expenses are debited to Trading
account.
ii.
All the expenses relating to administration, selling and distribution
are termed as indirect expenses, e.g. Salaries, rent, interest paid, etc. All
indirect expenses are debited to Profit and Loss Account.
4. The interest on capital is an income of the partnership firm.
Ans. This
statement is False.
Reason:
i.
Capital is contributed by the proprietor or partners. It constitutes
liabilities of the business or partnership form. Naturally interest due or
payable on capital becomes expense of partnership firm.
ii.
Interest on capital is paid to partners out of business revenue. Hence,
it is an expense to the partnership firm. If it remains unpaid, it becomes
liability.
5. Interest on drawings is an income of the partnership firm.
Ans. This
statement is true.
Reason:
a. Total amount in cash
or kind withdrawn by a partner from the partnership firm for his / her personal
use is called ‘drawings’. It is partner’s liability to repay the same or to pay
interest at an agreed rate to the partnership firm.
ii.
Interest on drawings is adjusted with partner’s capital account. Hence
interest on drawings is an income of the partnership firm.
2. The Balance sheet is an account of business result. (March 09)
Ans. This statement is False.
Reason –
i.
Summarised, systematic and classified records in relation to particular
person, asset, or expenditure or income are called an account. Balance sheet is
not an account.
ii.
It is a statement showing the financial position of a firm, as on a
given date in the form of assets and liabilities. On the left hand aide of the
Balance Sheet closing balances of all types of liabilities are shown an on the
right hand side, closing balances of all types of assets are shown.
3. Debit balance of Trading Account indicates Net loss. (Sept. 10)
Ans. This statement is False.
Reason
i.
The debit balance of Trading account indicates gross loss suffered by
the business concern, during the accounting year. Gross loss refer to excess of
expenditures over incomes.
ii.
When the total of debit side of an account is greater than the total of
credit side the resulting balance shown debit balance. i.e. gross loss.
However, debit balance of Profit and Loss account indicates net loss.
4.
Non commercial
concerns with ‘no profit’ base prepare income and expenditure account in place
of profit and loss account. (March 09)
Ans. This statement is True.
Reason:
i.
Non – commercial concerns with ‘no profit’ base are established to
render services to society and not for earning profit. They have incomes and
they incur expenses.
ii.
As these organisations do not produce any tangible product, they are
required to prepare Income and Expenditure Account instead of Trading and
Profit and Loss Account to find out whether their incomes are sufficient to
meet their expenses.
5.
The expenditure
incurred on installation of machinery is revenue expenditure. (Sept. 08)
Ans. This statement is False.
Reason:
i.
Expenses incurred on erection and electrification of fixed asset are
called installation charges.
ii.
Installation charges are incurred or paid once and not every year. Hence
they are non – recurring in nature. i.e. capital expenditure and therefore
added to the value of machinery.
6. The Receipts and Payments Account is a Nominal Account. (March 08)
Ans. This statement is false.
Reason
i.
An account prepared by a Not For Profit concern to record the summary of
all types of cash receipts and cash payments is called the Receipts and
Payments account.
ii.
In this account only summary of cash received and paid during the
accounting year is recorded. Hence the Receipts and Payments Account is a Real
account.
7.
The Receipts and
Payment account records only cash transactions. (Sept. 09)
Ans. This statement is True
Reason.
i.
Receipts and Payments account is similar to Cash – Book and contains
summary of cash and bank transactions.
ii.
It is prepared at the end of every financial year and includes only
actual receipts and actual payments made during a particular period.
8.
The main object of
‘Not for Profit’ organisation is to earn profit. (March 10) Or
Maximisation of
profit is the motive of a ‘Not for Profit Concern’ (Sept 10)
Ans. This statement is False
Reason.
i.
The main object of not for profit organisations is to provide services to
the society without having objective of earning profit.
ii.
However, trading organisations are established with the main motive of
earning profit.
9.
Drawee has no right
to discount the bill with the bank. (March 08)
Ans. This statement is True.
Reason.
i.
The person on whom the bill is drawn is called drawee of the bill.
ii.
Since drawee is a debtor and liable to pay the amount of the bill to the
drawer, he has no right to discount the bill with the bank.
10.
Drawer and Payee of a
bill of exchange may be one and the same person. (March 11)
Ans. This statement is True.
Reason.
i.
Drawer is the person who drafts the bill and gives order to drawee to
pay the amount either to the person (Payee) named therein or to himself. Payee
is the person who receives the amount of the bill on the due date.
ii.
If the bill is retained by the drawer with himself till the due date,
then the amount of such bill is paid by the drawee to the drawer. In such a
case drawer and payee may be one and same person.
11.
If discounted bill is
honoured, the drawer does not record this transaction. (Sept. 08)
Ans. This statement is True.
Reasons:
i.
The bill is said to be honoured when drawee makes full payment on its
due date.
ii.
When discounted bill is honoured by the drawee, the transaction takes
place between drawee and the bank. Hence, drawer does not record this
transaction in his books.
12.
Noting charges should
be borne by the drawee
Ans. This statement is True
Reason
i.
Fes charged by the Notary Public for establishing the facts of dishonour
of a bill are called noting charges.
ii.
Drawee or acceptor who is ultimately responsible for dishonour of the
bill, has to bear noting charges.
13.
While calculating the
average profit, the losses are ignored. (March 2011)
Ans. This statement is False
Reason:
i.
Total amount of profit earned by the business organisation over certain
number of years is called total profit.
ii.
Since losses are treated as negative profits, such losses are required
to be adjusted with the profits earned in the other years while finding out the
total profit of the given number of years.
OMTEX WISHING YOU ALL THE VERY SUCCESS IN
YOUR FORTH COMING BOARD EXAMINATON BISMILLAH
Important points to remember
1. Bad debts = Trial
balance amount (debit side)
2. Further bad debts =
Adjustment Amount.
3. N.R.D.D. = Adjustment
percentage
4. O.R.D.D. = Trial
balance amount (credit side)
1. Interest on drawings
is to be calculated for 6 months only.
2. If bills receivable is
dishonoured then (-) from Bills receivable and (+) to debtors.
3. If bills payable is
dishonoured then (-) from bills payable and (+) to creditors.
4. N.R.D.D. on debtors
should be charged at second last.
5. Discount on debtors
should be charged at last.