case study on accounting principles class 11

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CBSE 11th Standard CBSE Accountancy question papers, important notes , study materials , Previuous Year questions, Syllabus and exam patterns. Free 11th Standard CBSE Accountancy books and syllabus online. Practice Online test for free in QB365 Study Material. Important keywords, Case Study Questions and Solutions. Updates about latest education news and Scholorships in one place.

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Chapter 2 Theory Base of Accounting Case Study Questions

Please refer to the Chapter 2 Theory Base of Accounting Case Study Questions with answers provided below. We have provided Case Study Questions for Class 11 Accountancy for all chapters as per CBSE, NCERT and KVS examination guidelines. These case based questions are expected to come in your exams this year. Please practise these case study based Class 11 Accountancy Questions and answers to get more marks in examinations.

Case Study Questions Chapter 2 Theory Base of Accounting

Case Based Questions

Read the following case study and answer questions 

Olly and Robin are two friends graduated from a top college of the country. After the college, they decide to build a start up in their hometown, Bengaluru. They decided to start a subscription service of fruits in the nearby cities. For obtaining high-quality fruits, they made 5-year contracts with farmers in and around Karnataka. They also decided to purchase machinery for cleansing and quality check of the fruits. The business of the company started booming. Two years down the line, they had built a strong brand and reputation. To leverage the same, the company decided to venture into other states as well with the similar service line. They first expanded to Tamil Nadu and got great demand. While accounting, company usually booked a normal loss to account forspoiled fruits that they might get. Moreover ,   they charged depreciation on the machinery to ensure that expenses are distributed over the years. With all these good practices, after four more years of operations, the company attained a unicorn status.

Question. “They first expanded to Tamil Nadu and got great demand.” Which type of GST is applicable on this supply to Tamil Nadu? (a) Centre GST (b) State GST (c) Integrated GST (d) Both (a) and (b)

Question. Which AS will be applicable to evaluate the reputation and brand value of firm? (a) AS-20 (b) AS-26 (c) AS-30 (d) AS-2

Question. The principle highlighted in the line, “Moreover, they charged depreciation on the machinery to ensure that expenses are distributed over the years” is matching principle. (a) True (b) False (c) Partially false (d) Can’t say

Question. Which concept is highlighted in the fact that company made long-term contracts with the farmers? (a) Going concern concept (b) Accrual concept (c) Consistency concept (d) Both (a) and (b)

Question. Which principle is highlighted in the line, “While accounting, company usually booked a normal loss to account for spoiled fruits that they might get”? (a) Business entity principle (b) Prudence principle (c) Materiality principle (d) Full disclosure principle

Read the following case study and answer questions

Golu Plastic Ltd (GPL) is a leading plastic articles manufacturing company. It was listed on Indian stock market in 1999. The founders and promoters of the company hold the highest number of shares of the company, approximately around 55%. All these founders belong to a single family. Unfortunately, all of them died in a car accident recently. However, the company continued to exist and grow.In the year 2004, the company imported multiple machines for producing low – cost plastic sheets. The machines were recorded at  the price prevailing in 2004 and have been subjected to depreciation year on year based on written down value method. The depreciation is treated as a non-cash expense while preparing the cash flow statement. When GST was implemented in 2017, it benefitted the company by streaming  the processes. A single rate of GST was charged on the supply of the goods and the process of filing was very simple.

Question. Which principle is highlighted in the line, ‘‘The machines were recorded at the price prevailing in 2004”? (a) Full disclosure principle (b) Conservatism principle (c) Duality principle (d) Historical cost principle

Question. “A single rate of GST was charged on the supply of the goods …”. Who levy GST on this common base? (a) Centre government (b) State government (c) Union territory government (d) Both (a) and (b)

Question. Which principle/concept is highlighted in the line,” … and have been subjected to depreciation year on year based on written down value method.”? (a) Full disclosure principle (b) Business entity principle (c) Consistency concept (d) Accrual concept

Question. Which principle is highlighted in the fact that the company continued even after death of the founders? (a) Business entity principle (b) Money measurement principle (c) Duality principle (d) Historical cost principle

Question. Which AS is required to be followed to prepare cash flow statements?  (a) AS-1 (b) AS-2 (c) AS-3 (d) AS-4

Dukuma is an MSME business in the Alwar district of Rajasthan. It is 40 years old business of selling hardware parts to local traders of the district and some other retailers of Rajasthan. The company has multiple SKUs and the inventories ar e valued by their  accountant. The accountant of the enterprise also happens to be a good friend of the owner of the enterprise. Therefore, the fees of the accountant was not paid in the year when pandemic set in as the firm was going through cash-crunch. However, the accountant entered the amount of his fees as expense even though cash was not paid. He justified his act by stating some accounting concepts. The accountant further completed the books of accounts for the year ended 31st December, 2020. Over the years, the company has developed a reputation in market by supplying high quality products and customer-friendly service. The owner of the firm asked the accountant to enter this fact but accountant denied and gave the correct reasons. The owner was contended. 

Question. Which AS would have been followed by accountant to value inventories? (a) AS-1 (b) AS-2 (c) AS-3 (d) AS-4

Question. The company follows the calendar year as accounting year. Which principle is highlighted in the fact that firm divided the whole life of firm into small financial years? (a) Dual aspect principle (b) Materiality principle (c) Prudence principle (d) Accounting period principle

Question. Which principle/concept of accounting is highlighted in the line, “Therefore, the fees of the accountant was not paid in the year when pandemic set in as the firm was going through cash-crunch. However, the accountant entered the amount of his fees as expense even though cash was not paid”? (a) Dual aspect principle (b) Accrual concept (c) Consistency concept (d) Cost principle

Question. “The owner of the firm asked the accountant to enter this fact but accountant denied and gave the correct reasons.” Which principle was used by accountant to explain the owner? (a) Dual aspect principle (b) Money measurement principle (c) Full disclosure principle (d) Accounting period principle

Question. The supplies of the company would be subjected to Integrated GST. (a) True (b) False (c) Partially true (d) Can’t say

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Accounting Principles Class 11 Notes

Accounting Principles Class 11 Notes: Accounting statements disclose the profitability and solvency of the business to various parties.

It is, therefore, necessary that such statements should be prepared according to some standard language and set rules. These rules are usually called ‘Generally accepted accounting principles’ (GAAP) .

Topics Discussed

Features of Accounting Principles

1) accounting principles are uniform set of rules.

Accounting principles are a uniform set of rules or guidelines developed to ensure uniformity and easy understanding of the accounting information.

2) Accounting Principles are Man-made

Accounting principles are not right but flexible. They are bound to change with time in response to the changes in business practices.

3) Accounting Principles are Generally Accepted

Accounting principles are bases and guidelines for accounting and are generally accepted. The general acceptance of an accounting principle depends upon how well it satisfies the following three criteria:

• Relevance: A principle is relevant if it results in information that is useful to the user of the accounting information.
• Objectivity: A principle is objective if it is free from personal bias or judgments of those who furnish the information.
• Feasibility: A principle is feasible if it can be applied without undue complexity or cost.

Kinds of Accounting Principles

Accounting Principles are described by various terms such as assumptions, conventions, concepts, doctrines, postulates, etc. These principles can be classified mainly into two categories:

• Accounting Concepts or Assumptions

Accounting Conventions

1) accounting concepts or conventions.

As per Accounting Standard (AS-1), issued by the Institute of Chartered Accountants of India, there are three fundamental accounting concepts or assumptions:

a) Going Concern Concept

As per this concept, it is assumed that the business will continue to exist for a long period in the future. The transactions are recorded in the books of the business on the assumption that it is a continuing enterprise.

It is on this concept that we record fixed assets at their original cost and depreciation is charged on these assets without reference to their market value.

Because of the concept of going concern, the full cost of the machine would not be treated as an expense in the year of its purchase itself.

It is also because of the going concern concept that outside parties enter into long-term contracts with the enterprise.

Without this concept, the classification of current and fixed assets and short and long-term liabilities cannot be made and such classification would be difficult to justify.

b) Consistency Concept

This concept states that accounting principles and methods should remain consistent from one year to another. These should not be changed from year to year, to enable the management to compare the Profit & Loss Account and Balance Sheet of the different periods and draw important conclusions about the working of the enterprise.

If a firm adopts different accounting principles in two accounting periods, the profits of the current period will not be comparable with the profits of the preceding period.

However, the consistency concept should not be taken to mean that it does not allow a firm to change the accounting methods according to the changed circumstances of the business.

Otherwise, the accounting will become non-flexible and the improved techniques of accounting will not be used.

c) Accrual Concept

In accounting, an accrual basis is used for recording transactions. It provides more appropriate information about the performance of business enterprises as compared to a cash basis. The accrual concept applies equally to revenues and expenses.

In the accrual concept, revenue is recorded when sales are made or services are rendered and it is immaterial whether cash is received or not.

Similarly, according to this concept, expenses are recorded in the accounting period in which they exist in earning the revenues whether the cash is paid for them or not. The accrual concept is often described as a matching concept

d) Business Entity Concept

According to this concept, a business is treated as a unit separate and distinct from its owners, creditors, managers, and others. In other words, the owner of a business is always considered distinct and separate from the business he/she owns.

The business unit should have a completely separate set of books and we have to record business transactions from the firm’s point of view and not from the point of view of the proprietor.

The proprietor is treated as a creditor of the business to the extent of capital invested by him in the business.

The amount withdrawn by the proprietor from the business for his/her personal use is treated as his/her drawings.

e) Money Measurement Concept

Only those transactions and events are recorded in accounting which are capable of being expressed in terms of money. An event, even though it may be very important for the business, will not be recorded in the books of the business unless its effect can be measured in terms of money with a fair degree of accuracy.

The following are not recorded in the books due to Money Measurement Concept:

• Calibre or Quality of the management
• Image of the enterprise among people
• Loss of profit due to labor strike
• Capabilities of human resources

However, the money measurement concept suffers from the following limitations:

• Transactions and events that are not capable of being measured in terms of money are not recorded even though they may be very important for the enterprise. For example, the human resources of the enterprise are very important to the enterprise.
• Due to the changes in price level, the value of money does not remain the same over some time. On account of rises in prices, the value of the rupee today is much less than what it was.

Accounting Standards Class 11 Notes

f) Accounting Period Concept

As the business is intended to continue indefinitely for a long period, the true results of the business operations can be ascertained only when the business is completely up.

Thus, the entire life of the firm is divided into time intervals for the measurement of the profits of the business. The period of 12 months is usually adopted for this purpose.

g) Historical Cost Concept or Cost Concept

According to this concept, an asset is ordinarily recorded in the books of accounts at the price at which it was acquired. This cost becomes the basis of all subsequent accounting for the asset. Since the acquisition cost relates to the past, it is referred to as historical cost.

The justification for the historical cost concept lies in the following arguments:

• This cost is objectively verifiable.
• It is justified by the going concern concept which assumes that the enterprise will continue its activities indefinitely and thus there is no need to use the current values.
• Market values or current values of assets are difficult to determine.

Drawbacks of the historical concept are:

• Assets for which nothing is paid will not be recorded
• During periods of inflation, the figure of net profit disclosed by the profit and loss account will be seriously distorted because depreciation based on historical costs will be charged against revenues at current prices.
• Information based on historical cost may not be useful to management, investors, creditors, etc.

h) Dual Aspect Concept

According to this concept, every business transaction is recorded as having a dual aspect. In other words, every transaction affects at least two accounts.

If one account is debited, any other account must be credited. The system of recording transactions based on this principle is called a ‘Double Entry System’.

i) Revenue Recognition (Realization) Concept

Revenue means the amount which is added to the capital as a result of business operations. Revenue is earned by the sale of goods or by providing a service.

Concept or revenue recognition determines the time or the particular period in which the revenue is realized. Revenue is deemed to be realized when the title or the ownership of the goods has been transferred to the purchase.

It should be remembered that revenue recognition is not related to the receipt of cash.

Revenues in case of income such as rent, interest, commission, etc. are recognized on a time basis. For example, rent for March 2024, even if received on April 2024 will be treated as revenue for the financial year ending 31 March 2024.

As per the Revenue Recognition Concept:

• Advance received against sales is not recorded as sales.
• Credit sales are treated as revenue on the day sales are made and not when the amount is received from the buyer.

j) Matching Concept

This concept is very important for the correct determination of net profit. According to this concept, in determining the net profit from business operations, all costs that apply to the period’s revenue should be charged against that revenue.

Based on this principle, outstanding expenses, though not paid in cash are shown in the profit and loss account.

When some expense, say insurance premium is paid partly for the next year also, the part relating to next year will be shown as an expense only next year and not this year.

k) Objectivity Concept

This concept requires that accounting transactions should be recorded objectively, free from the personal bias of either management or the accountant who prepares the accounts.

It is possible only when each transaction is supported by verifiable documents and vouchers such as cash memos, invoices, sales bills, pay-in-slip, correspondence, agreements, etc.

Objectivity is one of the reasons for adopting the ‘Historical Cost’ as the basis of recording accounting transactions because the cost paid for an asset (i.e. historical cost) can be verified from the documents.

Difference between Accounting Concepts and Accounting Conventions

The following are the main accounting conventions:

• Full Disclosure
• Materiality
• Prudence/Conservatism

1) Full Disclosure Convention

This convention requires that all significant information relating to the economic affairs of the enterprise should be completely disclosed.

This convention is so important that the Companies Act makes ample provisions for the disclosure of essential information in the financial statements of a company like contingent liabilities , important information related to stocks in the footnote, etc.

2) Materiality Convention

This convention is an exception to the convention of full disclosure. According to this convention, items having an insignificant effect or being irrelevant to the user need not be disclosed.

3) Prudence/Conservatism Convention

According to this convention, all anticipated losses should be recorded in the books of accounts, but all anticipated or unrealized gains should be ignored.

Following are the examples of the application of this convention:

• Closing stock is valued at cost price or realizable value whichever is less.
• Provision for doubtful debts is created in anticipation of actual bad debts.
• A joint life insurance policy is shown only at surrender value or against the amount paid.
• Provision for a pending lawsuit against the firm, which may be decided in its favor.

These were the accounting principles class 11 notes. If you have any doubts regarding any topic written above, you can ask that in the comment section.

[…] Accounting Principles Class 11 Notes […]

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CBSE Sample Papers for Class 11 Accountancy Set 1 with Solutions

January 6, 2024 by Bhagya

Students must start practicing the questions from  CBSE Sample Papers for Class 11 Accountancy with Solutions Set 1 are designed as per the revised syllabus.

Time Allowed : 3 hours Maximum Marks: 70

General Instructions:

• This question paper contains 34 questions. All questions are compulsory.
• This question paper is divided into two parts, Part A and B.
• Question Nos.1 to 15 and 25 to 29 carries 1 mark each.
• Questions Nos. 16 to 18, 30 to32 carries 3 marks each.
• Questions Nos. 19, 20 and 33 carries 4 marks each.
• Questions Nos. 21 to 24 and 34 carries 6 marks each.
• There is no overall choice. However, an internal choice has been provided in 7 questions of one mark, 2 questions of three marks, I question of four marks and 2 questions of six marks.

Part – A ((Financial Accounting – I)

Question 1. Consider the following points with respect to the steps of Accounting: (i) Identification of business transaction. (ii) Recording of transaction into Journal. (iii) Posting the transaction into Ledger. (iv) Paying salary to the accountant. Identify the correct statement/statements: (A) (i) only (B) (i) and (ii) only (C) (i), (ii) and (iii) (D) (i), (ii), (iii) and (iv)  [1] Answer: (C) (i), (ii) and (iii)

Explanation: Paying salary to the accountant falls under the category of recording the transactions itself so is already included In that step as it forms the part of the day to day working of a business.

Question 2. Assertion: Only financial transactions are recorded in Accounting. Reasoning: Events or transactions, which can be expressed in terms of money, are recorded in the books of accounts. (A) Both A and R are correct, and R is the correct explanation of A. (B) Both A and R are correct, but R is not the correct explanation of A. (C) A is correct, but R is incorrect. (D) A is incorrect, but R is correct.  [1] Answer: (B) Both A and R are correct, but R is not the correct explanation of A.

Explanation: One of the important attributes of accounting is that only those transactions and events are recorded in accounting, which are of financial character. It means that events or transactions, which can be expressed in terms of money, are recorded in the books of accounts. Consequently, those events or transactions that cannot be expressed in terms of money, do not find a place in the books of accounts though they may be very useful for the business.

Question 3. are the properties and resources owned by an enterprise: (A) Assets (B) Liabilities (C) Capital (D) Creditors  [1] OR From which type of transactions do capital receipts arise? (A) Recurring Transactions (B) Non-recurring Transactions (C) Both (A) and (B) (D) Neither (A) nor (B)  [1] Answer: (A) Assets OR (B) Non-recurring Transactions

Question 4. Which of the following limitations is covered with the manipulation of accounts: (A) Problem of window dressing (B) Not fully exact (C) Ignores qualitative factors (D) Ignores the effect of price level changes  [1] OR Who among the following is not an internal user of financial accounting: (A) Chief Executive Officer (B) Financial Manager (C) Employees (D) Potential Inventors  [1] Answer: (A) Problem of window dressing

Explanation: Window dressing is an accounting practice of manipulating the business results, usually to show a respectable figure of profits more than the real profits. The practice may be followed by loss-making companies to show profit. For this purpose. companies may not show some expenses or the expenses may be shown less. On the other hand, income may be more than the actual, the Firm may show inventories at a higher value (overvaluation of stock) and may hide bad debts written off during the year.

OR (D) Potential Inventors

Explanation: As potential investors have not yet joined the firm, they are not internal user of financial accounting. Rest all CEO, Financial Manager and Employees are the internal users of the firm, as they work in the firm.

Question 5. Mr. Ram creates provisions for certain types of contingencies that may happen in near future but does not anticipate any future profits. Identify the accounting concept being followed by Mr. Ram. (A) Conservatism concept (B) Full disclosure concept (C) Dual aspect concept (D) Money measurement concept  [1] Answer: (A) Conservatism concept

Explanation: The pnndple of conservatism requires a business to be extremely cautious about possible losses. It should guard against any possible losses. If there is an anticipated loss, there should be adequate there is an anticipated 1os, there shu1d be adequate provision In the account. There need not to be any provision for anticipated revenue or gain.

Question 6. “Personal transactions of the owner are not recorded in the books of the business unless it involves inflow or outflow of business funds.” To which accounting principle the above phrase is related? (A) Dual Aspect Concept (B) Principle of Conservatism (C) Business Entity Concept (D) Accounting Period Concept  [1] OR What are the written statements of uniform accounting rules and guidelines adopted while preparing financial statements called? (A) Accounting Standards (B) IFRS (C) AS and IFRS Answer: (C) Business Entity Concept

Explanation: According to the business entity concept, a business unit should be understood as a separate entity apart from the businessman. Transactions of business should not be merged with the personal transactions of businessman. When the owner invests money into the business it should be assumed that the business owes money to the owner. This is known as capitaL Capital is the amount which a business owes to its owner. OR (A) Accounting Standards

Question 7. Assertion: Accounting standards help auditors in the audit of accounts. Reasoning: Accounting standards raise standard of audit of accounts. (A) Both A and R are correct, and R is the correct explanation of A. (B) Both A and R are correct, but R is not the correct explanation of A. (C) A is correct, but R is incorrect. (D) A is incorrect, but R is correct.  [1] Answer: (B) Both A and R are correct, but R is not the correct explanation of A.

Question 8. Ajay wants to start a business systematically. Which accounting system he should follow? (A) Single Entry System (B) Double Entry System (C) Cash basis (D) Accrual basis  [1] OR Pick the odd one out: (A) Double Entry System (B) Single Entry System (C) Dual Aspect Principle (D) Indian Accounting System  [1] Read the following hypothetical situation, answer question no. 9 and 10. Mr. Manoj Manohar Lai started a new business with cash of ₹ 60,000 by the name Manohar Lai and Sons on 1st of March, 2020. For the business, he had to purchase furniture on the 2nd of March worth ₹ 10,000. He decided to buy the goods for cash as well on that day for ₹ 25,000 and on credit from Janki Das and Sons for ₹ 50,000. On 4th of March he was able to sell the goods at ₹ 60,000 out of which 75% was on credit to different people. Answer: (B) Double Entry System

Explanation: Every transaction has two aspects, one aspect is debit and the other aspect is credit. When both the aspects of a transaction are recorded in the books of accounts, it is said that the accounts are systematically maintained under Double Entry System.

(C) Dual Aspect Principle Explanation: Dual aspect principle is an accounting principle while the rest are systems of accounting.

Question 10. For the sale of goods on 4th of March, how much will be recorded in the Cash Account? (A) ₹ 60,000 (B) ₹ 45,000 (C) ₹ 15,000 (D) ₹ 75,000  [1] Answer: Option (C) is correct.

Explanation: As 75% of sales is on credit, 25% of ₹ 60,000 will he recorded in cash account, i.e., ₹ 15,000

Question 11. During the lifetime of an entity, accounting produces financial statements in accordance with which basic accounting concept? (A) Conservation (B) Matching (C) Accounting period (D) None of the above [1] Answer: (C) Accounting period

Question 12. In which subsidiary book all transactions relating to cash receipts and cash payments are recorded? (A) Cash Account (B) Journal Proper (C) Cash Book (D) Ledger [1] Answer: (C) Cash Book

Question 13. Consider the following statements with regard to the maintenance of subsidiary books: (i) All credit purchases are maintained in the Purchases Book. (ii) All credit sales are recorded in the Sales Return Book (iii) All the cash transactions are recorded in the Cash Book. Identify the correct statement/statements: (A) (i) and (iii) (B) (i), (ii) and (iii) (C) (i) only (D) (iii) only   [1] Answer: (A) (i) and (iii)

Explanation: Statement (ii) is incorrect as all credit sales are recorded in the sales book and the sales returns book records all the sales returns of the goods sold on credit.

Explanation: Depredation is a non-cash expense, hence it will be debited and the value of furniture is declining, hence to be credited. Amount of depreciation = 10% of 20,000 = ₹ 2,000

Question 15. Which of the following transactions will become a part of Bank Reconciliation Statement: (A) Amount wrongly debited by Bank ₹ 5,000 (B) Amount wrongly credited by bank ₹ 500 (C) Both (A) and (B) (D) None of the above  [1] OR Which of the following is a limitation of Trial Balance: (A) Helps in preparation of final accounts. (B) Transactions that are not recorded at all cannot be found out. (C) Helps in locating errors. (D) Ascertains the arithmetical accuracy of books. Answer: (C) Both (A) and (B)

Explanation: Bank reconciliation statement reconciles the bank balance as per pass book and balance as per the cash book. So, the errors committed by bank while recording transactions in bank pass book or by the businessman in bank column of cash book are taken into account while preparing Bank Reconciliation Statement.

(B) Transactions that are not recorded at all cannot be found out.

Question 16. Accounting provides information about the profitability and financial soundness of a concern. In addition, it also provides various other valuable information. However, accounting has certain limitations. Explain any three of such limitations. [3] Answer: Following are the Limitations of accounting: (i) Only monetary transactions : Accounting records only those transactions which can be measured in terms of money. But transactions and events, that are not measurable how-so-ever are important for business are not recorded. (ii) are recorded at their costs and not at their market prices. Hence, financial statements fail to show real worth of the business, (iii) Personal judgement : Based on the personal judgement of the accountant, certain accounting policies are adopted. As a result. financial statements. may not be objective and comparable. (iv) Not exact : Accounting information is sometimes based on estimates. Hence, the financial statements do not reflect the true position of the business. (v) Not a good tool for management : Accounting records the past facts which do not help the management in decision-making. It not provide for evaluation of business policies and plans.

Question 19. From the following information, prepare Bank Reconciliation Statement as on 31st March, 2016 : [4]

Question 23. Journalise the following transactions:

Question 24. Enter the following transactions in a simple Cash Book of Lata, Delhi:

Part – B ((Financial Accounting – II)

Question 25. Formula to calculate cost of goods sold : [1] (A) Cost of goods sold = Net sales – Gross Profit (B) Cost of goods sold = Opening stock + Net Purchases + Direct expenses – Closing stock (C) Both (A) and (B) (D) None of the above OR Consider the following statements with respect to the limitations of Trial Balance: (i) Transactions that are not recorded at all cannot be found out. (ii) The wrong amount written on both sides of a Trial Balance cannot be detected. (iii) The wrong amount recorded of an account is compensated by the wrong amount of the other account. Identify the correct statement/statements: (A) (i) only (B) (i) and (ii) (C) (iii) only (D) (i), (ii), and (iii) [1] Answer: (C) Both (A) and (B)

Explanation: Cost of Goods Sold (COGS) measures the” direct cost” incurred in the production of any goods or services. OR (D) (i), (ii), and (iii)

Question 26. Commission of ₹ 1,000 is received in advance. The accountant is not able to pass an adjustment entry for this advance commission received. Help him in identifying which of the following entries will be the adjusting entry for this advance commission: [1] (A) Debit Commission Account and credit Commission Received in Advance Account (B) Debit Cash Account and credit Commission Received in Advance Account (C) Debit Commission Account and credit Cash Account (D) Debit Commission Received in Advance Account and credit Commission Account [1] Answer: (A) Debit Commission Account and credit Commission Received in Advance Account

Question 27. Statement I: The expenses that are unpaid during the year are shown in the liability side of the Balance Sheet. Statement II: The income that are not yet received during the year are shown in the asset side of the Balance Sheet. (A) Both Statements are correct. (B) Both Statements are incorrect. (C) Statement I is correct and Statement II is incorrect. (D) Statement I is incorrect and Statement II is correct. OR Entries which are made at the end of each accounting period for the purpose of preparing Profit & Loss Account: (A) Adjusting entries (B) Opening entries (C) Closing entries (D) Transfer entries [1] Answer: (C) Statement I is correct and Statement II is incorrect. Explanation: Income that does not pertain to current year and are not received are not recorded.

(C) Closing entries Explanation: Closing entries are journal entries made at the end of an accounting period, that transfer temporary account balances into a permanent account.

Question 28. Consider the following statements with respect to the limitations of single entry system: (i) Arithmetical accuracy cannot be determined as Trial Balance cannot be prepared. (ii) Figures or profits cannot be relied upon as the system is incomplete and unscientific. (iii) True and fair financial health of the business concern cannot be shown. Choose the correct option: (A) (i) and (ii) (B) (ii) and (iii) (C) (i) and (iii) (D) (i), (ii) and (iii)  [1] Answer: (D) (i), (ii) and (iii)

Question 29. Which of the following means a statement of assets and liabilities prepared to find out the amount of capital? (A) Incomplete Records (B) Statement of Affairs (C) Statement of Profit & Loss (D) None of the above  [1] Answer: (B) Statement of Affairs

Question 30. From the following balances taken from the books of Simmi and Vimmi Ltd. for the year ending March 31,2014, calculate the gross profit.

Question 32. The following are the extracts from the trial balance of M/s Bhola & Sons as on March 31,2014:

Question 33. Prepare a Trading Account of M/s Pushpanjali from the following information related to 2013-14 :

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Class 11th Study Material Accountancy: Free Study Guide

Accountancy is a field of study that focuses on the systematic recording, analyzing, and reporting of financial transactions and information within businesses and organizations. learn accountancy for class 11th with our easy-to-follow and latest cbse guidelines-based study material to get good marks in board exams. we've gathered everything a class eleventh student needs to excel in their accounts curriculum..

Discover a smoother learning journey through our effortless roadmap

[Part-A] Chapter 1: Introduction to Accounting

Introduction to Accounting

Types and Users of Accounting Information

Difference between Bookkeeping and Accounting

Accounting: Objectives, Characteristics, Advantages, Disadvantages and Role of Accounting

Basic Accounting Terms

Difference between Accounting and Accountancy

[Part-A] Chapter 2: Theory Base of Accounting

Accounting Standards : Need, Benefits, Limitations and Applicability

IFRS (International Financial Reporting Standards) and GAAP (Generally Accepted Accounting Principles)

Difference between Cash Basis and Accrual Basis of Accounting

Accounting Concepts: Types, Examples & Principles

Systems and Basis of Accounting | Single and Double Entry System

[Part-A] Chapter 3: Recording of Business Transactions

16 articles

Accounting Voucher: Format & Types of Vouchers

Accounting Equation: Meaning, Formula, Components & Calculation

Accounting Equation | Increase in Assets and Capitals both and Increase in Assets and Liability both

Accounting Equation | Decrease in Assets and Capital both and Decrease in Asset and Liability both

Accounting Equation|Decrease in Capital and Increase in the Liability, Decrease in Liability and Increase in the Capital and Increase and Decrease in Assets

Accounting Equation|Sale of Goods and Calculation of Net Worth (Owner's Equity) Or Capital

Journal Entries

Journal Entry Questions and Solutions

Rules of Journal Entry in Accounting

Cash Book: Meaning, Types, and Example

Purchase Book : Meaning, Format, and Example

Sales Book: Meaning, Format and Example

Purchase Return Book : Meaning, Format, and Example

Sales Return Book: Meaning, Format, and Example

Journal Proper: Meaning, Format and Examples

Ledger | Meaning, Format, Example and Balancing of Accounts

[Part-A] Chapter 4: Bank Reconciliation Statement

Bank Reconciliation Statement (BRS) | Full Form of BRS and Need of BRS

How to Prepare Bank Reconciliation Statement (BRS) ? | Purpose of BRS with Example

Difference between Bank Statement and Bank Reconciliation Statement

Preparation of BRS without correcting Cash Book

Bank Reconciliation Statement (BRS) : Without Correcting Cash Book

Preparation of Bank Reconciliation Statement with Amended Cash Book

Bank Reconciliation Statement (BRS): When Extracts from Cash Book and Pass Book are given

[Part-A] Chapter 5: Depreciation, Provisions, and Reserves

11 articles

Depreciation: Features, Causes, Factors and Need

Methods of charging Depreciation

Straight Line Method of Charging Depreciation

Written Down Value (WDV) Method of Depreciation

Difference between Straight Line and Written Down Value Method of calculating Depreciation

Difference between Depreciation and Amortization

Provisions in Accounting - Meaning, Accounting Treatment, and Example

Reserves in Accounting: Meaning, Accounting Treatment, Importance, and Example

Difference between Provisions and Reserves

Reserves and its Types

Difference between Capital Reserve and Revenue Reserve

[Part-A] Chapter 6: Trial Balance and Rectification of Errors

Trial Balance: Meaning, Objectives, Preparation, Format & Example

Types of Errors in Trial Balance

Detection and Rectification of Errors in Trial Balance

Suspense Account : Meaning, Journal Entry & Format

[Part-A] Chapter 7: Bills of Exchange

Bills of Exchange: Meaning, Features, Parties, and Advantages

Promissory Note: Features and Parties

Difference between Bills of Exchange and Promissory Note

Important Terms in Bills of Exchange

Accounting Treatment of Bills of Exchange

[Part-B] Chapter 1: Financial Statements

42 articles

Financial Statements : Meaning, Objectives, Types and Format

Financial Statement with Adjustments

Financial Statement with Adjustments ( Journal Entries )

Financial Statement with Adjustment with Examples-I

Adjustment of Closing Stock in Final Accounts (Financial Statements)

Adjustment of Outstanding Expenses in Final Accounts (Financial Statements)

Adjustment of Prepaid Expenses in Final Accounts (Financial Statements)

Adjustment of Accrued Income in Final Accounts (Financial Statements)

Adjustment of Unearned Income in Final Accounts (Financial Statements)

Financial Statement with Adjustment with Examples-II

Adjustment of Interest on Capital in Final Accounts (Financial Statements)

Adjustment of Interest on Drawings in Final Accounts (Financial Statements)

Adjustment of Interest on Loan in Final Accounts (Financial Statements)

Adjustment of Proprietor’s Salary in Final Accounts (Financial Statements)

Adjustment of Interest on Deposits in Final Accounts (Financial Statements)

Financial Statement with Adjustment with Examples-III

Adjustment of Depreciation in Final Accounts (Financial Statements)

Adjustment of Appreciation in Final Accounts (Financial Statements)

Adjustment of Bad Debts in Final Accounts (Financial Statements)

Adjustment of Provision for Bad and Doubtful Debts in Final Accounts (Financial Statements)

Adjustment of Bad Debts Recovered in Final Accounts (Financial Statements)

Financial Statement with Adjustment with Examples - IV

Adjustment of Provision for Discount on Debtors in Final Accounts (Financial Statements)

Adjustment of Provision for Discount on Creditors in Final Accounts (Financial Statements)

Financial Statement with Adjustment-Loss of Insured Goods & Assets (All three cases)

Adjustment of Goods given as Charity or Free Sample in Final Accounts (Financial Statements)

Adjustment of Goods used for Personal Purpose in Final Accounts (Financial Statements)

Financial Statement with Adjustment with Examples-V

Adjustment of Use of Goods in Business in Final Accounts (Financial Statements)

Adjustment of Manager's Commission in Final Accounts (Financial Statements)

Adjustment of Deferred Revenue Expenditure in Final Accounts (Financial Statements)

Stakeholders and their Information Requirements

Capital Expenditure | Meaning, Example and Accounting Treatment

Revenue Expenditure | Meaning, Types, Example and Accounting Treatment

Capital Receipts | Meaning, Types, Components, and Accounting Treatment

Revenue Receipts | Meaning, Features, Example and Accounting Treatment

Difference between Capital Expenditure and Revenue Expenditure in Accountancy

Difference between Capital Receipts and Revenue Receipts in Accountancy

Trading and Profit and Loss Account: Opening Journal Entries

Operating Profit (EBIT): Meaning, Formula and Example

Balance Sheet: Meaning, Format, Need and Objectives

How to prepare a Balance Sheet?

Study Material Overview

Explore our comprehensive Chapter-Wise study material for Class 11 Accounting, which cover all essential topics aligned with the latest CBSE Guidelines. From mastering the basics of accounting principles in Part A, including understanding business transactions, bank reconciliation, and rectification of errors, to delving into financial statements in Part B, our study material provides a structured approach to learning all key concepts.

What do we offer?

This GeeksforGeeks CBSE Class 11 Accountancy Study Material for the academic year 2024-25 is structured into two parts. Part A comprises 7 chapters, while Part B consists of 1 chapter. Our guide covers each and every concept with detailed explanations and practical examples, allowing students to gain a solid foundation in accounting principles and prepare effectively for their exams.

Key Highlights of this Class 11 Accounting Study Material

• Aligned with NCERT Guidelines: Accurately matches the latest NCERT curriculum.
• Covers Updated Syllabus (2024-25): Includes all new topics introduced for the academic year 2024-25.
• Illustrated Diagrams: Visual aids provided for better understanding of concepts.
• Clear Explanations: Complex concepts simplified for easy comprehension.
• Chapter Summaries: Concise summaries provided for quick revision before exams.
• Expertly Crafted Content: Comprehensive and well-researched material curated by subject matter experts.
• Accessible Anywhere: Study conveniently on-the-go with our online platform.

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With GeeksforGeeks, I finally get Accountancy . Their easy explanations and helpful practice questions make studying less stressful.

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What is Accountancy?

Accountancy is the process of recording, summarizing, and analyzing financial transactions of a business.

Why is Accountancy Important?

Accountancy helps businesses keep track of their financial performance, make informed decisions, and comply with legal requirements.

Is the study material updated for the academic year 2024-25?

Yes, our study material is aligned with the latest CBSE curriculum for 2024-25.

How many chapters are in Class 11 Accounts?

The material covers all 8 Chapter of Class 11 Accounting chapters specified by CBSE.

How to score full marks in accountancy?

Understand the Basics: Debits, Credits, Equation and more. Solve sample papers, mock tests, past paper. Use Flow Charts and Diagrams during Practice. Solve Atleast 5 Yeast Previous Papers. Clear Doubts and revise.

Improve your Coding Skills with Practice

What kind of Experience do you want to share?

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Class 11 Accountancy Chapter 2 Question Answers

Home » CBSE » Class 11 Accountancy Chapter 2 Question Answers

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The accounting process helps to communicate crucial information about the organisation to external and internal users. The data needs to be reliable and possess comparability so that inter-firm and intra-firm comparisons can occur. Class 11 Chapter 2 in Accountancy explains the theory base of accounting. It is established so that enterprises can have consistency in identifying economic events, measuring and recording transactions and finally communicating them to the related users without any confusion.

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Class 11 Accountancy Chapter 2 is henceforth considered crucial for the students to develop a good understanding of the theory base used in accounting. 

With Extramarks, students can access Important Questions Class 11 Accountancy Chapter 2 that are collated from various sources such as NCERT books, reference books, and past years’ papers to help students revise Chapter 2. With subject experts providing solutions to the Important Questions Class 11 Accountancy Chapter 2 from Extramarks students can feel fully prepared to understand the exam pattern and answer questions accordingly in the examinations.

Apart from Accountancy Class 11 Chapter 2 Important questions students can also find various other study resources such as NCERT books, NCERT solutions,  CBSE Revision Notes, past years’ papers, etc by registering on the Extramarks’ website, for an all-rounded exam preparation 

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Class 11 Accountancy Chapter-wise important questions are available for free to students, and these questions are perfect for self-study.

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Important Questions Class 11 Accountancy Chapter 2 with Solutions

Here is a list of Important Questions Class 11 Accountancy Chapter 2 with easy solutions for maximum understanding.

Question 1. In India, the accounting standard board was set up in the year-

Answer 1: (b) 1977

Explanation: The accounting Standard Board (ASB)was set up on 21st April 1977 to formulate accounting standards to bring consistency in the accounting policies and practices.

Question 2. The realisation concept determines when goods sent on credit to customers are to be included in the sales figure for the purpose of computing the profit or loss for the accounting period. Which of the following tends to be used in practice to determine when to include a transaction in the sales figure for the period. When the goods have been:

Answer 2: (b) Invoiced

Explanation: When the goods are invoiced it gives the customer the right to own the goods from that point, hence credit sales are treated as revenue on that day’s sales 

Question 3. Which concept denotes that the existence of a business is separate from its owner?

Answer 3: Concept of Business Entity 

Question 4. What are the different basis of accounting?

Answer 4: The basis of accounting refers to the times at which the transactions are recorded into books of accounts. The two most used basis of accounting is

• Cash Basis of Accounting 
• Accrual Basis of Accounting

Question 5. What is the basic accounting equation?

Answer 5: The basic accounting equation is:

Assets = Liabilities + Capital

It means that the value of all assets of a firm is equal to the total liabilities or claims to the owners and outsiders.

Question 6.  ‘Do not anticipate a profit but provide for all possible losses’- State and explain the principle behind.

Answer 6: The principle behind the above statement is the concept of prudence or conservatism. Conservatism states that the enterprise’s profits should not be overstated; hence recording all future profits does not happen, but future losses are taken into account even if they have a remote possibility of occurring. 

Question 7. Why is it necessary for the accountants to assume that the business entity will remain a going concern? 

Answer 7: According to the going concern concept, the business entity will continue its operation for a reasonably long period and would not be liquidated in the foreseeable future. 

The Going Concern Concept helps divide expenditure into revenue and capital expenditure. 

Example: Suppose the business enterprise purchases a piece of machinery for producing cloth worth Rs. 50,000/- which has an estimated life span of 5 years. Rs. 50,000 will be treated as an item of capital expenditure as the machinery’s benefits will be derived for more than a year. And the per-year depreciation of Rs. 10,000 will be charged over the next five years and treated as revenue expenditure. 

Question 8. What is the nature of accounting principles?

Answer 8: The nature of Accounting Principles is as follows:

• Accounting principles are man-made and are derived from past experiences, usage, customs, statements from professional bodies and regulations by government agencies.
• The Accounting principles are not static and are constantly influenced by the changes in the legal, social, and economic environments and  in the needs of the organisations.
• Accounting principles provide a uniform way of treating accounting information that helps comparing and easily comprehend accounting data.

Question 9. What is the money measurement concept? Which one factor can make it difficult for a business to compare the monetary values of one year with the monetary values of another year?

Answer 9: The  money  measurement  concept states that transactions that can be measured in monetary terms will be recorded. For example, if an enterprise purchases 12 computer units of Rs. 1,20,000/-, then the monetary value, i.e. Rs. 1,20,000 will be considered while recording the purchase transaction; hence, this principle also focuses on the monetary value being recorded and not just the physical units. 

The yearly comparison of such monetary data becomes difficult because the nominal value of money is considered and not the real value of money. 

Hence as the purchasing power of money is different in different periods, it implies that what Rs. 10 could repurchase in five years , it could not buy today.  

Question 10. What are the components of GST

Answer 10: GST is an indirect tax levied on goods and services. It is a destination-based tax that has to replace indirect taxes such as VAT, excise duty, service tax, etc.

The three main components of GST are as follows:

• CGST: The Central Goods and Services Tax is the tax that the Central Government levies on the purchases that are made within the state. 
• SGST: The State Goods and Services Tax is the tax levied on the purchases made within the state, collectd by the State Government 
• IGST: Integrated Goods and Services Tax is a tax that is levied on the interstate supply (between two states) of goods and services

Question 11. What is the accrual basis of accounting?

Answer 11: The accrual basis of accounting is a method of financial accounting that allows the enterprises to record a revenue or expense when it occurs rather than when the payment is received or paid. 

This method also follows the matching principle of accounting, which states that expenses and revenues should be recognised in the same period. 

Question 12. ‘The Accounting Concepts and Accounting Standards are generally referred to as the essence of financial accounting’ Give your comment on the statement.

Answer 12: The process of financial accounting revolves around recording and classifying financial data relating to an enterprise and presenting it as financial statements to users of accounting information. 

Concepts such as Conservatism, Money Measurement, Consistency etc., provide the accountants with several ways of treating such transactions. For example, there are different ways enterprises might calculate depreciation, which can result in incorrect interpretation of data by the users. The accounting concepts and standards help with the problem of inconsistency mentioned above. 

Institute of Chartered Accountants of India came up with these accounting concepts and standards that help establish consistency in the financial recording undertaken by enterprises.

By applying these accounting standards and concepts, the business can successfully remove ambiguities that will help the companies create reliable, consistent, comparable financial records that do not lead to wrong interpretations. Hence they are rightfully considered the essence of financial accounting.

Question 13. State the difference between the Accrual Basis of Accounting and the Cash Basis of Accounting?

Answer 13: The following are the differences between the Accrual Basis and the Cash Basis of Accounting:

Question 14. What is the Matching Concept? Why should a business concern follow this concept? Discuss.

Answer 14: The matching concept says that the expenses paid in a particular accounting period should match with revenues earned in that period. It necessitates that all expenses paid or not, or revenues earned or not during the accounting period, should be considered when the enterprise’s profit and loss are calculated. 

The reasons why businesses should follow the matching concept are as follows:

• The matching concept helps show the business enterprise’s exact financial position.
• As the matching principle involves matching revenues with expenses, the profits are neither overstated nor understated.
• It also ensures that transactions occurring in one accounting period and realised in another accounting period are recognised in the period in which they occur.

Question 15. Complete the following worksheet:

• If a firm believes that some of its debtors may default, it should act on this by making sure that all the possible losses are recorded in the books. This is an example of the ___________ concept.
• Everything a firm owns, it also owns out to somebody. This coincidence is explained by the ___________ concept.
• A firm may hold the stock which is heavily in demand. Consequently, the market value of this stock may be increased. Normal accounting procedure is to ignore this because of the ___________.
• The management of a firm is remarkably incompetent, and the firm accountants can not take this into account while preparing the book of accounts because of the ___________ concept.
• The fact that the business is separate and distinguishable from its owner is best exemplified by the ___________ concept.

Answer 15: 

• Conservatism
• Money measurement
• Business Entity

Benefits of Solving Important Questions Class 11 Accountancy Chapter 2

Theory  base of  accounting contains essential concepts and principles, a better understanding of which can help students build strong foundational knowledge in Accountancy Chapter 2 Class 11 Accountancy Important Questions from Extramarks are a great way to begin your examination preparations. Not only do these questions provide a comprehensive list of questions to go through, but they also make the chapter easy to comprehend. 

Some of the benefits of going through the Important Questions Class 11 Accountancy Chapter 2 are as follows:

• Easy-to-understand solutions for Chapter 2 in Accountancy prepared by experts having years of experience in the subject.
• Access to sources such as NCERT Solutions, important questions, and past years’ papers to ensure students become confident after practising solving the questions.
• Extramarks provides questions that can most likely appear in the examination, so by practising them the students will be exam ready so going through Important Questions Class 11 Accountancy Chapter 2 can be beneficial for the students.
• Class 11 Accountancy Chapter 2 Important Questions list was created keeping in mind the recent CBSE guidelines and syllabus so students can rely on them.

Students in classes 1 to 12 can find comprehensive study resources on Extramarks’ official site. The website has many materials in addition to the essential questions and answers. Students can access some of these resources by clicking on the links provided below:

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Q.1 The rules and guidelines used in preparing accounting reports are known as_______.

A. Basic rules

B. Accounting rules

C. Generally accepted accounting principle

D. Double entry system

In order to maintain uniformity and consistency in accounting records, certain rules or principles have been developed which are generally accepted by the accounting profession. They are popularly known as GAAP.

Q.2 Name the convention that states closing stock is valued at cost price or market price which ever is lower.

A. Conservation of conservatism

B. Convention of full disclosure

C. Convention of conservatism

D. Accounting lower assumption

Convention of conservatism requires that business transactions should be recorded in such a manner that profits are not overstated. All anticipated losses should be accounted for but all unrealized gains should be ignored.

Q.3 With introduction of GST in India, It subsumed multiple indirect taxes of Center and State both. Which of the following is the objective of GST

A. Ensuring that the cascading effect of tax on tax will be eliminated

B. Reducing the tax slab rates to avoid further clarification issues

C . Making a unified law involving all the tax bases, laws and administration procedures across the country

D. All of the above

The objectives of introducing GST are- 1. Ensuring that the cascading effect of tax on tax will be eliminated. 2. Decreasing the unhealthy competition among the states due to taxes and revenues. 3. Reducing the tax slab rates to avoid further clarification issues.

Q.4 An investment company has been valuing its inventory of land at lower of market price or cost. It now wants to value its inventory at the current market price which is higher than the cost. Which accounting concept will be violated

Prudence principle will be violated in this case.

The Prudence concept is many a time described using the phrase ‘Do not anticipate a profit, but provide for all possible losses.’ Prudence concept takes into consideration all prospective losses but not the prospective profits.

Q.5 What are the objectives of introducing GST

• Ensuring that the cascading effect of tax on tax will be eliminated.
• Improving the competitiveness of the original goods and services, thereby improving the GDP rate too.
• Ensuring the availability of input credit across the value chain.
• Reducing the complications in tax administration and compliance.
• Making a unified law involving all the tax bases, laws and administration procedures across the country.
• Decreasing the unhealthy competition among the states due to taxes and revenues.
• Reducing the tax slab rates to avoid further clarification issues.

Q.6 What do you understand by ‘The Going Concern Assumptions’ Marks: 4

The going concern assumption holds that a business or the institution shall last for a long time. Therefore, it is also known as ‘continuity assumption’. In other words, it is assumed that the business will exist for an indefinite period of time and therefore, transactions are recorded from this point of view.

On the basis of this assumption, fixed assets are recorded at their original cost and are depreciated in a systematic manner without reference to their market value.

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Cbse class 11 accountancy important questions, chapter 1 - introduction to accounting.

Chapter 3 - Recording of Transactions – 1

Chapter 4 - recording of transactions ii (financial accounting – i), chapter 5 - bank reconciliation statement, chapter 6 - trial balance and rectification of errors, chapter 7 - depreciation, provisions & reserves, chapter 8 - bill of exchange, chapter 9 - financial statements – 1, chapter 10 - financial statements 2, chapter 11 - accounts from incomplete records, chapter 12 - applications of computers in accounting, chapter 13 - computerised accounting system, faqs (frequently asked questions), 1. where can students easily get access to important questions class 11 accountancy chapter 2.

By registering on the Extramarks, students can easily access Important Questions Class 11 Accountancy Chapter 2 with many other important materials significant for creating a solid base of knowledge. The solutions provide an easy way to revise the chapter and help to understand key concepts that are covered in it.

2. How many books are assigned for Class 11 Accountancy

As per CBSE there are two books assigned for Accountancy in Class 11. The first book, Financial Accountancy 1, contains 8 chapters, and the second book, Financial Accountancy 2, contains 5 chapters. Both of these books are also available in Hindi.

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Theory Base of Accounting Class 11 Notes and Mind map

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Theory Base of Accounting - Notes, Mind Map and Extra Questions and Answers (PDF)

Diving into the world of accounting in Class 11 brings you to a critical juncture where the Theory Base of Accounting stands as a cornerstone. This fascinating chapter, integral to Class 11 Accounts, unlocks the fundamentals that shape the realm of accounting. As you embark on this journey with Class 11 Accounts Chapter 2 Notes, you're not just learning; you're stepping into a world where numbers and principles weave the story of businesses. These notes, meticulously designed, cover the crux of Accounting Principles Class 11, offering a clear and comprehensive understanding of the subject.

The Theory Base of Accounting Class 11 Notes are more than just pages of information. They are a gateway to understanding the building blocks of accounting, including various accounting principles and conventions. These notes, available as Class 11th Accounts Chapter 2 Notes and in PDF formats, cater to all learning styles. They are an invaluable resource, whether you're looking to download the Theory Base of Accounting Class 11 PDF for offline study or prefer the interactive Class 11 Accountancy Chapter 2 Notes online.

For those who favor a visual learning approach, the Theory Base of Accounting Class 11 Mind Map transforms complex concepts into a simple, engaging format. It's a tool that not only enhances understanding but also aids in memory retention. Moreover, the Class 11 Accountancy Theory Base of Accounting notes are supplemented with extra questions and answers, providing a comprehensive learning experience. These additional resources challenge your understanding and prepare you thoroughly for exams.

The Notes of Theory Base of Accounting Class 11 encapsulate the essence of Chapter 2 Theory Base of Accounting, making complex concepts approachable and digestible. They are a must-have for any student looking to master the basics of accounting and lay a strong foundation for their future studies in commerce. With these notes, the journey through the theory base of accounting becomes not just an educational task, but an exciting exploration into the world of finance and business.

Generally Accepted Accounting Principles (GAAP)

Generally Accepted Accounting Principles, commonly known as GAAP, are a set of rules and guidelines that companies follow when they report their financial information. Think of GAAP like the rules of a game that make sure every company is playing fairly and similarly. This makes it easier for people to understand and compare different companies' financial statements. GAAP covers things like how a company should report its sales, expenses, and profits, and how to value things it owns or owes money on. Following GAAP helps companies show a true picture of their financial health.

Basic Accounting Concepts

Basic Accounting Concepts are the fundamental ideas that form the basis of how accounting is done. These concepts include things like the idea that a business is separate from its owner (Separate Entity Concept), that we should record what something costs when we get it and not change this value later (Historical Cost Concept), and that we should assume a business will keep operating in the future (Going Concern Concept). These concepts make sure that accounting is done in a consistent and reliable way, helping businesses and people who look at financial information understand it better.

Systems of Accounting

Systems of Accounting refer to the methods businesses use to record their financial transactions. There are mainly two types: cash-based and accrual-based. In cash-based accounting, income and expenses are recorded only when cash is received or paid. It's like your personal budget where you track money when you actually get or spend it. In accrual-based accounting, transactions are recorded when they happen, not when money changes hands. This is like booking or recording a sale even if the customer hasn’t paid yet. Each system has its advantages and is chosen based on the business's needs.

Basis of Accounting

Basis of Accounting is about when financial transactions are recorded. There are two main types: cash basis and accrual basis. In cash basis accounting, transactions are only recorded when cash is received or paid. It’s simple and straightforward, commonly used by small businesses. In accrual basis accounting, transactions are recorded as soon as they happen, regardless of when the cash is actually received or paid. This method gives a more accurate picture of a company's financial position, especially for larger businesses.

Accounting Standards

Accounting Standards are like rules that guide how financial statements should be prepared and presented. They ensure that the financial information a company provides is consistent, reliable, and comparable with other companies. These standards cover a wide range of topics like how to record revenue, what kind of information to disclose about certain transactions, and how to value assets. By following these standards, companies can provide clear and accurate financial information to investors, regulators, and the public.

Theory Base of Accounting Class 11 Notes

Theory Base of Accounting in Class 11 Notes covers the basic principles and concepts of accounting. These notes are essential for understanding how accounting works and why certain methods are used. They explain the fundamental rules and ideas, like accounting principles, concepts, and conventions. These notes are crucial for students in Class 11 to build a strong foundation in accounting, helping them grasp more complex topics in the future.

Theory Base of Accounting Class 11 Mind Map

The Theory Base of Accounting Class 11 Mind Map is a visual tool that helps students understand and remember the key concepts of accounting. It simplifies complex topics into an easy-to-follow diagram, showing how different accounting principles and concepts are connected. This mind map is a great study aid, especially for visual learners, making it easier to review and recall important information during exams.

Theory Base of Accounting Class 11 Extra Questions Answers

The Theory Base of Accounting Class 11 Extra Questions Answers are additional resources that help students test their understanding of accounting principles and concepts. These questions cover various aspects of the theory base of accounting and provide answers for self-assessment. By practicing these questions, students can strengthen their grasp of the subject, prepare better for exams, and gain confidence in their accounting knowledge.

• Theory base of accounting class 11 notes
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• All 11 COMMERCE notes

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DK Goel Solutions

• DK Goel Solutions Class 11

DK Goel Solutions Chapter 3 Accounting Principles

Read below DK Goel Solutions for Class 11 Chapter 3 Accounting Principles . These solutions have been prepared based on the latest DK Goel Accountancy book issued for this academic year.

The book is really useful as it explains in detail the core principles of Accountancy, which includes basic Characteristics of Accounting Principles, explanation of the Basic Accounting Equation, a brief Separate and Business Legal Entity, money Measurement Concepts, to the Class 11 commerce Accountancy students.

DK Goel Solutions for Class 11 Chapter 3 includes a lot of simple to understand examples explaining the meaning of the terms and pointing out the basic differences between them. DK Goel Solutions for Class 11 Chapter 3 solutions are free and will help you to prepare for Class 11 Accountancy.

Accounting Principles DK Goel Class 11 Accountancy Solutions

Students can refer below for solutions for all questions given in your DK Goel Accountancy Textbook for Class 11 in Chapter 3

Question 1: 

Solution 1:  The basic concepts of accounting are referred to as the fundamental concepts or fundamental assumptions underlying financial accounting theory and practice and are broad operating rules for all accounting practices established by the accounting profession. As follows, the essential principles were listed:

• Business entity
• Revenue recognition
• Money measurement
• Going concern
• Full disclosure
• Accounting period
• Consistency
• Conservatism
• Dual aspect
• Objectivity

Question 2: 

Solution 2:  The business entity concept suggests that enterprise has similar and distinct bodies from its members. Thus, company and its shareholders must be viewed as two independent companies for the purpose of accounting.

Question 3: 

Solution 3:  Accounts need to presume that a corporate enterprise would remain an issue and there is no distinction between cash and stock if it does not arise (goods). We believe that in the near term, properties are not going to be sold.

Question 4: 

Solution 4:  Basic accounting equation is as under:-

Assets = Liabilities + Capital

Question 5: 

Solution 5:  Below is the characteristics of Accounting Principles are:-

(1) The rules of accounting are manmade. Such directors are man-made with years of experience and purpose.

(2) Accounting standards are, in essence, versatile. Such values are not rigid, but they provide an ability to adapt due to the user’s current policies and desires over time.

(3) In general, accounting rules are accepted.

Very Short Question of DK Goel Solutions for Class 11 Chapter 3 – Accounting Principles

Solution 1:  Two characteristics of accounting principles are as under:-

(i) Accounting principles are Man-made. 

(ii) Accounting principles are Flexible

Solution 2:  An entity has independent and separate existence from its owner. According to this concept, an enterprise is regarded as an entity which is separate and distinct from the owner of that entity.

Therefore, purchases are reported and evaluated and, from the point of view of the company and not of the individual, financial statements are prepared. Company, thus, is regarded as an individual independent from its owners and different from them.

Solution 3:  The concept of money measurement indicates that only such transactions exist in an entity. It should be reported in the books of accounts and can be represented in terms of money. The transaction documents must also be maintained not in tangible units, but in monetary units.

Solution 4:  The concept of going concern assumes that a business firm would continue to carry out its operations indefinitely, i.e. for a fairly long period of time and would not be liquidated in the foreseeable future.

This is an important assumption of accounting as it provides the very basis for showing the value of assets in the balance sheet.

Solution 5: The accounting period refers to the period of time at the close of which an enterprise’s financial accounts are prepared to assess if it has made a profit or suffered losses over that period, and to what is precisely the status of its assets and liabilities at the end of that period.

Question 6: 

Solution 6:  The cost concept requires that all assets are recorded in the book of accounts at their purchase price, which includes cost of acquisition, transportation.

Installation and making the asset ready to use. For instance A Plant Purchases Rs. 50,000 and installation Expenses for this machinery is Rs. 5,000 So, the total cost of machinery is Rs. 55,000.

Question 7:

Solution 7:  Dual aspect is the foundation or basic principle of accounting. It provides the very basis for recording business transactions into the book of accounts.

This concept states that every transaction has a dual or two-fold effect and should therefore be recorded at two places. For instance, Rakesh commenced business with capital Rs. 5,00,000. It increases cash in assets side and capital in liabilities- side by Rs. 5,00,000. 

Rs. 5,00,000 (Cash) = Rs. 5,00,000 (Capital).

Question 8: 

Solution 8:  Any cost generated in an accounting period should be balanced with income for the same period, according to the balancing definition. Both costs paid during a given period shall be charged on the income of the net profit determination period.

Question 9: 

Solution 9:  Any cost generated in an accounting period should be balanced with income for the same period, according to the balancing definition.

Depreciation for the current year is paid against the profits for the current year. In the year of purchases, the valuation of the commodity is not a cost, because it is split over its usable life.

Question 10: 

Solution 10:  Revenues and costs are recognised in the period in which they occur rather when they are paid. A distinction is made between the receipt of cash and the right to received cash and payment of cash and legal obligation to pay cash.

Question 11: 

Solution 11:  According to this concept, all relevant details pertaining to the financial activity of a corporate entity should be registered and published in the financial records in a full and understandable manner.

Question 12: 

Solution 12:  According to this theory, accounting techniques can be applied continuously, year after year, once they are selected and implemented. For a number of years, this would ensure a meaningful study of the company’s results.

If the legislation or accounting standard specifies it, any accounting procedure may be modified to make the financial information more meaningful and clear.

Question 13: 

Solution 13:  According to the theory of populism, all potential gains need not be reported in the financial books, but all possible expenses should be recorded instantly.

Question 14: 

Solution 14:  As per this concept, only certain transactions which have a material impact and are accessible to consumers should be revealed.

It is mandatory to report all material facts, but it does not mean that even certain statistics that are meaningless must be included in the financial statements. Whether or not an object is material depends on the essence of it.

Question 15: 

Solution 15:  The Full disclosure principle states that the financial statements should disclose all significant information.

Question 16: 

Solution 16:  ‘Closing stock is valued at lower of cost or realisable value’ the principle is accounting is Convention of Prudence or Conservatism.

Question 17: 

Solution 17:  The continuity principle of accounting should be practiced by any organization, since financial statements must be comparative from year to year. Only if the accounting rules are unchanged and implemented the same year after year is that possible.

Question 18: 

Solution 18: Fixed assets are reported and viewed at the price at which they were bought in historical cost accounting and the fair value of those assets is overlooked.

Question 19: 

Solution 19:  The entire corporate life is broken into time periods so the sales cost and capital expenditure can be calculated and the amount of profit gained or the company’s loss can be determined.

Higher Order Thinking Skills (HOTS)

Solution 1:  In order to maintain uniformity and consistency in accounting records, certain rules or principles have been developed which are generally accepted by the accounting profession.

GAAP refers to the rules or guidelines adopted for recording and reporting of business transactions. GAAP stands for General Accepted Accounting Principles.

Question 2:

Solution 2:  According to Business entity concept the proprietor of the business is treated as a creditor to the extent of his capital.

Solution 3:  Yes, this knowledge is material-related and recipients of financial statements should be aware of it. So, as per the convention of full disclosure, it must be disclosed.

Solution 4:  No, the management isn’t perfect. In the books of accounts per year, only real gains and losses can be reported. As per the definition of the accounting cycle, it is broken into separate time frames for the determination of benefit.

Solution 5:  The calibre or quality of the management is not disclosed in the balance sheet it is Money measurement concept.

Solution 6:  All anticipated losses should be recorded but all anticipated profits should be ignored it is in Conservatism Principle.

Question 7: 

Solution 7:  The depreciation is to be charged as per one particular method year after year is Consistency concept.

Solution 8:  Because of the principle of concern, the full cost of an item is not regarded as an investment in the year of its purchase; it is presumed that the company will continue to operate for a long time in the future.

Therefore, the asset’s loss is spread over its working period and only the decay of the current year is viewed as an expense.

Solution 9:  The convention on materiality will be followed in dealing with this object. As per the definition, it is not appropriate to report things having an insignificant impact or being meaningless to consumers of financial statements.

It will then be viewed as an expense and the stationery account will be debited.

Question 10: A

Solution 10:  Yes, all expected losses should be recorded in the books of accounts is in Conservatism Principle.

Question 11:

Solution 11:  Business entity concept will be violated if Goods withdrawn by the proprietor for his personal use has not been recorded in the books of accounts.

Solution 12:  Two accounting principal should be as under:-

1.) Conservatism Principle

2.) Consistency concept 

Solution 13:  Yes, the accountant is right that he has adopted the principle of the materiality convention. Those products that have a marginal impact on the organization will not be disclosed or may be written off.

DK Goel Solutions for Class 11 Chapter 3 – Value-Based Questions

Question 1:

Solution 1:  Closing stock is valued at lower cost price or realisation value it is according to Prudence or Conservatism principle.

Solution 2:  Prospective benefit need not be reported according to this theory, but any prospective losses should be recorded immediately.

Below are the principle involve in above situation:- 

(i) Not to overstate the profit of the enterprise

(ii) Transparency

Solution 3:  The convention of conservatism will have two result:-

(i) Profit and loss account shows less profit.

(ii) The balance sheet reveals the undervalued side of assets and the overvalued side of liabilities.

Solution 4:  We are unable to figure out the net gains and damages if the notion of a different corporation is absent, so the company’s financial status will not be established.

Solution 5:  Below are the principles included on the above situation:-

(i) The purchase of an asset is not regarded as an expense on the grounds of this assumption. By implementing depreciation, the cost of the asset is segregated over the productive life of it.

(ii) The disparity between capital and income expenditures may be discovered from this assumption.

Solution 6:  Fixed assets are not shown at fair value in the books because:-

(i) The valuation of fixed assets reported at their original expense is historically specified.

(ii) It is believed that properties cannot be traded in the future in the presence of the present definition, so that the fair valuation of assets is meaningless.

Solution 7:  The life of an organization is separated into smaller cycles according to this theory, so that its output can be calculated at frequent intervals.

Solution 8:  The principle of Prudence or Conservatism is violated in the above situation.

Solution 9:  Plant and equipment losses are material facts for an organization and should be revealed. The organization has broken the principle of full transparency in this case.

Solution 10:  No, as per the price principle, this treatment is not right. A fixed asset is listed in the accounts at its initial expense, according to the cost principle.

Solution 11:  No, as per the Prudence or Conservatism Theory, this treatment is not right. If the business is reported at its expense, so the company has broken the accounting principle of conservatism. Current assets are priced at expense price or realizable value, whichever is lower, according to this theory.

Solution 12:  Yes, the business may also adjust the deprecation form and rate. All the modifications should be disclosed according to the presumption of continuity. The only condition is that it should be fully reported in the financial report when a transition is desirable, along with its effect on the income statement and balance sheet.

Solution 13:  No, under the corresponding theory, Mohan is unable to report this transaction as a sale because the goods have not been shipped, so that the transaction is not yet finished. Under the matching concept, only where the cost paid to earn the revenue is also recorded as an expense in that time is revenue recognized as earned.

Question 14:

Solution 14:  Below are the values on the full disclosure principle:-

(i) Transparency

(ii) Honesty

(iii) Reliability

Accounting principles is one of the most important chapters of Class 11 Accounts. Therefore, it requires a thorough understanding of the main concepts. The DK Goel Solutions are the most comprehensive resource for quick revision. It helps the students frame several notes while preparing for the exams. Through regular practice from the solutions, the students can easily learn complex topics like Matching concepts, GAAP, Convention of prudence, and much more.

The accounting period is quoted as the time interval for preparing the profit and loss balance sheets for a firm. This gives the firms a clear picture of the financial transactions and helps them make better decisions within an appropriate time frame. The accounting period is typically a time period of one year

The Prudence Principle depicts that the assumed profit of a firm should not be recorded, but the assumed losses must be quickly recorded. The sole aim behind this principle is to prevent the firm from anticipating any extra profit. However, to record the predictable losses to help alternative methods to prevent them and blend out the most fruitful results.

The most prominent characteristics of Accounting Principles are as follows – ● Accounting principles bring a set of pre-defined guidelines designed to frame the most accurate financial statements for a firm. ● These principles may differ as they are prepared from experience on practical grounds. ● All the accounting principles are non-static. Therefore, it can be modified as per the needs of the users or change in the policies.

The accrual concept depicts that when revenue is recorded in case of sales or for rendering services, the transfer of cash will completely be immaterial.

The consistency concept is one of the primary characteristics of accounting principles, which highlights that the financial statements of the firms must mandatorily be comparable from year to year, provided there are no modifications in the principles. This helps the companies analyze the financial transactions and rectify their lacking areas.

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Important Questions for CBSE Class 11 Accountancy (2024-25)

• Class 11 Important Question
• Accountancy

CBSE Class 11 Accountancy Important Questions - Free PDF Download

For Class 11 Commerce students, getting a strong grasp of the concepts related to Accountancy is very important. The Class 11 Accountancy syllabus is wide, consisting of various chapters related to accounting theories, transactions, recordings, statements, balances, and bills. Students will get a detailed insight into the chapters if they take the help of Accountancy Class 11 important questions . These questions have been formulated by experts at Vedantu to provide a strong conceptual foundation for the students.

Important Questions for Class 11 Accountancy are created from the latest CBSE syllabus of the CBSE board. The subject matter experts have done intense research through various examination papers from earlier years and then developed a set of CBSE important questions that can be expected in exams. Students are advised to go thoroughly through the given CBSE Class 11 Accountancy chapter-wise important questions along with the solutions. Students will positively benefit from these questions and score good marks in board exams.  

Overview of Accountancy Class 11 Important Questions 2024 with Answers PDF

The CBSE Class 11 Accountancy subject is one of the most important for Commerce students in Class 11. This subject has a lot of weightage in the final exams consisting of some very important chapters. There are different topics covered in those chapters such as Accountancy terms, financial statements, bills of exchange , etc.

Students will also get to learn about the application of computers in accounting, and structuring a database for accounting. They will understand the uses of accounting systems and Database Management Systems from the chapters as well. Students will get familiar with the theory base of accounting and learn the Accounting Standards set by the Institute of Chartered Accountants of India.

So, with the help of Class 11 Accountancy Important Questions and Answers PDF , students can prepare those chapters better and perform well in their exams. These question papers can also be analysed to figure out the probable questions that might appear in the final exams. Also, the subject matter experts at Vedantu have formulated these solutions based on the CBSE guidelines. Thus, students can get a lot of help in their preparation. So, there is no doubt that downloading and referring to these questions will help students strengthen their base in accountancy.

Download CBSE Class 11 Accountancy Important Questions 2024-25 PDF

Also, check CBSE Class 11 Accountancy Important Questions for All chapters:

CBSE Class 11 Accountancy Important Questions

Class 11 Accountancy Chapter Wise Questions PDF

Chapter-wise important questions are available on Vedantu’s website in the free PDF format and you can download them on any device at your convenient time. There are plenty of solved Accountancy Extra questions from each and every chapter on the website. You can also enrol with Vedantu if you want extra classes from the teachers.

Class 11 Accountancy

Accountancy is the process of identifying, recording, classifying, summarizing, interpreting and communicating financial information relating to a business entity to the interested users such as shareholders or investors. The objective of accounting is to maintain a systematic and complete record of business transactions in the books of accounts and this work is done by a specialized person who is called an accountant. The following topics unit wise, covered in the CBSE Class 11 Accountancy will give you an insight of what you are going to learn in the subject and how your understanding will grow after completion of every unit.

Unit 1 of CBSE Class 11 Accountancy:

It includes an introduction to accounting that covers the basic accounting concepts, objectives, advantages and limitations of accounting and types of accounting. It also includes the qualitative characteristics of accounting information, the role of accounting in business.

In this unit, you will learn basic accounting terms like business transaction, capital, drawings, liabilities, assets, fixed assets and expenditure, expense, income, profits, gains and losses, purchases, sales, goods, stocks, debtors and creditors, vouchers and discounts, etc. Unit 1 of CBSE Class 11 Accountancy also covers GAAP concept, business entity, money measurement, accounting period, cost concept, dual aspect, revenue recognition, systems of accounting .

After going through this unit students will be able to describe the meaning, significance, objectives, advantages and limitations of accounting in the modern economic environment with varied types of business and non-business economic entities. Students will also learn to identify the individual(s) and entities that use accounting information for serving their needs for decision making. The students will be able to explain the various terms used in accounting and differentiate between different related terms like current and non-current capital and revenue.

Students can also explain sales and purchases, the meaning, objective and characteristics of GST after studying the topics in Unit 1.

Unit 2 of CBSE Class 11 Accountancy:

It includes topics like the recording of business transactions where students will learn about vouchers and transactions, rules of debit and credit, recording of transactions in journals, cash books, purchase books and sales books. Bank Reconciliation Statement, Depreciation, Provision and Reserves are included in Unit 2 of the syllabus. Accounting for Bills of Exchange, the difference between Bill of Exchange and Promissory Note, term of bill, accommodation bill, trial balance and rectification of errors are included in Unit 2.

After the completion of Unit 2, students will be able to explain the concept of accounting equations, effects of a transaction on the assets, liabilities, capital, revenue and expenses . Students will also develop the understanding of recording of transactions in journals and the skill of calculating GST. Students will be thorough with the concept of maintaining a cash book and develop the skill of preparing different types of cash books, creating reserves, and explaining the method of recording of bill transactions. They will also develop the skill of identification and location of errors and their rectification and preparation of suspense accounts.

Unit 3 of CBSE Class 11 Accountancy:

It includes the financial statements of a sole proprietorship. The topics included under this unit are meaning, objectives and importance of revenue receipts, capital receipts, capital expenditure, revenue expenditure and deferred expenditure . Trading and profit & loss account, balance sheet, adjustments in preparation of financial statements and trading and Profit & Loss account and balance sheet of a sole proprietorship.

After completion of Unit 3, students will be able to state the meaning of financial statements and the purpose of preparing them. The concept of gross profit, operating profit and net profit will help the students develop the skill of preparing trading and profit & loss accounts. Students can now explain the need for preparing a balance sheet. They will also develop the understanding and skill of computation of profit/ loss using the statement of affairs method.

Unit 4 of CBSE Class 11 Accountancy:

In Unit 4 of CBSE Class 11 Accountancy syllabus, the concept of computers in accounting is introduced where students will learn the need for use of computers in accounting for preparing accounting reports . They will also understand the different kinds of accounting software.

Benefits of Accountancy Class 11 Important Questions PDF

If you download and practice the Accountancy Class 11 important questions from Vedantu, your fundamental knowledge will definitely be stronger than ever. The question papers summarise all the important topics included in the book in one place for the comfort of students.

Every set of questions comes with verified and accurate answers that have been formulated by the experts at Vedantu. Referring to these answers will ensure that students are easily able to score high marks by answering the questions according to the CBSE guidelines.

Students can also use the questions and answers to clarify any doubts that they have. Comparing the given solutions to their own will help them in rectifying any mistakes that they might have made. This also helps in improving their answering skills.

While revision before the exam, you can refer to the important questions for Class 11 Accountancy Chapter Wise PDF in order to complete the chapter without going through the textbook. This is the final step before you are ready to tackle any question in the examination.

Include the accountancy important questions into your study routine and you will be able to perform better than your class. Referring to the questions and answers will enable the students to learn how to answer the questions without making any mistakes.

You can download the CBSE Class 11 Accountancy Important Question Papers for each topic and master each and every concept. The Important Question Papers topic wise will definitely help you in scoring good marks.

Download Important Questions for Class 11 Accountancy Chapter Wise PDF

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FAQs on Important Questions for CBSE Class 11 Accountancy (2024-25)

Q1. Is Class 11 Accountancy difficult?

Class 11 Accountancy is easy if you follow the correct strategy and plan while preparing for the Accountancy exam. The more clarity you have on the syllabus, exam pattern and marking scheme, the better you will be able to understand the exam requirements. Clear all doubts as soon as possible to perform well in the Accountancy exam. Take help of Vedantu's Important Questions, Vedantu's NCERT Solutions and Vedantu's Revision Notes to simplify Accountancy preparation.

These solutions are available on Vedantu's official website( vedantu.com ) and mobile app free of cost.

Q2. How can I pass my Class 11 Accountancy exam?

To clear the Class 11 Accountancy exam , first of all, analyze the latest syllabus, marking scheme and exam pattern. Refer to the previous year question papers to identify the most important portions of the syllabus. Prepare the units with more weightage first. Refer to Vedantu's Important Questions for Class 11 Accountancy . By preparing these questions you can easily cover the most important topics of the syllabus and can surely clear the Accountancy exam. 

Q3. Which chapters are important in Class 11 Accountancy?

Each chapter in Class 11 Accountancy is important from an examination viewpoint. Below is given the unit-wise latest marks allocation of Class 11 Accountancy -

Part A: Financial Accounting I 

Unit-1 : Theoretical Framework- 12 Marks 

Unit-2 : Accounting Process- 40 Marks 

Part B: Financial Accounting II  

Unit-3 : Financial Statements of Sole Proprietorship from Complete and

Incomplete Records- 20 Marks 

Unit-4 : Computers in Accounting- Eight Marks 

Q4. What is the first chapter of Class 11 Accountancy ?

The first chapter of Class 11 Accountancy is- Introduction to Accounting- Meaning, Objectives . The chapter begins with a brief introduction of Accountancy, then,  the chapter discusses the different aspects of accounting. Next, the fundamentals of accountancy such as assets, liability and owner's equity are discussed. Then, the objectives, characteristics, branches and the steps of Accounting are discussed in depth. The chapter also explains the difference between accounting and bookkeeping. The chapter concludes with an analysis of the limitations and advantages of accounting. 

Q5. Which book is best for Class 11 Accountancy ?

For Class 11 Accountancy, the most important source for exam preparation is NCERT standard Accountancy Textbook. NCERT helps to lay the basic foundation and conceptual understanding of the Accountancy topics. Thus, NCERT is the most important book in Class 11 Accountancy preparation. After preparing the chapters thoroughly from the NCERT, students can refer to the Accountancy reference books written by D.K. Goel and T.S. Grewal . These books will help you to master the Class 11 Accountancy syllabus .

• NCERT Solutions
• NCERT Class 11
• NCERT Class 11 Accountancy
• Chapter 1: Introduction To Accounting

NCERT Solution for Class 11 Accountancy Chapter 1 - Introduction to Accounting

NCERT Solutions are extremely helpful books while preparing for the CBSE Class 11 Accountancy examinations. The Solutions of NCERT are useful in understanding the concepts easily.

NCERT Solution for Class 11 Accountancy Chapter 1 – Introduction to Accounting furnishes us with all-inclusive information on all the concepts. As the students would have to learn the fundamentals about the subject, the NCERT Class 11 Solutions is a comprehensive study material which explains the concepts in a great way.

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Short answers for class 11 accountancy chapter 1 – introduction to accounting.

1. Define Accounting.

Accounting is defined as the systematic process of identifying, recording, classifying, summarising, interpreting and communicating information about financial transactions to the users of the accounting information, such as the owners, government, investors, creditors, etc.

It provides the following information:

• Resources available in the firm.
• The means employed to finance those resources.
• Results achieved by using those resources.

2. State the end product of financial accounting. 

The end product of Financial Accounting is shown below:

• Income statement: The Trading and Profit and Loss Account is part of the income statement; it determines the financial position of the business based on gross/net loss or profit.
• Balance Sheet: A balance sheet is helpful in presenting the exact financial position of the business. It provides information about the assets and liabilities of a business to users of the business information.

3. Enumerate the main objectives of accounting.

The main objectives of accounting are discussed below.

1. To keep a systematic record of all financial transactions.

2. To determine the profit and loss of a business as reflected in a P & L account.

3. Making information available to users of the information (employees, shareholders, stakeholders).

4. To determine the financial position of the business by preparing a balance sheet.

4. Who are the users of accounting information?

There are two types of users for accounting information. They are

• Internal Users
• External Users

Internal Users include management, employee and owners. While external users consist of investors, creditors, the government, the public and customers.

5.  State the nature of accounting information required by long-term lenders.

The long-term lenders seek the following accounting information:

1. Liquidity of a business

2. Profitability

3. Operating efficiency

4. Growth potential of the business

5. Ability to repay the creditors

6. Who are the external users of information? 

External users are those users who are not part of a business but are interested in accounting information. Some examples are government, suppliers, banks, labour unions, tax authorities, etc.

7.  Enumerate the information needs of management.

The following are the information needs of management:

• Gather data that assist in decision-making and planning.
• To determine the soundness of business by preparing reports on funds, profits and costs.
• To compare current financial statements with past statements of own and of other similar businesses to determine the operating efficiency of the business.

8.  Give any three examples of revenues.

Examples of revenues are

• Sales Revenue
• Interest Received

9.  Distinguish between debtors and creditors; profit and gain.

Debtors and Creditors have the following differences:

Profit and Gain can be distinguished as follows:

10. ‘Accounting information should be comparable.’ Do you agree with this statement? Give two reasons.

Comparing accounting information is necessary for

• To determine how a firm is performing as compared to its competitors.
• To determine the internal performance of a firm to check how a firm has been performing over the years.

11.  If the accounting information is not clearly presented, which of the qualitative characteristic of accounting information is violated? 

The following characteristics are violated:

1. The data will be erroneous or biased, which impacts reliability.

2. The information loses validity and hence loses relevance.

3. Records will be difficult to understand and will be prone to errors which impact understandability.

4. Comparison with other reports will be difficult, resulting in biased interpretations, hence impacting comparability.

12.  “The role of accounting has changed over the period of time.” Do you agree? Explain. 

The role of accounting has evolved over the years. Earlier, it was concerned only with record keeping; in current times, it is more concerned with providing business information to relevant users of the information. These changes are the result of the dynamic changes in business structure, which has become more competitive nowadays.

13. Giving examples, explain each of the following accounting terms: • Fixed assets • Revenue • Expenses • Short-term liability • Capital 

Fixed assets: Fixed assets are long-term assets and are not for sale. They bring profits over the years to the business; for example, land, buildings, machinery, etc.

Revenue: Revenue is income earned through routine activities of a business, such as an amount that is received from the sales of goods, services provided to customers, the commission received, and royalties.

Expenses: Expenses are costs incurred by the business during the process of earning revenue. Examples are depreciation, rent, wages and salaries.

Short-term liabilities: Liabilities that are to be cleared off within a year; for example, creditors, bank overdraft, outstanding wages, bills payable, short-term loans, etc.

Capital: The sum financed by the owner of the firm, either in the form of cash or asset. It is recorded as a liability in the balance sheet.

14.  Define revenues and expenses.

Revenue: Revenue is income earned through routine activities of business such as royalties, the amount received from sales of goods, services to customers, and the commission received.

15. What is the primary reason for business students and others to familiarise themselves with the accounting discipline?

Accounting is the language of business. Hence, it is necessary for business students and others to familiarise themselves with the accounting discipline. The following reasons are also important:

1. Understand various principles of accounting.

2. Learn how to maintain the records of business.

3. Summarising account information to study the financial position of a business.

4. Accurate interpretation of accounting information.

Long Questions for Class 11 Accountancy Chapter 1 – Introduction to Accounting

1. What is accounting? Define its objectives.

• Objectives of Accounting
• Maintaining the records of business transactions: Accounting helps in the systematic maintenance of all the financial transactions in books of accounts.
• Determining profit or loss: Profit and loss should be determined in a business to understand how the business is running. It is determined by creating a P & L account.
• Determining the financial position of the firm: A balance sheet is prepared to determine the exact financial position of the business. It shows the assets and liabilities of the business.
• Providing accounting information to various users: Communicating accounting information to internal and external users helps understand accounting data in a structured manner.

2. Explain the factors which necessitated systematic accounting.

The following factors necessitated systematic accounting.

• Recording only financial transactions: Only those transactions that are financial in nature are recorded among all the transactions and events that occur in the organisation.
• Recording transactions in monetary terms: All economic events must be recorded in terms of monetary value.
• Recording information: The information should be accurately and carefully segregated, keeping the recording rules under consideration. In addition, the economic events are recorded in sequential order.
• Classification: Transactions must be classified and logged into the respective account records maintained in the form of ledgers.
• Summarising transactions: All the transactions get prepared in the form of a Trading Account, Profit and Loss Account, Balance Sheet, and Trial Balance, providing users with information for whom these accounts are prepared.
• Analysis and Data Interpretation: Recording accounting information in a systematic manner helps the users to analyse and interpret the accounting information efficiently and accurately. Data presented in various formats like charts, graphs, and accounting statements make it easier to communicate to the users.

3. Describe the informational needs of external users.

The informational needs of external users are discussed below.

1. Customers: Customers require the information to ensure there is continuity of the business so that they have a good probability of supply of products, parts and after-sales service.

2. Competitors: Competitors need the information on the relative strengths and weaknesses of their competition in the market and also for performance benchmarking purposes. Their information need is purely strategic in nature.

3. Government and other regulatory agencies: They need the information to decide about the allocation of resources and to ensure that the business is complying with the regulations.

4. Investors and potential investors: They need the information to assess the risks and the return on their investment.

5. Lenders and financial institutions: Information required to assess the creditworthiness of the business and its ability to repay loans.

6. Social responsibility groups: They need the information to assess the impact on the environment and its protection.

7. Unions and employee groups: They need this information to understand the profitability, stability and distribution of wealth within the business.

4. What do you mean by an asset, and what are the different types of assets?

The asset is a resource of value owned by a person or business that can be used to generate cash flows in future.

The types of assets can be classified in the following way:

1. Current asset: Asset which can be easily converted into cash or similar cash equivalents.

2. Non-Current asset: Also known as fixed asset, this asset cannot be converted into cash or cash equivalents easily.

3. Tangible asset: Asset that have a physical existence, i.e., which can be touched, seen and felt.

4. Intangible asset: Asset without any physical existence.

5. Operating asset: This is the assets that are required for the daily operations of the business.

6. Non-operating asset: This asset can generate revenue even when not being utilised for daily operations.

7. Fictitious assets: Asset which have no tangible existence or realisable value but represents actual cash expenditure.

5. Explain the meaning of gain and profit. Distinguish between these two terms.

Profit: It is the summation of total income minus total expenses. The profit is generated from the daily activities of the business.

Gain: Gain is the economic benefit that a company earns apart from its usual business activities, such as the sale of fixed assets, and appreciation in the value of an asset.

Thus, the difference between gain and profit is that gain is the economic benefit earned from activities outside of usual business, while profit is earned from the usual business activities.

6. Explain the qualitative characteristics of accounting information.

The following are the qualitative characteristics of accounting information:

• Reliability: A piece of information becomes reliable when users are able to rely on that information.
• Relevance: Information that is appropriate should be made easy to access and available timely. It avoids any irrelevant information. The relevant information will help in proper planning and decision-making.
• Understandability:  Information presented to users of the information must be created in such a way that information is meaningful and appropriate without any difficulty in understanding.
• Comparability: Accounting information should be comparable with firms’ performance of previous years as well as with competitors. It helps in determining the steps that need to be taken to ensure growth of a business.

7. Describe the role of accounting in the modern world.

The role of accounting has changed with the changing time. Earlier, it was considered only with recording of transactions, but in the modern world, it is about sharing the information with the users of information.

Here are some of the roles of accounting in the modern world.

• Assisting the management: It assists management in planning and organising the business plans by preparing budgets and reports.
• Comparative study: It helps to determine the performance of the firm and compare with that of previous years’ data and the same data can be used to compare against competitors’ performance within the same period. Such comparison helps in devising improvement strategies if there is a need.
• Substitute of memory: In today’s world, every business processes large number of transactions. It is beyond human capacity to memorise every transaction. Hence, it becomes essential to record transactions in the books of accounts.
• Information to end user: Being an information system, it collects and communicates relevant and reliable economic information about the organisation to its various users. Thus, the users depend on this information to make changes in their strategies for the business.

Concepts covered in this chapter

The chapters covered in NCERT Solutions for Class 11 Accountancy Chapter 1 are –

• Meaning of Accounting
• Economic events
• Identification, measurement, recording and communication
• Organisation
• Interested users of information
• Accounting as a source of information
• Qualitative characteristics of accounting information
• Understandability
• Maintenance of record of business transactions
• Calculation of profit and loss
• Depiction of financial position
• Role of accounting

Frequently Asked Questions on Introduction to Accounting

Who is the father of accounting.

Luca Pacioli is regarded as the Father of Accounting. He published the first book on double-entry accounting in 1494.

What are the 3 golden rules of accounting?

Three golden rules of accounting are 1) Debit the Receiver, Credit The Giver, 2) Debit What Comes in, Credit What Goes Out. 3) Debit All Expenses And Losses, Credit All Incomes and Gains.

What are the 5 types of accounts?

Five types of accounts are 1) Assets 2)Liabilities 3)Equity 4)Revenue and 5)Expenses.

What is accounting and its purpose?

The purpose of Accounting is to inform about the performance and financial condition of a business. This information is used to make business decisions.

Why is accounting useful?

Accounting is very useful for recording financial transactions of a business that helps in informing the financial health of the business to shareholders. It also helps in determining which actions are profitable for the business and which are not.

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• Theory Base of Accounting class 11 Notes Accountancy

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LEARNING OBJECTIVES

After studying this chapter, students will be able to:

·Describe the meaning of Accounting Assumptions and Accounting Principles.

·Explain the Accounting Standard and IFRS along with their objectives.

·Describe the Bases of Accounting.

·Distinguish between Cash  Basis  of  Accounting  and  Accrual  Basis  of Accounting

Main objective of accounting is to provide appropriate, useful and reliable information about the financial performance of the business to its various users to enable them in judicious decision-making. This objective can be achieved only when accounting records are maintained on the basis of uniform rules and principles.

Accounting principles, concepts and conventions are known as Generally Accepted Accounting Principles (GAAP). These principles are the base of Accounting. Generally Accepted Accounting Principles (GAAP) refers to the rules or guidelines adopted for recording and reporting of business transactions, in order to bring uniformity and consistency in the preparation and the presentation of financial statements.

These principles have evolved over a long period of time on the basis of experiences of the accountants, customs, legal decisions etc., and which are generally accepted by the accounting professionals.

FUNDAMENTAL ACCOUNTING ASSUMPTIONS

1. Going Concern Assumption: This concept assumes that an enterprise has an indefinite life or existence. It is assumed that the business has neither intention to liquidate nor to scale down its operations significantly.

(a) Distinction is made between capital expenditure and revenue expenditure.

(b) Classification of assets and liabilities into current and non-current.

(c)Depreciation is charged on fixed assets and fixed assets appear in the Balance Sheet at book value, without having reference to their market value.

2. Consistency Assumption: According to this assumption, accounting practices once selected and adopted, should be applied consistently year after year. This will ensure a meaningful study of the performance of the business for a number of years.

Consistency assumption does not mean that particular practices, once adopted, cannot be changed. The only requirement is that when a change is desirable, it should be fully disclosed in the financial statements along with its effect on income statement and Balance Sheet.

Any accounting practice may be changed if the law or Accounting standard requires so, to make the financial information more meaningful and transparent.

Relevance: It  helps  the  management  in  decision-making  by  utilizing  the comparable financial information.

3. Accrual Assumption: Accrual concept applies equally to revenue and expenses. As per this assumption, all revenue and costs are recognized when they are earned or incurred.

It is immaterial, whether the cash is received or paid at the time of transaction or later date e.g., if a credit sale (Credit for two months) for Rs. 15,000 is made on 15th Feb. 2015, then the revenue earned is to be recorded on 15th Feb. 2015, not on the date of cash realized, i.e., after two months. In case of Expenses, if at the end of the year the two months’ salary is due but not paid, then the expenses of salary will be recorded in the current year in which salary is due, not in the next year in which it will be paid.

Relevance: Earning of a revenue and consumption of a resource (expenses) can be accurately matched to a particular accounting period.

ACCOUNTING PRINCIPLES

1. Accounting Entity: An entity has a separate existence from its owner. According to this principle, business is treated as an entity, which is separate and distinct from its owner. Therefore transactions are recorded; analyzed and financial statements are prepared from the business point of view and not of the owner.

The owner is treated as a creditor (Internal liability) for his investment in the business, as if the firm has borrowed from its owner instead of the outside parties. Interest on capital is treated as expense like any other business expense. His private expenses are treated as drawings leadings to reduction in capital.

2.Money Measurement Principle: According to this principle, only those transactions that are measured in money or can be expressed in term of money are recorded in the books of accounts of the enterprises. Non- monetary events like death of any employee/Manager, strikes, disputes etc., are not recorded at all, even though these also affect the business operations significantly.

Limitations:

1. It ignores qualitative aspect e.g., efficient human resources (Assets), satisfied customers (Assets) and dishonest employee (liabilities).

2. Value of money (currency) is not stable.

To make accounting records simple, relevant, understandable and homogeneous, facts are expressed in a common unit of measurement- money. ,

3.Accounting Period Principle: According to this principle, the whole indefinite life of an enterprise is divided into parts, known as accounting period.

Accounting period is defined as interval of time, at the end of which the profit and loss account and balance sheet are prepared, so that the performance is measured at regular intervals and decision can be taken at the appropriate time. Accounting period is usually a period of one year and that year may be financial year or calendar year.

1. This Assumption requires showing the allocation of expenses between Capital and Revenue.

2.Portion of Capital Expenditure that is consumed during the current year is charged to Income statement and rest of the portion i.e., Unconsumed portion is shown as an asset in the Balance Sheet.

3. As per income tax law, tax on income is calculated on annual basis from 1st April to 31st March (Financial Year)

4. Timely action for corrective measures can be taken by the Management.

4. Full Disclosure Principle: According to this principle, apart from legal requirements all significant and material information relating to the economic affairs of the entity should be completely disclosed in its financial statements and accompanying notes to accounts.

The financial statements should act as means of conveying and not concealing the information. Disclosure of information will result in better understanding and the parties may be able to take sound decisions on the basis of the information provided.

E.g., footnotes such as :

1.Contingent liabilities in respect to a claim of a very big amount against the business are pending in a Court of Law.

2.Change in the method of providing depreciation.

3.Market value of investment.

5. Materiality Principle: Disclosure of all material facts is compulsory but it does not imply that even those figures which are irrelevant are to be included in financial statements. According to this principle, only those items or information should be disclosed that have material effect and relevant to the users. So, item having an insignificant effect or being irrelevant to user need not be disclosed separately, these may be merged with other item.

If the knowledge of any information may affect the user’s decision, it is termed as material information.

It should be noted that an item material for one enterprise may not be material for another enterprise, e.g., an item of expenses Rs. 50,000 is immaterial for an enterprise having turnover of Rs. 100 crore.

6. Prudence Principle: According to this principle, profit in anticipation should not be recorded but loss in anticipation should immediately be recorded. The objective of this principle is not to overstate the profit of the enterprise in any case. When different equally acceptable alternative methods are available, the method which having least favorable immediate effect on profit should be adopted, e.g.,

(1)  Valuation of stock at cost or realizable values, whichever is lower.

(2)  Provision for doubtful debts and provision for discount on debtors is made.

7. Cost Principle: According to this Principle, an asset is recorded in the books of accounts at its original cost comprising cost of acquisition and all expenditure incurred for making the assets ready to use.

This cost becomes the basis of all subsequent accounting transactions for the asset, since the acquisition cost relates to the past, it is referred to as Historical cost. Example: Machinery purchased for Rs. 1,50,000 in cash and Rs. 20,000 was spent on installation of machine then Rs. 1,70,000 be recorded as cost of machine in the books and depreciation will be charged on this cost. If market value of machine due to inflation has gone up to Rs. 2,00,000 then the increased value will not be recorded. This cost is systematically reduced from year after year by charging depreciation and the assets are shown in the balance sheet at book value (cost – depreciation).

8. Matching Principle: According to this principle, all expenses incurred by any enterprises during an accounting period are matched with the revenue recognized during the same period.

The matching principle facilitates to ascertain the amount of profit or loss incurred in a particular period by deducting the related expenses from the revenue recognized that period.

The following treatment of expenses and revenue are done due to matching principle:

(1)   Ascertainment of Prepaid Expenses!

(2)   Ascertainment of Income received in advance.

(3)   Accounting of closing stock.

(4)   Depreciation charged on fixed assets.

9. Dual Aspect Principle: According to this principle, every business transaction has two aspects-a debit and a credit of equal amount. In other words, for every debit there is a credit of equal amount in one or more accounts and vice-versa.

The system of recording transaction based on this principle is called as “Double

Entry System”.

Due to this principle, the two sides of Balance Sheet are always equal and the following accounting equation will always hold good at any point of time.

Assets = Liabilities + Capital

Example : Ram started business with cash Rs. 1,00,000. It increases cash in assets side and capital in liabilities- side by Rs. 1,00,000.

Assets Rs. 1,00,000 = Liabilities + Capital Rs. 1,00,000

BASES OF ACCOUNTING

There are two bases of ascertaining profit or loss, namely 1 Cash Basis, and (2) Accrual Basis.

1. Cash Basis of Accounting : Under this system of accounting transactions are recorded in the books of accounts only on the receipt/ payment of cash. The income is calculated as the excess of actual cash receipts (in respect of sale of goods, service, properties etc.) over actual cash payments (regarding purchase of goods, expenses, rent, electricity, salaries etc.)

Entry  is  not  recorded  when  a  payment  or  receipt  merely  due  i.e., outstanding expenses, Accrued income are not treated. This method is contrary to the matching principle.

2. Accrual Basis of Accounting: Under this system of accounting, revenue and expenses are recorded when they are recognized i.e., Income is recorded as Income when it is accrued (when transaction takes place) irrespective of fact whether cash is received or not. Similarly, expenses are recorded when they are incurred or become due and not when the cash is paid for them.

Under this system, expenses such as outstanding expenses, prepaid expenses, accrued income and received in advance are identified and taken into account.

Under the companies’ amendments Act 2013, all companies are required to maintain their accounts according to accrual basis of accounting.

  Difference between accrual basis of accounting

and cash basis of accounting

ACCOUNTING STANDARDS : CONCEPT AND OBJECTIONS

The accounting principles or GAAP in the form of concepts and conventions have been developed to bring comparability and uniformity in the financial statements. But GAAP also allow a large number of alternative treatments for the same item. Different organizations may adopt different accounting policies for the same transaction or an organization may follow different accounting policies for the same item over different accounting periods. As a result, the financial statements become inconsistence and incomparable.

So it was felt that certain minimum standards should be universally applicable, so that the accounting statements have the qualitative characteristics of reliability, relevance, understandability and comparability.

International Accounting Standard Committee (IASC) was set up in 1973. (Now renamed as International financial  Reporting  Committee  IFRC). The Institute of Chartered Accountants of India (ICAI) and the Institute of Cost and Works Accountants of India (ICWAI) are members of this committee. ICAI set up the Accounting Standard Board (ASB) in 1977 to identify the areas in which uniformity in accounting required. ASB prepares and submits a draft accounting standard to the Council of ICAI. The Council of ICAI issues the draft for the comments to the Govt., industry and professionals etc. After due consideration on comments received, the Council of ICAI notifies it for its use in financial statements.

Concept of Accounting Standards

Accounting standards  are  written  statements, issued  from  time-to-time by  institutions  of  accounting  professionals, specifying  uniform  rules  or practices for drawing the financial statements.

Objectives of Accounting Standards

1.Accounting standards are required to bring uniformity in accounting practices and policies by proposing standard treatment in preparation of financial statements.

2.To improve reliability of the financial statement: Accounts prepared by using accounting standards are reliable for various users, because these standards create a sense of confidence among the users.

3.To prevent frauds and manipulation by codifying the accounting methods and practices.

4.To Help Auditors : Accounting standards provide uniformity in accounting practices, so it helps auditors to audit the books of accounts.

IFRS International Financial Reporting Standards

This term refers to the financial standard issued by International Accounting standards Board (IASB). It is the process of improving the financial reporting internationally to help participants in the various capital markets of the world and Other Users.

IFRS Based financial Statements

Following financial statements are produced under IFRS:

1. Statement of financial position: The elements of this statement are

 (a) Assets (b)  Liability (c)  Equity

2.Comprehensive Income statement: The elements of this statement are

(a) Revenue (b)  Expense

3. Statement of changes in Equity

4. Statement of Cash flow

5. Notes and significant accounting policies

Main difference between IFRS and IAS (Indian Accounting Standards)

1. IFRS are principle based while IAS are rule based.

2. IFRS are based on Fair Value while IAS are based on Historical Cost.

Theory Base of Accounting class 11 Notes

• CBSE Revision notes (PDF Download) Free
• CBSE Revision notes for Class 11 Accountancy PDF
• CBSE Revision notes Class 11 Accountancy – CBSE
• CBSE Revisions notes and Key Points Class 11 Accountancy
• Summary of the NCERT books all chapters in Accountancy class 11
• Short notes for CBSE class 11th Accountancy
• Key notes and chapter summary of Accountancy class 11
• Quick revision notes for CBSE exams

CBSE Class-11 Revision Notes and Key Points

Theory Base of Accounting class 11 Notes Accountancy. CBSE quick revision note for class-11 Mathematics, Physics, Chemistry, Biology and other subject are very helpful to revise the whole syllabus during exam days. The revision notes covers all important formulas and concepts given in the chapter. Even if you wish to have an overview of a chapter, quick revision notes are here to do if for you. These notes will certainly save your time during stressful exam days.

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