CBSE Class 11 Chapter 2 Basic Accounting Terms - Questions and Answers
Basic Accounting Terms
Introduction:
Learn the important MCQ questions for Class 11 Accountancy Chapter 2 of Basic Accounting Terms with the latest CBSE syllabus.
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Very
Short Answer-Type Questions:
1. What is meant by Cash Transaction?
Ans: Cash transaction is a financial transaction or
event that is settled immediately in cash.
2. What is meant by Credit Transaction?
Ans: Credit transaction is a financial transaction
or event that is not settled immediately, i.e., is agreed to be settled later.
3. Briefly explain Expenditure.
Ans. Expenditure is the amount spent or liability
incurred for acquiring assets, goods or services.
4. What are Assets?
Ans. An asset is a property (land, machine, goods,
premises, etc.) or legal rights (patents, copyrights, etc.) owned by an
individual or business which can be measured in money terms.
5. What are Fixed Assets?
Ans. Fixed Assets are the assets which are acquired
not with a purpose to resell but with a purpose to increase the earning
capacity of the business.
6. What is meant by Tangible Assets?
Ans. Tangible Assets are the assets which have
physical existence, i.e., they can be seen and touched such as Land, Building,
Plant and Machinery and Computers.
7. Briefly explain Intangible Assets.
Ans. Intangible Assets are the assets which do not
have a physical existence, i.e., they cannot be seen or touched such as
Computer Software and Goodwill.
8. Give two examples of revenue expenditure.
Ans. Rent & Salary.
9. Give two examples of Intangible Assets.
Ans. Goodwill & Patents.
10. Briefly explain the term 'Goods'.
Ans. Goods are the physical items of trade.
11. Define the term 'Purchase'.
Ans: a) The term 'Purchase' is used for purchase of
goods for resale or for producing the finished products which are also to be
sold.
b) The term 'purchase' includes both cash and credit purchases
of goods.
c) Goods purchased for cash are termed as Cash
Purchases and goods purchased on credit are termed as Credit Purchases.
12. What are the main classes of Liabilities?
Ans. Non-current Liabilities and Current
Liabilities.
13. What are Current Assets?
Ans. Assets held in the form of cash or expected to
be converted into cash within one year are known as Current Assets.
14. Give any two examples of Current Assets.
Ans. Stock-in-Trade (Inventories) and Cash in Hand.
15. Name three Current Liabilities.
Ans. Creditors, Bills Payable and Outstanding
Expenses.
16. Name two Long-term Liabilities.
Ans. Long-term loans and Debentures.
17. Explain Capital briefly.
Ans. Capital is the amount invested by the
proprietor or the partner in the business.
18. Who is a Debtor?
Ans. A debtor is a person who owes an amount to the
business on account of credit sales of goods and/or services in the normal
course of business.
19. Who is a Creditor?
Ans. A creditor is the person to whom an amount is
owed on account of credit purchases of goods and/or services in the normal course
of business.
20. What is an Income?
Ans. Income is profit earned during the accounting
period, i.e., revenue minus expenses.
21. Define Drawings with example.
Ans. Drawings is the amount of money or value of
goods which the proprietor or partner withdraw for personal use. For example,
withdrawal of cash by the proprietor for personal use
22. Define Voucher.
Ans: A Voucher is an evidence of a business
transaction.
23. Define Merchandise.
Ans. Merchandise means goods for resale.
24. A firm earns a revenue of Rs. 21,000, and the
expenses to earn this revenue are Rs. 15,000. Calculate its income.
Ans. Income Revenue - Expense = Rs. 21,000 - Rs.
15,000 = Rs. 6,000.
25. A firm has received a large order to supply goods.
Will it be recorded in the books of account of the firm? Give reason.
Ans. No, it will not be recorded in the books of
account because it is not a transaction.
26. What are Internal Liabilities?
Ans. All amounts which a business has to pay to the
proprietor or owners are internal liabilities such as capital.
Short
Answer Type Questions:
1. Distinguish between Loss and
Expense.
Ans: An expense is a value which
has expired during the accounting period, whereas a loss is the excess of
expenses of a period over its related revenues, which may arise from normal
business activities.
2. What are vouchers?
Ans: Vouchers are the
evidence of business transactions. Examples include cash memo, invoice,
bill, receipt, debit notes, and credit notes.
3. Distinguish between Opening
Stock and Closing Stock.
Ans: Opening stock is the
stock-in-hand at the beginning of the accounting year or at the end of the
previous accounting year. Closing stock is the stock in hand at the end of the accounting period.
4. Explain the meaning of any
three of the following terms:
Ans: (i) Assets: Assets are property
or legal rights owned by an individual or business to which money value can be
attached, e.g., land, building, machinery, furniture, stock, debtors, cash, and
bank balance.
(ii) Capital: Capital is the
amount invested by the proprietor or partner in the business, either in money
or assets. It is a liability of the business towards the proprietor or partner.
(iii) Goods: Goods are physical
items of trade, purchased or manufactured with the purpose of selling, e.g.,
air conditioners for an appliance business or stationery for a stationery business.
5. Explain the following terms:
Ans: (i) Revenue: Revenue is the
amount added to capital as a result of operations, such as the sale of goods or services. Examples include receipts from sales, rent, and commission.
(ii) Debtors: A debtor is a
person who owes money to the enterprise due to credit sales of goods or
services.
(iii) Fictitious Assets:
Fictitious assets represent losses or expenses yet to be written off, e.g.,
debit balance of the profit and loss account and deferred advertisement
expenditure.
(iv) Working Capital: Working
capital is the difference between current assets and current liabilities, used
to cover day-to-day business expenses.
6. Explain the meaning of any
three of the following terms:
Ans: (i) Liability: Liabilities are
amounts owed by the business to outsiders or proprietors, categorized as
internal, external, long-term, current, or contingent liabilities.
(ii) Stock: Stock refers to
tangible assets held for sale or production purposes, classified as opening
stock or closing stock.
(iii) Business Transaction: A
business transaction is a financial event recorded in the books of accounts,
involving the transfer or exchange of goods or services.
7. Explain and give
examples of the following accounting terms:
Ans: (i) Expenses: Expenses are values expired during the accounting period, such as salaries, rent, depreciation, and bad debts.
(ii) Drawings: Drawings are amounts or goods withdrawn by the proprietor for personal use, reducing the owner's capital.
(iii) Gain: Gain refers to profit of an irregular or non-recurrent nature, e.g., profit on the sale of fixed assets.
8. Define the following basic accounting terms with examples:
Ans: (i) Revenue: Revenue is the inflow of assets from operations, e.g., receipts from sales, rent, and commission.
(ii) Drawings: Drawings are amounts or goods withdrawn by the proprietor for personal use, reducing capital.
(iii) Profit: Profit is the
excess of revenue over costs, categorized as gross profit (sales revenue minus
direct costs) and net profit (after all expenses).
9. Explain the following terms with examples:
Ans: (i) Sales: "Sales" refer to the sale of goods dealt with by the firm, including both cash and credit sales.
(ii) Cost: Cost is the expenditure incurred on a specified article, product, or activity, categorized as direct and indirect costs.
10. Write a note on types of assets with one example of each:
Ans: (i) Non-current Assets: Assets held for investment or business operations, e.g., non-current investments.
(ii) Tangible Assets: Assets with physical existence, e.g., land.
(iii) Intangible Assets: Assets without physical existence, e.g., trademarks.
(iv) Current Assets: Assets convertible into cash within a year, e.g., stock.
(v) Fictitious Assets: Assets
representing losses or expenses yet to be written off, e.g., deferred
advertisement expenditure.
11. Explain the following terms with examples:
Ans: (a) Capital Expenditure: Expenditure incurred to acquire or improve assets, providing enduring benefits, e.g., shown on the asset side of the balance sheet.
(b) Non-current Assets: Assets held for long-term purposes, e.g., fixed assets, non-current investments.
Conclusion:
Carefully rewrite all the important MCQs to clarify your concepts of basic accounting terms.
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