PREPARATORY CLASSES: ACCOUNTING ASSIGNMENT 1

1.

State whether the following statements are True or False.

a. Accounting is a measurement discipline.
b. Accounting is concerned with monetary and non-monetary transactions.
c. Book-keeping and accounting are different terms.
d. Fixed assets must always be shown at market value.
e. Current assets must always be shown at market value.
f.

Owners Equity = Assets + Liabilities.

g. Patent is an example of current asset.

h. Cash basis considers the revenue as realized, when the goods are produced.
i.

The losses from the sale of capital assets need not be deducted from revenue to
ascertain the net income.

j.

According to money measurement concept, only transactions that can be expressed in

money are recorded in accounts.

k. The business entity concept considering the business and the proprietor as a separate
from each other.
l.

Going concern concept requires that always assets should be valued and recorded at
market value.

m. According to consistency concept, the results of one accounting period of a business

cannot be compared with that in the past.
n. Conservation concept requires that all probable profits must be considered while all
prospective losses must be ignored in computation of income.
2.

Are the following events transactions of a business or not?

a. Furniture purchased for cash.
b. Owner of the business withdraws goods for his personal consumption from the business.
c. Interest received from bank on fixed deposits.
d. Manager of a firm dies.

3.

Following are the applications of some accounting assumptions or principles.

State the name of the relevant accounting assumption or principle applied herein.
a. Classification of assets as current assets and fixed assets.
b. Appending notes to the financial statements.

c. Accounting of a small calculator as an expense and not as an asset.

d. Following the WDV method of depreciating a particular asset year after year.
e. Valuation of stock at lower of cost or net realisable value.
f.

Making provision for bad and doubtful debts

g. Valuation of the crops at market value

h. In gold mining, revenue is recognized in the accounting period in which the goal is
mined.
4.

Fill in the blanks by choosing the right word:

a. Cost accounting helps in ascertaining and controlling _________. (cost/revenue)
b. Closing stock is an example of __________ asset. (non-current/ current)
c. Loan (long-term) from bank is __________. (non-current/ current)
d. Plant and machinery is __________ asset. (non-current/ current)

5.

Ram Lal carries on business as a cloth dealer. State which of the following are
transactions to be recorded in his business books:
a. He purchases a bicycle for Rs.2000 for his son using his own money.
b. He employs a typist for official correspondence and pays him Rs.4500 per month.
c. He buys a showcase for Rs.3500.
d. He sells old domestic furniture for Rs.3000.
e. He purchases cloth for for Rs.15000.
f.

He buys a Cash Counting Machine for Rs.25000.

g. He purchases domestic utensils for Rs.2000 for which he gives cloth from the shop.
h. He takes cloth worth Rs.2500 for use at home.

6.

i.

He pays salary to his domestic servant, Rs.500, from private funds.

j.

He takes a loan of Rs.100000 from a friend for the marriage of his daughter.
Which of the following are incomes? A firm receives money for:

a. Interest received on a loans given

a. Rent of a premise sublet
b. A loan taken from a bank
c. A customer gives advance to buy your product