Class 11 Accountancy em Sample Materials - TN

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ACCOUNTANCY
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11th Standard
VOLUME - I & II
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Based on the updated new textbook for the year 2019 - 20
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Salient Features o
Prepared as per the updated new textbook for the year 2019 - 20
Exhaustive Additional MCQs, VSA, SA, LA questions with answers are given in each
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chapter.
All the objective type (1 Mark) questions, are given with 4 options.
(i) Choosing the correct option
(ii) Matching
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(iii) Filling the blanks

(iv) Picking the Odd one Out
(v) Assertion & Reason
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(vi) Choosing the correct Statement

Govt. Model Question Paper-2018 [Govt. MQP-2018], First Mid-Term Test (2018)
[First Mid-2018], Quarterly Exam - 2018 [QY-2018], Half Yearly Exam - 2018
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[HY-2018] and Board Expected Questions [BEQ] are incorporated at appropriate

sections.
Govt. Model Question Paper - 1 (2018) & 2 (2019) with Answer Key.
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Sura’s Model Question Paper - 1 with Answer Key.

March 2019 Question Paper with Answer Key.
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(iii)

CONTENT
VOLUME - I
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1. Introduction to Accounting................................................................................................................. 1 - 18
2. Conceptual Framework of Accounting.............................................................................................. 19 - 33
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3. Books of Prime Entry........................................................................................................................ 34 - 80
4. Ledger............................................................................................................................................ 81 - 128
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5. Trial Balance..................................................................................................................................129 - 146
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6. Subsidiary Books - I ......................................................................................................................147 - 182
7. Subsidiary Books - II Cash Book....................................................................................................183 - 219

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8. Bank Reconciliation Statement .....................................................................................................220 - 244
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VOLUME - II
9. Rectification of Errors......................................................................................... 245 - 269
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10. Depreciation Accounting...................................................................................... 270 - 308

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11. Capital and Revenue Transactions....................................................................... 309 - 322
12. Final Accounts of Sole Proprietors - I................................................................... 323 - 353

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13. Final Accounts of Sole Proprietors - II...................................................................354 - 402

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14. Computerised Accounting ....................................................................................403 - 414

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Govt. Model Question Paper - 1 with Answers ........................................................415 - 428
Sura’s Model Question Paper - 1 with Answers ................................................429 - 444
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ACCOUNTANCY
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11th Standard ok
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Volume - I
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[1]

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CONTENT
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VOLUME - I
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1. Introduction to Accounting................................................................................................................. 1 - 18
2. Conceptual Framework of Accounting.............................................................................................. 19 - 33

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3. Books of Prime Entry........................................................................................................................ 34 - 80
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4. Ledger............................................................................................................................................ 81 - 128
5. Trial Balance..................................................................................................................................129 - 146

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6. Subsidiary Books - I ......................................................................................................................147 - 182
7. Subsidiary Books - II Cash Book....................................................................................................183 - 219

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8. Bank Reconciliation Statement .....................................................................................................220 - 244

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[2]

UNIT
Introduction to
1
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accounting
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CHAPTER SNAPSHOT
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1.1 Introduction to Accounting
1.2 Evolution of Accounting
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1.3 Meaning and Definition of Accounting
1.4 Accounting Cycle
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1.5 Objectives of Accounting

1.6 Functions of Accounting
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1.7 Importance of Accounting

1.8 Basic Accounting terminologies
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1.9 Branches of Accounting

1.10 Bases of Accounting
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1.11 Users of Accounting information

1.12 Role of an accountant
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[3]

4 Sura’s  XI Std - Accountancy ➠ Volume - I
CONCEPT MAP
ACCOUNTING
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Importance of Accounting Branches of Accounting Role of an Accountant
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Systematic records Financial Accounting Tax Manager
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Preparation of financial Cost Accounting Financial Advisor
statements
Assessment of Progress Management Accounting Provider of information

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Social Responsibility Protector of
Aid to decision making Accounting Business Assets
Human Resource Public relation officer

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Statutory requirements Accounting
Information to Record keeper

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interested groups
Evidence in courts
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Taxation
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Merger of firms

Sura’s  XI Std - Accountancy ➠ Unit 1 ➠ Introduction to Accounting 5
IMPORTANT POINTS
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Accounting has rightly been termed as the language of the business.
An individual invests capital with the objective of making profit and thereby increasing his
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resources.
Accounting is the systematic process of identifying, measuring, recording, classifying,
summarising, interpreting and communicating financial information.
Accounting has to be a versatile system to serve a large number of goals in the modern
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business world.
Accountancy plays a major role in any industry and as such accountants are required to be
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competent in a number of areas.
� Transactions are those activities of a business, which involve transfer of money or goods or
services between two persons or two accounts.
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� Transaction are of two types, namely, cash and credit transactions.
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SELF-EXAMINATION QUESTIONS
I. Multiple Choice Questions. 3. Which one of the following is not a branch
of accounting?
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[BEQ] [Govt. MQP-2018]

1. The root of financial accounting system is (a) Financial accounting
[BEQ] [HY-2018]
(b) Management accounting
(a) Social accounting (c) Human resources accounting
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(b) Stewardship accounting (d) None of the above

(c) Management accounting [Ans. (d) None of the above]
(d) Responsibility accounting
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[Ans. (b) Stewardship accounting] 4. Financial position of a business is
ascertained on the basis of
2. Which one of the following is not a main [BEQ] [First Mid-2018; QY-2018]]
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objective of Accounting?
(a) Journal (b) Trial balance
(a) Systematic recording of transactions (c) Balance Sheet (d) Ledger
(b) Ascertainment of the profitability of the [Ans. (c) Balance Sheet]
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business
(c) Ascertainment of the financial position of 5. Who is considered to be the internal user of
the business the financial information? [BEQ] [HY-2018]
(d) Solving tax disputes with tax authorities (a) Creditor (b) Employee
[Ans. (d) Solving tax disputes with tax (c) Customer (d) Government
authorities] [Ans. (b) Employee]


II. Very Short Answer Questions. (ii) External users :
1. Creditors and Financial institutions
1. Define accounting. [BEQ] [First Mid-2018]
2. Investors
Ans. American Accounting Association has 3. Customers
defined accounting as "the process of 4. General public
identifying, measuring and communicating
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economic information to permit informed 5. Tax authorities and regulatory
judgments and decisions by users of the bodies
information." 6. Government
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7. Researchers
2. List any two functions of accounting.
[BEQ] [Govt. MQP-2018] 5. Name any two bases of recording accounting
Ans. (i) Measurement : information. [BEQ] [HY-2018]
1. The main function of accounting Ans. There are three bases of accounting in common
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is to keep systematic record of usage, namely
business transactions, post them to (i) Cash Basis
the ledger and ultimately to prepare (ii) Accrual or mercantile basis
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the final accounts. (iii) Mixed or hybrid basis
2. It also shows the current financial III. Short Answer Questions
position of the business enterprises.
(ii) Comparison : 1. Explain the meaning of accounting.[QY-2018]
Ans. (i) Accounting is the systematic process
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1. Accounting helps to compare
of identifying, measuring, recording,
the actual performance with the
planned performance. classifying, summarising, interpreting
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and communicating financial
2. It is also possible to compare with information.
the accounting policies. (ii) Accounting gives information on:
3. What are the steps involved in the process 1. the resources available
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of accounting? 2. how the available resources have

Ans. The Steps involved in accounting are : been employed and
(i) Identifying the transactions and 3. the results achieved by their use.
Journalising.
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(iii) The profit earned or loss incurred during

(ii) Posting and Balancing. the accounting period, value and nature
(iii) Preparation of Trial Balance. of assets, liabilities and capital can
(iv) Preparation of Trading Account. be ascertained from the information
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(v) Preparation of Profit and Loss Account. recorded in accounts.

(vi) Preparation of Balance Sheet. 2. Discuss briefly the branches of accounting.

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[BEQ] [First Mid-2018]

4. Who are the parties interested in accounting
information? Ans. The various branches of accounting are
Ans. There are several persons who need the (i) Financial Accounting :
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accounting information for various purposes. 1. It involves recording of financial

They can be classified into two. transactions and events.
(i) Internal users : 2. It provides financial information to
1. Owners the users for taking decisions.
2. Management 3. It ends up with the preparation of
trading and profit and loss account
3. Employees
and balance sheet.

(ii) Cost Accounting : (iv) Information to interested groups :

It involves the collection, recording, Accounting supplies appropriate
classification and appropriate allocation information to different interested groups
of expenditure for the determination of like owners, creditors, management,
the costs of products or services and for employees, financiers, tax authorities
and government.
the presentation of data for the purposes
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of cost control and managerial decision (v) Taxation :
making. Accounting records are the basis source
for computation and settlement of sales
(iii) Management Accounting : tax, income tax and other local taxes.
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It is concerned with the presentation of
accounting information in such a way as 4. Why are the following parties interested in
to assist management in decision making accounting information?
and in the day - to - day operations of an (i) Investors (ii) Government
(i) Investors :
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enterprise. Ans.
(iv) Social Responsibility Accounting : 1. Persons who are interested in
It is concerned with presentation of investing their surplus funds
should know about the financial
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accounting information from the view
point of the society by showing the social condition of a business unit while
making their investment decisions.
costs and social benefits.
(v) Human Resource Accounting : 2. They are more concerned about
future earnings and risk bearing
It is concerned with identification,
quantification and
oreporting of
capacity of the organisation
which will affect the return to the
investments made in human resources of investors.
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an enterprise. (ii) Government :
3. Discuss in detail the importance of 1. The scarce resources of the country
accounting. are used by business enterprises.
Ans. Importance of accounting is enumerated as 2. Information about performance of
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business units in different industries

below:
helps the government in policy
(i) Systematic records : formulation for development of
1. All the business transactions are trade and industry, allocation of
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recorded in the books of accounts. scarce resources, grant of subsidy,

etc.
2. Any event or happening which has
financial effects is included in the 3. Government also administers
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accounting records. prices of certain commodities.

(ii) Preparation of financial statements : 5. Discuss the role of an accountant in the
Results of business operations and the modern business world. [BEQ] [HY-2018]
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financial position of the concern are Ans. An accountant designs the accounting
provided by accounting periodically procedures for an enterprise. He plays several
through the preparation of financial roles in an organisation as follows :
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statements namely profit and loss account (i) Record keeper :

and balance sheet. 1. The accountant maintains a
(iii) Assessment of progress : systematic record of financial
Analysis and interpretation of financial transactions.
statements can be done to assess the 2. He also prepares the financial
progress made in different areas and it statements and other financial
also identify the areas of weaknesses. reports.


(ii) Provider of information to the capital budgeting, provision for future
management : growth and development, expansion of
The accountant assists the management enterprise, etc.
by providing financial information (v) Tax manager:
required for decision making and for 1. The accountant ensures that tax
exercising control. returns are prepared and filed
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(iii) Protector of business assets: correctly on time and payment of
The accountant maintains records of tax is made on time.
assets owned by the business which 2. The accountant can advice
enables the management to protect and
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the managers regarding tax
exercise control over these assets. management, reducing tax burden,
(iv) Financial advisor: availing tax exemptions, etc.
The accountant analyses financial (vi) Public relation officer:
information and advises the business The accountant provides accounting
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managers regarding investment information to various interested users
opportunities, strategies for cost savings, for analysis as per their requirements.
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Additional Questions and Answers
I. Choose the Correct Answer. 6. Accounting cycle begins with recording of
business transactions and ends with the
1 MARK
o preparation of
(i) Choose the Correct Option. (a) Final accounts
1. Luca Pacioli an italian developed double (b) Cost accounts
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entrybook keeping system in the year. (c) Financial accounts
[First Mid-2018; QY-2018]
(d) Management accounts
(a) 1449 (b) 1494 [Ans. (a) Final accounts]
(c) 1944 (d) 1459
[Ans. (b) 1494] 7. The activities of a business, which involve
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transfer of money or money's worth are

2. Who is considered to be the external uses of called
the financial information? [First Mid-2018] (a) Transactions (b) Events
(a) Owner (b) Investors (c) Accounting cycle (d) Costing
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(c) Management (d) Employees [Ans. (a) Transactions]

[Ans. (b) Investors]
8. What is decreased by the amount of losses
3. Accounting is not a modern concept and it incurred and the amounts withdrawn by
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is as old as the proprietor?

(a) money (b) goods (a) Assets (b) Liabilities
(c) services (d) all of these (c) Capital (d) Drawings
[Ans. (a) money]
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[Ans. (d) Drawings]

4. The industrial revolution took place in 9. Goodwill is an examples of
(a) 18th century (b) 19th century (a) Tangible assets (b) Liabilities
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(c) 20th century (d) 21th century (c) Intangible assets (d) Capital
[Ans. (b) 19th century] [Ans. (c) Intangible assets]
5. All the business transactions are recorded 10. The document prepared by the seller when
in the book of he sells goods to the buyer is
(a) accounts (b) book keeping (a) Voucher (b) Invoice
(c) transactions (d) none of these (c) Receipt (d) Ticker
[Ans. (a) accounts] [Ans. (b) Invoice]

11. A person who owns a business is called 2. List I List II

(a) Creditor (b) Proprietor (i) Internal users (1)
Financial advisor
(c) Debtor (d) Solvent of accounting
[Ans. (b) Proprietor] information
(ii) External users (2)
Management
12. Financial statements do not consider
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of accounting Accounting
(a) Assets expressed in monetary terms information.
(iii) Role of an (3)
Customers
(b) Liabilities expressed in monetary terms accountant
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(c) Assets expressed in non-monetary terms (iv) Branches of (4)
Owners
(d) Liabilities expressed in non-monetary accounting
terms Codes:
[Ans. (c) Assets expressed in non- (i) (ii) (iii) (iv)
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monetary terms] (a) 1 2 3 4
13. External reporting is done for (b) 3 4 1 2
(c) 4 3 1 2
(a) Journal (b) Trial balance
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(d) 2 3 1 4
(c) Balance Sheet (d) Ledger
[Ans. (c) 4 3 1 2]
[Ans. (b) Trial balance]
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(ii)
Match List I with List II and (i) Capital (1)
Invoice
Select the Correct Answer using (ii) Drawings (2)
Divident
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the Codes given below. (iii) Voucher (3)
Value of goods,
assets
1. [BEQ] [Govt. MQP-2018]
(iv) Income (4)
Proprietor
List I List II
Codes:
(i) Internal user 1. Human Resource
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of accounting Accounting (i) (ii) (iii) (iv)

information (a) 1 2 3 4
(ii) External user 2. Tax manager (b) 3 4 1 2
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of accounting (c) 4 3 1 2
information (d) 2 3 1 4
(iii) Role of an 3. Researchers [Ans. (c) 4 3 1 2]
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accountant
(iii) Choose the Correct Option and
(iv) Branches of 4. Employees Fill in the Blanks.
accounting
1. __________ has rightly been termed as the
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Codes: language of the business.

(i) (ii) (iii) (iv) (a) Accounting (b) Book-keeping
(a) 1 2 3 4 (c) Accountant (d) None of these
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(b) 3 4 1 2 [Ans. (a) Accounting]

(c) 4 3 2 1
(d) 2 3 1 4 2. __________ must be properly maintained
to increase their productivity.
[Ans. (c) 4 3 2 1] (a) Liabilities (b) Assets
(c) Debtors (d) None of these
[Ans. (b) Assets]


3. __________ of a business have to be repaid 10. __________ is concerned with identification,
in due time. quantification and reporting of investments
(a) Assets (b) Sales made in human resources.
(c) Liabilities (d) None of these (a) Management Accounting
[Ans. (c) Liabilities] (b) Human Resource Accounting
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(c) Cost Accounting
4. __________ also require accounting records
(d) Financial Accounting
to submit in courts to prove their claims.
[Ans. (b) Human Resource Accounting]
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(a) Salesmen (b) Owners
11. __________ are interested to know whether
(c) Producers (d) Businessmen the business has earned a profit or loss
[Ans. (d) Businessmen] during a particular period.
5. Double - entry book keeping first emerged (a) Owners (b) Management
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in Italy in the __________ century. (c) Employees (d) Producers
(a) 13th (b) 14th (c) 18th (d) 19th [Ans. (a) Owners]
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[Ans. (b) 14th]
12. __________ use the accounting data in their
6. __________ wrote his 'Summa de bargaining strategies with the management.
arithmetica'. (a) Production department
(a) Kautilya (b) Valluvar (b) Labour unions
(c) Luca pacioli
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(d) Chanakaya (c) Tax authorities
[Ans. (c) Luca pacioli]
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(d) Researchers [Ans. (b) Labour unions]
7. __________ provides the relevant data to
make appropriate decisions. 13. __________ also administers prices of
certain trades. [BEQ]
(a) Management (b) Accounting
(a) Government (b) Tax authorities
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(c) Accountant (d) Leadership

(c) Researchers (d) Consumers
[Ans. (b) Accounting]
[Ans. (a) Government]
8. Accounting works as a tool for measuring 14. __________ of a firm has to make
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past performance of the__________ innumerable routine and strategic decisions

enterprises. while discharging its functions.
(a) commerce (b) business (a) Book-keeping (b) Accounts
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(c) both 'a' and 'b' (d) none of these (c) Management (d) All the above
[Ans. (b) business] [Ans. (c) Management]
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9. __________ involves recording of 15. Accounting works as a tool for measuring

transactions and events which are financial past performance of the __________
in nature. enterprises.
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(a) Financial Accounting (a) commerce (b) business

(b) Cost Accounting (c) management (d) money
[Ans. (b) business]
(c) Management Accounting
(d) Human Resource Accounting
[Ans. (a) Financial Accounting]

16. __________ ends up with the preparation (v)

Which one of the Following is
of trading and profit and loss account and Not Correctly Matched?
balance sheet. 1. (a) Internal users - Employees
(a) Cost Accounting (b) External users - Investors
(b) Human Resource Accounting (c) Record keepers - Systematic record
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(d) Asset - Financial
(c) Management Accounting
obligation
(d) Financial Accounting [Ans. (d) Asset - Financial obligation]
[Ans. (d) Financial Accounting]
(vi) Which one of the Following is
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17. __________ is provided with a complete Correctly Matched?
picture of the liquidity, profitability and 1. (a) Luca pacioli - Double Entry book
solvency aspects of the business. keeping
(a) Accounts (b) Transaction (b) Industrial - 20th Century
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revolution
(c) Management (d) Book-keeping
(c) Social - 19th Century
[Ans. (c) Management]
Responsibility
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(iv) Pick the Odd one Out. Accounting
(d) Accounting Cycle - Bank reconciliation
1. [Govt. MQP-2018] statement
(a) Journalising (b) Posting [Ans. (a) Luca pacioli - Double Entry book
keeping]
(c) Trial Balance
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(d) Trade Discount
[Ans. (d) Trade Discount] 2. (a) Cash transaction - Credit receipt
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Reason: Trade discount is a deduction given (b) Capital - Salary
by the supplier to the buyer on the list price or (c) Voucher - Cash memo
catalogue price of the goods. Other three are (d) Expense - Commission
process of accounting.
[Ans. (c) Voucher - Cash memo]
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2. (a) Capital (b) Drawing (vii)

Consider the Following
(c) Voucher (d) Trial balance
Statement.
[Ans. (d) Trial balance]
Assertion (A)
:
Any written or printed
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1.
Reason: Trial Balance is a statement document in support of
containing the debit and credit balances of a business transaction is
all ledger accounts on a particular date. Other called a voucher.
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three are basic accounting terminologies. Reason (R) : Cash receipt, invoice, cash
memo, bank pay-in-slip are
3. (a) Financial accounting the examples of voucher.
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(b) Cost accounting

Select the correct answer.
(c) Bank reconciliation statement
(a) Both (A) and (R) are true and (R) is the
(d) Human Resource accounting correct explanation of (A)
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[Ans. (c) Bank reconciliation statement] (b) Both (A) and (R) are true and (R) is not the
Reason: Bank reconciliation statement is correct explanation of (A)
prepared by the business entity. Other three (c) (A) is true, but (R) is false.
are branches of accounting. (d) (A) is false, but (R) is true.
[Ans. (a) Both (A) and (R) are true and (R)
is the correct explanation of (A)]


2. Assertion (A)
:
The cost incurred by a Select the correct answer.
business in the process of (a) Both (A) and (R) are true and (R) is the
earning revenue are known correct explanation of (A)
as expenses.
(b) Both (A) and (R) are true and (R) is not the
Reason (R) : ABC company paid `20,000 correct explanation of (A)
as salaries, reduction in the
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value of asset. (c) (A) is true, but (R) is false.
Select the correct answer. (d) (A) is false, but (R) is true.
[Ans. (b) Both (A) and (R) are true and (R)
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(a) Both (A) and (R) are true and (R) is the
correct explanation of (A) is not the correct explanation of
(A)]
(b) Both (A) and (R) are true and (R) is not the
correct explanation of (A) (viii) Choose the Correct Statement
s.
(c) (A) is true, but (R) is false.
1. (i) Accountancy provides the basic theory,
(d) (A) is false, but (R) is true. principles and methods to be followed to
[Ans. (a) Both (A) and (R) are true and (R) account for all financial activities taking
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is the correct explanation of (A)] place in an organisation.
3. Assertion (A) : The first step in the (ii) Accounting is the systematic process
Accounting process is of iddentifying, measuring, recording,
identifying the financial
o classifying, summarising, interpreting and
transactions of a business. communicating financial information.
Reason (R) :
Entries are made in the (iii) Accounting cycle is the sequence of steps
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journals on the basis of involved in the accounting process.
source documents in the
(a) (i) is correct
chronological order, i.e, the
order of occurrence of the (b) (ii) is correct
transactions. (c) (iii) is correct
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Select the correct answer. (d) (i), (ii) and (iii) are correct
(a) Both (A) and (R) are true and (R) is the [Ans. (d) (i), (ii) and (iii) are correct]
correct explanation of (A)
.s
2. (i) The first step in the accounting process is

(b) Both (A) and (R) are true and (R) is not the identifying the financial transactions of a
business.
(c) (A) is true, but (R) is false.
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(ii) Transfering the entries from the ledger to

(d) (A) is false, but (R) is true. the journal is called posting.
[Ans. (a) Both (A) and (R) are true and (R) (iii) Finding the difference between the total of
is the correct explanation of (A)]
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the debit column and credit column of all

4. Assertion (A) : Accounting provides the ledger accounts is called balancing.
relevant information to the (a) (i) is correct
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management for planning, (b) (ii) is correct

evaluation of performance
(c) (i) and (iii) are correct
and control.
(d) (i), (ii) and (iii) are correct
Reason (R) :
Accounting works as a
tool for measuring the [Ans. (c) (i) and (iii) are correct]
performance of the business
enterprises.

II. Very Short Answer Questions. (ii) When goods bought are returned to the
suppliers, it is known as purchase return
2 MARKS
or returns outward.
1. What is financial accounting?
Ans. (i) Financial Accounting involves recording 10. What do you mean by solvency and
of transactions and events which are Insolvency?
financial in nature.
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Ans. (i) Solvency is the capability of a person or
(ii) It provides financial information to the an enterprise to pay the debts.
users for taking decisions
(ii) Insolvency is the incapability of a person
(iii) It ends up with the preparation of trading or an enterprise to pay the debts.
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and profit and loss account and balance
sheet. 11. Write short notes on :
2. What is cost accounting? [BEQ] a) Debtors b) Creditors
Ans. Cost Accounting involves the collection, Ans. a) Debtors :
recording, classification and appropriate
s.
A person who receives a benefit without
allocation of expenditure for the determination giving money or money’s worth
of the costs of products or services and for the immediately, but liable to pay in future
presentation of data for the purposes of cost or in due course of time.
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control and managerial decision making. b) Creditors :
3. What is sales? A person who gives a benefit without
Ans. When goods meant for resale are sold, it is received money or money’s worth
called sales. o immediately buy to claim in future.
4. Who is a proprietor? [BEQ] III. Short Answer Questions.3 MARKS
Ans. (i) A person who owns the business is called
1. Read the passage given below and answer
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proprietor.
the questions that follow:
(ii) He contributes capital to the business
with the intention of earning profit. Accounting is the language of business. The
most important function of language is to
5. What is meant by drawings? facilitate communication. The information
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Ans. It is the amount of cash or value of goods, about business entities regarding their
assets, etc., withdrawn from the business by operating performance and financial
the proprietor for his personal use. status can be obtained from the financial
information recorded in the accounting
What do you mean by accounting cycle?
.s
6. records. The information is communicated

Ans. An accounting cycle is a complete sequence to the interested users. [BEQ] [Govt. MQP-2018]
of accounting process, that begins with the Questions:
recording of business transactions and ends
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with the preparation of final accounts. (i) Who are the external users of
accounting information?
7. What is bad debt? (ii) Who are the internal users of
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Ans. Bad debt is a loss to the business arising out of accounting information?
failure of a debtor in payment of his dues. (iii) Why do the users need accounting
8. What is depreciation? information?
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Ans. (i) External users are the persons who are

Ans. Depreciation refers to the reduction in the
outside the organisation but make use
value of the fixed assets due to usage, passage of accounting information for their
of time and obsolescence.
purposes.
9. What is purchases and purchase returns? (ii) The internal users are owners,
Ans. (i) Buying of goods with the intention of management and employees who are
resale is called purchases. within the organisation.


(iii) The main need for accounting b) Expense :
information is ascertain the profit or loss (i) Expenses is the amount spent in
of the business enterprise. order to produce and sell the goods
2. Explain the term transactions. and services.
Ans. (i) Transactions are those activities of a
(ii) For example, purchase of raw
materials, payment of salaries,
business, which involve transfer of
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wages etc.
money or goods or services between two
persons or two accounts. c) Revenue :
(ii) For example, purchase of goods, sale of Revenue means the amount receivable or
goods, leading of money, salaries paid, realised from sale of goods and earnings
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rent paid, commission received and from interest, dividend, commission, etc.
dividend received. 5. Write short notes on a) Capital b) Assets
(iii) Transactions are of two types, namely c) Liabilities
cash and credit transactions.
Ans. a) Capital :
s.
1. Cash transaction : (i) Capital is the amount invested by
It is a transaction is which cash the owner in an organisation.
receipt or cash payment is involved. (ii) This amount is increased by the
profit of the business and the amount
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2. Credit transaction :
of additional capital introduced.
It is a transaction in which cash is b) Assets :
not received or paid immediately,
but will be paid or received later. (i) Any physical thing or right owned
that has a monetary value is called
3.
o
Briefly explain the following terms [BEQ] assets.
(ii) Assets can be classified into
a) Account b)Voucher c) Invoice
Ans. a) Account : tangible and intangible.
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(i) An Account is the basic unit of (iii) Tangible assets are those having
accounting. physical existence. It can be seen
(ii) Transactions are recorded into and touched.
various accounts. (iv) Intangible assets are those assets
having no physical existence. It
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(iii) In other words, an account is a

summary of transactions under cannot be seend and touched.
some common head. c) Liabilities :
b) Voucher : (i) Liabilities refers to the financial
obligations of a business.
.s
(i) Any written document in support

of a business transaction is called (ii) For example, loans from banks or
a voucher. other persons, creditors for goods
supplied, bills payable, outstanding
(ii) Example : Cash receipt, invoice,
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expenses, bank overdraft etc.

cash memo, bank pay-in-slip etc. 6. What are the informational needs of
c) Invoice : internal users?
(i) It is a statement prepared by a seller Ans. The internal users comprise of owners,
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of goods to be sent to the buyer. management and employees who are with in
(ii) It shows details of quantity, price, the organisation.
value etc., of the goods and any (i) Owners :
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discount given, finally showing the 1. The owners of a business furnish

net amount payable by the buyer. capital to be used for the purpose
4. Write short notes on a) Income b) Expense of business.
c) Revenue 2. They are interested to know
Ans. a) Income : whether the business has earned
Income is the difference between revenue a profit or loss during a particular
period and also its financial
and expense. position on a particular date.

(ii) Management : 7. What are the objectives of Accounting?

1. Accounting data are the basis for [First Mid-2018]
most of the decisions made by the Ans. Following are the objectives of accounting :
management. (i) To keep a systematic record of financial
2. The trends in sales and purchases, transactions and events
relationship of expenses to the (ii) To ascertain the profit or loss of the
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turnover, productivity of workers, business enterprise
comparative profitability of
different products and divisions (iii) To ascertain the financial position or
etc. status of the enterprise
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(iii) Employees : (iv) To provide information to various
1. The employees are interested in stakeholders for their requirements
the profit earing capacity of the (v) To protect the properties of an enterprise
business which will affect their and
salary, bonus, incentives and (vi) To ascertain the solvency and liquidity
s.
working conditions. position of an enterprise
2. Labour unions use the accounting
data in their bargaining strategies
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with the management.
8. What is the process of accounting?
Ans. (i) Accounting process starts with identifying financial transactions, involves recording, classifying,
and summarising and ends with interpreting accounting information to various concerned parties.
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(ii) Accounting process can be explained with the help of the diagram given below.
Communicating to the Financial Transactions or

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Identification
users Events
Analysis and
Recording
Interpretation
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Summarising Classifying
.s
(iv) Due to the industrial revolution in the

IV. Long Answer Questions. 5 MARKS 18th and 19th centuries, large scale
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operations were carried on and joint stock

1. Narrate the evolution of accounting? companies emerged as an important form
Ans. (i) In the earliest days of civilisation, of organisation which required separation
accounting was done by stewards who of ownership from management.
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managed the properties of wealthy people. (v) Hence, to safeguard the interest of owners
They rendered accounts periodically to and investors, the business establishments
the owners of property. required detailed information about
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(ii) The stewardship accounting is said to be business which paved the way for
the root of accounting. Records of debit development of comprehensive financial
and credit were found in the 12th century accounting information system.
itself. (vi) In the 20th century, the need for analysis
of financial information for managerial
(iii) In 1494, Luca Pacioli an Italian developed decision making caused emergence of
double-entry book-keeping system. Management Accounting as a separate
branch of accounting.


(vii) Though accounting was individual (v) Preparation of profit and loss account:
centric in the initial stage of evolution of (1) Profit and loss account is prepared
accounting, it has gradually developed next for a particular accounting
into Social Responsibility Accounting in period.
the 21st century, due to the vast growth
in business activities as a result of (2) All the indirect revenues and
indirect expenses along with gross
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development in various fields.
profit or gross loss are transferred
2. Explain the Accounting cycle. to profit and loss account.
Ans. Accounting cycle is the sequence of (3) The balance in the profit and loss
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steps involved in the accounting process. account is the net profit or net loss.
Accounting cycle starts with the identification
and recording of financial transactions of an (vi) Preparation of balance sheet :
organisation and ends with the preparation (1) A statement showing the balances
of final accounts for the accounting year. The of assets and liabilities namely
s.
steps involved are : balance sheet is prepared as the
(i) Identifying the transactions and final step in the accounting process.
journalising : (2) It is prepared on a particular date,
(1) The first step in the accounting normally, on the last day of the
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process is identifying the financial accounting period.
transactions of a business.
(2) All the monetary transactions are 3. Briefly explain the functions of accounting.
recorded in the books of original Ans. The main functions of accounting are as
entry called journals.
(ii) Posting and balancing :
o follows :
(i) Measurement :
(1) Transferring the entries from 1. The main function of accounting
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the journal to the ledger is called is to keep systematic record of
posting. business transactions, post them to
the ledger and ultimately to prepare
(2) In the ledger, entries are made in the final accounts.
each account after classifying them 2. Accounting works as a tool for
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under common heads. Finding the measuring past performance of the

difference between the total of the business enterprises.
debit column and credit column (ii) Forecasting :
of all the ledger accounts is called
With the help of the various tools of
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balancing. accounting, future performance and

(iii) Preparation of trial balance : financial position of the business
(1) The list of ledger balances namely enterprises can be forcasted.
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trial balance is prepared as the next (iii) Comparison :

step. 1. Accounting helps to assess the
(2) On the basis of ledger balances the actual performance with the
targets.
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financial statements are prepared.

2. It also discloses the accounting
(iv) Preparation of trading account : policies.
(1) Next step is preparation of trading (iv) Decision making :
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account for a particular accounting 1. Accounting assists the management

period. in planning, evaluation of
(2) All the direct revenues and direct performance, control and decision
expenses are transferred to trading making by providing required
account. information to various users of
accounts.
(3) The balance in the trading account
is the gross profit or gross loss.

2. This will help them to take various b) Any expenditure incurred

decisions on cost, price, sales, whether paid or not
volume, etc. c) Any asset purchased whether
(v) Control : cash is paid or not
1. As accounting works as a tool d) Any liability incurred whether
of control, the strengths and paid or not during the
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weaknesses are identified to accounting period is recorded.
provide feedback on various (iii) Hybrid or mixed basis :
measures adopted. 1. Under mixed basis of accounting
2. It serves as a tool for evaluating both cash basis and accrual basis
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compliance of business policies are followed.
and programmes. 2. Incomes are generally recorded on
(vi) Assistance to Government regulations: cash basis whereas expenses are
Government needs full information on generally taken on accrual basis.
the financial aspects of the business,
s.
so that proper tax can be levied on the 5. Describe the informational needs of external
income earned by the enterprises. users. [BEQ]
Ans. External users are the persons who are outside
What are the bases of accounting? and
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4. the organisation but make use of accounting
briefly explain it. information for their own purposes. They are :
Ans. There are three bases of accounting in common (i) Creditors and Financial institutions :
usage, namely 1. Suppliers of goods and services,
(i) Cash basis commercial banks, public deposit
(ii) Accrual or mercantile basis
o holders, debenture holders etc; are
included in this category.
(iii) Mixed or hybrid basis
2. They are interested in the liquidity
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(i) Accounting on cash basis : position and repaying capacity of
1. Under cash basis of accounting, the business to know the safety of
actual cash receipts and actual cash getting the interest and get back the
payments are recorded. principal amount.
2. Credit transactions are not recorded (ii) Investors :
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till the cash is actually received or 1. Persons who are interested in

paid. investing their surplus funds
should know about the financial
3. Under the basis, condition of a business unit while
a) Any income received
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making their investment decisions.

b) Any expenditure paid 2. They are more interested in future
c) Any asset purchased for which earning and risk.
cash is paid. (iii) Customers :
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d) Any liability paid during the 1. Those who use the products and
accounting period. Whether services of a firm are interested in
related to the past, present or knowing the justification for the
prices charged to them.
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future is taken into account.

2. They examine the expenses, sales
(ii) Accrual or mercantile basis : and profits to see if they are paying
1) Under accrual basis of accounting, fair prices for the products and
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the income whether received or services.

not but has been earned or accrued (iv) Tax authorities :
during the period and expenses 1. Accounting information helps
incurred whether paid or not are them in computing goods and
recorded. services Tax, Income tax etc., to be
2) Under this basis, collected from business units.
a) Any income earned whether 2. They scrutinise the revenues and
received or not expenses of business firms to
determine their accuracy.


(v) Government : (iv) These transactions may be important for
1. Government also administers the business but these are not recorded
prices of certain trades. in the books of accounts. Because these
2. In such cases, government agencies cannot be measured in monetary terms.
have to ensure that the guidelines
for pricing are followed. 2. Is accounting an art or a Science?
Accounting is both an art as well as Science.
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vi) Researchers : Ans.
Researchers to carry out their research i) Art :
can make use of the published financial 1. Art is the technique of achieving
statements in their analysis and some pre-determined objectives.
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evaluation. 2. And accounting is also an art
of recording, classifying and
summarising financial transactions.
Creative Questions ii) Science :
1. Science is an organised knowledge
s.
Very Short Answer Questions.2 MARKS based on certain basic principles.
1. "The role of accounting has changed over 2. Therefore, Accounting is also
the period of time". Do you agree? a Science as it is an organised
knowledge based on certain
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Ans. Earlier the role of Accounting was limited to principles.
recording of transactions. Now, it has sifted
to providing information to managers and
interested parties, to help them take appropriate HOTS Questions
decision. It is now regarded as an information
system.
o Very Short Answer Questions.2 MARKS
2. 'Accounting information should be
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comparable'. Do you agree with this 1. Accounting records of business transactions
statement? Give two reasons. and events which are of financial nature. Is
this a limitation of accounting?
Ans. Yes, Accounting information should be
Ans. Yes, it is a limitation of accounting because
comparable because,
there are events which impact business but are
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i) It helps to make inter-firm comparisons, not recorded because they are not of financial
i.e., to find out how a firm has performed nature.
as compared to the other firms.
ii) It helps to make inter-period comparisons, 2. A firm follows a practice of giving the figures
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i.e., to find out how it has performed as of previous year along with the figures of
compared to the previous years. current year. Now the accountant of the
Short Answer Questions. 3 MARKS firm wants to discontinue this practice. Do
you justify this decision?
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1. Non-monetary transactions are not

Ans. No, comparability of current year figures
recorded in the books of accounts'. Give with that of previous year is a qualitative
reason and explain. characteristic of financial information.
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Ans. (i) Accounting records only those Discontinuation of this practice will result
transactions and events which can be in discontinuation of a good practice being
expressed in terms of money such as sale followed by the firm.
of purchase of goods, salary paid etc.
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(ii) Non-monetary transactions i.e. those 3. Mr. Suresh, an electronic good dealer,
transactions which cannot be expressed gifted a microwave of value `40,000 to his
in terms of money are not recorded in the friend Roshan and recorded it in books as
books of accounts. drawings. Is he correct?
(iii) Example of such transactions are value Ans. Yes, he is correct, it will be treated as drawings
of human resources, appointment of a and will be recorded in the books.
new managing director, etc.   
UNIT
Conceptual Framework
2 of Accounting
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CHAPTER SNAPSHOT
s.
2.1 Book-keeping – An introduction
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2.1.1 Meaning of book-keeping
2.1.2 Definition of book-keeping
2.1.3 Features of book-keeping
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2.1.4 Objectives of book-keeping
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2.1.5 Advantages of Book-keeping
2.1.6 Limitations of book-keeping
2.2 Book- keeping Vs. Accounting
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2.3 Relationship among Book-keeping,

Accounting and Accountancy
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2.4 Accounting Principles
2.5 Accounting Standards (AS)

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2.5.1 Need for accounting standards

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2.6 International Financial Reporting

Standards (IFRS)
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2.7 Accounting Standards in India
[ 19 ]

CONCEPT MAP
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CONCEPTUAL FRAME WORK OF ACOUNTING
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Accounting Cycle Accounting Concepts Accounting Conventions
s.
Balance Sheet Business entity concept Consistency
(opening for next period)
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Money measurement concept
Balance Sheet Full Sclousure
(Closing)
Going concern concept
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Profit and Loss Account Materiality
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Cost concept
Conservatism or
Trading Account Dual aspect concept prudence
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Periodicity concept
Trial Balance
Matching concept
.s
Accounting Standards
Ledger
Realisation concept Recognition
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Journal
Objective evidence concept Measurement
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Treatment
Transaction
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IFRS Presentation
AS B

Sura’s  XI Std - Accountancy ➠ Unit 2 ➠ Conceptual Framework of Accounting 21
IMPORTANT POINTS
Accounting is the language of business. It records business transactions taking place during
the accounting period.
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The basic assumptions of accounting are like the foundation pillars on which the structure
of accounting is based.
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Six concepts guide how business transactions are reported.
To make the accounting information useful to various interested parties, the basic assumptions
and concepts discussed earlier have been modified.
s.
IASC the main purpose of this committee is to formulate and publish in public interest,
standards to be observed in the presentation of audited financial statements and to promote
their world-wide acceptance and observance.
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The ASB will consider the applicable law, custom, usage, business environment and the
International Accounting Standards.
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I. Multiple Choice Questions. 4. The rule of stock valuation 'cost price or
realisable value' whichever is lower is based
1. The business is liable to the proprietor of on the accounting principle of :
the business in respect of capital introduced
(a) Materiality
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by the person according to [BEQ] [HY-2018]

[BEQ] [Govt. MQP-2018; QY-2018] (b) Money measurement
(a) Money measurement concept (c) Conservatism
(b) Cost concept (d) Accrual
.s
(c) Business entity concept

(d) Dual aspect concept [Ans. (c) Conservatism]
[Ans. (c) Business entity concept]
5. In India, Accounting Standards are issued
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2. The concept which assumes that a business

by[Govt. MQP-2018; First Mid-2018; QY-2018; HY-2018]
will last indefinitely is
(a) Business Entity (b) Going concern (a) Reserve Bank of India
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(c) Periodicity (d) Conservatism (b) The Cost and Management Accountants of
[Ans. (b) Going concern] India
3. GAAPs are : (c) Supreme Court of India
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(a) Generally Accepted Accounting Policies

(d) The Institute of Chartered Accountants of
(b) Generally Accepted Accounting Principles
(c) Generally Accepted Accounting India
Provisions [Ans. (d) The Institute of Chartered
(d) None of these Accountants of India]
[Ans. (b) Generally Accepted Accounting
Principles]

II. Very Short Answer Questions. 5. Write a brief note on 'Consistency'

assumption.
1. Define Book Keeping. [BEQ] [Govt. MQP-2018] Ans. (i) The Consistency convention implies that
the accounting practice should remain
Ans. According R.N. Carter defines, "Book keeping the same from one year to another.
is the science and art of recording correctly
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(ii) The results of different years will be
in the books of account all those business
comparable only when same accounting
transactions of money or money's worth". methods are followed from year to year.
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2. What is meant by accounting concepts? (iii) The firm should be modify the method
of charging the depreciation from one to
Ans. (i) Accounting concepts are the basic another.
assumptions or conditions upon which
accounting bas been alid. (iv) If any change has to be incorporated,
valid reasons for such a change should
s.
(ii) Accounting concepts are the results of be emphasised.
broad consenses.
(iii) The word concept means a notion or III. Short Answer Questions.
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abstraction which is generally accepted. 1. What is matching concept? Why should a
(iv) Accounting concepts provide unifying business concern follow this concept?
structure to the accounting process and Ans. (i) According to this concept, revenues
accounting reports. during an accounting period are matched
3.
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Briefly explain about revenue recognition
with expenses incurred during that period
to earn the revenue during that period.
concept.
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(ii) This concept is based on accrual concept
Ans. (i) According to this concept, revenue is and periodicity concept.
considered as the income earned on the (iii) Periodicity concept fixes the time
date when it is realised. frame for measuring performance and
(ii) Unearned or unrealised revenue should determining financial status.
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not taken into account. (iv) All expenses paid during the period are
(iii) This concept is vital for determining not considered, but only the expenses
related to the accounting period are
income pertaining to an accounting
considered.
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period.
(iv) It avoids the possibility of inflating 2. "Only monetary transactions are recorded
incomes and profits. in accounting". Explain the statement.
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[BEQ] [Govt. MQP-2018]

4. What is "Full Disclosure Principle" of Ans. (i) Only financial transactions are to be
accounting? [BEQ] [HY-2018] recorded because it is due to Money
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Ans. (i) The accounts must disclose all material Measurement concept, which states that
information. only those transactions are to be recorded
in the books of accounts which consist of
(ii) The accounting reports should disclose cash.
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full and fair information to the related

(ii) Hence it is concerned with the Nominal
parties. value not the real value.
(iii) The financial position and performance (iii) For example Mohan purchase television
should be disclosed very honestly to all for `12,000. So this, will recorded
the users. in journal entry book as it has cash
transactions.

3. "Business units last indefinitely". Mention 4. Write a brief note on Accounting Standards.
and explain the concept on which the Ans. (i) Accounting Standards provide the
statement is based.
framework and norms so that the financial
Ans. (i) "Business units last indefinitely". This statements of different enterprises
statement is used in Going Concern become comparable.
Concept.
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(ii) It becomes necessary to standardise
(ii) Going concern concept influences the accounting principles and policies
Accounting practices in relation to to ensure consistency, comparability,
valuation of assets and liabilities,
adequacy and reliability of financial
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depreciation of the fixed assets, treatment
of outstanding and prepaid expenses and reporting.
incomes. (iii) Accounting standards in India are issued
(iii) The values involved in the going concern by the Institute of Chartered Accountants
concept are : of India (ICAI).
s.
1. Growth : By following the Definition :
going concern concept, business
activities are to be carried out for In the words of Kohler, "Accounting standards
are codes of conduct imposed by customs, law
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future growth.
2. Preparing for future : By or professional bodies for the benefit of public
following the going concern accountants and accountants generally".
assumption, business firm always
intends to prepare for the future.
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I. Choose the Correct Answer. (c) Decrease in one asset and decrease in
other asset
1 MARK (d) Increase in one asset and increase in
(i) Choose the Correct Option. capital
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1. IFRS is [First Mid-2018]

[Ans. (c) Decrease in one asset and decrease
in other asset]
(a) Indian Financial Reporting Standards
(b) Indian Funds Reporting Standards 4. Book keeping prepares the ground for
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the important steps of finalising and

(c) International Financial Reporting interpretation which are usually performed
Standards by
(d) None of these (a) accounting (b) economics
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[Ans. (c) International Financial Reporting (c) double entry (d) none of these
Standards] [Ans. (a) accounting]
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2. The profounder of double entry system of 5. Assets = [BEQ]

book-keeping is (a) Capital – Liability
(a) J. R. Batlibai (b) Luca Pacioli (b) Capital + Liability
(c) Old Kesal (d) Menhar
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(c) Capital + Investments

[Ans. (b) Luca Pacioli]
(d) Capital + Creditors
3. Which of the following does not follow dual [Ans. (b) Capital + Liability]
aspect concept? 6. International Financial reporting standards
(a) Increase in one asset and decrease in other established in
asset (a) 1947 (b) 1956 (c) 1970 (d) 1973
(b) Increase in both asset liability [Ans. (d) 1973]


7. The land is purchased for `5,00,000 and its 14. Which of the following concepts assumes
market value is Rs. 8,00,000 at the time of that a business will last indefinite?
preparing final accounts the land value is (a) Business Entity Concept
recorded only for
(a) `5,00,000 (b) `8,00,000
(b) Going Concern Concept
(c) `3,00,000 (d) `6,50,000 (c) Periodicity Concept
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[Ans. (a) `5,00,000] (d) Conservation Concept
[Ans. (b) Going Concern Concept]
8. The dual aspect concept is the basis for
(a) single entry system 15. If a company fails to make mention of a
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(b) double entry system major law suit filed against it, which it might
(c) book keeping lose, the Accounting principle violated is
(d) all the above that of
[Ans. (b) double entry system] (a) conservatism
s.
9. ASB stands for (b) cost principle
(a) Accounting Standard Board (c) materiality
(d) full disclosure
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(b) Accounting Standard Business
(c) Accounting Statistics Business [Ans. (d) full disclosure]
(d) Accounting Standard Books 16. A firm purchased five briefcases for
[Ans. (a) Accounting Standard Board]
o its managers costing `1000 each. The
10. The proprietor of the business is treated accountant charged it to profit and loss
as a creditor for capital introduced by him account instead of showing as an asset this
according to was done under
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(a) Money measurement concept (a) Consistency concept
(b) Cost concept (b) Business entity concept
(c) Business entity concept (c) Money measurement concept
(d) Dual aspect concept
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(d) Materiality concept

[Ans. (b) Cost concept]
[Ans. (d) Materiality concept]
11. Which of the following may be called the
language of the business? 17. Matching concept is based on the
.s
(a) Economics (b) Statistics (a) Accrual Concept

(c) Accountancy (d) English (b) Going concern concept
[Ans. (c) Accountancy] (c) Money measurement concept
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12. Which of the following is included in the (d) Accounting Period Concept
process for book keeping? [Ans. (d) Accounting Period Concept]
(a) Reading (b) Elimination
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18. Which of the following is / are objectives of

(c) Analysis issuing Accounting Standard?
(d) Recording and Classification
[Ans. (d) Recording and Classification] (a) Improve the reliability of financial
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statements
13. The policy of 'anticipate no profit and (b) Improve the comparability of financial
provide for all possible losses' is followed statements
due to the convention of
(c) Provides a set of Accounting policies
(a) Conservatism (b) Consistency
(d) All of these
(c) Materiality (d) Realisation
[Ans. (a) Conservatism] [Ans. (d) All of these]

(ii)
Match List I with List II and 2. __________ involves recording business
Select the Correct Answer using transactions of financial nature in the books
the Codes given below. of accounts.
1. (a) Balance Sheet (b) Trial balance
List I List II (c) Book keeping (d) All the above
[Ans. (c) Book keeping]
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(i)
Book keeping (1)
Accounting
Standards Board 3. __________ said "Book keeping is an art
(ii)
GAAP (2)
Industrial Financial of recording business dealings in a set of
books".
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Reporting [BEQ]
Standards (a) Norcot (b) J.R. Batliboi
(iii) ASB (3)
Accounting (c) R.N. Carter (d) Keynes
Principles [Ans. (b) J.R. Batliboi]
(iv) IFRS (4)
Accounting Process
s.
4. __________ is an art of recording business
Codes : transactions based on certain principles.
(i) (ii) (iii) (iv) (a) Double entry (b) Single entry
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(a) 1 2 3 4 (c) Book keeping (d) Accounting
[Ans. (c) Book keeping]
(b) 3 4 1 2
(c) 4 3 1 2 5. __________ cannot remember all the
(d) 2 3
o 1 4
transactions for quite a long time.
[Ans. (c) (i) - 4, (ii) - 3, (iii) - 1, (iv) - 2] (a) Owners (b) Bankers
2.
(c) Consumers
List I List II
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(d) Business Managers
(i) Accounting (1)
Primary stage [Ans. (d) Business Managers]
(ii) Accountancy (2)
Collective process
6. __________ is useful to find out tax liability
(iii) Book keeping (3)
Process of in case of sales tax, income tax, property
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recording tax, etc.

(iv) Accounting cycle (4)
Systematic (a) Double entry (b) Book keeping
knowledge
(c) Economics (d) Statistics
Codes : [Ans. (b) Book keeping]
.s
(i) (ii) (iii) (iv) 7. __________ is basically generating financial

(a) 1 2 3 4 information.
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(b) 3 4 1 2 (a) Accounting (b) Accountancy

(c) 4 3 1 2 (c) Economic (d) Book keeping
(d) 2 3 1 4 [Ans. (a) Accounting]
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[Ans. (b) (i) - 3, (ii) - 4, (iii) - 1, (iv) - 2] 8. __________ is the process of managing the
income and expenses of a business firm.
(iii) Choose the Correct Option and (a) Economic (b) Statistics
Fill in the Blanks.
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(c) Accountancy (d) None of these

1. When money came into existence, [Ans. (c) Accountancy]
__________ activities involving money also
flourished along with it. 9. __________ is a branch of knowledge.[BEQ]
(a) science (b) economic (a) Accountancy (b) Accounting
(c) commerce (d) business (c) book keeping (d) double entry
[Ans. (d) business] [Ans. (a) Accountancy]


10. __________ concept helps in keeping 16. The word __________ refers to traditions
business affairs free from the influence of or customs.
personal affairs of the owner. (a) Accounting (b) Book keeping
(a) Business entity (c) Convention (d) None of these
(b) Money measurement [Ans. (c) Convention]
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(c) Cost
17. __________ will be very much uneconomical
(d) Dual aspect [Ans. (a) Business entity]
to record small details in Accounting.
11. According to __________ concept only (a) Full disclosure
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business transactions are recorded. (b) Consistency
(a) Dual aspect (c) Convention of materiality
(b) Cost (d) Convention of conservatism
(c) Business entity [Ans. (c) Convention of materiality]
s.
(d) Money measurement (iv) Pick the Odd one Out.
[Ans. (c) Business entity]
1. (a) Cost concept
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12. __________ concept implies that is (b) Dual aspect concept
Accounting, every transaction, or happening
or event is recorded in terms of money. (c) Matching concept
(a) Business entity (d) Book Keeping
[Ans. (d) Book Keeping]
(b) Money measurement
o Reason: Book Keeping is the process of
(c) Cost
recording financial transactions in the books of
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(d) Full disclosure accounts. Other three are important accounting
[Ans. (b) Money measurement]
concepts.
13. __________ does not mean that the asset 2. (a) Accountancy (b) Accounting
will always be shown at cost. (c) Trial balance (d) Book keeping
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(a) Cost concept

[Ans. (c) Trial balance]
(b) Full disclosure concept Reason: Trial balance is a statement containing
(c) Dual aspect the debit and credit balances of all ledger
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(d) Measurement concept accounts on a particular date. Other three are

[Ans. (a) Cost concept] relationship of accounting.
14. __________ are made for outstanding and (v) Which one of the Following is
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prepaid expenses and income. Not Correctly Matched?

(a) Adjustments (b) Journals 1. (a) Business entity - books of accounts
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(c) Ledger (d) Trial balance concept

[Ans. (a) Adjustments] (b) Money - terms of money
measurement
15. According to __________ concept, revenue concepts
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is considered as being earned on the date at

which it is realised. (c) Going concern - valuation of assets
concept and liabilities
(a) Matching concept
(d) Dual aspect - Charging
(b) Realisation concept concept depreciation
(c) Objective evidence
[Ans. (d)
Dual aspect concept - Charging
(d) Accrual [Ans. (b) Realisation concept] depreciation]

2. (a) Periodicity - Particular period (c) (A) is true, but (R) is false
concept (d) (A) is false, but (R) is true
(b) Objective - Cash receipts [Ans. (b) Both (A) and (R) are true and
evidence concept (R) is not the correct explanation
(c) Dual aspect - Capital – Liabilities of (A)]
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concept = Assets
(d) Convention - Nature of 2. Assertion (A) : The consistency convention
of materiality information implies that the accounting
policies must be followed
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concept
consistently from one
[Ans. (c) Dual aspect concept - Capital – accounting period to
Liabilities = Assets]
another.
(vi) Which one of the Following is Reason (R) : A firm follows the straight
s.
Correctly Matched? line method of charging
depreciation since its
1. (a) Capital + Liabilities = Assets purchase or construction.
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(b) Capital – Liabilities = Assets the method should be
(c) Assets = Liabilities followed without any
(d) Liabilities = Capital change.
[Ans. (a) Capital + Liabilities = Assets]
o Select the correct answer.
2. (a) IFRS - International Financial (a) Both (A) and (R) are true and (R) is the
Reporting Standards correct explanation of (A)
ab
(b) ICAI - International Chartered (b) Both (A) and (R) are true and (R) is not the
Accountants of India correct explanation of (A)
(c) ASB - Accounting Standing Board (c) (A) is true, but (R) is false.
(d) IASB - Internating Accounting State
(d) (A) is false, but (R) is true.
Board
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[Ans. (a) IFRS - International Financial [Ans. (a) Both (A) and (R) are true and (R)
Reporting Standards] is the correct explanation of (A)]
(vii)
Consider the Following 3. Assertion (A) : Book-keeping is the process
.s
Statement. of recording financial

transactions in the books of
1. [BEQ] [Govt. MQP-2018]
accounts.
Assertion (A) : Book keeping provides a
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Reason (R) : Book-keeping is part of

permanent and reliable
accounting.
record for all business
transactions. Select the correct answer.
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Reason (R) : Transactions are (a) Both (A) and (R) are true and (R) is the
recorded systematically in correct explanation of (A)
chronological order in the (b) Both (A) and (R) are true and (R) is not the
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books of account. correct explanation of (A)

Select the correct answer: (c) (A) is true, but (R) is false.
(a) Both (A) and (R) are true and (R) is the (d) (A) is false, but (R) is true.
correct explanation of (A) [Ans. (b) Both (A) and (R) are true and (R)
(b) Both (A) and (R) are true and (R) is not the is not the correct explanation of
correct explanation of (A) (A)]


4. Assertion (A) :
Periodicity concept deals II. Very Short Answer Questions.
with preparing accounts for
a particular period. 2 MARKS
Reason (R) : This concept helps the 1. What is Accounting? [BEQ]
business in distribution of Ans. (i) Accounting is a process of recording,
income to the owners and
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classifying, summarizing business
comparing and evaluating transactions and events.
performance of different (ii) It is to ascertain the financial position
periods. and performance and to communicate the
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Select the correct answer. results to the interested users.
(a) Both (A) and (R) are true and (R) is the 2. What is Accountancy?
Ans. (i) Accountancy is the process of managing
(b) Both (A) and (R) are true and (R) is not the the income and expenses of a business
s.
correct explanation of (A) firm.
(c) (A) is true, but (R) is false. (ii) Recording, classification and reporting
(d) (A) is false, but (R) is true. are some key tasks of accountancy.
(iii) Accountancy is a branch of knowledge
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[Ans. (a) Both (A) and (R) are true and (R) where as accounting is the action or
is the correct explanation of (A)] process.
(viii) Choose the Correct Statement 3. What do you mean by Accounting Cycle?
1. (i) Book keeping is the primary stage in the Ans. (i) The Accounting Cycle refers to the
accounting process.
o collective process of recording and
(ii) Accounting principles provide the basic processing the accounting information of
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framework within which the accounting an organisation.
records. (ii) The series of steps begin when a
transaction occurs and end with its
(iii) Balance sheet is useful to find out the tax inclusion in the financial statements.
liability.
III. Short Answer Questions.3 MARKS
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(a) (i) is correct

(b) (ii) is correct 1. What are the limitations of Book keeping?
(c) (i) and (ii) are correct Ans. Book keeping has the following limitations.
.s
(d) (i), (ii) and (iii) are correct (i) Only monetary transactions are recorded
[Ans. (c) (i) and (ii) are correct] in the books of accounts.
2. (i) Money measurement concept implies (ii) Effect of price level changes are not
considered.
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that only those transactions, which can be

expressed in terms of money. (iii) Financial data recorded are historical in
nature, i.e., only past data are recorded.
(ii) Cost of acquisition will be the base for all
What do you mean by IFRS?
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further accounting. 2.
(iii) Periodicity concept fixes the time frame for Ans. (i) International Financial Reporting
measuring performance and determining standard are issued by the International
financial status. Accounting Standard Board (IASB).
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(a) (i) is correct (ii) IFRS is a set of International Accounting

Standards stating how particular types of
(b) (ii) is correct transactions and other events should be
(c) (i), (ii) and (iii) are correct reported in financial statements.
(d) (i) and (ii) are correct (iii) IASB initially adopted the Accounting
standards issued by IASC to be replaced
[Ans. (c) (i), (ii) and (iii) are correct] by IFRS upon their issuance.

(iv) The objective behind setting up the 5. What are the objectives of book-keeping?
IASE and later IASB was to develop [BEQ]
Accounting Standards that would be Ans. Following are the objectives of book-keeping :
acceptable worldwide and to improve (i) To have a complete and permanent
financial reporting internationally. record of all business transactions
3. What are the basic concepts of accounting? in chronological order and under
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appropriate headings.
Ans. The following are the basic concepts of
(ii) To facilitate ascertainment of the profit
accounting : or loss of the business during a specific
(i) Business entity concept period.
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(ii) Money measurement concept (iii) To facilitate ascertainment of financial
(iii) Going concern concept position.
(iv) Cost concept (iv) To know the progress of the business.
(v) Dual aspect concept (v) To find out the tax liabilities.
(vi) Accounting period concept
s.
(vi) To fulfill the legal requirements
(vii) Matching concept
(viii) Realisation concept 6. What is the need for accounting standards?
(ix) verifiable and objective evidence concept Ans. The need for accounting standards is as
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(x) Accrual concept. follows :
1. To Promote better understanding of
4. Explain the Process of Accounting cycle.
financial statements.
Ans. Process of Accounting cycle : o 2. To help accountants to follow uniform
Balance
policies and practices.
Sheet 3. To facilitate meaningful comparison
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Profit and (Closing) of financial statements of two or more
Loss Transactions entities.
Account 4. To enhance reliability of financial
statements.
Balance
Sheet 5. To meet the legal requirements effectively.
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Trading (Opening)
Account
Journal
IV. Long Answer Questions. 5 MARKS
1. Explain the meaning of Book-keeping and
.s
Trial
Ledger
its features. (Or)
Balance
Write down the features of book-keeping.
[BEQ] [First Mid-2018]
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(i) When a businessman starts his business Ans. Meaning of Book-keeping :

activities, he records the day-to-day (i) Book-keeping is the process of recording
transactions in the journal. financial transactions in the books of
(ii) From the journal the transactions move
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accounts.
further to the ledger where accounts are (ii) It is the primary stage in the accounting
written up.
process.
(iii) Preparation of trading and profit and loss
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account is the next step. (iii) It includes recording the transactions and
(iv) The balancing of profit and loss account classifying the same under proper heads.
gives the net result of the business (iv) Book-keeping work is of routine nature.
transactions. Features of Book-Keeping :
(v) Thus this cyclic movement of the Following are the features of book-keeping :
transactions through the books of (i) It is the process of recording transactions
accounts (accounting cycle) is a in the books of accounts.
continuous process.


(ii) Monetary transactions only are recorded c) This concept helps in keeping
in the accounts. business affairs free from the
(iii) Book-keeping is the primary stage in the influence of personal affairs of
accounting process. the owner.
(iv) Book-keeping includes journalising and 2. Money measurement concept :
ledger processing.
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a) This concept implies that in
2. Explain the advantages of Book-keeping. Accounting, every transaction,
or happening or event is
Ans. Book-keeping has the following advantages :
recorded in terms of money.
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(i) Transactions are recorded systematically
in chronological order in the book of b) In other words, only those
accounts. Thus, book-keeping provides transactions, which can be
a permanent and reliable record for all expressed in terms of money,
are recorded in the accounts.
business transactions.
s.
(ii) Book-keeping is useful to get the financial 3. Going concern concept :
information. a) It is the basic assumption that
(iii) It helps to have control over various business will continue for a
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business activities. quite long time and it will go on
(iv) Records provided by business serve as a and will not be closed down or
legal evidence in case of any dispute. stopped for quite a long time.
(v) Comparison of financial information over b) Going concern concept
the years is possible. Also comparison influences Accounting practices
o
of financial information of different in relation to valuation of assets
business units is facilitated. and liabilities, depreciation
ab
(vi) Book-keeping is useful to find out the tax of the fixed assets, treatment
liability. of outstanding and prepaid
expenses and incomes.
3. What do you mean by accounting concepts? 4) Cost concept :
Explain any five concepts.[BEQ] [First Mid-2018]
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a) As asset is recorded in the

Ans. (i) Accounting principles are the rules of books at the value of price paid
action or conduct which are adopted for it at the time of its purchase
by the accountants universally. Such and the cost paid will be the
accounting principles are known base for all further Accounting.
.s
as Generally Accepted Accounting b) It is recorded at cost at the

Principles (GAAP). time of its purchase, but is
(ii) Accounting concepts are bye laws systematically reduced in its
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whereas conventions are guidelines value by charging depreciation.

based upon customs or usage. 5) Accounting period concept :
The important Accounting concepts are
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listed out below : a) The true profit or loss earned

by a business unit can be
1. Business entity concept : ascertained only when the
a) This concept implies that a business is liquidated.
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business unit is separate and b) But many persons such

distinct from the persons who as proprietors, investors,
supply capital to it. creditors, employees and the
b) Based on this concept, accounts government are interested in
are prepared from the point of knowing the performance of
view of the business and not the business unit.
from the owner's point of view.

4. What are the differences between Book keeping and Accounting? [BEQ] [First Mid-2018]
Ans.
S. No. Basis of distinction Book-keeping Accounting
1. Scope It is concerned with recording It is concerned with recording,
and classifying the business classifying, summarising, analysing
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transactions. and interpreting the financial data.
2. Stage Book-keeping is the primary Apart from the primary stage, it
stage in accounting. It is the base includes secondary stage of analysis
for accounting. and interpretation.
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3. Nature of job It is routine and clerical in nature. It is analytical in nature.
4. Knowledge required It requires basic knowledge of It requires thorough knowledge of
the principles of journalising and accounting principles, procedures and
posting. practices.
s.
5. Skill required Analytical skill is not required It requires analytical skill.
for book-keeping.
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5. Explain briefly accounting conventions. (iii) Convention of full disclosure :
Ans. (i) Accounting Conventions : 1. The accounts must disclose
all material information. The
1. The word convention refers to Accounting reports should disclose
traditions or customs. full and fair information to the
2. The accounting
oconvention related parties.
describes the customs or 2. The financial position and
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traditions followed as a guide performance should be disclosed
to the preparation of accounting very honestly to all the users.
statements. 3. All the information should be
3. Modern business world has relevant, reliable, comparable and
understood by all the concerned
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accepted the utility of these authorities.

Accounting conventions in making
(iv) Convention of conservatism or
financial statements more realistic, prudence :
reliable, and useful to all concerned
It is a policy of caution or playing safe.
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parties. While recording the business transactions

(ii) Convention of consistency : one has to anticipate no income but
1. The consistency convention provide for all possible losses.
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implies that the Accounting

practice should remain the same Creative Questions
from one year to another.
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2. The results of different years will Very Short Answer Questions.2 MARKS
be comparable only when same
accounting methods are followed 1. Do you think that the principle of
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from year to year. conservatism results in creating of secret

reserve?
3. For Example : If a firm follows
the original or fixed instalment Ans. Yes, principle of conservatism has two effects.
method of charging depreciation (i) Profit and loss account discloses lower
since its purchase / construction, profit in comparison to the actual profits.
the method should be followed (ii) Balance sheet will disclose understatement
without any change. of assets and overstatement of liabilities.


2. Which value is reflected in the Accounting Ans. No, the principle of conservatism is being
standards issued by ICAI? violated. Here the closing stock should have
Ans. Value of consistency is reflected by the been valued at `1,80,000 i.e., lower of cost or
accounting standards issued by ICAI, as Net Realiable Value (NRV) whichever is less.
following consistent set of standards, enables 2. Due to a labour strike, in a factory the
comparability of financial statements. production had to stop for a week. The
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accountant estimated the loss of production
Short Answer Questions. 3 MARKS and likely loss of profit and recorded it in
the books of accounts. Is the the Accountant
1. How does matching principle apply to correct?
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depreciation?
Ans. No, as per the money measurement concept
Ans. (i) Matching principle states that the only those transactions and events, which can
expenses of an accounting period are be recorded in money terms on the basis of
matched with the related revenue for documentary evidences are recorded in books
correct determination of profit.
s.
of accounts.
(ii) According to the matching principle,
the purchase price of fixed asset is not 3. An accountant advised his client, who is
related to the accounting period because a doctor to maintain his accounts on cash
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the benefit derived from its use will be basis. Is the advice of accountant correct?
spread over a number of years. Ans. Yes, the advice given by the accountant is
(iii) Therefore, only depreciation related to correct as cash basis of accounting is more
the accounting period is considered for appropriate for a doctor as he receives his fee
determination of profit. in cash.
2.
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"Despite many advantages, double entry 4. Why is it necessary for accountants to
system also has some disadvantages". assume that business entity will remain a
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In the light of this statement discuss the going concern?
advantages of double entry system.
Ans. The concept of going concern assumes that
Ans. Despite of many advantages, double entry a business firm would continue to carry
system has some disadvantages which are as out its operations indefinitely. Due to this
follows :
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concept distinction is made between capital

(i) Double entry system is complex and hard and revenue expenditure and thus, assets and
to understand. liabilities are recognised.
(ii) It involves time, labour and money, so it
is not possible for small business to keep 5. What is the difference between IFRS and
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accounts under this system. India GAAP?

(iii) It required expert knowledge to keep Ans. The two principle differences between IFRS
accounts under this system. and Indian GAAP or Accounting standard are
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(iv) As the system is complex, there is greater as follows :

possibility of committing errors and
mistakes. IFRS GAAP
1. IFRS are principle Indian GAAP or
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HOTS Questions based. accounting standard

are rule based.
Very Short Answer Questions.2 MARKS 2. IFRS are based Indian GAAP
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on fair values or accounting

1. A company purchased goods for `10,00,000
and sold 80% of such goods during the year. concept. standard are based
The market value of remaining goods was on historical cost
`1,80,000. The Company valued the closing concept.
at `2,00,000 i.e., cost. Is the statement
correct?

Short Answer Questions. 3 MARKS (iii) Accounting transactions should be free

from basis of accountants and others.
1. As per consistency concept a company Ans. (i) Historical cost concept
cannot change an accounting policy. Does
this holds true in all instances? Explain. (ii) Accounting period concept
(iii) Verifiable objective concept
Ans. Yes, the method and the rate of depreciation
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can be changed but only in the following 3. During the financial year, Rajan had
circumstances. cash sales of `4,50,000 and credit sales of
(i) The change is to comply with statutory `3,00,000. Expenses incurred for the year
regulations. or
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were `3,50,000 out of which `1,50,000 are
(ii) The change would help in better still to be paid.
understanding of the true financial
position of the business. Find out Rajan's income following.
Also, the change and its effect on profit (i) Cash Basis of Accounting.
s.
should be disclosed in the financial (ii) Accrual Basis of Accounting.
statements of the enterprise.
Ans. (i) Cash Basis of Accounting
2. Name the accounting concept or convention = 4,50,000 – 2,00,000 (3,50,000 –
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associated with the following. 1,50,000)
(i) Assets are recorded at cost, irrespective = `2,50,000
of the market price. (ii) Accural Basis of Accounting
(ii) Life of a business should be divided into = 4,50,000 + 3,00,000 – 3,50,000
smaller periods.
o = `4,00,000
  
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UNIT
Books of
3 Prime Entry
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CHAPTER SNAPSHOT
3.1 Introduction
s.
3.2 Source documents
3.3 Double entry system
3.3.1 Definition
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3.3.2 Principles of double entry
system
3.3.3 Advantages of double entry
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system
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3.4 Transaction
3.5 Account
3.6 Approaches of recording transactions
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3.6.1 Accounting equation approach

3.6.2 Traditional approach
3.7 Accounting rules
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3.8 Journal entries

3.8.1 Meaning
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3.8.2 Format of Journal

3.8.3 Steps in journalising
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3.8.4 Different types of journal entries

3.8.5 Application of rules of double
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entry system
3.8.6 Analysis of transactions
3.8.7 Advantages of journal
[ 34 ]

Cash Book
Dr. (Bank Columns) Cr.
Amount Amount
Date Particulars Date Particulars
` `
2013 Aug 1 To Balance b/d 20,525 2013 Aug 8 By Kokila A/c 12,000
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18 To Shankar A/c 6,943 26 By Geetha A/c 9,740
19 To Sales A/c (Rajan) 450 28 By Latha A/c 11,780
20 To Commission A/c (Babu) 200 30 By Salaries A/c (Amala) 720
20 To Nirmala A/c 7,810 31 By Balance c/d 1,688
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35,928 35,928
2013 Sep 1 To Balance b/d 1,688
Pass Book Cheque paid into

Less :
Dr. bank, but not
s.
Cr. Balance
With- collected - Nirmala 7,810
Date Particulars Deposits Dr. / Cr.
drawals
` ` Bills payable paid,
`
2013 not entered in Cash
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Aug 1 By balance b/d 20,525 Cr. book 4,000 11,810
9 To Kokila 12,000 8,525 Cr. Balance as per pass book 23,503
19 By Shankar 6,943 15,468 Cr.
25 By Rajan 450 15,918 Cr.
26 To Geetha 9,740
o 6,178 Cr. HOTS Questions
27 By Babu 200 6,378 Cr.
28 To Amala 720 5,658 Cr. Very Short Answer Questions.2 MARKS
30 By B/R 20,000
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1. Which values are involved in the preparation of
,, By Interest 25 bank reconciliation statements?
,, By Interest on
Investment 1,820 27,503 Cr. Ans. The values involved in the preparation of bank
2013 reconciliation statement are
Aug 31 To B/P 4,000 25,503 Cr. (i) Prevention of fraud
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(ii) Identifying errors

Solution : (iii) Fulfilment of commitment on time by finding
In the books of Mr. Sekar Bank Reconciliation out reasons of undue delay in clearance of
cheque.
Statement as on August 31, 2013
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2. When bank column of a cash book shows a

Amount Amount credit balance, what doesn't mean?
Particulars
` ` Ans. It means overdraft ie., a mount due to the bank
Balance as per Cash book 1,688 or the excess amount withdrawn over the amount
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deposited in the bank.

Bills receivable
Add :
collected, not entered 3. When bank column of a cash book shows a
in cash book 20,000 debit balance, what does it mena?
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Ans. It means balance lying with the bank or the deposits

Interest collected, not made by the firm are more than its withdrawals.
entered in cash book 25 4. Briefly explain the statement 'wrongly debited
Interest on Investment
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by the bank' with the help of an example.

collected, not entered Ans. Amount wrongly debited by the bank implies a
in cash book 1,820 situation when the bank wrongly debits a passbook.
Cheques issued but For example a firm issued a cheque of `1,500 to its
not collected - Latha 11,780 33,625 creditor and it is presented for payment and paid
by the bank but in place of `1,500 bank debited it
35,313 wrongly by `15,000.
  
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s.
ACCOUNTANCY
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11th Standard
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Volume - II
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[ 245 ]

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CONTENT
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VOLUME - II
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9. Rectification of Errors......................................................................................... 245 - 269
10. Depreciation Accounting...................................................................................... 270 - 308

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11. Capital and Revenue Transactions....................................................................... 309 - 322
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12. Final Accounts of Sole Proprietors - I................................................................... 323 - 353
13. Final Accounts of Sole Proprietors - II...................................................................354 - 402

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14. Computerised Accounting ....................................................................................403 - 414
Govt. Model Question Paper - 1 with Answers ........................................................415 - 428

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Sura’s Model Question Paper - 1 with Answers ................................................429 - 444

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[ 246 ]

UNIT
Rectification
9
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of Errors
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s.
CHAPTER SNAPSHOT
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9.1 Introduction 9.6 Steps to locate errors
9.2 Meaning of errors 9.6.1 Location of errors
9.3 Errors at different stages of before preparation of
o trial balance
accounting
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9.6.2 Location of errors after
9.4 Classification of errors
the preparation of trial
9.4.1 Error of omission balance
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9.4.2 Error of commission 9.7 Suspense account

9.4.3 Error of principle 9.7.1 Meaning of suspense
account
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9.4.4 Compensating errors

9.5 Errors disclosed by the trial 9.7.2 Preparation of suspense
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balance and errors not disclosed account

by the trial balance 9.8 Rectification of errors
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9.5.1 Errors disclosed by the 9.8.1 Stages of rectification of

trial balance errors
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9.5.2 Errors not disclosed by 9.9 Errors in computerised

the trial balance accounting
[ 247 ]

248 Sura’s  XI Std - Accountancy ➠ Volume - II
CONCEPT MAP
ERRORS
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Errors of Principle Clerical Errors
(Treating a revenue expenses as
capital expenditure or
vice versa or the sale of a fixed
s.
asset as ordinary sale) Errors of Errors of Compensating
Trial Balance will agree Omission Commission Errors
Trial Balance
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will agree
Omitting an Omitting to post

Entry Completely the ledger account
from the
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subsidiary books. subsidiary books.
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Trial Balance will agree Trial Balance
will not agree
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Writing the Posting Posting an Wrong

Wrong casting the wrong amount on balancing
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wrong amount
of subsidiary amount the wrong of an
in the subsidiary
books. in the ledger side account
books.
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Trial Balance
will agree
Types balance will not agree
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Sura’s  XI Std - Accountancy ➠ Unit 9 ➠ Rectification of Errors 249
IMPORTANT POINTS
The very purpose of maintaining accounting records is to know the profit made or the loss incurred
and its financial position at the end of every accounting year.
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Errors mean wrongly recording or omissions to record transactions or in classifying or summarising
of accounting transactions unintentionally by an accountant or clerk.
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The failure of the accountant to record a transaction in the books of accounts is known as an error
of omission.
Error of Commission usually occurs due to lack of concentration or carelessness of the accountant.
Error of principle means the mistake committed in the application of fundamental accounting
s.

principles in recording a transaction in the books of accounts.

The errors that make up for each other or neutralise each other are known as compensating errors.
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Generally, one-sdied errors are revealed by trial balance. Two sided errors are not revealed by trial
balance.
Certain errors will not affect the agreement of trial balance.
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I. Multiple Choice Questions. 3. The difference in trial balance is taken to

(a) The capital account
1. Error of principle arises when
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(b) The trading account

(a) There is complete omission of a transaction
(c) The suspense account
(b) There is partial omission of a transaction (d) The profit and loss account
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(c) Distinction is not made between capital [Ans. (c) The suspense account]
and revenue items 4. A transaction not recorded at all is known
(d) There are wrong postings and wrong as an error of
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castings (a) Principle

[Ans. (c)
Distinction is not made between (b) Complete omission
capital and revenue items]
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(c) Partial omission

2. Errors not affecting the agreement of trial (d) Duplication
balance are [Ans. (b) Complete omission]
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(a) Errors of principle 5. Wages paid for installation of machinery

wrongly debited to wages account is an
(b) Errors of overcasting
error of [BEQ] [HY-2018]
(c) Errors of undercasting (a) Partial omission (b) Principle
(d) Errors of partial omission (c) Complete omission (d) Duplication
[Ans. (a) Errors of principle] [Ans. (b) Principle]


6. Which of the following errors will not affect 10. Which of the following errors will be
the trial balance? rectified using suspense account?
(a) Wrong balancing of an account (a) Purchases returns book was undercast by
`100
(b) Posting an amount in the wrong account (b) Goods returned by Narendran was not
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but on the correct side recorded in the books
(c) Wrong totalling of an account (c) Goods returned by Akila `900 was
recorded in the sales returns book as `90
(d) Carried forward wrong amount in a ledger
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account (d) A credit sale of goods to Ravivarman was
not entered in the sales book.
[Ans. (b) Posting an amount in the wrong [Ans. (a) Purchases returns book was
account but on the correct side] undercast by `100]
s.
7. Goods returned by Senguttuvan were taken II. Very Short Answer Questions.
into stock, but no entry was passed in the
books. While rectifying this error, which of 1. What is meant by rectification of errors?
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Ans. (i) The correction of accounting errors
the following accounts should be debited?
in a systematic manner is called the
(a) Senguttuvan account rectification of errors.
(b) Sales returns account (ii) In other words, the process of
(c) Returns outward account

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errors is known as rectification of errors.
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(d) Purchases returns account 2. What is meant by error of principle?
[Ans. (b) Sales returns account] Ans. Error of principle means the mistake committed
in the application of fundamental accounting
8. A credit purchase of furniture from
principles in recording a transaction in the
Athiyaman was debited to purchases
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books of accounts.
account. Which of the following accounts
3. What is meant by error of partial omission?
should be debited while rectifying this
Ans. (i) When the accountant has failed to record
error? [BEQ]
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a transaction partially, it is known as

(a) Purchases account error of partial omission.
(ii) This error usually occurs in posting. This
(b) Athiyaman account
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error affects only one account.

(c) Furniture account
4. What is meant by error of complete
(d) None of these omission?
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[Ans. (c) Furniture account] Ans. It means the failure to record a transaction in
the journal or subsidiary book or failure to post
9. The total of purchases book was overcast. both the aspects in ledger. This error affects
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Which of the following accounts should be two or more accounts.

debited in the rectifying journal entry? 5. What are compensating errors? [BEQ]
(a) Purchases account (b) Suspense account Ans. (i) The errors that make up for each other
(c) Creditor account (d) None of the above or neutralise each other are known as
compensating errors. These errors may
[Ans. (b) Suspense account] occur in related or unrelated accounts.

(ii) Thus, excess debit or credit in one account 3. What are the errors not disclosed by a trial
may be compensated by excess credit or balance?
debit in some other account. These are Ans. Certain errors will not affect the agreement of
also known as offsetting errors.
trial balance. Though such errors occur in the
III. Short Answer Questions. books of accounts, the total of debit and credit
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balance will be the same. The trial balance will
1. Write a note on error of principle by giving
tally. Examples of such errors are as follows:
an example.
(i) Treating revenue expenditure as capital
Ans. It means the mistake committed in the expenditure
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application of fundamental accounting
principles in recording a transaction in the (ii) Omitting a transaction completely
books of accounts. (iii) Entering a transaction in a wrong
subsidiary book
The following are the possibilities of error of
(iv) Entering a transaction twice in a
s.
principle:
(i) Entering the purchase of an asset in subsidiary book or journal
the purchases book : (v) Entering the amount of a transaction
Example : Machinery purchased on wrongly in the journal
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credit for `10,000 by M/s. Anbarasi (vi) Entering the amount of a transaction
garments manufacturing company wrongly in a subsidiary book.
entered in the purchases book.
(ii) Entering the sale of an asset in the 4. What are the errors disclosed by a trial
balance?
sales book :
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Example : Sale of old furniture on credit Ans. Certain errors affect the agreement of trial
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for `500 was entered in the sales book. balance. If such errors have occurred in the
(iii) Treating a revenue expenditure as a books of accounts, the total of debit and
capital expenditure : credit balances will not be the same. The trial
Example : An amount of `2,000 paid balance will not tally. Examples of such errors
for repairs to a machine is debited to are follows:
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machinery account. (i) Entered in the journal but posted to one

(iv) Treating a capital expenditure as a account and omitted to be posted to the
revenue expenditure : other.
Examples : An amount of `3,000 spent
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(ii) Posting an amount to the wrong side of a

on the construction of an additional room ledger account.
is debited to repairs account.
(iii) Posting twice in a ledger account
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2. Write a note on suspense account. [BEQ] (iv) Over-casting or Under-casting in a

Ans. (i) When the trial balance does not tally, subsidiary book
the amount of difference is placed to the (v) Posting a wrong amount to the correct
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debit (when the total of the credit column side of an account

is higher than the debit column) or credit
(vi) Posting a wrong amount to the wrong
(when the total of the debit column
side of an account
is higher than the credit column) to a
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temporary account known as ‘suspense (vii) Errors arising in carrying forward the
account’. page total from one page to the next page
(ii) Suspense account will remain in the of an account or subsidiary book.
books until the location and rectification (viii) Errors arising in the balancing of an
of errors. account.
(iii) If all the errors are located and rectified, (ix) Omission to post an entry from a
the suspense account gets closed. subsidiary book.


5. Write a note on one-sided errors and two Ans. (a) Sales account should be credited with
sided errors. `100.
Ans. One-sided errors : (b) Purchases returns account should be
(i) Generally, one-sided errors are revealed debited with `200.
by trial balance. they will cause
4. Rectify the following errors before the
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disagreement of totals of debit balances
and credit balances. preparation of trial balance:
(ii) When one-sided error is detected before (a) Returns outward book was undercast
preparing the trial balance, no journal by `2,000
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entry is required to be passed in the (b) Returns inward book total was taken
books. as `15,000 instead of `14,000
(iii) In such cases, the error can be rectified by (c) The total of the purchases account was
giving an explanatory note in the account carried forward `100 less.
s.
affected as to whether the concerned Ans. (a) Returns outward account should be
account is to be debited or credited.
credited with `2,000.
Two-sided errors : (b) Returns inward account should be
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(i) Two-sided errors are not revealed by trial credited with `1,000 (overcast).
balance
(c) Purchases account should be debited
(ii) When two-sided error is detected before with `100.
preparing the trial balance, it must be
rectified by passing a rectifying journal 5. Rectify the following errors assuming that
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entry in the journal proper after analysing the trial balance is yet to be prepared:
the error. (a) Sales book was undercast by `400
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IV. Exercises. (b) Sales returns book was overcast by
1. State the account/s affected in each of the `500
following errors: [BEQ] (c) Purchases book was undercast by
(a) Goods purchased on credit from `600
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Saranya for `150 was posted to the (d) Purchases returns book was overcast
debit side of her account. by `700
(b) The total of purchases book `4,500 was (e) Bills receivable book was undercast by
posted twice.
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`800
Ans. (a) Saranya A/c
Ans. (a) Sales account should be credited with
(b) Purchase A/c `400.
2. State the account/s affected in each of the
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(b) Sales returns account should be credited

following errors: with `500.
(a) Goods sold to Vasu on credit for `1,000 (c) Purchases account should be debited
was not recorded in the sales book.
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with `600.
(b) The total of sales book `2,500 was
posted twice. (d) Purchase returns account should be
Ans. (a) Vasu A/c
debited with `700.
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(b) Sales A/c (e) Bills receivable account should be

debited with `800.
3. Rectify the following errors discovered
before the preparation of the trial balance: 6. Rectify the following errors before
(a) Sales book was undercast by `100 preparing trial balance:
(b) Purchases returns book was overcast (a) The total of purchases book was
by `200 carried forward `90 less.

(b) The total of purchases book was 8. The accountant of a firm located the
carried forward `180 more. following errors before preparing the trial
(c) The total of sales book was carried balance. Rectify them.
forward `270 less. (a) Machinery purchased for `3,000 was
(d) The total of sales returns book was debited to purchases account.
(b) Interest received `200 was credited to
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carried forward `360 more.
commission account.
(e) The total of purchase returns book
(c) An amount of `1,000 paid to
was carried forward `450 less. Tamilselvan as salary was debited to
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Ans. (a) Purchases account should be debited his personal account.
with `90. (d) Old furniture sold for `300 was
(b) Purchases account should be credited credited to sales account.
with `180. (e) Goods worth `800 purchased from
(c) Sales account should be credited with Soundarapandian on credit was not
s.
`270. recorded in the books of accounts.
(d) Sales returns account should be credited Solution :
with `360.
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Journal Entries
(e) Purchases returns account should be
credited with `450. S. Debit Credit
L.F.
Particulars
No. ` `
7. The following errors were located by the
(a) Machinery A/c Dr. 3,000
balance. Rectify them.
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accountant before preparation of trial
To Purchases A/c 3,000
(Correction of wrong
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(a) The total of the discount column of debit to purchases A/c for
`1,100 on the debit side of the cash Machinery purchased)
book was not yet posted.
(b) Commission A/c Dr. 200
(b) The total of the discount column on
To Interest received A/c 200
the credit side of the cash book was
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(Correction of wrong credit

undercast by `500. to commission A/c for
(c) Purchased goods from Anbuchelvan interest received)
on credit for `700 was posted to the
(c) Salary A/c
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debit side of his account. Dr. 1,000

To Tamil Selvan A/c 1,000
(d) Sale of goods to Ponmukil on credit for
(Salary paid to Tamil Selvan
`78 was posted to her account as `87. was debited to his personal
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(e) The total of sales returns book of `550 account is now corrected)
was posted twice.
(d) Sales A/c Dr. 300
Ans. (a) Discount allowed account should be
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To Old Furniture A/c 300

debited with `1,100.
(Being sale of furniture
(b) Discount received account should be costing `5,000 was credited
credited with `500. to sales A/c, now rectified)
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(c) Anbuchelvan account should be credited

(e) Purchases A/c Dr. 800
with `1,400 (700 + 700).
To Soundarapandian A/c 800
(d) Ponmukil account should be credited (Being goods purchased
with `9. from Soundarapandian were
(e) Sales return account should be credited not received in the books of
with `550. accounts, now rectified)


9. Rectify the following errors which were (a) The total of the discount column on the
located before preparing the trial balance. debit side of the cash book of `225 was
(a) Wages paid `2,000 for the erection posted twice.
of machinery was debited to wages (b) Goods of the value of `75 returned
account. by Ponnarasan was not posted to his
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(b) Sales returns book was short totalled account.
by `1,000. (c) Cash received from Yazhini `1,000 was
not posted.
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(c) Goods purchased for `200 was posted
as `2,000 to purchases account. (d) Interest received `300 has not been
posted.
(d) The sales book was overcast by `1,500.
(e) Rent paid `100 was posted to rent
(e) Cash paid to Mukil `2,800 which was
account as `10.
s.
debited to Akhil’s account as `2,000.
Ans. (a) Discount allowed account should be
Solution : credited with `225.
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Rectification of Errors (b) Ponnarassan account should be credited
with `75.
S. Debit Credit
L.F.
Particulars (c) Yazhini account should be credited with

No. ` `
`1,000.
(a) Machinery A/c Dr. 2,000
To Wages A/c
o 2,000 (d) Interest received account should be
(Wages paid `2,000 for credited with `300.
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the erection of machinery (e) Rent account should be debited with
was debited to wages `90.
account now rectified) 11. The following errors were located at the
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(b) Sales returns account should be debited time of preparing trial balance. Rectify
with `1,000. them. [BEQ]
(c) Purchases account should be credited (a) A personal expense of the proprietor
with `1,800.
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`200 was debited to travelling expenses

(d) Sales account should be debited with account.
`1,500.
(b) Goods of `400 purchased from Ramesh
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S. Debit Credit on credit was wrongly credited to

L.F.
Particulars Ganesh’s account.

No. ` `
(c) An amount of `500 paid as salaries
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(e) Mukil A/c Dr. 2,800

to Mathi was debited to his personal
To Akhil's A/c 2,000
account.
To Suspense A/c 800
(d) An amount of `2,700 paid for extension
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(Cash paid to Mukil 2,800

was debited to Akhil's of the building was debited to repairs
account now rectified) account.
(e) A credit sale of goods of `700 on credit
10. Rectify the following errors which were to Mekala was posted to Krishnan’s
located at the time of preparing the trial account.
balance:

Solution : (c) Cash A/c Dr. 2,000

Rectification of Errors To Sales A/c 2,000
(Furniture sold for cash)
S. Debit Credit
L.F.
Particulars (d) Cash A/c Dr. 10,000
No. ` ` To Kumararaja A/c 10,000
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(a) Drawings A/c Dr. 200 (Goods sold to
To Travelling expenses A/c 200 Kumararaja for cash)
(Being goods withdraw by (e) Manimaran A/c Dr. 1,000
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proprietor to his personal To Purchases A/c 1,000
expense 200, was debited (Goods taken by the
to travelling expenses, now proprietor Mr. Manimaran
rectified) for his personal use)
s.
(b) Ganesh's A/c Dr. 400
Solution :
To Ramesh A/c 400
(Being credit purchase from Rectification of Errors
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Ramesh, wrongle credited
S. Debit Credit
L.F.
to Ganesh's account now Particulars
No. ` `
rectified)
(a) Salary A/c Dr. 10,000
(c) Salaries A/c Dr. o 500
To Kumanan A/c 10,000
To Mathi A/c 500 (Correct of wrong debit
(Being correction of wrong to Kumanan's A/c for
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debit to Mathi's personal salary paid)
account for salaries paid)
(b) Rent A/c Dr. 6,000
(d) Building A/c Dr. 2,700 To Senguttuvan A/c 6,000
To Repairs A/c 2,700 (Correct of wrong debit
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(Being amount paid for to Senguttuvan's A/c for

extension of building was rent paid)
debited wrongly to repairs
account, now rectified) (c) Sales A/c Dr. 2,000
To Furniture A/c 2,000
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(e) Mekala A/c Dr. 700 (Correct of wrong debit

To Krishnan's A/c 700 to cash A/c for furniture
(Being goods sold to Mekala, sold)
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wrongly posted to Krishnan's

(d) Kumararaja A/c Dr. 10,000
account, now rectified)
To Sales A/c 10,000
(Correct of wrong credit
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12. Rectify the following Journal Entries.

to Kumarraja for cash
S. Dr. Cr. sales)
L.F.
Particulars
No. ` `
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(e) Drawings A/c Dr. 1,000

(a) Kumanan A/c Dr. 10,000 To Manimaran A/c 1,000
To Cash A/c 10,000 (Goods taken by
(Salary paid to Kumanan) the proprietor Mr.
(b) Senguttuvan A/c Dr. 6,000 Manimaran for his
To Cash A/c 6,000 personal use, now
(Rent paid to Senguttuvan) rectified)


13. Rectify the following errors discovered 15. Pass necessary journal entries to rectify
after the preparation of the trial balance: the following errors located after the
preparation of trial balance:
(a) Rent paid was carried forward to the
(a) Sales book was undercast by `1,000.
next page `500 short.
(b) A amount of `500 paid for wages was
(b) Wages paid was carried forward `250 wrongly posted to machinery Account.
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excess.
Solution :
Solution :
Rectification of Errors
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S. Debit Credit S. Debit Credit
L.F.
Particulars
L.F.
No. ` ` Particulars
No. ` `
(a) Rent A/c Dr. 500 (a) Suspense A/c Dr. 1,000
To Suspense A/c 500 To Sales A/c 1,000
s.
(Short amount carried (Being the under casting in
forward to Rent a/c the Sales book rectified)
rectified) (b) Wages A/c Dr. 500
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(b) Suspense A/c Dr. 250 To Machinery A/c 500
To Wages A/c 250 (Being wages was wrongly
(Excess amount carried posted to machinery
forward to wages A/c, now
o account, now rectified)
rectified) 16. Give journal entries to rectify the following
errors discovered after the preparation of
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14. Rectify the following errors after trial balance:
preparation of trial balance: [BEQ]
(a) Purchases book was overcast by
(a) Salary paid to Ram `1,000 was wrongly `10,000.
debited to his personal account.
(b) Repairs to furniture of `500 was
(b) A credit sale of goods to Balu for `450
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debited to furniture account.

was debited to Balan.
(c) A credit sale of goods to Akilnilavan
Solution : for `456 was credited to his account as
Rectification of Errors `654.
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Solution :
S. Debit Credit
L.F.
Particulars Rectification of Errors

No. ` `
S. Debit Credit
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L.F.
(a) Salary A/c Dr. 1,000 Particulars

No. ` `
To Ram A/c 1,000
(a) Suspense A/c Dr. 10,000
(Being salary paid to Ram
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wrongly debited to his

(Excess overcast in
Personal account, now Purchases book now
rectified) rectified)
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(b) Balu A/c Dr. 450 (b) Furntiure repairs A/c Dr. 500
To Balan A/c 450 To Furntiure A/c 500
(Being the credit sale of (Being correcting of
goods to Balu for `450 wrong debit to furniture
was debited to Balan, now account for repairs
rectified) made)

(c) Akilnilavan A/c Dr. 1,110 (b) The total of the discount column on
the debit side of cash book `420 was
To Suspense A/c 1,110
not posted.
(Being credit sale to
(c) The total of one page of the purchases
Akilnilavan was credited book of `5,353 was carried forward to
to his account as `654 the next page as `5,533.
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now rectified) (d) Salaries `2,400 was posted as `24,000.
17. Rectify the following errors located after (e) Purchase of goods from
the preparation of trial balance: [HY-2018] Sembiyanmadevi on credit for
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(a) Purchases book was undercast by `180 was posted to her account as
`900. `1,800.
(b) Sale of old furniture for `1,000 was Solution :
credited to sales account. Journal Entries
s.
(c) Purchase of goods from Arul for
`1,500 on credit was not recorded in S. Debit Credit
L.F.
Particulars
the books. No. ` `
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Solution : (a) Suspense A/c Dr. 350
To Sales A/c 350
Rectification of Errors (Being the undercasting
S. Debit Credit of sales book, now
L.F.
Particulars
No.
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(a) Purchases A/c Dr. 900 (b) Discount allowed A/cDr. 420
ab
To Suspense A/c 900 To Suspenses A/c 420
(Being the undercasting in (Being total of the
the purchases book now discount column on the
rectified) debit side, now rectified)
(b) Sales A/c Dr. 1,000
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To Furniture A/c 1,000 (c) Suspense A/c Dr. 180

(Sale of old furniture To Purchase A/c 180
on book value, error (Being the total one
.s
rectification recording was page of the Purchase

wrongly credited to sales book 5,353 was carried
account) forward to the next page
as 5,533 now rectified)
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(c) Purchases A/c Dr. 1,500

To Arul A/c 1,500 (d) Suspense A/c Dr. 21,600
(Credit purchases from To Salaries A/c 21,600
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Arul, error rectification (Being the excess

recording, not recorded amount posted to the
earlier) salaries account rectified)
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18. The following errors were located after the (e) Sembiyanmadevi A/c Dr. 1,620
preparation of trial balance. Pass journal To Suspense A/c 1,620
entries to rectify them. Assume that there (Being the excess
exists a suspense account. amount posted to
(a) The total of sales book was undercast Sembiyanmadevi
by `350. account rectified)

19. Rectify the following errors assuming that 20. The following errors were located after the
the trial balance is already prepared and the preparation of trial balance. The difference
difference was placed to suspense account: in trial balance has been taken to suspense
(a) Sales book was undercast by `250 account. Rectify them.
(b) Purchases book was undercast by (a) The total of purchases book was
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`120 carried forward `70 less.
(c) Sales book was overcast by `130 (b) The total of sales book was carried
(d) Bills receivable book was undercast by forward `340 more.
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`75 (c) The total of purchases book was
(e) Purchases book was overcast by `35. carried forward `150 more.
(d) The total of sales book was carried
Solution :
forward `200 less.
s.
Rectification of Errors (e) The total of purchase returns book
was carried forward `350 less.
S. Debit Credit
L.F.
Particulars
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No. ` ` Solution :
(a) Suspense A/c Dr. 250
S. Debit Credit
L.F.
To Sales A/c 250 Particulars
No. ` `
(Being the undercasting of
sales book now rectified)
o (a) Purchases A/c
To Suspense A/c
Dr. 70
70
(Being purchases book
ab
(b) Purchases A/c Dr. 120
To Suspense A/c 120 was carried forward `70
less, now rectified)
(Being the undercasting
(b) Sales A/c Dr. 340
of Purchase book now
To Suspense A/c 340
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rectified)
(Being sales book was
(c) Sales A/c Dr. 130 carried forward `340
To Suspense A/c 130 more, now rectified)
.s
(Being the overcasting (c) Suspense A/c Dr. 150

the sales book now To Purchases A/c 150
rectified) (Being purchases book
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was carried forward `150

(d) Bills receivable A/c Dr. 75 more, now rectified)
To Suspense A/c 75 (d) Suspense A/c Dr. 200
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(Being bills receivable To Sales A/c 200

book undercast, now (Being sales book was
rectified) carried forward 200 less,
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now rectified)
(e) Suspense A/c Dr. 35 (e) Suspense A/c Dr. 350
To Purchases A/c 35 To Purchase returns A/c 350
(Being Purchase book (Being purchase return
was overcast by `35, now book was cast short, now
rectified) rectified)

21. The following errors were located by the 22. The accountant of a firm located the following
accountant after the preparation of trial errors after preparing the trial balance.
balance. There exists a suspense account. Rectify them assuming that there is a
Rectify them. [BEQ] suspense account.
(a) The total of the discount column of (a) Machinery purchased for `3,500 was
`1,180 on the debit side of the cash debited to purchases account.
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book was not posted. (b) `1,800 paid to Raina as salary was
(b) Purchase of goods from Arivuchelvan debited to his personal account.
on credit for `600 was posted to the (c) Interest received `200 was credited to
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debit side of his account. commission account.
(c) The total of the discount column on (d) Goods worth `1,800 purchased
the credit side of the cash book was from Amudhanila on credit was not
undercast by `400. recorded in the books of accounts.
(d) The total of sales returns book of `570 (e) Used furniture sold for `350 was
s.
was posted twice. credited to sales account.
(e) Sold goods to Mukil on credit for `87 Solution :
was posted to her account as `78.
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Solution :
S. Debit Credit
L.F.
Rectification of Errors Particulars
No. ` `
S. Debit Credit (a) Machinery A/c Dr. 3,500
L.F.
Particulars
No. ` `
(a) Discount allowed A/c Dr.
o 1,180
To Purchases A/c
(Being the Purchase of
3,500
To Suspense A/c 1,180 plant wrongly entered

ab
(Being the omission to in the purchases book
post the total of discount rectified)
allowed, now rectified) (b) Salary A/c Dr. 1,800
(b) Suspense A/c Dr. 1,200 To Raina A/c 1,800
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To Arivuchelvan A/c 1,200 (Being Salaries paid to

(Being the excess amount Raina wrongly debited to
posted to Arivuchelvan his account now rectified)
account rectified) (c) Commission A/c Dr. 200
.s
(c) Suspense A/c Dr. 400 To Interest Received A/c 200

To Discount received A/c 400 (Being Interest received
`200 was credited to
(Being Partial omission in
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commission account, now

discount received A/c is
rectified)
now rectified)
(d) Purchases A/c Dr. 1,800
(d) Suspense A/c Dr. 570
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To Amudhanila A/c 1,800

To Sales returns A/c 570 (Being goods purchased
(Being Sales return book was not recorded in the
of `570 was posted twice,
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books, now rectified)

now rectified) (e) Sales A/c Dr. 350
(e) Mukil A/c Dr. 9 To Furniture A/c 350
To Suspense A/c 9 (Being the credit sale of
(Being Sales to Mukil `87 used furniture credited
was posted to her Account to sales account, now
as `78, now rectified) rectified)


23. The book-keeper of a firm found that Solution : Rectification of Errors
the trial balance was out by `922 (excess
S. Debit Credit
L.F.
credit). He placed the amount in the Particulars
No. ` `
suspense account and subsequently found (a) Suspense A/c Dr. 78
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the following errors: To Discount Received A/c 78
(Partial omission in
(a) The total of discount column on the Discount received A/c is
now rectified)
credit side of the cash book `78 was
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not posted in the ledger. (b) Purchases A/c Dr. 1,000
To Suspense A/c 1,000
(b) The total of purchases book was short (Undercast in Purchase
book, now rectified)
by `1,000.
s.
(c) Sales A/c Dr. 360
(c) A credit sale of goods to Natarajan for To Natarajan A/c 360
(Excess Debit in Natarajan
`375 was entered in the sales book as
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A/c and excess Credit in
`735. Sales A/c now rectified)
(d) Mekala A/c Dr. 1,400
(d) A credit sale of goods to Mekala for To Sales A/c 700
`700 was entered in the purchases book. To Purchases A/c 700
o
You are required to give rectification
(Being the rectification for a
Credit sale wrongly passed
entries and prepare suspense account.
ab
through the Purchases book)
Dr. Suspense Account Cr.

Amount Amount
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Particulars Particulars
` `
To Balance b/d 922 By Purchases A/c 1,000

.s
To Discount received A/c 78

1,000 1,000
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24. The books of Raman did not agree. The (b) A credit sale of goods to Shanmugam
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accountant placed the difference of `1,270 for `430 was credited to his account as
to the debit of suspense account. Rectify the `340.
following errors and prepare the suspense (c) A purchase of goods on credit for `400
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account: [BEQ] from Vivek was entered in the sales

(a) Goods taken by the proprietor for his book. However, Vivek’s account was
personal use `75 was not entered in the correctly credited.
books. (d) The total of the purchases returns
book `300 was not posted.

Solution : Rectification of Errors (c) Purchases A/c Dr. 400

S. Debit Credit Sales A/c Dr. 400
L.F.
Particulars
No. ` ` To Suspense A/c 800
(a) Drawing A/c Dr. 75 (Correction of wrong Entry
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To Purchases A/c 75 in Sale book for a Credit
(Entry for goods taken by
the Proprietor for personal Purchase from Vivek)
one) (d) Suspense A/c
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Dr. 300
(b) Shanmugam A/c Dr. 770 To Purchase returns A/c 300
To Suspense A/c 770
(Purchase return book was
(being goods sold to
Shanmugam for `430 was not posted, now rectified)
s.
credited as `340, now
rectified)
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Amount Amount
` `
To Balance b/d 1,270 By Shanmugam 770
o By Sales A/c 400
To Purchase returns A/c 300 By Purchases A/c 400
ab
1,570 1,570

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I. Choose the Correct Answer. 3. When the accountant has failed to record a
transaction partially, it is known as
1 MARK (a) error of principle
(i) Choose the Correct Option. (b) error of partial omission
.s
(c) error of omission

1. Purchase of office furniture `4,800 has been (d) error of commission
debited to general expense account which [Ans. (b) error of partial omission]
error is it?
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(a) Error of commission 4. The errors that make up for each other or
(b) Error of principle neutralise each other are known as
(c) Compensating error (a) Compensating Errors
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(d) None of these (b) Rectifying Errors

[Ans. (b) Error of principle] (c) Both
(d) None of these
2. The failure of the accountant to record [Ans. (a) Compensating Errors]
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a transaction in the books of accounts is

known as 5. Errors which affect one side of an account
(a) error of omission are called
(b) error of complete omission (a) Single sided errors
(c) error of partial omission (b) Double sided errors
(d) errors of principle (c) Both
[Ans. (a) error of omission] (d) None of the above
[Ans. (a) Single sided errors]


6. Amount spent on servicing office Typewriter (ii) M
atch List I with List II and
should be debited to : Select the Correct Answer using
(a) Repairs account the Codes given below.
(b) Typewriter account
(c) Miscellaneous expenses account List I List II
(d) Drawings account (i) Error of omission (1) Offsetting errors
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[Ans. (a) Repairs account]
(ii) Error of commission (2) Temporary account
7. Wages paid to workers for the installation (iii) Compensating errors (3) Posting to wrong account
of a new machinery should be debited to : (iv) Suspense account (4) Partial omission
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(a) Wages account
(b) Factory expenses account Codes :
(c) Machinery account (i) (ii) (iii) (iv)
(d) Proprietor's account (a) 1 2 3 4
[Ans. (c) Machinery account]
s.
(b) 3 4 1 2
8. Salary paid to manager must be debited to (c) 4 3 1 2
(a) Manager's account (d) 2 3 1 4
(b) Salary account
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(c) Office expenses account [Ans. (c) (i) - 4, (ii) - 3, (iii) - 1, (iv) - 2]
(d) None of these [Ans. (b) Salary account]
(iii)
Choose the Correct Option and
9. Goods taken by the Proprietor for domestic Fill in the Blanks.
use should be credited to
o
(a) Proprietor's drawings account
1. Many business enterprises have shifted
(b) Sales account from manual accounting to __________
ab
(c) Purchases account accounting.
(d) Suspense account (a) Journal (b) Ledger
[Ans. (c) Purchases account] (c) Computerised (d) None of these
[Ans. (c) Computerised]
10. Cash received from Mani whose account
2. __________ is prepared to avoid the delay
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was previously written off as a Bad debt

should be credited in the preparation of final accounts.
(a) Cash account (b) Mani's account (a) Suspense account
(c) Bad debts recovered account (b) Trading account
(c) Profit and loss account
.s
(d) Miscellaneous income account

[Ans. (c) Bad debts recovered account] (d) Final account[Ans. (a) Suspense account]
11. Suspense account balance will be shown in 3. __________ usually occurs due to lack
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the [BEQ] of concentration or carelessness of the

(a) Trading account accountant. [BEQ]
(b) Profit and loss account (a) Error of omission

(b) Error of principle
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(c) Balance sheet

(c) Error of commission
(d) Final account [Ans. (c) Balance sheet] (d) None of the above
12. Purchase of office furniture `4,800 has been [Ans. (c) Error of commission]
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debited to general expense account. which 4. __________ account will remain in the
errors is it? books until the location and rectification of
(a) Error of commission errors. [BEQ]
(b) Error of principle (a) Suspense (b) Ledger
(c) Error of omission (c) Journal (d) None of these
(d) compensating errors [Ans. (a) Suspense]
[Ans. (b) Error of principle]

5. When errors are located and rectified, Select the correct answer.
__________ automatically gets closed. (a) Both (A) and (R) are true and (R) is the
(a) Suspense account correct explanation of (A)
(b) Journal account (b) Both (A) and (R) are true and (R) is not the
(c) Trial balance correct explanation of (A)
(d) Final account[Ans. (a) Suspense account] (c) (A) is true, but (R) is false.
m
(d) (A) is false, but (R) is true.
(iv) Pick the Odd one Out. [Ans. (b) Both (A) and (R) are true and (R)
1. (a) Errors of omission is not the correct explanation of
(b) Errors of commission (A)]
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(c) Suspense account
(d) Error of principle 2. Assertion (A) : The errors that make up
[Ans. (c) Suspense account] for each other or neutralise
Reason: Suspense account will remain in the each other are known as
books until the location and rectification of compensating errors.
s.
errors. Other three are types of errors on the Reason (R) : These are also known as
basis of journalising. error of omission.
Select the correct answer.
(v)
Which of the Following is Correct: (a) Both (A) and (R) are true and (R) is the
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1. Sale of furniture for `750 was credited to correct explanation of (A)
sales account. (b) Both (A) and (R) are true and (R) is not the
(a) Sales A/c Dr correct explanation of (A)
To Furniture A/c (c) (A) is true, but (R) is false.
(b) Furniture A/c Dr (d) (A) is false, but (R) is true.
To Sales A/c
o [Ans. (c) (A) is true, but (R) is false.]
(c) Cash A/c Dr
(vii) Choose the Correct Statement
ab
To Sales A/c
(d) Purchase A/c Dr 1. (i) Suspense account will remain in the
To Sales A/c books until the location and rectification
[Ans. (a) Sales A/c Dr of errors.
To Furniture A/c]
(ii) Error of partial omission and error of
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2. Sales book is overcast by `200. commission affect the agreement of

(a) Sales account should be credited with trial balance.
`200. (iii) One-sided errors are not revealed by
(b) Sales account should be debited with `200. trial balance.
.s
(c) Sales returns book should be debited with (a) (i) is correct
`200. (b) (ii) is correct
(d) Sales returns book should be credited with (c) (i) and (ii) are correct
`200.
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(d) (i), (ii) and (iii) are correct

[Ans. (b) Sales account should be debited [Ans. (c) (i) and (ii) are correct]
with `200.]
(vi)
Consider the Following II. Very Short Answer Questions.
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Statement. 2 MARKS
1. Assertion (A) : Many business enterprises 1. What is error of omission?
have shifted from manual Ans. (i) The failure of the accountant to record
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accounting to computerised a transaction in the books of accounts is

accounting. known as an error of omission.
Reason (R) : Error means recording or
classifying or summarising (ii) It can be complete omission or partial
the accounting transactions omission.
wrongly or omissions to
record them by a clerk or an
accountant unintentionally.


2. What is error of commission? 2. Following errors are discovered in the
Ans. (i) When the accountant has done something Books of Sita Ram. Make the necessary
which should not have been done, it is entries to rectify them.
known as error of commission. (i) Purchases journal was `2,150.
(ii) It usually occurs due to lack of (ii) `500 received from K. Krishna was
m
concentration or carelessness of the debited to his account.
accountant. (iii) An amount of `3,000 withdrawn by the
Proprietor of the firm for his personal
III. Short Answer Problems. 3 MARKS
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use was posted to the Traveling expense
1. Rectify the following errors. account.
(iv) An amount of `175 for a credit sale
(i) The Sales book of December was added
to R. Gopalan correctly entered in
short by `500. the sale book, has been debited to his
s.
(ii) A periodical total of the Purchases account as `157.
book was short by `5,000.
Solution :
(iii) The total of Purchases return Book
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has been undercast by `1,500.
(iv) The Sales return book is added `200 S. Debit Credit
L.F.
Particulars
No. ` `
short. o (i) Purchases A/c Dr. 2,150
Solution : To Suspense A/c 2,150
Rectification of errors (Being Purchases book
undercast, now rectified)
ab
S. Debit Credit
L.F.
Particulars (ii) Suspense A/c Dr. 1,000

No. ` `
To Krishna A/c 1,000
(i) Suspense A/c Dr. 500 (Being received from
To Sales A/c 500 Krishna was wrongly
debited, now rectified)
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(Being sales book was

(iii) Drawings A/c Dr. 3,000
added short, now rectified)
To Travelling expenses A/c 3,000
(ii) Purchases A/c Dr. 5,000 (Being amount withdrawn by
To Suspense A/c 5,000 proprietor for personal use
.s
(Being purchases book wrongly posted to travelling

expenses account, now
was undercast, now rectified)
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rectified) (iv) Gopalan A/c Dr. 18

(iii) Suspense A/c Dr. 1,500 To Suspense A/c 18
To Purchases return A/c 1,500 (Being Gopalan's account
was debited by `157 insead
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(Being purchases return of `175, now rectified)

book was cast short, now
3. Pass the journal entries rectifying the
rectified)
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following errors :
(iv) Sales return A/c Dr. 200
(i) Purchases of office furniture of `10,000
To Suspense A/c 200 was recorded in Purchases book.
(Being sales return book (ii) Office rent of `15,000 was debited to
was undercast, now the personal account of the landlord.
rectified) (iii) Old machine was sold for `5,000 was
credited to Sales account.

Solution : (iii) Discount A/c Dr. 100

Journal Entries To Suspense A/c 100
S. Debit Credit (Discount allowed is not
L.F.
Particulars debited to discount A/c)
No. ` `
(i) Furniture A/c Dr. 10,000
The Accountant in a firm committed the
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5.
To Purchases A/c 10,000 following errors.
(Being Purchase of (a) Rent paid to landlord `12,600 was
office furniture was debited to the Landlord's personal
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recorded in purchase account.
book, now rectified) (b) Sold Computer for `6,000 was entered
(ii) Rent A/c Dr. 15,000 in sales account.
To Landlord's A/c 15,000 (c) Cash drawn by the proprietor for his
(Being office rent of personal use `7,400 was debited to
s.
Trade expenses account.
`15,000 was debited
(d) Repairs to machinery `500 was passed
to landlord's Personal through the Machinery account.
account, now rectified)
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Rectify the above errors.
(iii) Sales A/c Dr. 5,000
Solution : Rectification of Errors
To Machinery A/c 5,000
(Being sale of machinery S. Debit Credit
L.F.
Particulars
costing `5,000 was No. ` `
credited to sales A/c,
o (a) Rent A/c Dr. 12,600
now rectified) To Landlord's A/c 12,600
ab
4. Following are some accounting errors. (Correction of wrong
Rectify the same through Suspense A/c. debit to Landlord's A/c
for rent paid)
(i) Goods Purchased from Manohar of
`2,500 has been posted to the debit of
(b) Sales A/c Dr. 6,000
his account. To Computer A/c 6,000
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(Correction of wrong
(ii) Cash of `4,500 paid to Munish was credit to sales of
credited to Manish. computer)
(iii) Discount `100 allowed to Anthony was (c) Drawings A/c Dr. 7,400
.s
not debited to discount account. To Trade expenses A/c 7,400

Solution : (Correction of wrong
Rectification of Errors debit to trade expenses
A/c for drawings made)
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S. Debit Credit
L.F.
No.
Particulars (d) Repairs A/c Dr. 500
` `
To Machinery A/c 500
(i) Suspense A/c Dr. 5,000 (Correction of wrong
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To Manohar A/c 5,000 debit to Machinery A/c

(Goods Purchased from for repairs made).
Manohar debited to his
IV. Problems.
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account is now corrected) 5 MARKS

(ii) Manish A/c Dr. 4,500 1. The following errors were detected before
Munish A/c Dr. 4,500 preparation of trial balance, Rectify them.
To Suspense A/c 9,000 [HY-2018]
(Cash paid to Munish
was wrongly credited to (a) The total of rent received account is
Manish, now rectified) carried forward `900 short.


(b) The total of rent received account is (d) Purchase returns A/c Dr. 200
carried foward `1,000 excess. To Suspense A/c 200
(c) The total of salary account is carried (Overcasting in the
forward `1,100 short. purchase returns book
(d) The total of salary account is carried rectified)
forward `1,200 excess. (v) Sales A/c Dr. 100
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(e) Payment of wages `2,000 to Venkat To Suspense A/c 100
was posted twice to wages account. (Excess amount carried
forward in the sales book
Ans. (a) Rent received account is to be credited rectified)
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with `900. 3. Rectify the following errors :
(b) Rent received account is to be debited
with `1,000. (i) Total one page of the Sales Book was
(c) Salary account is to be debited with carried forward to the next page as
`1,100. `2,785 instead of`2,587.
s.
(d) Salary account is to be credited with (ii) A cheque of `400 received from Mohan
`1,200. was dishonoured and had been posted
(e) Wages account should be credited with to the debit side of the allowance
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`2,000. account.
2. Pass journal entries to rectify the following (iii) Return of goods worth `5,000 by a
errors located after the preparation of the customer was entered in the Purchase
trial balance. Assume that there exists a return book.
suspense account. (iv) Sum of `200 owed by 'X' has been
o[BEQ] [HY-2018]
(a) The total of sales book was undercast included in the list of sundry creditors.
by `2,000. (v) Sale of old furniture worth `430 was
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(b) The purchase of machinery for `3,000 credited to the sales account as `340.
was entered in the puchases book. Solution :
(c) A credit sale of goods for `45 to Mathi Rectification of Errors
was posted in his account as `54. S. Debit Credit
L.F.
Particulars
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(d) The purchases returns book was No. ` `

overcast by `200. (i) Sales A/c Dr. 198
(e) The total of sales book `1,122 were To Suspense A/c 198
wrongly posted in the ledger as `1,222. (Being carry forwarding
.s
Solution : `2,785 instead of

Journal Entries `2,587, now rectified)
S. Debit Credit (ii) Mohan A/c Dr. 400
L.F.
Particulars
No. ` `
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To Allowance A/c 400

(a) Suspense A/c Dr. 2,000 (Being a cheque received
To Sales A/c 2,000 from Mohan was
(Under casting in the dishonoured but debited
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sales book rectified) wrongly to allowance's

(b) Machinery A/c Dr. 3,000 account)
(Purchase of machinery (iii) Sales return A/c Dr. 5,000
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wrongly entered in the Purchases return A/c Dr. 5,000

purchases book rectified) To Customer A/c 10,000
(c) Suspense A/c Dr. 9 (Being goods return by
To Mathi A/c 9 a customer was recorded
(Excess amount posted wrongly to Purchase
to the debit of Mathi return book, now
rectified.) rectified.)

(iv) Sundry creditors A/c Dr. 200 (d) Machine A/c Dr. 500
Sundry debtors A/c Dr. 200 To Carriage A/c 500
To X A/c 400 (Amount paid for
(Being amount owed carriage on Purchase
by X was included in of machine is debited
Sundry creditors, now to carriage A/c is now
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corrected)
rectified)
(e) Arya Ghosh A/c Dr. 50,000
(v) Sales A/c Dr. 340
To Surya Ghosh A/c 50,000
Suspense A/c Dr. 90 (Amount paid to Arya
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To Furniture A/c 430 Ghosh was debited
(Being sale of old to Surya Ghosh is
furniture `430 was corrected)
wrongly debited to sales
account for `340, now 5. Rectify the following Journal Entries.
s.
rectified) ` `
4. Following are some accounting errors.
Rectify them by making journal entries : (i) Purchases A/c Dr. 5,000
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(a) Sales for `20,000 made to Madhan was To Cash A/c 5,000
not entered in the sales book. (Purchase of furniture)
(b) Salary of `7,500 paid to accountant (ii) Anbu A/c Dr. 10,000
Raman was debited to his personal
o To Cash A/c 10,000
account. (Salary paid to Anbu)
(c) Old furniture sold for `2,800 was
entered in the sales book. (iii) Raju A/c Dr. 3,000
ab
(d) Carriage paid `500 on purchase of a To Cash A/c 3,000
machine was debited to carriage A/c. (Rent paid)
(e) Cash `50,000 paid to the creditor Arya (iv) Sales A/c Dr. 10,000
Ghosh was debited to Surya Ghosh's To Cash A/c 10,000
A/c. (Credit sale to Naresh)
ur
Solution : Rectification of Errors (v) Cash A/c Dr. 15,000

To Babu A/c 15,000
S. Debit Credit (Cash Sales)
L.F.
Particulars
.s
No. ` `
(a) Madhan A/c Dr. 20,000 Solution : Rectification of errors
To Sales A/c 20,000
(Sale to Madhan omitted S. Debit Credit
w
L.F.
Particulars
to be entered in sales No. ` `
book is corrected) (i) Furniture A/c Dr. 5,000
(b) Salary A/c Dr. 7,500 To Purchases A/c 5,000
w
To Raman A/c 7,500 (Correction of wrong

(Salary paid to Raman debit to Purchases
was debited to his A/c for purchase of
personal account is now
w
furniture)
corrected)
(c) Sales A/c Dr. 2,800 (ii) Salary A/c Dr. 10,000
To Furniture A/c 2,800 To Anbu's A/c 10,000
(Old furniture sold was (Correction of wrong
entered in the sales book debit to Anbu's A/c for
is now corrected) salary paid)

(iii) Rent A/c (c) The total of the sales book `12,000 was
Dr. 3,000 debited to sales returns account.
To Raju's A/c 3,000
(Correction of wrong (d) `1,000 received as interest was credited
debit to Raju's A/c for to interest account as `100.
rent paid) Solution : Rectification of Errors
m
(iv) Cash A/c Dr. 10,000
S. Debit Credit
L.F.
Naresh A/c Dr. 10,000 Particulars
No. ` `
To Sales A/c 20,000
(Correction of wrong (a) Sales A/c Dr. 1,500
co
debit to sales account To Suspense A/c 1,500
and wrong credit of cash (Excess credit in sales
account for credit sales book now rectified)
to Naresh) (b) Suspense A/c Dr. 3,000
To Vani's A/c 3,000
s.
(v) Babu's A/c Dr. 15,000
(Partial omission in
To Sales A/c 15,000 credit of Van i's A/c
(Correction of wrong now recorded)
credit to Babu's A/c for
ok
cash sales) (c) Suspense A/c Dr. 24,000
To Sales A/c 12,000
6. A Book keeper found his trial balance not To Sales return A/c 12,000
balanced placed the difference amount in (Wrong posting on Sales
the suspense account and subsequently return A/c for Sales A/c
found the following errors :
o is rectified)
(a) Sales book was overcast by `1,500. (d) Suspense A/c Dr. 900
ab
(b) `2,900 received from Vani in full To Interest A/c 900
settlement of his account of `3,000 was (Correction in interest
posted in cash book but omitted to be received A/c)
entered in her account.
ur
Particulars Amount Particulars Amount

` `
.s
To Vani's A/c 3,000 By Sales A/c 1,500

To Sales A/c 12,000 By Difference in trial Balance 26,400
To Sales return A/c 12,000 (Balancing Figure)
w
To Interest A/c 900

27,900 27,900
w
7. An accountant could not tally the trial (c) The total of the Purchases book was
balance. The Difference of `520 was short by `600.
temporarily placed to the credit of suspense
w
account and subsequently found the (d) A sale of `675 to Kannan was entered
following errors. in the sales book as `975.
(a) The total of the Discount column on (e) A sale of `500 to Vimal has been
the credit side of the cash book `230 entered in the purchase book.
was not posted in the ledger. Rectify the above errors through suspense
(b) The total of the Discount column on account. Also give journal entries for
the debit side of the cash book `150 rectification.
was omitted to be posted in the ledger.

Solution : (c) Purchases A/c Dr. 600

Rectification of errors
To Suspense A/c 600
S. Debit Credit (undercast in purchase
L.F.
Particulars
No. ` ` book, now rectified)
(a) Suspense A/c Dr. 230 (d) Sales A/c Dr. 300
To Discount received 230 To Kannan A/c 300
m
A/c (Excess debit in Kalpana's
(Partial omission in A/c and excess credit in
discount received A/c is sales A/c now rectified)
now rectified) (e) Vimal's A/c
co
Dr. 1,000
(b) Discount allowed A/c Dr. 150 To Sales A/c 500
To Suspense A/c 150 To Purchases A/c 500
(Partial Omission in (Correction of wrong
discount allowed A/c is entry in Purchases book
now rectified)
s.
for a credit sales to Vimal)
Dr. Suspense account Cr.
Amount Amount
ok
` `
To Discount Received A/c 230 By Discount allowed A/c 150
To Difference in trial balance o 520 By Purchases A/c 600
750 750
ab
Short Answer Questions. 3 MARKS
HOTS Questions 1. Sales of `30,000 by ABC Ltd was recorded
in the sales book as `3,000. The accountant
Very Short Answer Questions.2 MARKS has come to know about it but it was his
ur
1. Is it necessary that a suspense account will last day in the company as he has already
balance off after rectification of the errors resigned. He presented the sales figures to
detected by the accountant? If not, then the management without rectifying error.
what happens to the balance still remaining (i) Rectify the error
.s
in suspense account? (ii) Identify the value being overlooked by

Ans. No, it is not necessary that a suspense account th accountant.
will balance after rectification of the errors
Solution :
w
detected by the accountant.

Suspense account can remain unbalanced if all Rectification Entry
the errors are not detected. Balance remaining S. Debit Credit
L.F.
w
in the suspense account is transferred to the Particulars

No. ` `
balance sheet on the assets side, if there is a (i) Suspense A/c Dr. 27,000
debit balance, or the liabilities side if there is
To Sales A/c 27,000
w
a credit balance.
(Being sales of `30,000
2. Will the trial balance agree in case of errors recorded as `3,000,
of partial omission? Why? now rectified)
Ans. No, the trial balance will not agree. Because a (ii) Value overlooked by the accountant is
trial balance will agree only if both the aspects responsibility.
of a transaction are posted into ledger accounts
with correct amount.   

UNIT
Depreciation
10 Accounting
m
co
s.
CHAPTER SNAPSHOT
10.1 Introduction 10.7.2 Written down value /
ok
Diminishing balance
10.2 Depreciation – Meaning and
method
definition
10.7.3 Sum of years of digits
10.2.1 Useful life of the asset
o method
10.2.2 Depreciable assets 10.7.4 Machine hour rate
ab
10.3 Objectives of providing method
depreciation 10.7.5 Depletion method
10.4 Causes of depreciation 10.7.6 Annuity method
ur
10.5 Characteristics of depreciation 10.7.7 Revaluation method

10.7.8 Sinking fund method
10.6 Factors determining the amount
.s
of depreciation 10.7.9 Insurance policy

method
10.7 Methods of providing
10.8 Methods of recording
w
depreciation depreciation
10.7.1 Straight line method/ 10.8.1 Charging depreciation
Fixed instalment
w
to asset account
method / Original cost 10.9 Calculation of profit or loss on
method sale of asset
w
[ 270 ]

Sura’s  XI Std - Accountancy ➠ Unit 10 ➠ Depreciation Accounting 271
CONCEPT MAP
DEPRECIATION
m
co
Objectives of Causes of Factors affecting
providing depreciation Depreciation the amount of Depreciation
To Find out Use of the asset
s.
the true profit or loss Cost of asset
Lapse of time
ok
Expected useful life
To Present the true and
fair financial position Obsolescence
Estimated
residual value
To facilitate replacement
o Inadequacy
of fixed assets for the Purpose
ab
To comply with
legal requirements Methods of
ur
providing depreciation
Straight line method

.s
Diminishing Balance method

Annuity method
w
Depreciation fund method

Insurance policy method
Repairs provision method
w
Revaluation method
Machine hour rate method
w
Depletion method
Sum of years digits method

Sura’s  XI Std - Accountancy - Public Exam Question Paper March 2019453
36. Solution :
Analytical Petty Cash Book
Dr. Analysis of Payments Cr.
Printing &
Postage &
Stationery
telegrams
Accounts
expenses
Payment
Receipts
Personal
Sundry
C.
Total
m
B. V. L.
Date Particulars
F. N. F.
N.
(`) (`) (`) (`) (`) (`)
co
2017
250 Apr 1 To Balance b/d
1,050 1 To Cash A/c
7 By Writing pads and registers 100 100
s.
12 By Speed post 125 125
16 By Refreshment expenses 250 250
ok
30 By Amutha A/c 350 350
825 100 125 250 350
30 By Balance old 475
1,300 1,300
475 May 1 To Balance b/d
o
825 1 To Cash A/c
ab
37. Solution :
Dr. Profit and loss account for the year ended 31st December 2016 Cr.
Amount Amount Amount Amount
` ` ` `
ur
To Bad debts A/c 1,000

To Provision for Bad and doubtful
debts A/c 2,450
To Provision for discount on
.s
Debtors A/c 931

Balance sheet as on 31st December 2016
w
Amount Amount Amount Amount

Liabilities Assets
` ` ` `
Sundry Debtors 50,000
Less : Bad debts written off
w
1,000
49,000
Less : Provision for bad and
doubtful debts @ 5%
w
(49,000 × 5/100) 2,450

46,550
Less : Provision for
discount on debtors
(46,550 × 2/100) 931
45,619

454 Sura’s  XI Std - Accountancy - Public Exam Question Paper March -2019
38. Solution :
Dr. Profit and loss account Cr.
Particulars Amount Amount Particulars Amount Amount

` ` ` `
By Discount received A/c 1,000
m
Balance Sheet
Liabilities Amount Amount Assets Amount Amount

` ` ` `
co
Sundry creditors 30,000
39. Hardware
The physical components of a computer constitute its hardware. Hardware consists of input devices and output
s.
devices that make a complete computer system. Examples of input devices are keyboard, optical scanner, mouse,
joystick, touch screen and slylus which are used to feed data into the computer. Output devices such as monitor and
printer are media to get the output from the computer.
ok
Software:
A set of programs that form an interface between the hardware and the user of a computer system are referred to as
software. Example : Operating system, Logo etc.
o
40. a) No
b) it is a capital nature., because it is not received in the normal course of business. Or it is selling of assets rather
than goods.
ab
Part - IV
41. (a) Solution :
Total Total
ur
S. Cash Bank Stock Capital Creditors

Transactions Assets = Liabilities
No. ` ` ` ` `
` `
i) Started business with cash +40,000 +40,000
.s
Balance +40,000 +40,000

Equation +40,000 = +40,000
ii) Deposited with Bank –30,000 +30,000
w
Balance +10,000 +30,000 +40,000

Equation +40,000 = +40,000
iii) Credit purchases +12,000 +12,000
w
Balance +10,000 +30,000 +12,000 +40,000 +12,000

Equation +52,000 = +52,000
iv) Sold goods for cash + 6,500 – 5,500 +1,000
w
Balance +16,500 +30,000 +6,500 +41,000 +12,000

Equation +53,000 = +53,000
v) Paid Electricity charges – 500 – 500
Balance +16,500 +29,500 +6,500 +40,500 +12,000
Equation +52,500 = +52,500
(or)

(b) Solution : In the books of Vijay Electrical & Co

(i) Purchases Book
Inward Amount `
Date Particulars Invoice No. L.F. Details (`) Total `
2018 Mar 1 Anil & Co.,
m
25 table fans @ ` 1,000 each 25,000
10 fans @ ` 1,500 each 15,000 40,000
20 Sathya & Co.
20 fans @ ` 2,000 each 40,000
co
Less : Trade Discount 10% 4,000 36,000
Purchases A/c Dr 76,000
(ii) Sales Book
Outward Amount `
s.
Date Particulars Invoice No. L.F. Details ( `) Total `
2018 Mar 8 Sheela & Co
10 Electric Iron Box @ ` 1,200 each 12,000
ok
20 Electric stoves @ ` 500 each 10,000 22,000
Sales A/c Cr 22,000
o (iii) Purchase returns book
Debit Note Amount `
Date Particulars L.F. Remarks
No. Details ( `) Total `
2018 Mar 28 Anil & Co
ab
5 tables fans 5,000 damaged
Purchase return A/c Cr 5,000
42 (a) Solution : In the books of Brinda
Journal Entries
ur
Date Particulars L.F. Debit ` Credit `

2018 April 1 Cash A/c Dr. 50,000
To Brinda's Capital A/c 50,000
.s
(Brinda Commenced Business)

5 Purchases A/c Dr. 20,000
To Subashs A/c 20,000
w
(Credit purchases)
7 Ramu’s A/c Dr. 15,000
To Sales A/c 15,000
(Credit sales)
w
12 Subash A/c Dr. 20,000

To Cash A/c 19,500
To Discount received 500
w
(Subash Account full settled)

15 Wages A/c Dr. 500
Electricity charges A/c Dr. 3,000
Trade Expenses A/c Dr. 1,000
To Cash A/c 4,500
(Wages, Electricity charges and trade expenses are paid)
(or)

(b) Solution : Trial balance of Rohini as on 31 march 2018

S. Debit Credit
Name of Account
No ` `
1. Purchases 60,000
2. Plant and machinery 70,000
m
3. Advertising expenses 5,000
4. Drawings 5,250
5. Sales returns 4,200
co
6. Electricity charges 800
7. Capital 60,000
8. Discount received 3,250
s.
9. Sales 82,000
Total 1,45,250 1,45,250
43.(a) Solution : In the Books of Kunal
ok
Cash Book (Single column)
Date Receipts L.F. ` Date Payments L.F. `
2018 To Balance b/d 11,200 2018 By Wages A/c 300
April 1 April 7
o 10 By Mohan A/c 700
ab
5 To Ramesh A/c 3,000 27 By Furniture a/c 2,000
8 To Sales A/c 8,000 30 By Salaries a/c 2,500
30 To Dividend A/c 1,200 30 By Balance c/d 17,900
ur
23,400 23,400
May 1 To Balance b/d 17,900
(or)
.s
(b) Solution : Bank Reconciliation Statement

as on 31st December 2017
w
Particulars Amount ` Amount `

Balance as per cash book 15,000
w
Add : Cheques issued but not presented 1,500

Dividend directly received by bank 200 1,700
16,700
w
Less :
Cheques deposited but not cleared 1,000
Direct payment made by bank 1,000
Lock rent charged by bank 1,200 3,200
Balance as per bank statement 13,500

44. (a) Solution :

In the Books of Mr. Sundaram
Dr. Cash Book (Three columns) Cr.
Amount
R.N.
V.N.
L.F.
Date Receipts Date Payments Amount
L.F
m
Discount
Discount
received
allowed
Bank
Bank
Cash
Cash
co
` ` ` ` ` `
2017 To Balance 42,500 35,000 2017 By Bank A/c ‘C’ 11,500
Jan 1 b/d Jan 14
3 To Sales A/c 15,700 21 By Magesh A/c 300 19,700
s.
4 To Cash A/c ‘C’ 11,500 31 By Balance c/d 27,000 48,500
19 To Dividend 2,000
ok
received A/c
58,200 48,500 300 58,200 48,500
Feb 1 To Balance 27,000 48,500
b/d o (or)
(b) Solution : In the Books of Smt. Ramasundari
ab
Dr. Trading and Profit and Loss account for the year ended 31.12.2017 Cr.
Particulars ` Particulars `
To Opening stock 2,500 By Sales 7,000
ur
To Purchases 3,300 By Closing stock 4,000

To Wages 2,700
To Gross profit c/d 2,500
.s
11,000 11,000
To Salary 2,600 By Gross profit b/d 2,500
w
To Net profit 2,400 By Discount received 2,500

(Transferred to capital accounts)
5,000 5,000
w
Balance sheet as on 31 December 2017

st
Liabilities ` ` Assets `
Capital 52,000 Machineary 52,000
w
Add : Net profit 2,400 Cash at bank 2,500

54,400 Closing Stock 4,000
Creditors 8000
62,400 62,400

45. (a) Solution : Journal Entries
S. No Particulars L.F. Debit ` Credit `

(i) Suspense A/c Dr. 2,000
To Sales A/c 2,000
(Under casting in the sales book rectified)
m
(ii) Machinery A/c Dr. 3,000
(Purchase of machinery wrongly entered in the purchases
book rectified)
co
(iii) Suspense A/c Dr. 90
To Mathi A/c 90
(Excess amount posted to the debit of Mathi rectified)
(iv) Purchase returns A/c Dr. 200
To Suspense A/c 200
s.
(Overcasting in the purchase returns book rectified)
(v) Sales A/c Dr.. 100
To Suspense A/c 100
ok
(Excess amount carried forward in the sales book rectified)
(or)
(b) Solution :
Dr. Trading and profit and loss account of Mr. Raghu for the year ended 31st December 2016
o Cr.
Particulars Amount ` Amount ` Particulars Amount ` Amount `
To Opening stock 36,000 By Sales 1,64,000
ab
To Freight on purchases 22,000
(Transferred to profit and loss
account)
ur
2,12,000 2,12,000
To Salaries 21,200 By Gross profit b/d 64,000
(Transferred from
trading account)
.s
Add : Outstanding salaries 3,000 24,200

To Interest on capitals 2,500 By Discount received 2,200
To Net profit c/d 39,500
w
(Transferred to capital account)

66,200 66,200
Balance Sheet for the year ended 31st December 2016
Liabilities Amount ` Amount ` Assets Amount `
w
Capital 50,000 Furniture 62,600

Add : Net profit 39,500 Sundry Debtors 32,000
89,500 Cash at bank 6,000
w
Add : Interest on capital 2,500 Closing stock 48,000

92,000
Less : Drawings 1,000 91,000
Sundry creditors 44,000
Bills payable 10,600
Outstanding salaries 3,000
1,48,600 1,48,600

46. (a) Solution :

Calculation of profit or loss on sale of Machinery
Date Particulars Amount `
Ist year 1.4.2010 Cost price 4,50,000
Add : Installation charges 50,000
5,00,000
m
 10 
31.3.2011 Less : Depreciation 5, 00, 000×  50,000
 100 
4,50,000
co
 10 
IInd year 31.3.2012 Less : Depreciation 5, 00, 000×  50,000
 100 
4,00,000
 10  50,000
IIInd year 31.3.2013 Less : Depreciation 5, 00, 000× 
s.
 100 
3,50,000
Less : Selling price 3,85,000
ok
Profit on sale of machinery 35,000
The selling price is more than the book value on the date of sale of machinery. Hence , the difference ` 35,000 is
profit on sale of machinery.
In the books of Sudha Manufacturing Company
Dr. Machinery Account Cr.
Date Particulars
o Amount ` Date Particulars Amount `
ab
2010 Apr 1 To Bank A/c 4,50,000 2011 Mar 31 By Depreciation A/c 50,000
,, To Bank A/c 50,000 ,, By Balance c/d 4,50,000
5,00,000 5,00,000
2011 Apr 1 To Balance b/d 4,50,000 2012 Mar 31 By Depreciation A/c 50,000
ur
,, By Balance c/d 4,00,000

4,50,000 4,50,000
2012 Apr 1 To Balance b/d 4,00,000 2013 Mar 31 By Depreciation A/c 50,000
30 To profit and loss A/c 35,000 ,, By Bank A/c 3,85,000
.s
4,35,000 4,35,000
(or)
(b) Solution : Profit and loss A/c
w
Dr Cr
Particulars ` Particulars `
To Office rent 10,000 By Gross profit b/d 50,000
w
To Depreciation 8,000 By Discount received 3,000

To Discount allowed 12,000 By Interest received 2,000
To Advertisement 4,000
w
To Audit fees 1,000

To General expenses 3,000
To Carriage outwards 2,500
To Insurance premium 3,500
To Net profit (Transferred to capital account) 11,000
55,000 55,000

47. (a) Solution :

Dr Trading and profit and loss account of Mr. Kumar for the year ended 31st December 2017 Cr
Particulars Amount ` Amount ` Particulars Amount ` Amount `
To Opening stock 1,500 By Sales 20,500
m
To Carriage inwards 750
Less : Prepaid 250 500
(Transferred to profit and loss A/c)
co
24,400 24,400
To Advertisement 500 By Gross profit b/d 7,900
(Transferred from
trading account)
s.
To Carriage outwards 400
To Net profit 9,400 By Rent received 2,500
(Transferred to capital account)
Less : Advance 100 2,400
ok
10,300 10,300
Balance Sheet for the year ended 31 December 2017
st
Liabilities Amount ` Amount ` Assets Amount ` Amount `

Creditors 2,000 Bank 1,500
Capital
o5,000 Furniture 8,000
Add : Net profit 9,400 14,400 Debtors 2,850
ab
Advance received 100 Closing stock 3,900
Prepaid carriage inwards 250
16,500 16,500
(or)
ur
(b) Following are the three methods of codification. (ii) In most of the cases of block codes,
(a) Sequential Codes : numbers within a sub-range follow
(i) In sequential code, numbers and/or sequential coding scheme, i.e. the
letters are assigned in consecutive numbers increase consecutively. For
.s
order. example:
(ii) These codes are applied primarily to CODE DEALER-TYPE :
source documents such as cheques,
100 – 199 Small pumps
w
invoices, etc.
(iii) A sequential code can facilitate 200 – 299 Medium pumps
document search. For example: 300 – 399 Pipes
w
CODE ACCOUNTS :
400 – 499 Motors
CL001 ABC LTD
(c) Mnemonic Codes :
CL002 XYZ LTD A mnemonic code consists of alphabets or
w
CL003 SCERT abbreviations as symbols to codify a piece of

(b) Block Codes : information. For example:
(i) In a block code, a range of numbers CODE :
is partitioned into a desired number
of sub-ranges and each sub-range is SJ Sales Journals
allotted to a specific group. HQ Head Quarters


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2. Conceptual Framework of Accounting.............................................................................................. 19 - 33

7. Subsidiary Books - II Cash Book....................................................................................................183 - 219

10. Depreciation Accounting...................................................................................... 270 - 308

11. Capital and Revenue Transactions....................................................................... 309 - 322

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2. Conceptual Framework of Accounting.............................................................................................. 19 - 33

5. Trial Balance..................................................................................................................................129 - 146

6. Subsidiary Books - I ......................................................................................................................147 - 182

7. Subsidiary Books - II Cash Book....................................................................................................183 - 219

8. Bank Reconciliation Statement .....................................................................................................220 - 244

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1.5 Objectives of Accounting

1.7 Importance of Accounting

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Assessment of Progress Management Accounting Provider of information

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Sura’s  XI Std - Accountancy ➠ Unit 1 ➠ Introduction to Accounting 5

[BEQ] [Govt. MQP-2018]

(b) Stewardship accounting (d) None of the above

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6 Sura’s  XI Std - Accountancy ➠ Volume - I

of accounting? 2. how the available resources have

(iii) The profit earned or loss incurred during

(v) Preparation of Profit and Loss Account. recorded in accounts.

[BEQ] [First Mid-2018]

accounting information for various purposes. 1. It involves recording of financial

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Sura’s  XI Std - Accountancy ➠ Unit 1 ➠ Introduction to Accounting 7

(ii) Cost Accounting : (iv) Information to interested groups :

business units in different industries

recorded in the books of accounts. scarce resources, grant of subsidy,

accounting records. prices of certain commodities.

(b) Stewardship accounting (d) None of the above

(c) Management (d) Employees [Ans. (a) Transactions]

[Ans. (d) Drawings]

(b) 3 4 1 2 [Ans. (a) Accounting]

(c) Accountant (d) Leadership

16. __________ ends up with the preparation (v)

2. (a) Capital (b) Drawing (vii)

2. (i) The first step in the accounting process is

account for a particular accounting 1. Accounting assists the management

2. This will help them to take various b) Any expenditure incurred