1.

(a) Where book-keeping ends Explanation: Where book-keeping ends

2. (d) Quality of staff Explanation: The quality of staff will not be recorded in the books of account,
because it's not valued in terms of money.

3. (d) Bookkeeping Explanation: Bookkeeping

4. (d) Social responsibility groups Explanation: Social responsibility groups check that the business
should not exploit the environment but they should make working for the environment.

5. (a) Statement (c) is correct Explanation: According to the Business Entity Concept states that the
transactions associated with a business must be separately recorded from those of its owners or
other businesses.

6. (d) Cash as well as credit transactions Explanation: Cash as well as credit transactions

7. (b) principle-based AS Explanation: Ind-AS are principle-based accounting standards, in India and
issued under the supervision of the Accounting Standards Board (ASB) which was constituted as a
body in the year 1977.

8. (c) Order received for goods Explanation: According to Revenue Recognition Concept:- The
revenue is earned only when the goods are transferred. It means that profit is deemed to have
accrued when the property in goods passes to the buyer. Thus accounting should take into
consideration of profits only when the same have been realized and no anticipated profit should be
recorded in the books. Thus order received is not any generation of revenue. When sale is made it is
recorded whether payment is received or not.
9. (c) Personal Explanation: The personal account is opened first in a ledger book.

10. (a) All of these Explanation: All of these

11. (c) ₹ 59,000 Explanation: ₹ 59,000

12. (c) Option (iv) Explanation: All of these

13. (c) Credit Explanation: On the bank statement, cash deposited by the company is known as
credit.

14. (b) All Accounts having balance.

Explanation: All Accounts having balance.

15. (a) Only D Explanation: Writing an amount in the wrong account but on the correct side. It is
compensating error.

16. (b) Error of principle Explanation: Wages paid to a worker making additions to machinery
amounting to ₹5,000 were debited to the Wages account. It is an error of principle.

17. (d) A is false but R is true. Explanation: A is false but R is true. All transactions relating to the
business are first recorded in journal books then after in subsidary books then balancing amount are
transferred to ledger.

18. (d) A is false but R is true. Explanation: A is false but R is true. Assertion is false because concept
of prudence state that don't anticipate a profit but provide for all possible losses. the statement
shown in Assertion are related to consistency principle.

19. (a) Both A and R are true and R is the correct explanation of A. Explanation: Both A and R are true
and R is the correct explanation of A. Both statement are true GST is credited at time of withdrawal
of goods for personal purposes but not set off against as the transaction treated as personal
expenditure not for the business purpose.

20. (b) Both A and R are true but R is not the correct explanation of A. Explanation: Both A and R are
true but R is not the correct explanation of A.

Section B

21. A creditor could be a bank, supplier or person that has provided money, goods, or services to a
company and expects to be paid at a later date. They are interested to know the ability of the
enterprise to pay their dues. Sometimes, they also are also interested in the long-term continuation
of the enterprises, if their existence becomes dependent on the survival of that business. Suppose,
small ancillary units supply their products to a big enterprise, if the big enterprise collapses, the
future of the small units which depend upon big enterprises may also become dark.

22. Book-keeping is a part of accounting. It is mainly concerned with the record keeping or
maintenance of books of accounts. This function is of routine and clerical in nature. Major Activities
covered under book-keeping are as follows : a. Identifying the transactions and events of financial
nature. b. Measuring the identified transactions and events in a common measuring unit i.e. money.
c. Recording the identified and measured transactions and events in proper books of accounts i.e.,
the books of original entry. d. Classifying the recorded transactions and events into ledger.
23. Yes, the Convention of conservatism will have two effects: i. Profit and Loss Account discloses
lower profits in comparison to the actual profits. ii. The Balance Sheet will disclose the
understatement of assets and the overstatement of liabilities.

OR

In accrual accounting, the revenue recognition principle states that companies should record their
revenues when they are recognized or earned (regardless of when the cash is actually received).
Revenue is considered as being earned on the date at which it is realized, that is, the date when
goods or services are furnished to the customers in exchange for cash or some other valuable
consideration. For services, revenue is recognized in the period in which the services are rendered.
For tangible products, revenue is recognized neither when a sale order is received, nor when a
contract is signed, nor when goods are manufactured but rather when it is shipped or delivered to a
customer.

24. The journal and the ledger are the most important books of the double entry mechanism of
accounting and are indispensable for an accounting system. The following points of comparison are
worth noting

25.

i. Purchases - Debit (Expenses) ii. Capital - Credit (Equity) iii. Trade Receivable - Debit (Assets) iv.
Drawings - Debit (Expenses) v. Discount Received - Credit vi. Buildings - Debit (Assets)

OR

Features of a trial balance are as follows:

i. A complete record of all ledger accounts and cashbook as prepared.

ii. Not a part of the double-entry system of bookkeeping but is prepared with the result of the
double-entry system of bookkeeping

iii. Assists in verifying the arithmetic accuracy of posting entries from journal to ledger accounts iv.
Not completely accurate to take any decision because of some errors not disclosed in this trial
balance after accuracy v. Prepared on a particular date and considered as a working paper in books.

26. A trial balance is a bookkeeping or accounting report that lists the balances in each of an
organization's general ledger accounts. The debit balance amounts are listed in a column with the
heading "Debit balances" and the credit balance amounts are listed in another column with the
heading "Credit balances." The total of each of these two columns should be identical. Functions of a
Trial Balance are as follows: i. It presents to the businessman a consolidated list of all ledger
balances. ii. It is the shortest method of verifying the arithmetical accuracy of entries made in the
ledger. iii. If the total of debit side/column is equal to the total of credit side/column, the trial
balance is said to agree. Otherwise, it is implied that some errors have been committed in the
preparation of accounts. iv. It helps in the preparation of the final accounts i.e., Trading a/c. Profit
and loss a/c and Balance Sheet.

Section C

27. Read the text carefully and answer the questions:

A business purchased goods for ₹ 2,00,000 and sold 75% of such goods during accounting year
ended 31st March 2020. The market value of remaining goods was ₹ 43,000. Accountant valued
closing stod at cost. According to him,

i. Owner of the business is treated as creditor to the extent of his capital;

ii. All expenses incurred to earn revenue or a particular period should be charged against that
revenue to determine the net income:

Financial statements are prepared on 31st March every year.

(i (b) Conservatism Explanation: Conservatism

(i) (b) Business entity Explanation: Business entity

(iii) (a) Matching Explanation: Matching

(iv) (c) Accounting period Explanation: Accounting period

28. Read the text carefully and answer the questions: Given below is a hypothetical extract from the
Cash Book and Pass Book of M/s Ganjan Traders. Extract of Cash Book (Bank Column Only)
 (i) (a) ₹ 37,000 Explanation: ₹ 37,000
(ii) (a) Cheque of Shruti Ltd. is issued but not presented for payment. Explanation: Cheque of
Shruti Ltd. is issued but not presented for payment.
(iii) (d) Bank Explanation: Bank
(iv) (a) Credit Explanation: Credit

29. Read the text carefully and answer the questions:

In the books of M/s Ravilal and Company

Trial Balance as on 31 / 3 / 2018

(ii) (b) Credit Explanation: Credit

(iii) (d) Debit, expenses Explanation: Debit, expenses

(iv) (c) ₹18,21,000 Explanation: ₹18,21,000

Section D

30. The accounting cycle is the holistic process of recording and processing all financial transactions
of a company, from when the transaction occurs, to its representation on the financial statements,
to closing the accounts. One of the main duties of a book keeper is to keep track of the full
accounting cycle from start to finish. The cycle repeats itself every fiscal year as long as a company
remains in business. The accounting cycle incorporates all the accounts, journal entries, T accounts,
debits and credits, adjusting entries over a full cycle.
Steps in accounting cycle are as follows :

i. Transaction: Financial transaction starts the process.

ii. Journal Entries: With the transaction set in place, the next step is to record these entries in the
company's journal

iii. Posting: After that the journal entries are posted to the general ledger.

iv. Trial Balance: After the end of the accounting period, a total balance is calculated for the
accounts.

v. Worksheet: When the debits and credits on the trial balance don't match the book keeper must
look for errors and make corrective adjustments that are tracked on a worksheet.

vi. Adjusting Entries: At the end of the accounting period, adjusted entries must be posted to
accounts for accruals and deferrals.

vii. Financial Statements: The Balance sheet, Trading and P/L A/c and cash flow statement can be
prepared using the correct balance. viii. Closing the Books: The revenue and expense accounts are
closed and zeroed out for the next accounting cycle. Balance Sheet accounts are not closed because
they show the company's financial position at a certain point of time. OR Financial accounting is the
field of accounting concerned with the summary, analysis and reporting of financial transactions
pertaining to a business. This involves the preparation of financial statements available for public
consumption. Limitation of Financial Accounting: i. Accounting ignores the qualitative elements:-
Accounting only records that transaction which can convert into money it ignores the qualities
elements. E.g. quality to staff, public, industrial relations. ii. Accounting is not fully exact:- In
accounting transactions are recorded in the basis of evidence (i.e., sale or purchase receipts) but
some transactions are recorded on the basis of estimation. E.g. depreciation, provision for bad debts
etc. iii. Accounting may lead to window dressing:- windows dressing means manipulation of accounts
as to conceal vital facts and present financial statements in such a way as to show a better position
than what it actually is. Hence income statement doesn’t show true financial position. iv. Accounting
doesn’t indicate the realisable value:- Balance sheet does not show actual realisable value become
assets are shown at net cost i.e.(Cost – Depreciation). 31. Double Entry System:- Double entry
system is based on the principle of ‘dual aspect’ which states that every transaction has two aspects
i.e. debit and credit. The basic principle followed is that every debit must have a corresponding
credit. Thus, one account is debited and the other is credited. It is a complete system as both the
aspects of a transaction are recorded in the books of accounts. The system is accurate and more
reliable as the possibilities of frauds and misappropriations are minimised. The system of double
entry can be implemented by big as well as small organisations. Features of the Double Entry
System:- Features of the double entry system are as follow i. It maintains a complete record of each
transaction. ii. In this system, one aspect is debited and another aspect is credited as per the rules of
debit and credit .