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NIOS Class 12 Accountancy Chapter 2 Accounting Concepts
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Accounting Concepts
Chapter: 2
| Module – 1: Basic Accounting |
INTEXT QUESTIONS 2.1
1. Fill in the blanks with suitable word/words
(i) The accounting concepts are basic ___________ of accounting.
Ans: Rules.
(ii) The main objective of accounting concepts is to maintain ___________ and ___________ in the accounting record.
Ans: Uniformity and consistency.
(iii) ___________ concept assumes that business enterprise and its owners are two separate independent entities.
Ans: Business entity concept.
(iv) The goods drawn from business for owner’s personal use are called ___________.
Ans: Drawings.
INTEXT QUESTIONS 2.2
1. Put a tick mark (√) against the information that should be recorded in the books of accounts and cross mark (×) against the information that should not be recorded
(i) Health of the managing director__________.
Ans: ×
(ii) Purchase of factory building 10 crore_________.
Ans: √
(iii) Rent paid 100000_________.
Ans: √
(iv) Goods worth `10000 given as charity___________.
Ans: √
(v) Delay in supply of raw materials ________.
Ans: ×
INTEXT QUESTIONS 2.3
1. Fill in the blanks by selecting correct words given in the bracket/brackets:
(i) Going concern concept states that every business firm will continue to carry on its activities ___________ (for a definite time period / for an indefinite time period).
Ans: For an indefinite time period.
(ii) Fixed assets are shown in the books at their ___________ (cost price / market price).
Ans: Cost price.
(iii) The concept that a business enterprise will not be closed down in the near future is known as ___________ (going concern concept / money measurement concept).
Ans: Going concern concept.
(iv) On the basis of going concern concept, a business prepares its ___________ (financial statements / bank statement / cash statement).
Ans: Financial statements.
(v) ___________ concept states that business will not be dissolved in near future. (Going concern / Business entity)
Ans: Going concern.
INTEXT QUESTIONS 2.4
1. Fill in the blanks with suitable word/words:
(i) Recording of transactions in the books of accounts with a definite period is called ___________ concept.
Ans: Accounting period.
(ii) The commonly accepted accounting period in India is ___________.
Ans: One Year.
(iii) According to accounting period concept, revenue and expenses are related to a ___________ period.
Ans: Particular.
(iv) If accounting year begins from 1st of January, and ends on 31st of December, it is known as ___________.
Ans: Calender Year.
(v) If accounting year begins from 1st of April and ends on 31st of March of the following year, then accounting year is known as ___________.
Ans: Financial Year.
INTEXT QUESTIONS 2.5
1. Fill in the blanks with suitable word/words
(i) The cost concept states that all fixed assets are recorded in the books of accounts at their ___________ price.
Ans: Purchase.
(ii) The main objective to adopt historical cost in recording the fixed assets is that the cost of the assets will be easily verifiable from the ___________ documents.
Ans: Supporting.
(iii) The cost concept does not show the ___________ of the business.
Ans: True net worth.
(iv) The cost concept is otherwise known as ___________ concept.
Ans: Historical Cost.
INTEXT QUESTION 2.6
Write the two aspects (effects) of the following transactions.
| S.No. | Transaction | I st aspect | IInd aspect |
| (i) | Owner brings cash in business | ||
| (ii) | Goods purchased for cash | ||
| (iii) | Goods sold for cash | ||
| (iv) | Furniture purchased for cash | ||
| (v) | Received cash from Sharma | ||
| (vi) | Purchased machine from Rama on credit | ||
| (vii) | Paid to Ram | ||
| (viii) | Salaries Paid | ||
| (ix) | Rent Paid | ||
| (x) | Rent Received |
Ans:
| S.No. | Transaction | Ist Aspect | IInd Aspect |
| (i) | Owner brings cash in business. | Cash increases. | Capital increases. |
| (ii) | Goods purchased for cash. | Purchases increase. | Cash decreases. |
| (iii) | Goods sold for cash. | Cash increases. | Sales increase. |
| (iv) | Furniture purchased for cash. | Furniture increases. | Cash decreases. |
| (v) | Received cash from Sharma. | Cash increases. | Debtor (Sharma) decreases. |
| (vi) | Purchased machine from Rama on credit. | Machine increases. | Creditor (Rama) increases. |
| (vii) | Paid to Ram. | Creditor (Ram) decreases. | Cash decreases. |
| (viii) | Salaries paid. | Salary expense increases. | Cash decreases. |
| (ix) | Rent paid. | Rent expense increases. | Cash decreases. |
| (x) | Rent received. | Cash increases. | Rent income increases. |
INTEXT QUESTIONS 2.7
1. Ascertain the amount of current revenue realized for the year ending 31st December 2006
(i) An order to supply goods for 20,00,000 is received in the year 2006. The goods have been supplied only for 10,00,000 in 2006.
Ans: Rs. 10,00,000
(ii) What will be the revenue (a) if the payment of 6,00,000 is received in cash in 2006 and the balance payment of 4,00,000 received in 2007.
Ans: Rs. 10,00000
(iii) What will be the revenue (b) if the goods have been sold on credit and the payment of 15,00,000 is received in the year 2007, while all the goods of 20,00,000 are supplied in the year 2006.
Ans: Rs. 20,00,000
(iv) What will be the revenue (c) if an advance payment of `1,00,000 is received in the year 2006 and the balance received in the year 2007.
Ans: Rs.1,00,000
INTEXT QUESTIONS 2.8
1. Fill in the blanks with suitable word/words:
(i) Accrual concept relates to the determination of ___________.
Ans: Income.
(ii) Goods of `50,000 are sold on 25th March 2014 but payment is received on 10th April 2014. It will be a revenue for the year ending ___________.
Ans: 31 st march 2006.
(iii) Accrual concept requires revenue is recognised when ___________ and expenses are recognised when they become ___________.
Ans: Realised, Due.
INTEXT QUESTIONS 2.9
1. Fill in the blanks with suitable word/words:
(i) Expenses are matched with ___________ generated during a period.
Ans: Revenue.
(ii) Goods sold for cash is an example of ___________.
Ans: Revenue.
(iii) Salaries paid is an example of ___________.
Ans: Expense.
(iv) Income is the excess of ___________ over ___________.
Ans: Revenue, Expense.
(v) ___________ concept states that the revenue and the expenses incurred to earn the revenue must belong to the same accounting period.
Ans: Matching.
(vi) ___________ concept states how the expenses should be compared with revenues for ascertaining exact profit or loss for a particular period.
Ans: Matching.
| TERMINAL EXERCISE |
1. Explain meaning and significance of going concern concept.
Ans: This concept states that a business firm will continue to carry on its activities for an indefinite period of time. Simply stated, it means that every business entity has continuity of life. Thus, it will not be dissolved in the near future. This is an important assumption of accounting, as it provides a basis for showing the value of assets in the balance sheet.
The following points highlight the significance of going concern concept :
(i) This concept facilitates preparation of financial statements.
(ii) On the basis of this concept, depreciation is charged on the fixed assets.
(iii) It is of great help to the investors, because, it assures them that they will continue to get income on their investments.
(iv) In the absence of this concept, the cost of a fixed asset will be treated as an expense in the year of its purchase.
(v) A business is judged for its capacity to earn profits in future.
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