CUSTOMER_CODE
SMUDE
DIVISION_CODE
SMUDE
EVENT_CODE
JULY15
ASSESSMENT_CODE BBA203_JULY15
QUESTION_TYPE DESCRIPTIVE_QUESTION
QUESTION_ID
15050
QUESTION_TEXT Define Accounting. Discuss the accounting processes?
SCHEME OF
EVALUATION
Accounting is an art. In India, it existed in the time of Chandra gupta
maurya. Chanakya speaks of accounting and auditing in his famous work
Arthashashsthra. However, accounting as we know today is of recent
origin.
Luca pacioli who lived Italy in the 15 th century is supposed to be the
father of accounting. (2 Marks)
The American Accounting Association defined accounting as
“Accounting is the process of identifying, measuring and communicating
economic information to permit informed judgement and decisions by the
users of the information” (2 Marks)
Accounting Process is as follows:
∙Identifying the transactions and events: this is the first step of accounting
process. It identifies the transaction of financial character that is required
to be recorded in the books of accounts. Transaction is transfer of money
or goods or services from one person or account to another person or
account. (1 Mark)
∙Measuring: this denotes expressing the value of business transactions
and events in terms of money
(1
Mark)
∙Recording: it deals with recording and identifiable and measurable
transactions and events in a systematic manner in the books of original
entry that is in accordance with the principles of accountancy. (1 Mark)
∙Classifying: it deals with periodic grouping of transactions of similar
nature that appear in the books of original entry into appropriate heads by
posting or transfer entries. (1 Mark)
∙Summarizing: it deals with summarizing transactions in a manner useful
to the users. (1 Mark)
∙Analysing: it deals with the establishment of relationship between the
various items or group of items taken from income statement or balance
sheet or both
∙Interpreting: it deals with explaining the significance of those data in a
manner that the end users of the financial statement can make a
meaningful judgement about the profitability and financial position of the
business. (1 Mark)
∙Communicating: it deals with communicating the analysed and
interpreted data in the form of financial report to the users of financial
information. (1 Mark)
QUESTION_TYPE
DESCRIPTIVE_QUESTION
QUESTION_ID
15052
QUESTION_TEXT
Discuss the qualitative characteristics of Financial Statements.
SCHEME OF
EVALUATION
the qualitative characteristics of useful financial reporting identifies the
types of information that are likely to be most useful to users in making
decisions about reporting entity on the basis of information in its
financial report. Qualitative characteristics of financial statements
includes
∙Relevance: financial information is useful when it is relevant and
represent faithfully. Relevance and faithful representation are the
fundamental qualitative characteristics of useful information. Relevant
information is capable of making a difference in the decisions made by
users. (2 Marks)
∙Understand ability: The information must be readily understandable to
users of the financial statements. While financial statements can be
somewhat complicated for the uninitiated to understand, users must be
able to understand the information within them. This applies to the
format/ layout of the statement, the terms used in the statement and the
policies, methods and assumptions utilized in preparing the statement. (2
Marks)
∙Reliability: In the context of accounting, "reliable" information is free
from material error (errors that affect the economic decisions of users)
and bias. In other words, a reliable financial statement must fairly and
consistently present information about the performance and financial
position of an entity. (2 Marks)
∙Comparability: The information must be comparable to the financial
information presented for other accounting periods, so that users can
identify trends in the performance and financial position of the reporting
entity. (2 Marks)
∙True and fair view / fair presentation: it must exhibit the true and fair
view of the financial position of the organization. (2 Marks)
QUESTION_TYPE
DESCRIPTIVE_QUESTION
QUESTION_ID
15055
QUESTION_TEXT
Vamshi and sagar are partners sharing profit in the ratio of 4:3. On 1 st
april 2008 they admit Sandeep as a new partner for ¼ the shares in
profits. On that date the balance sheet of the firm shows a balance of
70,000 Rs. In general reserve and debit balance of profit and loss a/c of
Rs. 21000. Make necessary journal entries.
SCHEME OF
EVALUATION
General reserve Dr. 70,000
To vamshi’s capital a/c
40,000
To sagar’s capital a/c
30,000
( transfer of general reserve to existing partner’s capital account)
Vamshi’s capital A/c Dr. 12,000
Sagar’s Capital A/c Dr. 9000
To Profit & Loss a/c 21,000
(transfer of accumulated loss to existing partner’s capital)
QUESTION_TYPE
DESCRIPTIVE_QUESTION
QUESTION_ID
72644
QUESTION_TEXT
What are the difference between straight line method and written
down value method.
SCHEME OF
EVALUATION
Straight line method (5 marks)
1. Depreciation is calculated at fixed percentage on original cost.
2. The amount of depreciation remains constant.
3. The book value of the asset become zero.
4. Total expenditure will be more in latter years.
5. Easy to calculate the rate of depreciation
Written Down (5 marks)
1. Original cost in first year and written down value in
subsequent years.
2. The amount of depreciation goes on decreasing.
3. Does not becomes zero.
4. Total expenditure remains almost uniform.
5. Difficult
QUESTION_TYPE
DESCRIPTIVE_QUESTION
QUESTION_ID
123199
QUESTION_TEXT
What is asset? Explain the various types of assets.
Assets: (2 Marks)
SCHEME OF
EVALUATION
Assets refer to properties owned by a concern and debts due to a concern
from other parties. Assets are property and possession of a business.
Assets can be buildings and machinery used to manufacture products.
They can be patents or copyrights that provide financial advantages for
their holder. They are classified on the basis of their nature. The various
types of assets are –
Fixed Assets: (2 Marks)
Fixed assets are those tangible assets with a useful life greater than one
year. Generally, fixed assets refer to items such as equipment, buildings,
production plants and property. On the balance sheet, these are valued at
their cost. Depreciation is subtracted from all except land. Fixed assets
are very important to a company because they represent long-term liquid
investments that a company expects will help it generate profits.
Current Assets: (2 Marks)
Current assets are assets that are usually converted to cash within one
year. Bondholders and other creditors closely monitor a firm's current
assets since interest payments are generally made from current assets.
They include several forms of current assets.
Intangible Assets: (1 Mark)
These are non-physical assets such as copyrights, franchises and patents.
To estimate their value is very difficult because they are intangible.
Often there is no ready market for them. Nevertheless, for some
companies, an intangible asset can be the most valuable asset it
possesses.
Fictitious Assets: (1 Mark)
These assets are mere debit balances i.e. expenses and losses, carried
forward from one accounting year to another. These assets are fictitious,
as they are not represented by any tangible property.
Wasting Assets: (1 Mark)
Wasting assets are those fixed assets, which are exhausted or lost
through use. Examples of wasting assets are minesand quarries. Mines
become useless when they are fully exploited. Similarly quarries become
valueless, when they are fully exploited.
Liquid Assets: (1 Mark)
Liquid assets are those current assets, which are either in the form of
cash or which can be converted into cash quickly without much loss.
Examples of liquid assets are cash in hand, cash at bank, bills receivable,
sundry debtors etc.
QUESTION_TYPE
DESCRIPTIVE_QUESTION
QUESTION_ID
123201
QUESTION_TEXT
What are the types of Errors? Explain in brief.
1.Errors of Omission: The error of omission is one where a transaction has not
been recorded in the books of account either wholly or partially. When the
transaction has been completely omitted in the books of accounts, it is an
error of complete omission.
For example, if a credit purchase of goods is omitted to be entered
in the purchase book, it is an error of complete omission. Such an error
will not affect the trial balance and the omission will not even be
apparent. But sometimes it is apparent from the balance of an account
that an entry has been omitted e.g., the rent account may show that the
rent for the 12th month has not been paid. This type of error can be
detected by careful observation.
Partial Omission: If one of the items or aspects of a transaction
recorded in a subsidiary book is omitted to be posted from the subsidiary
book to a ledger account, the error is an error of partial omission. For
e.g. if salaries paid to clerks recorded in the cash book is omitted to be
posted to salaries account in the ledger, the error is an error of partial
omission.
SCHEME OF
EVALUATION
2.Errors of Commission: Error of commission refers to errors resulting from
something, which ought not to be done. In other words, when a transaction
has been recorded but has been wrongly entered in the books of original entry
or posted in the ledger, error of commission is said to have been made.
For example a purchase invoice for Rs. 1,320 was entered in the
purchase book as Rs. 1,230. Such an error may be intentional or
unintentional. This type of error usually occurs in the process of
totalling, postings, carries forward and balancing of subsidiary books.
3.Errors of Principle: If a transaction is recorded in the books of account
against the fundamental principle of double entry book keeping the error is
known as error of principle. Such errors arise when the entries are not
recorded according to the fundamental principles of accountancy.
For example, wrong allocation of expenditure between capital and
revenue, ignoring the outstanding assets and liabilities, valuation of
assets against the principles of book-keeping.
4.Compensating Errors or off-setting Errors: A compensating error or offsetting error is one which is counter balanced by any other error or errors.
For example, if A’s account was to be debited for Rs. 100 but was
debited for Rs. 10 while B’s account which was to be debited for Rs. 10
was debited for Rs. 100. Thus, both the accounts have been debited for a
total sum of Rs. 110 which amount ought to have been debited.
5.
Errors of Duplication: Such errors arise when an entry in a book of
original entry has been made twice and has also been posted twice.