CUSTOMER_CODE
SMUDE
DIVISION_CODE
SMUDE
EVENT_CODE
SMUAPR15
ASSESSMENT_CODE BB0006_SMUAPR15
QUESTION_TYPE
DESCRIPTIVE_QUESTION
QUESTION_ID
32884
QUESTION_TEXT Define accounting. Explain the functions of accounting.
SCHEME OF
EVALUATION
The Committee on Terminology of the American Institute of Certified Public
Accountants (AICPA) formulated the following definition, which was widely
quoted for many years – “Accounting is the art of recording, classifying and
summarizing in a significant manner, and in terms of money transactions
and events which are in part at least, of a financial character, and
interpreting the results there of.”
Functions of accounting:
● Recording
● Classifying
● Summarizing
● Dealing with financial transactions
● Analyzing and communicating
● Interpreting
(Explanation required)
QUESTION_TYPE
DESCRIPTIVE_QUESTION
QUESTION_ID
32888
QUESTION_TEXT
Discuss the classification of Errors.
SCHEME OF EVALUATION
Classification of Errors:
● Errors of Omission
● Errors of Commission
● Errors of Principle
● Compensating errors or of-setting errors
● Errors of Duplication
(Explanation required)
QUESTION_TYPE
DESCRIPTIVE_QUESTION
QUESTION_ID
32889
QUESTION_TEXT
What are the principal characteristics of financial statements?
SCHEME OF EVALUATION
The characteristics are:
● Relevance
● Understandability
● Reliability
● Comparability
(Explanation required)
QUESTION_TYPE
DESCRIPTIVE_QUESTION
QUESTION_ID
74170
QUESTION_TEXT Discuss the various Accounting Concepts.
SCHEME OF
EVALUATION
Accounting concepts provide the conceptual guidelines for
application in the financial accounting process. They are self-evident
statements or truths. The important accounting concepts are:
1. Money measurement concept: Each transaction must be
expressible in monetary terms. Money is the only practical unit of
measurement that can be employed to achieve homogeneity of
financial data. Therefore, accounting records only those transactions,
which can be expressed in terms of money. (1 mark)
2. Business entity concept: This concept implies that a business
unit is separate and distinct from the person who owns and controls it.
A business entity is an artificial entity distinct from its proprietors.
This enables the business to segregate the transactions of the
company from the private transactions of the proprietors. (1 mark)
3. Going concern concept: The business is assumed to exist for a
longtime and transactions are recorded on this basis. This concept
forms the basis for the distinction between expenditure that will yield
benefit over a long period of time and expenditure whose benefit will
be exhausted in the short term. (1 mark)
4. Cost concept: As per this concept, assets are always recorded at
acquisition cost or historical cost and that cost becomes the basis for
all future accounting for the asset. The transactions are recorded at
the amounts actually involved. The cost concept brings objectivity in
the accounts. (1 mark)
5. Dual aspect concept: It is an expression of entity concept
because it shows that the business itself owns the assets and in turn
owes the various claimants. This is technically stated as ‘for every
debit, there is a credit’. The dual aspect means that “Owners equity +
outside liability = Assets”. (1 mark)
6. Accounting period concept: Business firms prepare their income
statements for a particular period. Normally accounting period
adopted is one year as it helps to take any corrective action, to pay
income tax, to absorb seasonal fluctuations and for reporting to the
outsiders. (1 mark)
7. Matching concept: It is based on the accounting period concept.
Revenue earned in an accounting year is offset with all the expenses
incurred during the same period to generate that revenue, thus
providing a measure of the overall profitability of the economic
activity. (1 mark)
8. Realization concept: Revenue should be recognized only when
they are realized, while expenses should be recognized as soon as
they are reasonably possible. A transaction is recorded only on
receipt of cash or a legal obligation to pay. (1 mark)
9. Accrual concept: It suggests that incomes and expenses should
be recognized as and when they are earned and incurred irrespective
of whether the money is received or paid in connection thereof. It
implies that revenues accrue in that year in which they are earned,
and not in the year in which they are actually received and expenses
accrue in the year in which they are incurred and not in the year in
which they are actually paid. (1 mark)
10.
Legal aspect concept: This concept implies that the accounting
records and books should reflect the legal position and the accounting
record statements should conform to legal requirements. The
accounting records should be kept and the statements should be
prepared in the manner provided by law. (1 mark)
QUESTION_TYPE DESCRIPTIVE_QUESTION
QUESTION_ID
74174
QUESTION_TEXT
Explain briefly the role of computer’s in accounting and
Disadvantages of mechanization.
SCHEME OF
EVALUATION
Computers can be used as accounting machines and perform all the
functions which accounting machines perform. Some of the important
functions performed by computers include:
(1 Mark)
1. Transactions Recording: Business transactions are recorded
accurately and regularly for making available upto date accounting
information to the management. The operation of recording and
posting are done simultaneously with great speed.
(2 Marks)
2. Payroll Accounting: Computers help in the calculation of wages
and salaries due to each worker and employee in each department
without any error. It prepares a permanent payroll record for each
employee and ensures timely distribution of wages and
salaries.
(2 Marks)
Disadvantages of Mechanization:
1. Expensive and most of the concerns cannot afford to make use
of accounting machine.
2. More scope for fraudulent purposes as cards and sheets can be
lost or misplaced or substituted easily.
3. It makes human beings mechanical and diminish the power of
reasoning and logic.
4. Installation requires a complicated and expensive task of system
analysis and design. Hence requires the services of programmers.
5. Installation is costly. But there are data processing centres who
work on a fees basis.
6. There are chances of errors in data processing and requires
serious efforts to detect and correct them.
7. Employees may resist the introduction of mechanized
accounting.
8. They are not flexible as manual system.
9. The installation may take a long time. Further the hardware
technology is rapidly changing rendering the system obsolete.
10. They are subject to breakdown and there is the need for standby
equipment which means additional investment.
(5 Marks)
QUESTION_TYPE
DESCRIPTIVE_QUESTION
QUESTION_ID
125493
QUESTION_TEXT
Define Business Transaction. List the types of business transactions.
Business transaction is “Any happening which brings change in the
pattern of assets or liabilities or proprietorship of a business concern
in a financial transaction to it”
(2 marks)
SCHEME OF
EVALUATION
Types: (2 marks each)

Cash transactions

Credit transactions

Barter transactions

Paper transactions