1 Financial Accounting Important Questions pdf 2023 sem 1

Short 4 marks Important questions for Sem-1 2023 :

1. Book Keeping & Accounting.

- Book keeping is the art and science of correctly recording in books of accounts
all those transactions that result in the transfer of money or money’s worth.

- Accounting is the process of identifying, measuring, and communicating

economic information to permit informed judgements and decisions by users of the
information.

2. Journal Proper.

- It is the book where in all transactions are first recorded in chronological order. It
is the book of prime entry. The process of recording transactions in journal is
termed as ‘Journalising’.

3. Accounting Equation.

- According to this concept, every business transaction has a dual aspect. Every
business transaction always results in receiving some benefit of some value and
giving of some other benefit of equal value. The dual aspect is expressed in another
form of equation as under:

a. Capital + liabilities = Assets

b. Capital = Assets – Liabilities

4. Four Functions of Accounting.

- The key functions of accounting include:

a. Recording Transactions: This includes the collection and organization of

financial data to create a complete and accurate record of business activites.

b. Classifying and categorizing Transactions: This classification helps in

organizing financial data and simplifies the retrieval and analysis of information.

c. Summarizing Financial Information: This involoves consolidating and

presenting the financial data in a concise and structured format, such as income
statements, balance sheets, and cash flow statements.
2 Financial Accounting Important Questions pdf 2023 sem 1

d. Analysing and interpreting financial data: This includes calculating financial

ratios, comparing performance indicators, and assessing the financial health and
efficiency of the organization.

[pgno-1/2.5]

5. Accounting Cycle.

- Accounting cycle includes:

a. Recording: first, all transactions should be recorded in the journal or books of

original entry known as subsidiary books as and when they take place.

b. Classifying: All entries in the journal or books of original entry should be posted
to the appropriate ledger accounts to find out at a glance the total effect of all such
transactions in a particular account.

c. Summarizing: Last stage is to prepare the trial balance and final accounts with a
view to ascertaining the profit or loss made during a trading period and the
financial position of the business on a particular date.

 Thus sequential steps involved in an accounting cycle are: i. journalising,

ii.posting, iii. Balancing, iv. Trial balance, v. Income statement(i.e. traading
and profit & loss account), vi. Position statement(i.e. balance sheet).
[pgno-1/2.25]

6. Accounting Concepts.

- Acounting concepts may be considered as postulates i.e., basic assumptions or

conditions upon which the science of accounting is based. Given are few
accounting concepts involved :

i) Business entity

ii) Money measurement

iii) Going Concern

iv) Dual Aspect [pgno-1/2.11]

3 Financial Accounting Important Questions pdf 2023 sem 1

7. Difference between Journal and ledger.

Journal Ledger
1.The journal is a book of original entry. 1. Ledger is the book of second entry.
2. Transactions are recorded in the 2. The ledger is a book for analytical
chronological order as and when they record.
occur.
3. The process of recording financial 3. The process of recording transactions
transactions in the journal is called in the ledger is known as posting.
journalization.
4. The journal as a book of source entry 4. Ledger is the main source of
has greater weight as legal evidence information.
than the ledger.

[pgno-1/2.43&44]

8. Cash discounts, Trade discount. [unit2subsidiarybookslesson]

- Cash discount arises when payment is made before a specified date. Trade
discount is an allowance made by the manufacturer or wholeseller to a detail or off
the catalogue price of the goods sold. There is no entry made for trade discount.
Trade discount is deducted from catalogue price and the balance is recorded in
books of account.

9. Debit Note and Credit Note.

- Debit note is a bill or statement sent to the person to whom goods are returned to
inform him that his account is debited to the extent of the value of goods returned.

- Credit note is a statement by the seller to the purchaser after receipt of goods
returned by the purchaser. It is called ‘Credit Note’ because the customer’s
Account is credited with the amount written there in.

10. List out any 4 reasons for difference between cash book and pass book.

- given below are the 4 reasons for the difference between of cash book balance
and pass book balance:
4 Financial Accounting Important Questions pdf 2023 sem 1

a) Cheques issued, but not presented for payment: Whenever cheques are issued by
the trader for making payments, he immediately credits the cash book. The bank
makes the entry in its books only when these cheques are presented for payment
and actual payment is made.

b) Cheques deposited but not yet collected by the bank: Whenever cheques, drafts
etc, are deposited in the bank for collection, the trader debits the bank account
immediately. The bank will not credit the customer’s account until they are
actually collected.

c) Interest on investements, dividends, interest on deposits etc, credited in pass

book, but not entered in cash book: As per the standing instructions of the trader
the bank may collect interest on government securities, dividends on shares and
credit the pass book of the trader.

d) Bank Charges, Interest on overdrafts, insurance premium etc.,: According to the

standing instructions of the trader the bank may pay insurance premium, club
subscriptions etc. For the services rendered by it to customers, the bank may
charge some fees called ‘Bank Charges’.

11. What do you mean by cash book and pass book.

- The term ‘Cash Book’ used in this chapter means ‘Bank Account’ in the books of
businessman. The deposits in the bank are entered on the debit side and payments
from bank are entered on the credit side.

- At the time of opening the Bank Account, the Bank will give him a book called
‘Pass Book’. The customer is expected to bring the Pass book periodically to the
bank and get it up to date.

12. Any 4 types of Errors.

- Errors are divided in to two types:

i) Errors affecting one account only can be :

a) errors of posting , b) errors of casting, c) errors of carry forward, d) errors of

omission of balance of any account in the trial balance.

ii) Errors affecting two or more accounts can be :

5 Financial Accounting Important Questions pdf 2023 sem 1

a) Errors of posting to wrong account, b) Errors of omission, c) Errors of

principle.

13. Capital expenditures, revenue expenditure

- Capital expenditure is that expenditure which results in acquisition of an asset

or which results in an increase in earning capacity of the business.

- Any expenditure whose benefit expenses within the year or expenditure which
merely seeks to maintain the business or keep assets in good working condition
in revenue expenditure.

14. Depreciation meaning

- Depreciation is the systematic allocation of the depreciable amount of fixed

asset over its useful life. This refers to a permanent, continuing and gradual
skrinkage in the book value of a fixed asset. The depreciation charge for each
period should be recongnized in income statement unless it is included in
carrying amount of any other asset.

15. Causes of Depreciation.

- Following are the main causes of depreciation:

a) Physical Deterioration: It is casued mainly from wear and tear when the asset
is in use and from erosion, rust, rot and decay from being exposed to wind, rain,
sun and other elements of nature.

b) Economics Factors: These may be said to be those that cause the asset to be
put out of use even though it is in good physical condition. These arise due to
obsolescence and inadequacy. Obsolescence means the process of becoming
obsolete or out of date.

c) Time Factors: There care certain assets with a fixed period of legal life such
as lease, patents, and copyrights. For instance, a lease can be entered into for
any period while a patent’s legal life is for some years but on certain grounds
this can be extended.
6 Financial Accounting Important Questions pdf 2023 sem 1

d) Depletion: Some assets are of a wasting character perhaps due to the

extraction of raw materials from them. These materials are then either used by
the firm to make something else or are sold in their raw state to other firms.

e) Accident: An asset may reduce in value because of meeting of an accident.

= THANK YOU =

Narayanan : )