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Accountancy Two Mark Question and Answers

1. What is Single Entry System?


Single entry system is a system of accounting which, as a rule only maintained the
cash and personal accounts. It is incomplete of double entry system and both the
aspects of every transactions are not recorded.
2. What are the two disadvantages of single entry system?
It is the incomplete system of book-keeping because the two aspect of each
and every transaction are not recorded in the book of accounts.

It is not possible to prepare a trial balance and verify the arithmetical


accuracy of the books of accounts.

3. What is Statement of Affairs?


A Statement of Affairs is a statement which shows the assets and liabilities of a firm
at the end of the accounting year, it is prepared under single entry system of bookkeeping and can e compared to the balance sheet prepared in a double entry
system.
4. What is the object of preparing the statement of affairs?
The object of preparing statement of affairs is to find out either the capital at the
beginning or at the end of a particular year. A statement of affairs is like the
Balance sheet of the concern. That maintains its accounts under single entry
system.
5. What is partnership?
Sec 04 of the partnership Act of 1932 defines a partnership as the relation between
the person who have agreed to share the profit and losses of the business carries on
by all or any of them acting for all.
6. In the absence of partnership deed, how do you treat the following?
1. interest on capital- not allowed.
2. Salary to a partner- not allowed.
7. What is Goodwill?
Goodwill is the value of the reputation of the form which these business built up due
to its efficient service to its customer and quality of his products. It is a value of all
favourable attributes relating to a business enterprises. Goodwill is an intangible
asset.
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8. What are the two methods of maintaining capital accounts in


partnership business?
i.

Fixed capital method.

ii.

Fluctuating capital method.


9. What is fluctuating capital system?

Fluctuating capital system is that method of maintaining capital account under


which not only the capital of a partner is recorded but also the other items like
salary, commission, interest on capital and drawings etc, are recorded. As a result of
which the capital accounts balance of partners keeps on fluctuating year to year.
10.
state any two rules to be followed in the absence of a
partnership deed.
i.

Interest on capital not allowed.

ii.

Interest on drawings not allowed.

iii.

Partners commission and salary not allowed.

iv.

Interest on loan 6% P.A

v.

Sharing profit and loss equally.


11.
Mention any two factors which determine the goodwill of a
partnership firm.
a. Profit earning capacity of the business.
b. Future prospects of the business.
c. Quality of the product and services.
d. Personal image and integrity of the businessman.
12.

What is partnership deed (or) What is partnership agreement?

A partnership agreement which is written and signed by all the partners, and is duly
stamped according to the stamp Act, is called a Partnership Deed.
13.

State any two contents of partnership deed.

i.

The name of the firm.

ii.

The name and address of partners.


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iii.

The nature of the business and duration of the firm.

iv.

Capital contributed of the firm and partners sharing ratio.


14.
How do you close Revaluation account in admission of a
partner?

During the admission of a partner, on closing the revaluation a/c, if the credit side is
greater than the debit side, it results in loss. The profit or loss arising out of
revaluation a/c has to be transferred to old partners capital account in their old
profit sharing ratio.
15.

What is sacrifice ratio?

The ratio in which the old partners have agreed to sacrifice their share in profit in
favour of new partner is called sacrifice ratio.
Sacrifice ratio=old ratio-new ratio.
16.
Give the journal entry for transferring profit on revaluation
Account in a admission of a partner.
Revaluation a/c
to old partners capital a/c
17.
Give the journal entry for Goodwill brought in by the new
partner in cash.
cash A/c

Dr.

to goodwill A/c
(being cash brought in by the new partner for his share of goodwill)
18.

What is Revaluation account?

Revaluation account is an account opened for the purpose of ascertain the profit or
loss on account of revaluation of assets and liabilities.
19.
How do you close revaluation account on retirement of a
partner?
On closing the Revaluation A/c, if the credit side shows greater than the debit side,
it results in a profit and if the debit side is higher than the credit side it results in
losses. The profit or loss has to be transferred to capital account of all the partners
in the profit sharing ratio
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20.

Define Gaining ratio.

The ratio in which the continuing partners acquire the outgoing partners share is
called gaining ratio.
Gain Ratio=New ratio old ratio.
21.

What is an Executor account?

Executors account is the account of legal representative of diseased partner which


is opened at the time of death of a partner. All the adjustments are made in the
diseased partners capital a/c the balance is transferred to executors account.

22.
Give the journal entry of payment of cash immediately to the
executor.
Diseased partner executor a/c

Dr.

To cash a/c
(Being diseased partner capital a/c paid to is executor)
23.
Give the journal entry for realisation expenses paid on
dissolution of firm.
Realisation A/c

Dr.

to cash A/c
(being realisation expenses paid)
24.
Give the journal entry for the asset taken by a partner in
dissolution of a firm.
Partners capital a/c

Dr.

to Realisation a/c
(Being the assets taken over by the partner).
25.
Give the journal entry to transfer Realisation a/c profit to
partners A and B.
Realisation A/c
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to As capital a/c
to Bs capital a/c.
(being the profit on realisation transferred to partners capital account).
26.

Why realisation account prepared?

The realisation account is opened on the dissolution of a partnership firm. It is


generally prepared to find out the profit or loss made by a firm on the realisation of
assets and payment of liabilities to outsiders
27.
Give the journal entry to close partners loan account on
dissolution of a firm.
Partners loan a/c

Dr.

to Bank a/c
(Being the partners loan repaid on dissolution).

28.
Give journal entry for closing the realisation A/c of a firm
when.
i.
ii.

There is a profit.
There is a loss.
1. There is a profit:

Realisation A/c Dr.


to Partners capital A/c
2. There is a loss:
Partners capital A/c Dr.
to Realisation A/c
29.
Give journal entry for closing the realisation A/c of a firm
when.
i.

There is a profit.

ii.

There is a loss.
1. There is a profit:
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Realisation A/c Dr.


to Partners capital A/c
2. There is a loss:
Partners capital A/c Dr.
to Realisation A/c

30.
State any two types of shares of a public company (or)Sate
the different types of shares that can be issued by a public
company?
There are two types of shares:
1. Preferensional shares
2. Equity shares.
31.

What is meant by issue of shares at premium?

When the company issues shares at price which is higher than its face value or
nominal value is called Issue of shares at Premium. The difference between the face
value and the issue price is called share Premium.
32.

What is forfeiture of shares?

Forfeiture of shares means cancelation of shares issued to a shareholder by a


company for non-payment of allotment or call money are called forfeiture of shares.
33.

What are meant by calls in arrears?

Sometimes some of the share holders may fail to pay the amount due from on
allotment or calls are called calls in arrears.
34.

What is over-subscription of shares?

In the case of some companies, sometimes, the public may apply for more shares
than those offered to them. When the public apply for more shares than those
offered to them, it is said to be over subscription of shares. In case of over
subscription of shares, some applicants may be allotted less shares than they have
applied for and some applicants may not be allotted any shares at all.
35.

What are calls-in-advance?

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The call money paid in advance by a shareholder to the company even before the
company makes the call is called calls in advance. This is shown as a liability in
the balance sheet under the head current liabilities.
36.

what do you mean by Issue of shares at par?

When the shares are issued at a price equal to their nominal value, it is called issue
of shares at par.

37.

What is Debenture?

Debenture are the loan raised by the company usually on long-term basis. It
is an instrument in writing issued by a company under its common sale
acknowledging debt due by the company to its holders.
38.
Under what headings are the following items shown in the
companys Balance sheet?
1. Share premium -under reserve and surplus.
2. Preliminary expenses-under Miscellaneous Expenses.
39.

What is dividend?

Dividend is the portion of net profit of the company that is distributed among
the shareholders according to their share-holdings. It is an appropriation of
profit.
40.
Under what headings do you show the following in Companys
Balance sheet.
1. Share Premium-Reserve and surplus.
2. Discount on issue of shares- Miscellaneous Expenses.
41.
Under what headings will you show the following items in
companys Balance sheet?
1. Bills receivable- loans and advances
2. Preliminary expenses-miscellaneous expenses.

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42.
Under what headings do you show the following in companys
Balance sheet?
I.
II.

Forfeited shares a/c- Share capital


Preliminary Expenses- miscellaneous expenses.
43.
Under what headings will you show the following items in
companys Balance sheet?
a) Share premium- reserve and surplus.
b) Discount in issue of shares- Miscellaneous expenditure.
44.
Under what heading do the following items appear in the
companys Balance sheet?
a) Loose tools- current asset.
b) Unclaimed dividend- current liabilities.

45.
State any two items which are shown under the heading fixed
asset.
i.

Machinery.

ii.

Furniture.

iii.

Goodwill.

iv.

Building.
46.
Under what headings do you show the following in the
companys Balance sheet?

i.

Machinery-fixed asset

ii.

Bills payable- current liabilities.


47.
Name any two assets which appear in the Balance sheet of a
company.
Loose tools
Debtors
Closing stock
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Cash in hand
Cash at bank

48.

what is depreciation (or) Define depreciation?

Depreciation can be defined as the permanent gradual decrease in the value


of a fixed asset due to constant use, wear and tear, obsolescence, efflux of
time, accidents, fall in market price etc. In fact depreciation is the value cost
on an asset due to constant use.
49.
Calculated the amount of annual depreciation under annuity
method if cost of lease is Rs.20000 and annuity of Rs. 1.(for same
period and at same rate of interest) is Rs. 0.282012.
Annual depreciation=cost of assets*Annuity.
20000*0.282012
Annuity depreciation=Rs. 5640.24

50.

State any two causes of depreciation.

Wear and tear due to actual use: Some fixed asset lose their value due to
actual use. For e.g. A plant used in business loses its value every year on
account of use.

Obsolescence: some fixed assets become useless and lose their value due to
change of fashion or new invention.

51.
What factors do you take into account in determining the
amount of depreciation?
i.

Cost of the fixed asset.

ii.

The estimated scrap value or break up of the asset.

iii.

The estimated life of the asset.


52.
Write the formula for calculating the amount of depreciation
under original cost method if percentage is not given .
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Depreciation= cost of asset scrap value/ estimated life of the asset.


53.
Calculate the amount of annual depreciation of an asset, if the
cost of asset is Rs.83000 with scrap value of Rs.3000 and estimated
life 10years.
Depreciation=

cost of asset scrap

estimated life of the asset


83000-3000
10
80000
10
depreciation=8000
54.

What is original cost method of depreciation?

Under original cost method of depreciation, we calculate depreciation on the


original cost of the asset at a fixed rate, throughout the life of the asset.
For e.g. If the original cost of the asset is Rs.50000 and if the depreciation is
10%P.A. Is written off as depreciation throughout the life of the Asset.

55.

State two methods of charging depreciation.

a) Straight line method: here the depreciation is charged on the original cost of
the asset every year.
b) Written down value method: in this method, depreciation is calculated on the
written down value of the asset every year.
56.

State any two features of Receipts and Payments account?

The features of receipts and payment account are as follows:


a) It is a real a/c and is similar to cash book.
b) It includes both capital and revenue items.
57.

Give two examples of non-trading concern.


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a. Sports club
b. Hospitals
c. Educational institutions like schools
d. Public libraries.
58.

What are non-trading concern?

A non-trading concern is that concern started not for doing business and
making profits but for promoting art, culture, sports, charity, literature etc.
These concerns are created to render services to their members and to the
general public.
For e.g. Educational institution like schools, colleges, public hospitals, public
libraries, sports club etc.
59.

Give two examples for capital expenditure.

a. Costs of fixed or permanent asset such as lands, buildings, machinery, patent


rights, vehicles, furniture, tools etc. purchased for use in the business are
capital expenditure .
b. Costs of addition or extensions to existing fixed assets.

60.

What are legacies?

Legacy is a sum received by a non trading concern at the wish of a decreased


persons will. Usually it is taken as a capital receipt, as such amounts are not
expected regularly.
61.

Give the meaning of capital expenditure.

All the expenditure which will result in acquisition of fixed asset or which will
add to the revenue earning capacity of an asset are called capital
expenditure. It is generally of non recurring nature.
62.

What is manual accounting?

Manual accounting system is an accounting system, where each and every


accounting work is performed by the employees of the organisation without
the use of computer. It is less costly but more time consuming.
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63.

What is master file?

Master files is a collection of related information in some pre-arranged order.


It contains permanent records for identification and summarising information.
e.g. Bio-data of employees, records of customers etc.
64.

What is computerized accounting?

Computerised accounting means, maintaining books of accounts and


preparing the financial statements by using computers. It is the performance
of various accounting functions on a computer.
65.

What is data processing?

Data processing means the methods and procedures used to convert the
available data or unprocessed information in to useful information with the
help of men or computers. It involves the activities related to, collection of
data, manipulation of data and management of the output.
66.

What is Information in computer?

Information is the processed data with a definite meaning. In other words , it


refers to proceed facts, figures or statics that have a definite meaning.

67.

What is Tally in computer?

Tally is a user-friendly accounting package or software produced by Peutronics


Pvt.Ltd. It facilitates various kind of accounting solutions in a very simplified
format.

68.

what is spread sheet?

Spread sheet is a large sheet, consisting of several rows and columns with
the help of which, mathematical and financial calculations can be done in a
computer. It is a general software package.
e.g. Lotus 123, excel, v3 etc.
69.

What is word processing?

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Word processing is the process of using a computer, to write, correct, edit,


store text and print it. The text may be reports, memos, letters or any thing
which is useful to the business.
70.

Mention two types of Accounting package?

a. Tally Accounting Package.


b. Window-Based Business Accounting Package.
71.

What is payroll accounting?

Payroll accounting refers to the calculation of the amounts of salaries and


wages payable to employees and dictions like provident fund contribution,
income tax etc. To be made from the salaries of each employee. Payroll
accounting done with the help of computers is called computerised payroll
accounting.
72.

What is data base system?

It is a collection of information, organized in a structural way. It is the


information gathered from different sources and stored in such a manner,
that it is available to different users.
73.

What is flow chart?

A flow chart is the diagrammatic representation of sequence of operations to


be performed to obtain the solution for a problem. It is a computer
programme which helps in solving a problem step-by-step.

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