Section A : Accounting Basics [ 25 Marks]

1.Fundamentals of Accounting:
Accounting - Meaning, Scope and Significance of Accounting - Accounting
Principles, Concepts and Conventions -Capital and Revenue Transactions
Depreciation - Rectification of Errors.
Accounting for Special Transactions
Bills of Exchange - Consignment - Joint Venture - Insurance Claims (Loss
of Stock and Loss of Profit).

Liquidity refers to the availability of cash in the near future to meet financial
commitments over this period. Solvency refers to the availability of cash over
the longer term to meet financial commitments as they fall due.
Gross Working Capital = Total Current Assets
= Long term internal liabilities plus long term debts plus the current liabilities
minus the amount blocked in the fixed assets.
Working Capital (Net) = Current Assets Currents Liabilities.

Contingent Liability : It represents a potential obligation that could be created depending on the
outcome of an event. E.g. if supplier of the business files a legal suit, it will not be treated as a liability
because no obligation is created immediately. If the verdict of the case is given in favour of the
supplier then only the obligation is created. Till that it is treated as a contingent liability. Please note
that contingent liability is not recorded in books of account, but disclosed by way of a note to the
financial statements.