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Exchange of money, goods & services between the parties is known to

have resulted in a transaction. The procedure to record all these transactions is


known as Book-keeping.
Accounting is the analysis & interpretation of book keeping records. It
includes not only the maintenance of accounting records but also the
preparation of financial & economic information which involves the
measurement of transactions & other events relating to entry.
There are various terminology used in the Accounting which are being
explained as under: -
1) Assets: An asset may be defined as anything of use in the future
operations of the enterprise & belonging to the enterprise. E.g., land,
building, machinery, cash etc.
Assets = Liabilities + Capital (where Capital for a corporation equals Owner's Equity)
2) Equity: In broader sense, the term equity refers to total claims against the
enterprise. It is further divided into two categories.
i. Owner Claim - Capital
ii. Outsiders Claim Liability
Capital: The excess of assets over liabilities of the enterprise. It is the
difference between the total assets & the total liabilities of the
enterprise. e.g.,: if on a particular date the assets of the business amount to
Rs. 1.00 lakhs & liabilities to Rs. 30,000 then the capital on that date would be
Rs.70,000/-.
Liability: Amount owed by the enterprise to the outsiders i.e. to all others
except the owner. e.g.,: trade creditor, bank overdraft, loan etc.
3) Revenue: It is a monetary value of the products or services sold to the
customers during the period. It results from sales, services & sources like
interest, dividend & commission.
4) Expense/Cost: Expenditure incurred by the enterprise to earn revenue is
termed as expense or cost. The difference between expense & asset is that the
benefit of the former is consumed by the business in the present whereas in
the latter case benefit will be available for future activities of the business. e.g.,
Raw material, consumables & salaries etc.
5) Drawings: Money or value of goods belonging to business used by the
proprietor for his personal use.
6) Owner: The person who invests his money or moneys worth & bears the
risk of the business.
7) Sundry Debtors: A person from whom amounts are due for goods sold or
services rendered or in respect of a contractual obligation. It is also known as
debtor, trade debtor, accounts receivable.
8) Sundry Creditors: It is an amount owed by the enterprise on account of
goods purchased or services rendered or in respect of contractual obligations.
e.g., trade creditor, accounts payable.

American Institute of Certified Public Accountants (AICPA)

1. Accounting is defined as?

[A] An 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 thereof.

[B] A systematic and regular record of events clear financial picture

[C] A method of ascertaining profits & loss

[D] Noting but book keeping

Answer: A.

2.What is the method of summarizing and classifying the record of financial transaction in monetary
terms ?

[A] Book keeping

[B] Auditing

[C] Accountancy

[D] Cost Accounting

Answer: C. Accountancy

3.Accounting is also defined as an 'Information System' because ?


[A] The function of accounting is to provide quantitative information,primarily financial in nature about
economic entities

[B] It is a system which provides information

[C] Accounting provides required information for anyone seeking it

[D] All of above

Answer: A.

4.Accounting in modern age is regarded as ?

[A] The art of recording,classifying and summarizing the business transactions in monetary units

[B] The language of business

[C] The source of business information

[D] All of above

Answer: A

5.Accounting is the process of matching

[A] Benefits and Costs

[B] Revenues and Costs

[C] Cash inflows and outflows

[D] Potential and real performance

Answer: B. Revenues and Costs

6.Choose the correct statement

[A] Keeping systematic recording of business transaction is not the function of financial accounting

[B] Accounting is concerned with monetary transactions

[C] Accounting is concerned with past as well as future events

[D] Business and Businessman are one and the same from accounting point of view

Answer: B. Accounting is concerned with monetary transactions

7.Which of the following event is subject matter of Accounting ?

[A] Death if key executive of the business/company

[B] Strike of workers

[C] Payment of Rs.10,000 to bank in discharge of outstanding loan


[D] Marriage of the daughter of the Managing Director of the Company

Answer: C. Payment of Rs.10,000 to bank in discharge of outstanding loan

8.Choose the incorrect statement

[A] Accounting is the language of business

[B] Transaction are recorded in quantitative terms only

[C] Accounting is the art of recording,classifying and summarizing

[D] Transaction and events of financial character are subject matter of accounting

Answer: B. Transaction are recorded in quantitative terms only

9.Management Accounting

[A] Is a clerical work

[B] Is accounting for future

[C] Is a recording technique of the management related transactions

[D] Is an analysis of the past business activities

Answer: B. Is accounting for future

10.Which of the following is not available in the Financial Statements of a Company ?

[A] Total Sales

[B] Total Profit and Loss

[C] Loss from Fire

[D] None of above

Answer: D. None of above

11.The problems related to price-rise are handles under ?

[A] Management Accounting

[B] Cost Accounting

[C] Financial Accounting

[D] Inflation Accounting

Answer: D. Inflation Accounting

12.......... of American Institute of Certified Public Accountants enumerated the functions of


Accounting ?
[A] Accounting Principals Board

[B] Accounting Standards Board

[C] Accounting Concepts Board

[D] None of above

Answer: A. Accounting Principles Board

13.Accounting means recording of ........ ?

[A] Transactions

[B] Events

[C] Both A and B

[D] Neither A nor B

Answer: C. Both A and B


1. Which one of the following is an ingredient of the entity convention of accounting ?
(A) The owner of a unit and the unit itself is one and the same
(B) The owner and the unit are treated separately
(C) No separate accounts for the unit is required
(D) The unit is a private affairs of the owner, hence no accounting is required
Answer: The owner and the unit are treated separately

2. Which one of the following accounting equations is correct ?


(A) Assets = Owners Equity
(B) Assets = Liabilities + Owners Equity
(C) Assets = Liabilities Owners Equity
(D) Assets + Liabilities = Owners Equity
Answer: Assets = Liabilities + Owners Equity

3. Which one of the following accounting conventions stipulates that contingent assets appear as a footnote in the
balance sheet ?
(A) Materiality (B) Consistency
(C) Disclosure (D) Conservation.
Answer: Disclosure
19. According to the Companies Act, 1956 every registered company shall have to prepare which of the following
accounts and statements at the end of the financial year for approval of the shareholders and submission to the
Registrar of Companies ?
(A) Profit and Loss Account and Balance Sheet after making adjustments for inflation
(B) Profit and Loss Account. Balance Sheet and Funds Flow statement
(C) Profit and Loss Account Balance Sheet and Cash Flow statement
(D) Profit and Loss Account and Balance Sheet.
Answer: Profit and Loss Account and Balance Sheet.

The employee welfare facilities available outside the organization are called
intra-mural facilities

extra-mural facilities

extravagance

None of the above

The employee welfare facilities available inside the organization are


called
intra-mural facilities

extra-mural facilities

extravagance

None of the above

Who among the following has the responsibility for employee welfare?
Employers

Central government

State government

All of the above

In the absence of statutory requirements, the employers may not


provide even the basic facilities to the employees. This is the basic
assumption of the
Religious theory

Policing theory

Appeasement theory

Benevolence theory

According to which theory, employee welfare is an investment which


would multiply and return to the employers in some other forms?
Religious theory

Policing theory

Appeasement theory

Benevolence theory

An inclination to do something good for others can influence the


employers to undertake welfare facilities. This is the assumption of the
Religious theory

Policing theory

Appeasement theory

Benevolence theory

Making peace with employees by fulfilling all their needs without any
resistance is the essence of the
Religious theory

Policing theory

Appeasement theory

Benevolence theory

Which of the following benefits is covered under social security


schemes?
Retirement benefits

Compensation facilities

Medical facilities

All of the above

In which year was the Employees State Insurance Act enacted?


1948
1976

1923

1961

In which of the following years was the Workmens Compensation Act


introduced?
1948

1976

1923

1961

The Maternity Benefit Act was introduced in the year


1948

1976

1923

1961

The Payment of Gratuity Act was introduced in the year


1972

1976

1923

1961

Employees Deposit Linked Insurance Scheme was introduced in the


year
1948

1976
1923

1961

The employee welfare facilities available outside the organization are


called
1.
extra-mural facilities
Your Answer:

The employee welfare facilities available inside the organization are called
2.
intra-mural facilities
Your Answer:

Who among the following has the responsibility for employee welfare?
3.
All of the above
Your Answer:

In the absence of statutory requirements, the employers may not provide


even the basic facilities to the employees. This is the basic assumption of
4. the

Benevolence theory
Your Answer:

Policing theory
Correct Answer:

According to which theory, employee welfare is an investment which would


multiply and return to the employers in some other forms?
5.
Appeasement theory
Your Answer:

Religious theory
Correct Answer:

An inclination to do something good for others can influence the employers


to undertake welfare facilities. This is the assumption of the
6.
Policing theory
Your Answer:

Benevolence theory
Correct Answer:

Making peace with employees by fulfilling all their needs without any
resistance is the essence of the
7.
Policing theory
Your Answer:

Appeasement theory
Correct Answer:

Which of the following benefits is covered under social security schemes?


8.
All of the above
Your Answer:

In which year was the Employees State Insurance Act enacted?


9.
1948
Your Answer:
In which of the following years was the Workmens Compensation Act
introduced?
10
. 1948
Your Answer:

1923
Correct Answer:

The Maternity Benefit Act was introduced in the year


11
1961
.
Your Answer:

The Payment of Gratuity Act was introduced in the year


12
1923
.
Your Answer:

1972
Correct Answer:

Employees Deposit Linked Insurance Scheme was introduced in the year


13
1976
.
Your Answer: