ACCOUNTING FOUNDATION CLASSES – ASSIGNMENT 1

1. State whether the following statements are ‘True’ or ‘False’.

a. Accounting is concerned with monetary and non-monetary transactions.
b. Book-keeping and accounting are different terms.
c. Fixed assets must always be shown at market value.
d. Current assets must always be shown at market value.
e. Owners’ Equity = Assets + Liabilities.
f. Patent is an example of current asset.
g. Cash basis considers the revenue as realized, when the goods are produced.
h. The losses from the sale of capital assets need not be deducted from revenue to ascertain
the net income.
i. According to money measurement concept, only transactions that can be expressed in
money are recorded in accounts.
j. The business entity concept considering the business and the proprietor as a separate
from each other.
k. Going concern concept requires that always assets should be valued and recorded at
market value.
l. According to consistency concept, the results of one accounting period of a business
cannot be compared with that in the past.
m. Conservation concept requires that all probable profits must be considered while all
prospective losses must be ignored in computation of income.

2. Are the following events transactions of a business or not?

a. Furniture purchased for cash.
b. Owner of the business withdraws goods for his personal consumption from the business.
c. Interest received from bank on fixed deposits.
d. Manager of a firm dies.

3. Which of the following are incomes? A firm receives money for:

a. Interest received on a loan given
a. Rent of a premise sublet
b. A loan taken from a bank
c. A customer gives advance to buy your product
d. Repayment of a loan
4. Following are the applications of some accounting assumptions or principles. State
the name of the relevant accounting assumption or principle applied herein.
a. Appending notes to the financial statements.
b. Accounting of a small calculator as an expense and not as an asset.
c. Following Written Down Value (WDV) method of depreciating a particular asset year
after year.
d. Valuation of stock at lower of cost or net realisable value.
e. Making provision for bad and doubtful debts.

5. Fill in the blanks by choosing the right word:

a. Cost accounting helps in ascertaining and controlling _________. (cost/ revenue)
b. Closing stock is an example of __________ asset. (non-current/ current)
c. Loan (long-term) from bank is __________. (non-current/ current)
d. Plant and machinery is a __________ asset. (non-current/ current)

6. Ram Lal conducts a business as a cloth dealer. State which of the following are
transactions to be recorded in his business books:
a. He purchases a bicycle for ₹2000 for his son using his own money.
b. He employs a typist for official correspondence and pays him ₹4500 per month.
c. He buys a showcase for ₹3500.
d. He sells old domestic furniture for ₹3000.
e. He purchases cloth for ₹15000.
f. He buys a cash counting machine for ₹25000.
g. He purchases domestic utensils for ₹2000 for which he gives cloth from the shop.
h. He takes cloth worth ₹2500 for use at home.
i. He pays salary to his domestic servant, ₹500, from private funds.
j. He takes a loan of ₹100000 from a friend for the marriage of his daughter.