APPLICATION BASED QUESTIONS

UNIT -1
INTRODUCTION TO ACCOUNTING CONCEPTS AND IFRS

1) Read the following hypothetical Case Study and answer the given questions:
A business purchased goods for Rs 2,00,000 and sold 75% of such goods during
accounting year ended 31st March, 2020. The market value of remaining goods was
Rs 43,000. Accountant valued closing stock at cost. According to him,
(i) Owner of the business is treated as creditor to the extent of his capital;
(ii) All expenses incurred to earn revenue of a particular period should be charged
against that revenue to determine the net income.
Financial statements are prepared on 31st March ever year.
1. A business purchased goods for Rs 2,00,000 and sold 75% of such goods during
accounting year ended 31st March, 2020. The market value of remaining goods
was Rs 43,000. Accountant valued closing stock at cost. Identify the concept
violated in the above situation.
a. Conservatism
b. Business Entity
c. Accounting period
d. Matching
2. According to which concept, all expenses incurred to earn revenue of a particular
period should be charged against that revenue to determine the net income.
a. Conservatism
b. Business Entity
c. Matching
d. Accounting period
3. Financial Statements of an entity are prepared at regular intervals in accordance to
which accounting concept.
a. Conservatism
b. Matching
 c. Business Entity
d. Accounting period

2) List out the Accounting concepts with an example for each concept related to a company.
3) Classify each of the following transactions into capital or revenue transactions and try
to analyse the transactions :
a. Legal fees on the acquisition of land.
b. Complete repaint of existing building.
c. Repainting of a delivery van.
d. Providing drainage for a new piece of water-extraction equipment.
e. Carriage costs on a replacement part for a piece of machinery.

4)  Mr. Manohar could not believe his luck. Just when he thought that the difficult days were
over and the situation was under control, news came about accident of his accountant Mr.
Arun. He was also informed that all the books of accounts were destroyed in the same
accident. It was March 2022 now, the financial year closing time, the time to prepare the final
accounts. What was to be done now? Give him the suggestion using the accounting concept.

5) Consider the list of accounts shown below. Your task is to classify these accounts and
analyse.
1. Plant and machinery
2. Purchases
3. Sales
4. Rent
5. Land and building
6. Cash
7. Sam’s capital
8. Loan from city bank