Major Financial Accounting Question Paper 2021, Dibrugarh University B.Com 1st Sem Question Papers

(i) What is Financial Accounting Principle?

Ans: According to the American institute of certified public accountants :

"principles of the accounting are general law or rule adopted or proposed as a guide to action, a settled ground or basis of conduct or practice."

•It is a body of doctrine.

• commonly used associated with the theory and procedure of accounting.

• These principles are classified into two categories:
。Accounting concepts
。Accounting convention


(ii) What is meant by Errors of Commission?

Ans: Errors of commission are those errors which may be committed when transactions are recorded with wrong amounts, wrong balancing is done, wrong posting and/or wrong carrying forwarded is done. Here are some examples which will illustrate the errors of commission in detail.

Let us consider the first example.

Sales return from Megha Rs 1,600 were posted to her account as Rs 1,000. This is an error of commission.

The rectification entry for the above error will be

Suspense a/c ...Dr 600
To Megha a/c. 600
(Being sales return from Megha Rs 1,600 were posted to her account as Rs 1,000 now rectified)

Let us consider the second example.

Cash received from Karim Rs 6,000 posted to Nadim. This is an error of commission.

The rectification entry for the above error will be

Nadim ...Dr. 6000
To Karim. 6000
(Being cash received from Karim Rs 6,000, wrongly posted to Nadim's account now rectified)


(iii) What is independent branch?

Ans: this chapter is not included in B.com 2nd major financial accountancy syllabus.

(iv) What do you mean by Realization Account?

Ans: At the time of dissolution of a firm all the books of account are closed, all assets are sold and all liabilities are paid off. In order to record the sale of assets and discharge of liabilities a nominal account is opened known as realisation account.

(i) On which one of the following concepts is determination of expenses for an accounting period based?

(1) Accounting period concept

(2) Matching concept

(3) Cost concept

Ans: (2) Matching concept



(ii) _____ explains how revenue is to be determined in Profit & Loss Account of an enterprise.

(1) AS-6

(2) AS-19

(3) AS-9

Ans:(3) AS-9

AS-9 explains how revenue is to be determined in Profit & Loss Account of an enterprise



(iii) Inventory should normally be valued

(1) at historical cost or net realisable value whichever is lower

(2) at net realisable value

(3) at historical cost or net realisable value whichever is higher

Ans:(1) at historical cost or net realisable value whichever is lower



(iv) On the date of agreement, hire purchaser pays an amount which is called

(1) hire-purchase price

(2) down payment

(3) instalment

Ans: (2) down payment

(a) Bases of accounting

Ans:For recording financial transactions, there can be two broad approaches to accounting. These are:
1. Cash Basis and
2. Accrual Basis.

Cash Basis of Accounting: Cash basis of accounting is a system in which transactions are recorded only when cash is received or paid, i.e., entry is not recorded when a payment or receipt is merely due.

It means revenue is recognised only on receipt of cash. Likewise, expenses are recorded as incurred only when they have been paid.

The difference between the total incomes and total expenses represents Profit or Loss of a concern for a particular accounting period. Thus, when Cash Basis of Accounting is followed, outstanding and prepaid expenses and income received in advance or accrued incomes are not considered.

Accrual Basis of Accounting: A system in which income is recorded when it is earned, whether received or not. Similarly, expense is recorded when incurred, whether paid or not.

For example, credit sale is recognised as sale irrespective of the fact whether cash has been received or not.

Similarly, if an expense has been incurred but payment has not been made, it will be recorded as an expense. For example, rent for the month of March, 2010 has not been paid. It will still be recorded as an expense because it had become due.

Accrual Basis of Accounting is based on the concept of realisation and follows two basic accounting principles, i.e., revenue recognition and matching principle.

Thus, under the Accrual Basis of Accounting, outstanding and prepaid expenses are adjusted, Similarly, accrued income and income received in advance are recognised for ascertaining correct profit or loss for the accounting period.


(b) Causes of depreciation

Ans: Causes of Depreciation:

1. By Constant Use: The constant use of any asset by a business causes wear and tear, which causes a decrease in the value of those assets. As a result, the capacity of the asset to serve in the business is reduced.

2. By Passing of Time: The value of assets also decreases when an asset is exposed to forces of nature like wind, rain, etc., even if it is not put to any use.

3. By Obsolescence: Obsolescence is also one main reason for depreciation. An existing asset can become outdated in some time due to technological changes, improvements in production methods, changes in market demand, etc., as a result, the demand for the asset decreases, as the old asset is not able to fulfill the requirements of the business.

4. By Expiration of Legal Rights: There are some assets that are used in the business for a certain time period. The time period is determined by an agreement in which the tenure to use that particular asset is mentioned. Example: Patents, Copyrights, Lease, etc.

5. By Accident: Assets can be destroyed due to some abnormal factors, such as earthquakes, floods, etc. This leads to a decrease in the value of the asset. Thus, it needs to be taken into account.


(c) Applicability of IFRS in India

Ans:The International Financial Reporting Standards (IFRS) are a set of accounting guidelines that help companies around the world report their finances consistently. In India, these standards are being gradually introduced to align with global practices.


Key Points:

Adoption: Indian companies are adopting IFRS to make their financial statements understandable globally.

Phases: The change to IFRS is happening in stages, focusing first on large companies.

Benefits: Using IFRS in India helps in attracting foreign investment and simplifies reporting for companies that operate internationally.

Challenges: The shift requires training, changes in systems, and adapting to new regulations.

Overall, IFRS helps Indian companies to be more transparent and comparable on an international level, which is good for business and the economy.


(d) Matching concept

Ans: In accounting, the matching principle is a fundamental concept that ensures expenses are recognized in the same period as the revenues they help to generate. This principle is part of the accrual accounting method and aims to provide a more accurate picture of a company’s financial performance.

For example, if a company incurs costs for raw materials that are used to produce goods sold in the same month, the cost of the raw materials should be recognized as an expense in the same month as the sales revenue from those goods.

The matching principle ensures that financial statements reflect the true costs associated with generating revenue, which helps stakeholders make more informed decisions.


(e) Characteristics of dependent branch

Ans:this chapter is not included in B.com 2nd major financial accountancy syllabus.


(f) Joint venture and consignment

Ans:this chapter is not included in B.com 2nd major financial accountancy syllabus.