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1.	Distinguish between Opening Stock and Closing Stock
Answer» Opening stock means the goods and services that are used on 01 april according to financial years Closing stock means the stock which are used on 31 march of every financial year

2.	Differentiate between Assets and Goods on the basis of any two points.
Answer» (i) Goods are purchased for resale whereas assets are held for continued use in the business. (ii) Goods are alwasys tangible i.e., they can be seen and touched whereas assets may be both tangible and intangible.

3.	Explain the following terms : (a) Revenue (b) Trade Payables (c ) Fictitious Assets (d) Working Capital
Answer» Working Capital = Current Assets - Current Liabilities.

4.	Distinguish between expenses and losses.
Answer» If the benefit of an expenditure is exhausted within a year it is called expense whereas excess of expenses of a period over its related revenues is termed as loss.

5.	Godrej Ltd. Imported from Germany one machinery for sale in India and another machinery for production purpose. Will you treat them goods or fixed assets?
Answer» First machinery will be treated as goods, and second machinery will be treated as Fixed Asset.

6.	Mr Prem commenced business of trading in electronic goods with an initial capital of Rs 15,00,000. out of the said Rs 15,00,000, he paid Rs 10,00,000 towards purchase of electronic goods. He further spent Rs 2,00,000 on furnishing the shop and Rs 35,000 for purchase of computer and printer. Rs 10,000 is yet to be paid to supplier of computer. He sold goods costing Rs 5,00,000 for Rs 7,00,000 in cash and goods costing Rs 2,50,000 for Rs 3,10,000 on credit. Goods sold on credit for Rs 25,000 were returned being defective. These goods (costing Rs 20,000) were returned to the supplier. Looking into the response, he decided to trade in home appliances also and further invested Rs 5,00,000. He purchased electronic goods and home appliances for Rs 8,00,000 out of which purchaese of Rs 2,00,000 were on credit. Due to an earthquake, 2 LCD Televisions costing Rs 50,000 were completely destroyed Mr. Prem received an insurance claim of Rs 30,000. A customer purchased goods costing Rs 2,25,000 for Rs 3,00,000 and was allowed discount of Rs 15,000. He was further allowed discount of Rs 5,000 for payment within agreed time. He paid salary to Shyam of Rs 55,000 were yet to be paid. He insured the goods and paid insurance premium of Rs 10,000. out of this, Rs 5,000 are for the next year. Yor are required to answer the following questions on the basis of the above : (i) What is the amount of capital invested in the business by Mr. Prem ? (ii) What is the amount invested by Mr. Prem in fixed assets ? (iii) What is the amount of total purchases ? (iv) What is the amount of long -term liabilities ? (v) What is the amount of current liabilities ? (vi) What is the amount of prepaid expenses ? (vii) What is the amount of outstanding expenses ? (viii) What is the income earned by Mr.Prem ? (ix) How much profit is earned by Mr. Prem ? (x) What is the amount due form debtors ? (xi) What is the amount due to creditors ? (xii) What is the value of Closing Stock ? (xiii) What is the value of net purchases ? (xiv) What is the amount of Trade Discount allowed ? (xv) Has Mr. Prem allowed Cash Discount ? If yes, what is the amount ? (xvi) What is the amount of Drawings ? (xvii) What is the amount of Sales Return ? (xviii) What is the amount of Purchases Return ?
Answer» (i) Capital invested by Mr. Prem in the business is Rs 20,00,000 (i.e., Rs 15,00,000 + Rs 5,00,000). (ii) Mr. Prem has invested Rs 2,35,000 (i.e., Rs 2,00,000 + Rs 35,000) in the fixed assets. (iii) Purchases made by Mr.Prem are Rs 18,00,000 (i.e., Rs 10,00,000 + Rs 8,00,000) during the year. (iv) Long -term liabilities of Mr. Prem are nil (v) Current libilities of Mr. Prem are Rs 1,95,000 [Rs 10,000 (Computer and Printer) + Rs 2,00,000 (Purchases + Rs 5,000 (Salaries) - Rs 20,000 (Purchases Return)] (vi) Amount of prepaid expenses is Rs 5,000 being insurance premium. (vii) Outstanding expenses are Rs 5,000 being salary payable. (viii) Income earned by Mr. Prem is Rs 1,75,000 [Rs 12,70,000 (Sales) - Rs 10,95,000 (Expenses)] (ix) Profit earned by Mr. Prem is Rs 1,75,000 as he has no income from non-operating activities (x) Amount due from debtors is Rs 2,85,000 (xi) Amount due to creditors is Rs 1,80,000. (xii) The value of Closing Stock is Rs 7,75,000 `[Rs 10,00,000 + Rs 20,000 + Rs 8,00,000 - Rs 5,00,000 - Rs 2,50,000 - Rs 20,000 - Rs 50,000 - Rs 2,25,000 = Rs 7,75,000]` (xiii) The amount of net purchases is Rs 17,80,000 (xiv) The amount of Trade Discount allowed is Rs 15,000 (xv) Yes, Mr Prem has allowed cash discount and the amount is Rs 5,000 (xvi) The amount of Drawings is Rs 30,000. (xvii) The amount of Sales Return in Rs 25,000 (xviii) The amount of Purchases Return is Rs 20,000

7.	Explain the meaning of any three of the following terms: (i) Liability, (ii) Stock, (iii) Business Transaction and (iv) Drawings
Answer» i) Liability - An obligation that legally binds an individual or company to settle a debt. When one is liable for a debt, they are responsible for paying the debt or settling a wrongful act they may have committed. ii) Business transaction - Business transactions refer to activities and events that affect the financial position of a business and are capable of being assigned monetary values. Business transactions are recorded in the books of the business and summarized in financial reports.

8.	Which of the following is not an expense ?A. FurnitureB. SalaryC. RentD. Electricity Expenses
Answer» Correct Answer - A

9.	Which of the following is not a busincess transaction ?A. Bought furniture of Rs 25,000 for businessB. Paid for salaries of employees, Rs 20,000C. Cash withdrawn from personal bank account, Rs 10,000 for domestic use.D. All of the above
Answer» Correct Answer - C

10.	A liability arises because ofA. cash transactionsB. Credit transactionsC. cash as well as credit transactionsD. None of these
Answer» Correct Answer - B

11.	Bank overdraft isA. short-term liabilityB. long-term liabilityC. contingent liabilityD. None of these
Answer» Correct Answer - A

12.	Which of the following are goods ?A. Machines manufactured for saleB. Furniture purchased for saleC. Books and stationery purchased by a book sellerD. All of the above
Answer» Correct Answer - D

13.	Which of the following is a business transaction ?A. Goods purchased on creditB. An employee being dismissedC. Proprietor purchasing a car for own useD. Sale of personal asset by the proprietor
Answer» Correct Answer - A

14.	Which of the following is a liability ?A. FurnitureB. Rent PayableC. Interest ReceivedD. Stock
Answer» Correct Answer - B

15.	Out of the following assets, which one is not an intangible asset ?A. MachineryB. PatentsC. GoodwillD. Trade Mark
Answer» Correct Answer - A

16.	Profit is earned on sale of Fixed Asset. What should be the accounting treatment of this profit?
Answer» It is a capital profit. Hence, it should be transferred to capital reserve.

17.	The amount invested by the proprietor in a business is calledA. capitalB. cashC. revenues.D. loan
Answer» Correct Answer - A

18.	Goodwill is a/anA. Tangible AssetB. Intangible AssetC. Current AssetD. Fictitious Asset
Answer» Correct Answer - B

19.	Expenditure of revenue nature that gives benefit for more than one accounting period is categorised asA. Capital ExpenditureB. Revenue ExpenditureC. Deferred Revenue ExpenditureD. None of these
Answer» Correct Answer - C