Theoretical Framework

What do you mean by accounting? Give its definition.

What are the branches of Accounting? Explain. OR What are the sub-fields of Accounting? [Dec 2023]

Limitations of accounting

Functions of accounting data. [Jan. 2025, 4 Marks]

Differentiate between Book keeping and Accounting. [Sept. 2024, 4 Marks]

Capital is all assets less fictitious assets.

Capital+ Long Term Liabilities = Fixed Assets+ Current Assets+ Cash - Current Liabilities.

Equity+ LTL-CL = FA+ CA

Customers of business should not be considered as users of accounts prepared by business. They are not interested in knowing the performance of the business. [Jan. 2025, 2 Marks]

Book keeping and accounting are not synonymous terms; they are different from each other. [Jan. 2025, 2 Marks]

What are Accounting Concepts, Principles & Conventions?

What are Fundamental Accounting Assumptions? Explain them in detail.

Money Measurement Concept [June 2022, Dec 2023, Jan 2025 MTP]

Convention of Materiality [June 2023, l Mark]

Convention of Prudence [June 2023, l Mark]

Cash Basis of Accounting [June 2024, 1 Mark]

Distinguish between Going Concern concept and Cost concept. [May 2019, 4 Marks; June 2024,1 Mark]

The financial statement must disclose all the relevant and reliable information in accordance with the foll disclosure principle. [Dec. 2023, 2 Marks]

As per Concept of Conservatism, the accountant should provide for all possible losses, but should not anticipate income. [June 2023, 2 Marks]

Valuation of inventory at cost or net realizable value is based on principle of Conservatism. [Nov. 2019, 2 Marks , Sep 2024, 2 Marks]

A concern proposes to discontinue its business from December, 2020 and decides to dispose of its plants within a period of 3 month§. The Balance Sheet as on 31st December, 2020 should continue to indicate the plants at its historical costs as the assets will be disposed of after the Balance Sheet date. [Nov. 2020, 2 Marks]

Matching concept is based on accrual concept. [Jan. 2025, 2 Marks]

"The cost of Property, Plant and Equipment comprises of any cost directly attributable to bring the asset to the location and condition necessary for it to be capable of operating in a manner intended hy the enterprise". Give any five examples of such ‘directly attributable costs'. [Dec. 2022, 5 Marks]

Capital Receipts and Revenue Receipts

Capital Expenditure. [July 2021, 2 Marks]

Revenue Expenditure. [July 2021, 2 Marks]

Expenses in connection with obtaining a license for running the Cinema Hall is Revenue Expenditure, [May 2018, June 2023, 2 Marks]

Overhauling expenses for the engine of motor car to get better fuel efficiency is revenue expenditure. [Nov. 2018, 2 Marks]

Amount spent for the construction of temporary huts, which were necessary for construction of the Cinema House and were demolished when the Cinema House was ready, is capital expenditure. [May 2019, 2 Marks]

M/ s. XYZ & Co, runs a cafe. They renovated some of the old cabins. Because of this renovation some space was made free and number of cabins was increased from 15 to 18. The total expenditure incurred was~ 30,000 and was treated as a revenue expenditure. [Nov. 2019, 2 Marks]

Expenses incurred on the repairs for the first time on purchase of an old building are capital expenditure. [Dec. 2021, 2 Marks]

Any amount spent for replacement of worn out part of a machine is capital expenditure, [June 2022, 2 Marks]; [MTP Jan. 2025]

Inauguration expenses of Rs. 10 lakhs incurred on the new unit in an existing business is a capital expenditure. [Dec. 2023, 2 Marks]

Overhaul Expenses of a second-hand machinery purchased are revenue Expenditure. [Sep. 2024, 2 Marks]

Classify the following expenditures as capital or revenue expenditure/ receipt: (i) An extension of railway tracks in the factory area. (ii) Amount spent on painting the factory. (iii) Payment of wages for building a new office extension. (iv) Premium received on issue of shares. (v) Rings and Pistons of an engine were changed to get full efficiency. (vi) Legal fees paid to acquire a property. [RTP Jan. 2025]

Contingent liability. [Dec. 2021, 1 Mark]

Contingent Assets. [Dec. 2021, 1 Mark]

Provision and Contingent liability. [May 2018; Nov, 2019, 4 Marks] [Dec. 2022, 4 Marks]

Present liability of uncertain amount, which can be measured reliably by using a substantial degree of estimation is termed as contingent liability.

In the financial statement, contingent liability is recognized.

If an inflow of economic benefits is probable then a contingent asset is disclosed in the financial statements.

Contingent asset usually arises from unplanned or unexpected events that give rise to the possibility of an outflow of economic benefits to the business entity.

A claim that an enterprise is pursuing through legal process, where the outcome is uncertain, is a Contingent Liability. [June 2022, 2 Marks]; [MTP Jan. 2025]

What do you mean by Accounting policies? What are the basis of their selection? What are the different areas in which different accounting policies are possible? [June 2024, 1 Mark]

When changes in accounting policies are permitted? What disclosures are to be made whenever change takes place? [June 2024, 1 Mark]

Distinguish between fundamental accounting assumption and accounting policies. [RTP Jan. 2025]

"Change in accounting policy may have a material effect on the items of financial statements." Explain the statement with the help of an example. [RTP Jan. 2025]

Historical Cost.

Current Cost

Realisable Value

Present Value

Need of Accounting Standards

Objectives & Advantages of Accounting Standards [MTP Jan. 2025]; [RTP Jan~ 2025]

Accounting Standards for non-corporate entities in India are issued by the Central Government. [Jan. 2021, 2 Marks]

Promissory Note is different from Bill of Exchange because the amount is paid by the maker in case of former and by the acceptor in the later. [July 2024, 2 Marks]

What do you mean by accounting? Give its definition.

What are the branches of Accounting? Explain. OR What are the sub-fields of Accounting? [Dec 2023]

Limitations of accounting

Functions of accounting data. [Jan. 2025, 4 Marks]

Differentiate between Book keeping and Accounting. [Sept. 2024, 4 Marks]

Capital is all assets less fictitious assets.

$\displaystyle Capital + Long\ Term\ Liabilities = Fixed\ Assets + Current\ Assets + Cash - Current\ Liabilities$

Equity+ LTL-CL = FA+ CA

Customers of business should not be considered as users of accounts prepared by business. They are not interested in knowing the performance of the business. [Jan. 2025, 2 Marks]

Book keeping and accounting are not synonymous terms; they are different from each other. [Jan. 2025, 2 Marks]

What are Accounting Concepts, Principles & Conventions?

What are Fundamental Accounting Assumptions? Explain them in detail.

Money Measurement Concept [June 2022, Dec 2023, Jan 2025 MTP]

Convention of Materiality [June 2023, l Mark]

Convention of Prudence [June 2023, l Mark]

Cash Basis of Accounting [June 2024, 1 Mark]

Distinguish between Going Concern concept and Cost concept. [May 2019, 4 Marks; June 2024,1 Mark]

The financial statement must disclose all the relevant and reliable information in accordance with the foll disclosure principle. [Dec. 2023, 2 Marks]

As per Concept of Conservatism, the accountant should provide for all possible losses, but should not anticipate income. [June 2023, 2 Marks]

Valuation of inventory at cost or net realizable value is based on principle of Conservatism. [Nov. 2019, 2 Marks , Sep 2024, 2 Marks]

A concern proposes to discontinue its business from December, 2020 and decides to dispose of its plants within a period of 3 month§. The Balance Sheet as on 31st December, 2020 should continue to indicate the plants at its historical costs as the assets will be disposed of after the Balance Sheet date. [Nov. 2020, 2 Marks]

Matching concept is based on accrual concept. [Jan. 2025, 2 Marks]

"The cost of Property, Plant and Equipment comprises of any cost directly attributable to bring the asset to the location and condition necessary for it to be capable of operating in a manner intended hy the enterprise". Give any five examples of such ‘directly attributable costs'. [Dec. 2022, 5 Marks]

Capital Receipts and Revenue Receipts

Capital Expenditure. [July 2021, 2 Marks]

Revenue Expenditure. [July 2021, 2 Marks]

Expenses in connection with obtaining a license for running the Cinema Hall is Revenue Expenditure, [May 2018, June 2023, 2 Marks]

Overhauling expenses for the engine of motor car to get better fuel efficiency is revenue expenditure. [Nov. 2018, 2 Marks]

Amount spent for the construction of temporary huts, which were necessary for construction of the Cinema House and were demolished when the Cinema House was ready, is capital expenditure. [May 2019, 2 Marks]

M/ s. XYZ & Co, runs a cafe. They renovated some of the old cabins. Because of this renovation some space was made free and number of cabins was increased from 15 to 18. The total expenditure incurred was~ 30,000 and was treated as a revenue expenditure. [Nov. 2019, 2 Marks]

Expenses incurred on the repairs for the first time on purchase of an old building are capital expenditure. [Dec. 2021, 2 Marks]

Any amount spent for replacement of worn out part of a machine is capital expenditure, [June 2022, 2 Marks]; [MTP Jan. 2025]

Inauguration expenses of Rs. 10 lakhs incurred on the new unit in an existing business is a capital expenditure. [Dec. 2023, 2 Marks]

Overhaul Expenses of a second-hand machinery purchased are revenue Expenditure. [Sep. 2024, 2 Marks]

Classify the following expenditures as capital or revenue expenditure/ receipt: (i) An extension of railway tracks in the factory area. (ii) Amount spent on painting the factory. (iii) Payment of wages for building a new office extension. (iv) Premium received on issue of shares. (v) Rings and Pistons of an engine were changed to get full efficiency. (vi) Legal fees paid to acquire a property. [RTP Jan. 2025]

Contingent liability. [Dec. 2021, 1 Mark]

Contingent Assets. [Dec. 2021, 1 Mark]

Provision and Contingent liability. [May 2018; Nov, 2019, 4 Marks] [Dec. 2022, 4 Marks]

Present liability of uncertain amount, which can be measured reliably by using a substantial degree of estimation is termed as contingent liability.

In the financial statement, contingent liability is recognized.

If an inflow of economic benefits is probable then a contingent asset is disclosed in the financial statements.

Contingent asset usually arises from unplanned or unexpected events that give rise to the possibility of an outflow of economic benefits to the business entity.

A claim that an enterprise is pursuing through legal process, where the outcome is uncertain, is a Contingent Liability. [June 2022, 2 Marks]; [MTP Jan. 2025]

What do you mean by Accounting policies? What are the basis of their selection? What are the different areas in which different accounting policies are possible? [June 2024, 1 Mark]

When changes in accounting policies are permitted? What disclosures are to be made whenever change takes place? [June 2024, 1 Mark]

Distinguish between fundamental accounting assumption and accounting policies. [RTP Jan. 2025]

"Change in accounting policy may have a material effect on the items of financial statements." Explain the statement with the help of an example. [RTP Jan. 2025]

Historical Cost.

Current Cost

Realisable Value

Present Value

Need of Accounting Standards

Objectives & Advantages of Accounting Standards [MTP Jan. 2025]; [RTP Jan~ 2025]

Accounting Standards for non-corporate entities in India are issued by the Central Government. [Jan. 2021, 2 Marks]

Promissory Note is different from Bill of Exchange because the amount is paid by the maker in case of former and by the acceptor in the later. [July 2024, 2 Marks]