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MP Board Class 11th Accountancy Important Questions Chapter 15 Adjustments

Adjustments Important Questions

Adjustments Objective Type Questions

Question 1.
Choose the correct answer:

Question 1.
Outstanding Expenses are related to –
(a) Current year
(b) Next year
(c) Last year
(d) None of these.
Answer:
(a) Current year

Question 2.
Prepaid expenses are shown in –
(a) Liability side
(b) Asset side
(c) Assets or Liability side
(d) None of these.
Answer:
(b) Asset side

Question 3.
Charity of goods is –
(a) Expenses
(b) Loss
(c) Profit
(d) None of these.
Answer:
(b) Loss

Question 4.
If a person fails to pay his debt, such amount is considered as –
(a) Bad debts
(b) Bad debts recovered
(c) Provision for Bad debt
(d) None of these.
Answer:
(a) Bad debts

Question 5.
The object of non – trading concerns –
(a) Social service
(b) Profit earning
(c) Both of these
(d) None of the above.
Answer:
(a) Social service

Question 2.
Fill in the blanks:

1. Goods given in charity is credited in …………… Account.
2. Such Expenses which are paid in current year but are related to next year are called ……………. expenses.
3. Accrued income is ……………. Account.
4. There is ……………. fall in the value of Asset due to depreciation.
5. Interest on capital is always shown in …………….. side of profit & loss A/c.
6. Unearned income is shown on the ……………….. side of balance sheet.

Answer:

1. Purchase
2. Prepaid expenses
3. Personal account
4. Constant/ gradual
5. Debit
6. Liability.

Question 3.
Match the following:

Answer:

1. (c)
2. (d)
3. (b)
4. (a).

Question 4.
Answer in one word/sentence:

1. Such Expenses for which services have been received but amount is yet to be paid are called.
2. Recording of relevant transactions and eliminating non – related transactions is called.
3. Such income which is earned but not yet received is called.
4. Unearned income is recorded in which side of the balance sheet?

Answer:

1. Outstanding Expenses
2. Adjustment
3. Accrued or Earned Income
4. Liability side.

Question 5.
State True or False:

1. Depreciation is charged only in case of profits.
2. Unearned Income is recorded in Asset side.
3. Interest on Capital is income for the business.
4. Drawing of goods is deducted from purchases.

Answer:

1. False
2. False
3. False
4. True.

Adjustments Short Answer Type Questions

Question 1.
What do you mean by adjustments? What are its object?
Answer:
Sometimes certain transactions may be partially or fully omitted by mistake or wrongly entered. Besides this, there are some incomes or expenses which are related to the next year or of the last year, which are received or paid during the current year, if they are including in the current years. Final accounts, it will not show a correct net profit or net loss. So, they must be adjusted. It is called adjustments.

1. To record the related expenses and Income, of the year – It is essential to record all expenses and incomes of the related year while preparing the Final Accounts. Otherwise, it will not produce a true picture of net profit or net loss and financial position of the business.

2. To separate unrelated expenses and incomes of the business – Sometimes there are chances of unpaid amount or incomes received in advance. These items must be excluded. For this purpose, adjustments are necessary.

3. To make provision for future loss – Possibility of loss in future is always exist in the business. In order to overcome these loss like bad debt etc. a provision is required to be maintained in the business.

4. To provide depreciation – Various assets are continuously used in the business. Due to its constant use, their value decreases which is termed as depreciation. Thus, it is essential to make record of it as a business expense.

5. To rectify errors – To make rectification of errors made while recording, posting or balancing of accounts, adjustment entries are needed.

6. To make complete record – To make record of one individual items of the trading year related with interest on capital, interest on drawings, interest on loan etc. in the final accounts, adjustments are necessary.

Question 2.
Write adjustment entries of depreciation.
Answer:
1. Depreciation    A/c      Dr.
To Assets             A/c
(Being depreciation charged on asset)

2. Profit & Loss    A/c      Dr.
To Depreciation   A/c
(Being depreciation transferred)
To P&L      A/c

Question 3.
Differentiate between outstanding expenses and prepaid expenses.
Answer:
The following are some of the differences between outstanding expenses and prepaid expenses:

Question 4.
Differentiate between accrued income and unaccrued income.
Answer:
The ahead are some of the differences between accrued and unaccrued income:

Question 5.
How the debtors can be classified? Explain.
Answer:
Debtors are those persons who debted to the business or liable to pay the amount to the business. On the basis of recoverability of amount, debtors can be classified into three ways. They are:

1. Good debtors – Good debtors are those debtors who are expected to make their payment in time, i.e., Full amount is expected to recover from them.
2. Doubtful debtors – Doubtful debtors are those debtors from whom doubt is arising regarding their payment, i.e., Their payment is in doubtful condition.
3. Irrecoverable or bad debt – From these debtors no amount is expected to receive. It arises when debtor dies, becomes lunatic, mad or the court declares insolvent. It is a business loss.

Question 6.
Why a provision for discount on debtors and creditors are maintained in the business?
Answer:
Discount provision on sundry debtors:
When the sundry debtors make their payment before the prescribed time, they are allowed some concession. This concession is called cash discount. It is a loss to the business. In certain condition, the trader keeps a reserve to allow discount on debtors for future, in anticipation. This reserve or provision is known as discount provision on sundry debtors. It is calculated after the deduction of further bad debt and new reserve from debtors at a percentage. This amount is shown in the debit side of profit and loss account and is also deducted from debtors in the balance sheet.

Discount provision on sundry creditors:
When the trader makes the payment before the stipulated time, he is allowed some discount. It is an income of the business. In certain condition, the trader keeps a reserve in anticipation that some discount may receive in future. This reserve on provision is called, ‘Discount provision on sundry creditors’. It is shown in the credit side of P&L A/c and is deducted from the sundry creditors in the balance sheet.

Question 7.
Show adjustment entry for adjustment of interest on capital and interest on drawings.
Answer:
Interest on Capital
Interest on Capital    A/c   Dr. –
To Capital     A/c   –
(Being interest on capital adjusted)

Interest on Drawings
Drawing      A/c   Dr. –
To Interest on Drawings      A/c
(Being adjustment of intertest on drawing)

Question 8.
Explain Accrued income and unaccrued income.
Answer:
Accrued income:
Accrued income is such type of an income which is due but not received. It is an outstanding amount to receive. Here, the journal entry is:

Accrued Income A/c     Dr.
To Income A/c (Being income accrued)

Unaccrued Income:
Unearned income is such type of an income, where an income received in advance, but the service is not offered or the income received is applicable to the coming period. Here, the journal entry is:
Income     A/c                  Dr.
To Unearned Income     A/c  –
(Being income unearned)

Question 9.
Explain how the following adjustments are done in final accounts.

1. Outstanding wages
2. Outstanding salary
3. Accrued rent
4. Unearned commission.

Answer:

1. Outstanding wages – In trading accounts the amount of outstanding wages is added to the respective item and such outstanding amount is shown in the liability side of balance sheet.
2. Outstanding salary – The amount of outstanding salary is added to the respective item in profit and loss account and such outstanding amount is shown in the liability side of balance sheet.
3. Accrued rent – The amount of accrued rent is added to the respective item in profit and loss account and the accrued amount is shown in the asset side of balance sheet.
4. Unearned commission – The amount of unearned commission is deducted from the respective item in profit and loss account and is shown in the liability side of balance sheet.

Question 10.
How is manager’s commission calculated on net profit? Where and how is the adjustment done?

Mannager’s commission on net profit:
Shown in the debit side of profit and loss account and shown separately in the liability side of the balance sheet after the calculation.

MP Board Class 11 Accountancy Important Questions

MP Board Class 12th Business Studies Important Questions Chapter 3 Management and Business Environment

Management and Business Environment Important Questions

Management and Business Environment Objective Type Questions

Question 1.
Choose the correct answer:

Question 1.
Out of the following which is not a part of business environment:
(a) Urbanization
(b) Employee
(c) Comparative
(d) Mandatory.
Answer:
(b) Employee

Question 2.
Out of the following which is a component of business environment:
(a) Identification
(b) Improvement in performance
(c) Coping with rapid changes
(d) All the above.
Answer:
(d) All the above.

Question 3.
Which is an example of social environment:
(a) Supply of money in the economy
(b) Consumer protection ACT
(c) Structure of country
(d) Formation of family.
Answer:
(d) Formation of family.

Question 4.
Liberalization means:
(a) Integration among economies
(b) Reduced government control and restriction
(c) Policy of planned disinvestment
(d) None of these.
Answer:
(b) Reduced government control and restriction

Question 5.
Shape and distribution of population is taken as :
(a) Part of technological environment
(b) Part of legal environment
(c) Part of political environment
(d) Part of social environment.
Answer:
(d) Part of social environment.

Question 2.
Fill in the blanks :

1. The …………….. components of business are controllable.
2. The internal components of business …………….. affects the business.
3. Legal regulatory is the …………….. component of business.
4. The objectives and outlook of business is included …………….. in components or factor.
5. India formulated the policy of new economic reforms in ……………..

Answer:

1. Internal
2. Directly
3. External
4. Internal
5. 1991.

Question 3.
Write the answer in one word/sentence :

1. What do you mean by Globalization ?
2. What is the policy made for providing employment to people known as ?
3. Foreign policy is the component of which business environment ?
4. What does EPCG stands for ?
5. Name the business zone established to encourage exports.

Answer:

1. Integration of world trade economies
2. Employment policy
3. Political
4. Export promotion goods plans
5. Export promotion policy.

Question 4.
Write true or false :

1. Liberalization in India is failure in affecting industry and business.
2. Economic, Social and political situations creates business environment.
3. Globalization has affected industries and business in India.
4. External factors do not affect the business environment.
5. Changes in government policies do not affect industries and business.

Answer:

1. False
2. True
3. True
4. False
5. False.

Question 5.
Match the columns :

Answer:

1. (e)
2. (a)
3. (b)
4. (c)
5. (d)

Management and Business Environment Very Short Answer Type Questions

Question 1.
Advanced techniques lay emphasis on what factors ?
Answer:
Advanced techniques lay emphasis on the following :

1. Scientific research
2. Innovation
3. Invention
4. Improvement
5. Spreading innovation.

Question 2.
Name the change in economic surrounding of India after 1991.
Answer:
The changes in economic surroundings of India after 1991 :

1. Modernization
2. Privatization
3. Globalization,
4. Liberalization.

Question 3.
what are the reasons behind adoption of new economic policy in India ?
Answer:
The following are the reasons behind adoption of new economic policy in India:

1. Decrease in foreign exchange
2. Heavy government loss
3. Increase in cost
4. Increase in internal loan
5. Decrease in foreign business.

Question 4.
Under 1956 industrial policy how are the industries classified ?
Answer:

1. First category: Those industries whose development is completely based on its state.
2. Second category: Those industries which are run by the state and new industries in future will also be stated by them.
3. Third category: Rest all industries belong to this. Industries in this category are mainly consumer products based.

Question 5.
Write names of four economic policies :
Answer:
Four economic policies :

1. Export import policy
2. Employment policy
3. Agricultural policy
4. Industrial policy
5. Foreign investment policy
6. Tax policy.

Question 6.
Which industries according to the new economic policy compulsorily need to take licence.
Answer :
The six industries according to the new economic policy compulsorily need to take licence are :

1. Harmful/Dangerous chemical
2. Drugs and pharmaceuticals
3. Alcohol peva
4. Defense equipment
5. Industrial explosive.

Question 7.
After 1991, what were the changes in the Indian economic environment ?
Answer :
These were the important parts of new economic policy which has been modified so that objectives of liberalization, globalization and privatization can be achieved.

1. Declaration of new industrial policy : At the time, 1991 industrial policy was announced, 18 items were subject to industrial licensing but gradually their number has been reduced to 5 namely.

1. Cigars and cigarettes
2. Electronic aerospace and defence equipment
3. Indus-trial explosives
4. Hazardous chemicals
5. Certified specified drugs.

2. New trade policy :

1. Minimum restriction on trade. To increase foreign trade, import duty and tariff were slowly reduced.
2. To bring expansion in economy foreign investment and new technology was encouraged.
3. Liberal financial facilities to exporters were given.

3. Reform in capital market: SEBI was established.

4. Reforms in fiscal policy : Control on public expenditure and introduction of VAT in states.

Question 8.
Throw light on new monetary policy.
Answer:
To encourage liberalization and to enhance foreign business government decided to amend monetary policy for which Narshimham Committee was formed. The recommendations are as follows:

1. Bank should independently control the interest rates and RBI should not interfere in it.
2. To redesign the banking system.
3. To give more independence to banks.
4. To improve the accounting system of banks.
5. National banks should be given freedom to accumulate money from the market.
6. Private sector should be permitted to establish bank.
7. There should be reorientation of banks. Two or three banks should have international orientation which means that they alone should operate overseas.
8. Necessary changes should be made in accounting systems of banks.
9. There should be 8 to 10 national banks who should operate throughout the country.

Question 9.
What do you understand by business environment ?
Answer:
business environment is made of two words ‘Business’ and ‘Environment’. Business simply mean busy with an aim of profit earning. Environment means the surrounding extend agents influences or circumstances under which someone or something exits. Business environment consists of all external and internal factors that influence the complex interaction in the market production and finance.

Question 10.
Write the various components of internal environment.
Answer:
Various components of internal environment are as follows :

1. Policies, rules and plans of business.
2. Aims and objectives of business.
3. Production pattern of business. .
4. Organization of business.
5. Sources and resources of business.
6. Labour policy of business.

Question 11.
Explain India vision 2020.
Answer:
On 23rd January, 2003, the planning commission for the evaluation of economic development of next two decades issued a document or deed called “lndia Vision 2020” Through this document, planning commission has made an effort to improve the business environment.
The main features of India Vision 2020 are as follows :

1. To pay attention towards the multiplying of employment opportunities.
2. Per capital income to be increased by 4 times.
3. To lay stress on balanced environment protection.
4. To increase economic development at the rate of 9% p.a.
5. To increase the share of direct foreign investment in the total capital formation.
6. To increase the gross domestic product etc.

Management and Business Environment Short Answer Type Questions

Question 1.
What does LPG stands for in business environment ?
Answer:

• L : Liberalization
• P : Privatization
• G : Globalization.

Question 2.
Write full forms of FERA and FEMA under the new policy of India which rule has been eliminated to implement FEMA ?
Answer:
FERA: Foreign exchange regulation Act
FEMA: Foreign exchange management Act.
In India at the time of new economic policy FEMA was implemented in place FERA.

Question 3.
What do you understand by Micro and Macro environment ?
Answer:
Micro environment: It means that environment in which the included components have close relationship with business.

Question 5.
What were reasons which compelled Indian government to adopt new economic policy ?
Answer:
Following are the reasons which compelled Indian government to adopt new economic policy:

1. Fiscal threat
2. Increased international loan
3. Appreciation of currency index
4. Fall in foreign exchange accumulation
5. Depreciation in Indian rupee
6. Imbalance and negligence of payments
7. RBI and SBI Mortgaged Gold.

Question 6.
Give three examples of Indian legal environment which has affected the business.
Answer:

1. Restriction on advisement of toxic production.
2. Industries were made free from licencing.
3. Statutory warning was made compulsory on tobacco products.

Question 7.
What do you mean by liberalization ? Under liberalization what measures were taken and what was the impact of it on business and industry ?
Answer
Meaning : Liberalization refuse to removal of entry and growth restrictions on the private companies. It is an economic reform with main objective to minimize licencing requirements, remove restrictions related to scale of operations, give freedom for fixing prices and movement of goods, encourage.import and export.Measures and impact of liberalization on business and industries are as follows :

1. Ending of licensing and registration : The main objective under new economic policy is to have controlled economy. The new economic policy has benefited the private industries by providing free licensing.

2. Relief from proprietorship restrictions: The restrictions of more than 100 crores investment in proprietorship was removed.

3. Increase in investments in small scale industries : Investment limits in small scale industries have been increased to 1 crore and adopted the latest advance in technology.

4. Discount on technological imports: To promote the new economic policy emphasis was laid to promote latest technologies and discounts were given. This policy promoted industries based on computers and electronics.

Question 8.
In today’s scenario of business environment how can a businessman prove his existence ?
Answer:
The ahead points lay emphasis on what a businessman can do in today’s scenario to exist:

1. To produce goods as per customer’s need
2. To keep the employees happy with sufficient remuneration
3. To recruit trained and experienced employees
4. To produce good in such a manner which lays good impression on consumers
5. To make plans and techniques keeping in view the competitors.

Question 9.
Explain the following in short:

1. Liberalization
2. Privatization
3. Globalization.

Answer:
1. Liberalization: Means removing unnecessary trade restriction. Liberalization allows private sectors to run even those industries which are reserved for the public sectors, relaxing the restriction and regulations imposed on it.
Measures of liberalization adopted by India are :

1. Exemption from licensing
2. Concession from MRTP Act (Monopolistic and Restrictive Trade practice)
3. Increase in production capacity
4. Freedom of production,
5. Buying foreign exchange from open market.

2.Privatization: Privatization refers to transfer of ownership management and control of public sector enterprise to the entrepreneurs of private sector. It is a set of economic reforms with the main objective to allow private sector to invest in sectors earlier restricted to public sector to develop healthy competition between public and private sector and dilute government ownership in public sector enterprises. Process by which the participation of state and public sector in economic activities are reduced. The main aim of privatization to allow private sector to run and manage the industries and to minimize the reservation made for public sector.

3.Globalization : Globalization refers to integration of national economy with the world economy by removing with the objective to strengthen relationships between countries and increase imports and exports.

Question 10.
Write any two objectives of globalization.
Answer:
Two objectives of globalization are as follows :

1. Removal of inefficiency: Globalization is intended to remove inefficiency of firms and Industries.

2. Improvement in banking and financial sectors : As result of globalization, entry of foreign banks will be easy. It will improve the efficiency of banking and financial sector.

Question 11.
What do you mean by internal components of business ?
Answer:
Business environment can be classified in two categories. Internal environment and external environment. Internal environment includes those factors of business which can be controlled by business. In internal environment changes take place speedily.
Components of Internal Environment:

1. Policies,rules and plans of business.
2. Aims and objectives of business.
3. Production pattern of business.
4. Sources and resources of business.
5. Organization of business
6. Labour policy of business etc.

These are the internal factors of business which affects the business directly while it is under the control of the owners of business. Hence changes can be made according to our own will but external environment is not under the control of the owner of business.

Question 12.
Explain the social environment of business.
Answer:
Social environment: Social environment is shaped by social factors such as attitudes of people, cultural heritage, beliefs and customs of people, education system, consumers organizations, trade unions and other non-government organizations. In society, there are activities related with caste, religion, sex, family etc. which affects the business.

Question 13.
Throw light on legal regulatory of business.
Answer:
Legal Regulatory: Legal regulatory environment of business is determined by constitutional provisions, economic laws, commercial laws, industrial and labour laws, government regulations under various laws and court decisions. These help the government in the regulation of economic activities of the business enterprises. Since Indian economy is centrally planned and controlled the business enterprises are required to operate within the framework of legal regulatory environment. The important components of the legal regulatory environment include the following:

1. The constitutional framework: Directive principle fundamental rights and division of legislative powers between central and state government.
2. Commercial and economic laws and government policies under the laws relating to licensing, monopolies, foreign investment etc.
3. Government policies related to imports and exports. .
4. Government policies related to small scale industries, sick industries, consumer protection etc.
5. Government policies related to pricing and distribution of essential commodities.
6. decisions for the protection of consumers, environment and ecological balance.

Question 14.
What is meant by External Environment ? What are its dimentions ?
Answer:
External Environment which is an index of opportunities and anticipations Internal
environment inclueds. External environment indued micro environment and macro environment it is called up External Environment.

Dimention:

1. Political environment
2. Social environment
3. Legal environment
4. Demographic environment
5. Technological environment
6. Physical environment
7. International environment

Management and Business Environment Long Answer Type Questions

Question 1.
Write the main characteristics of economic environment.
Answer:
The main characteristics of economic environment are as follows :

1.Related with economic activities: All those activities of human beings are included in the economic environment which is related with the purchase sale, consumption, income- expenditure etc. of man.

2. Related with environment : Economic environment is affected by other environments. Ecological environment like land, air, forest, soil, water, mineral resources etc. also affects the economic environment. Political environment also affects the economic environment.

3. Administration by government : Economic environment is administered and directed by government. The government uses economic policies to effectively influence the economic environment of the business.

4. Related with common people : Economic environment is directly related with common people. Each person is having the will to earn money therefore he is affected by the economic environment. He cannot remain distant from economic environment.

5. Availability of capital: If capital is available in sufficient quantity then the natural and human resources are utilized properly. This leads increase in national income due to this rate Of national development also increases.

Question 2.
What are the elements components of micro environment ?
Answer:
Elements of micro environment:

1. Supplier : A person, firm, agency or organization which supplies raw materials, labour or other required things is known as supplier. More number of suppliers must be there to avoid problems of supply to firms.

2. Consumer market: A businessman can have many areas of consumer market. Consumer market can be National/International which uses the material for self or uses it to produce any other goods.

3. Competitor : The competitive business environment increases the level of productivity.

4. Public: Public has various categories, local public, press, media, etc. The behaviour of these categories effect the business unit.

5. Marketing middlemen: Marketing middlemen are those people who decrease and work as connectors between producers and consumers. The success of an industry also depends upon these marketing middlemen.

Question 3.
Name the characteristics of business environment and explain them.
Answer:
Main features/characteristics of business environment are as below :

1. Sum total of external forces.
2. Inter relatedness.
3. Dynamic Nature.
4. Uncertainly.
5. Complexity.
6. Relativity.

1. Dynamic Nature : Business environment is dynamic in nature in the sense that it keeps on changing whether in terms of technological improvement, shifts in consumer preferences of entry of new competition in the market.

2. Complexity : Environment is a complex phenomenon that is relatively easier to understand in parts but difficult to grasp in it totality.

3. Relativity: It is a relative concept since it differs from country to country and even
region to region. For e.g.,  South India may have fairly high in demand than in North India. .

4. Long-term process: business environment has a long-term effect long-term changes in affect the profitability, productivity and development.

5. Business environment influences the firms differently: It is not compulsory that all firms will be equally affected by change in business environment. Each firm is affected according to its nature.

6. Inter dependency of components of business environment: All the components of business environment are related to each other. So effect of business cannot be found out separately.

Question 4.
Explain the components of business environment.
Answer:
Different components of business environment are.

1. Economic components : It includes economic activities, Economic policies, Demand, supply, Investment, Industrial tendency/behaviour and monetary pressure, Investment flow and level, Import-Export, Fiscal and Taxation policies, Monetary policies, etc.

2.Geographical and ecological components : It includes Resources, Environment, Climate locomotion. Marine, Celestical, Geologic resource, Magnetic and solar energy.

3.Political components : It includes government monetary system and government system, Political point of view, administrative arrangements, constitutional arrangements security, etc.

4.Social and cultural components : It includes cost, beliefs, assumptions, social arrangement, materialism, religion, culture, traditions, etc.

5.Science and technological components : It includes scientific research and level, competitive development, Mechanization thermal power, Satellite transmission system, Celestical research labs, etc.

6.Legal and judical components : It includes justice system, various business, Industrial and labour control forum, administrative system, etc.

7.Others components: Population, educational level, consumer behavior, security, crisis, danger, international powers, industrial power and struggle, etc.

Question 5.
Describe the importance of business environment.
Or
What is the need of business Environment today ? Explain.
Answer:
The importance of business environment is as follows : .

1. Market conditions and situations : A business must know the structure of market and changes taking place in the market. Creation of demand, monopoly, boom periods etc. should be in the knowledge of business. These information, conditions are provided by business environment.

2. Better performance : Proper understanding of the various elements of external environment is necessary to take timely action to deal with the threats and avail opportunities for the purpose of improvement in performance of the firm.

3. Technological up gradation : Development of business also depends upon the new technology and inventions, so if a business has to grow it should be aware of new techniques of production, new products, new designs, scientific development etc., No business will survive if technology is ignored.

4. Optimum utilization of resources : Natural environment divides the nature of business, localization, stability, progress etc. Human resource decide the knowledge, techniques, production, Industrial relations, managerial efficiency etc. Management of these resources play an important role in success of business.

5. Survival and growth : A detailed study of business environment is essential for the survival and growth of business enterprise. Business has limited capacity to influence the environment. Therefore adjustment of business, policies and strategies to be changed environment is essential for business survival.

6. Reputation of the company: The management of a company is interested not only in building up its business but also to build an image and reputation of the company in the public mind. Therefore study of environment will help the company to be friendly and avoid such policies which will affect the public.

Question 6.
Explain the political factors affecting business environment.
Answer:
The political conditions and situations of any country affects the business environment. The main factors of political environment are as follows :

1. Ideology of government: The three forms of government are capitalism, socialism and mixed economy. These governments have different ideologies and thinking. These political ideologies and thinking affects the economic and business environment.

2. Policies of government: The policies of government are related with their ideology and thinking. Their policies directly affects the business, trade and industries.

3. Political stability : Stability of government is also an important factor whenever there is political instability in the country, business is affected adversely. The stable government and peaceful atmosphere of the society encourages economic growth.

4. Foreign policy: The foreign policy of any country affects its business environment. The foreign policies helps in maintaining peaceful atmosphere which develops the international business.

5. National security : The business of any country is also affected due to its national
security. Terrorist activities, civil wars disrupt. The business activities while in peaceful atmosphere of the country economic growth takes place.

6. Constitution : The laws and provisions made in constitution is not changeable for a long-term if political situation is stable and changes are not made in constitution then it is not getting to affect the business.

Question 7.
Explain the impact of government policy changes on business and industry.
Answer:
Following are the impacts on business and Industry due to changes in government policies:

1. Increase in competition: Due to government polices of liberalization, privatization and globalization has increase the competition in day to day world. Increasing competition has adver self affected many industries.

2. Increase in demands: Due to economic reforms.speedy industrialization has taken place and various high quality products are available for customers. The customers are demanding these products for improvement in standard of living.

3. Technological environment: Due to rapid changes in technological environment competition is increasing. Only those companies will survive who are going to follow the changes in technology. For smaller firms it is becoming difficult to face the competition.

4. Need of efficient human resource : To achieve success it is necessary to have efficient human resource and it should be properly utilized. That’s why in all industries the demand for efficient human resources and their salary have also increased.

5. Decline of Public Sector : Due to government policies and economic reforms importance of public sector has declined. Financial assistance is also not provided to the public sectors property.

6. Decline of small-scale and cottage industries : Economic reforms and policies had played a major role decline of small-scale and cottage industries. It is becoming difficult for small-scale and cottage industries to face the competition with big companies with limited resources.

7. Open economy : The policies of the government has made our economy as open economy. Due to minimisation of restrictions our country is now developing into as international market.

Question 8.
Explain the managerial response of changing pattern in business environment.
Answer:

1. Large-scale production : Big companies are increasing their production to reduce the cost of production and large-scale production makes it possible to get subsidies.

2. New technology: Various companies are using the new technology with the help of foreign countries to increase their share in market.

3. Direct distribution : By eliminating the middle men companies are trying to sell their products directly to the the consumers. For e.g.Amway is distributing its products directly to consumers.

4. Variety of line of goods and services : Various types of products and services are provided to the consumers at reasonable prices. For e.g., Tata’s are dealing in Iron products, Tea, cars etc.

5. Capital Formation : To expand the business to increase production, to open new branches in national and international market big companies are changing capital structure and forming huge capital.

Question 9.
Explain the economic policy of 2007.
Or
Explain new Exim policy 2002-07.
Answer:
The export-import policy for the period 2002-07 was announced on 31st March, 2002 with the objective to consolidate. The gains of the previous export-import policies and to set for itself a challenging target to achieve one per cent share in global trade by 2007 but this policy was replaced by Foreign Trade Policy by UPA Govt, for the period of2004-2009. This policy aimed to have exports of US 80-48 billion $ per year. The salient features of this policy are: ‘

1. Increase in export: The target of 11 -9% per annum average growth by increase annual exports up to 80 Billion $.

2. Abolishing Quantitative restrictions : Exim policy removed all quantitative re-strictions on all agricultural products except a few sensitive items like jute and onions.

3. Export promotion schemes: Value cap exemption granted on 429 items to continue.

4. More facilities to SEZs : A scheme for setting up special economic zones (SEZs) in the country to promote exports was announced by the Govt, in the export and import policy on 31st March, 2000. The SEZs are to provide an internationally competitive and hassle free environment for exports and exported to give a further boost to the country’s exports. 13 new SEZs were given the permission to start their work by Govt. Units set up in SEZ would be eligible for income tax concessions, exemptions from customs and excise duties.

5. Transport subsidies : Processed fruits and vegetables, poultry, dairy products, wheat and rice etc., Their cost of transportation is more than 80S per ton. This leads to increase in prices of products. To increase exports in the international market Govt, provided a transport subsidy of Rs. 100 crores in the year 2002-03.

6. Overseas banking : Permission have been given by the Govt, to start overseas banking branches in SEZs. In these branches the rules like CRR and SLR of Reserve Bank of India will not be followed.

7. Export to Russia: To increase the export of butter, wheat, groundnut, oil, cashewnuts and products of wheat to Russia, packaging and registration have been stopped.

8. Expansion of market: The countries separated from Africa and Russia and some Latin American countries are the new markets of India. Hence, the exports have been in-creased by 40%. The policy has also made provision for expansion of export market. In first phase Nigeria,.South Africa, Mauritius, Kenya, Ethiopia, Tanzania and Ghana were selected which helped in expansion of market.

By increasing the exports in international market it helped India in increasing foreign trade. This happened due to the efforts and policy of 1991. India’s current share in global merchandise trade is about 0-8 percent ($ 55 billion out of $ 7274 billion in 2003).

MP Board Class 12 Business Studies Important Questions

MP Board Class 11th Accountancy Important Questions Chapter 14 Financial Statement

Financial Statement Important Questions

Financial Statement Objective Type Questions

Question 1.
Choose the correct answer:

Question 1.
Trading Account discloses –
(a) Gross profit
(b) Net profit
(c) Net loss
(d) Gross profit or Gross loss
Answer:
(d) Gross profit or Gross loss

Question 2.
Direct Expenses are entered in:
(a) Trading Account
(b) profit & Loss Account
(c) Balance sheet
(d) None of these
Answer:
(a) Trading Account

Question 3.
Profit and loss Account discloses:
(a) Gross profit
(b) Gross profit or Gross loss
(c) Gross profit or Gross loss
(d) None of these
Answer:
(b) Gross profit or Gross loss

Question 4.
Goodwill is a –
(a) Fixed Asset
(b) Current Asset
(c) Fictitious Asset
(d) None of these
Answer:
(a) Fixed Asset

Question 5.
Drawing is deducted from:
(a) Sales
(b) Purchase
(c) Returns outward
(d) Capital
Answer:
(b) Purchase

Question 2.
Fill in the blanks:

1. Indirect Expenses are entered in …………….. account.
2. Gross profit or loss is transferred to …………….. account.
3. ……………. accounts are prepared at the end of the year.
4. Balance sheet is a ………………
5. Increase in capital at the end of the year represents ………………..

Answer:

1. Profit & loss account
2. Profit & loss account
3. Final
4. Statement
5. Profit.

Question 3.
Match the following:

Answer:

1. (c)
2. (d)
3. (b)
4. (a)
5. (f)
6. (e)

Question 4.
Answer in one word/sentence:

1. When cost of goods sold is deducted from net sales, we get.
2. The Expenses written in profit & loss Account are known as.
3. The statement of Assets & Liabilities is called.
4. Give an example of current Liability.
5. In which side of balance sheet, the goods in transit are shown.

Answer:

1. Gross profit
2. Indirect expenses
3. Balance sheet
4. Bank overdraft
5. Asset side.

Question 5.
State True or False:

1. Capital is a fixed Liability.
2. Closing stock is not shown in balance sheet.
3. Balance sheet is prepared on the basis of Trial balance.
4. Bad debt reserve is a loss.
5. Interest on drawings is loss of owner.

Answer:

1. True
2. False
3. True
4. False
5. True.

Financial Statement Short Answer Type Questions

Question 1.
What do you mean by trading account?
Answer:
At the end of the financial year, the trader prepares an account called trading account to ascertain the gross profit or loss, of the business, i.e., The result of purchase and sale of goods. In its debit side, opening stock of goods, purchases less returns, wages, freight, carriage, power and fuel, etc. are entered. In its credit side sales less returns, closing stock etc. are entered. Then both, the sides are totalled and balanced. It may be either gross profit or gross loss. The debit balance shows gross loss and credit balance shows gross profit. It will be transferred to profit and loss account.

Question 2.
Explain the meaning of profit and loss account.
Answer:
Profit and Loss Account is an account prepared to find out Net Profit on Net Loss of the business for a particular period. In this account, all indirect incomes and expenses are entered. It starts with either gross profit or gross loss.

Question 3.
What is balance sheet? What are the objects of its preparation?
Answer:
“Balance sheet is a statement which gives information of business liabilities and assets on a particular date of which shows the financial position of the business”.

Objects:

1. To ascertain the financial position of the business.
2. To show the various assets and liabilities of the business.
3. To find out the amount payable to creditors and the amount receivable from debtors.
4. To ascertain the capital balance.
5. To compare with previous years.

Question 4.
Write a short note on valuation of closing stock.
Answer:
The unsold goods lies with the seller at the end of the financial year is called closing stock. It is essential to calculate the value of unsold stock at the end of each financial year, before the preparation of final accounts. Without its valuation, the net profit or net loss of the business is not possible to find out. In the following way it is valued.

The valuation of unsold stock is done in two ways, i.e., either in market price or in cost price. Generally, it is done in market price or in cost price which is lower. By doing so, chances of arising loss is minimized.

Question 5.
Differentiate between trading account and profit & loss account.
Answer:
Differences between trading account and profit & loss account:

Question 6.
Explain the objects of preparing profit and loss account
Answer:
The following are the advantages of preparing P&L accounts:

1. To find out net profit or net loss of the business – The trading, profit and loss account shows the net profit or net loss of the business.
2. Comparison – The net profit or net loss ascertained from the P&L account helps to compare it with previous years and plans can be taken to change the business policies.
3. To calculate income tax – For the valuation of income tax, it helps the taxation authorities. It is done on the basis of net profit.
4. Knowledge of daily expenses – P&L account gives the information of daily expenses and incomes of the business.
5. Future plans – On the basis of net profit or net loss, ascertained from P&L account helps’the trader to make plans for the future.

Question 7.
Give the classification of liabilities.
Answer:
Liabilities can be classified as follows:

1. Fixed liabilities – The liabilities which are to be paid after a long period of time.
2. Current liabilities – The liabilities which are to be paid during short period (1 year) of time.
3. Contingent liabilities – Those liabilities whose payment depend on future happenings.

Question 8.
What is meant by financial statement? What are accounts are open in it.
Answer:
At the end of current year for knowing the financial condition of business what¬ever statements are prepared are called financial statement. Trading account, profit & loss account, balance sheet.

Question 9.
What is meant by closing stock ?
Answer:
The amount of goods remains unsold at the end of the accounting year is called as closing stock. It is necessary to enter closing stock in Dr. side of trading A/c because, profit or loss cannot be ascertained without taking closing stock into consideration.

Financial Statement Long Answer Type Questions

Question 1.
Explain the importance of final accounts.
Answer:
Ahead are the main importance of preparing final accounts:

1. To know the production cost and profit or loss on goods – Trading Account helps to know the cost of production and profit or loss made on goods for a particular period.

2. To know Net Profit or Net Loss of the business – The profit and loss account includes all indirect incomes and expenses, profits and losses of the business for a particular period. It enables us to find out the net profit or net loss of the business.

3. To know the financial position of the business – A Balance Sheet is prepared to find out the financial position of the business on a particular date. This statement contains all the assets and liabilities in its actual value. It must be equal.

4. To increase the earning capacity of the business – Final accounts are prepared in each year. It helps the trader to compare them from year to year. It enables him to find out the reasons of increase or decrease in profit or earning capacity.

5. To help in making future plans – The informations obtained from final account can work as a guideline for the business and on its base, he can make future plans.

Question 2.
Differentiate between trial balance and balance sheet.
Answer:
Differences between trial balance and balance sheet:

Question 3.
Differentiate between trading and profit & loss account and balance sheet Answer: Differences between balance sheet and profit & loss account:

Question 4.
Explain in brief me items which are written in the debit side of trading account
Answer:
The various iterns that appear in Dr. side of trading account:

1. Opening stock – Last year’s unsold stock is brought toward and written as opening stock in trading account
2. Purchases – The total amount of goods purchased is reduced by purchase returns.
   goods destroyed by fire etc. and net purchases are written.
3. Direct expenses – It refers to those expenses which are incurred for purchase or production of goods, e.g., carriage purchases, octroi, wages, fuel etc.
4. Gross profit – The credit balance of trading account is turned as gross profit. It is transferred to profit and loss account.

MP Board Class 11 Accountancy Important Questions

MP Board Class 11th Accountancy Important Questions Chapter 13 Bills of Exchange and Promissory Note

Bills of Exchange and Promissory Note Important Questions

Bills of Exchange and Promissory Note Short Answer Type Questions

Question 1.
What are the parties to a bill? Explain.
Answer:
There are three parties to a bill. They are:

1. Drawer – He is the person who draws a bill. He is the seller or the creditor. He writes the bill.
2. Drawee – He is the person to whom the bill is drawn. He is also known the acceptor of the bill. He is buyer or the debtor.
3. Payee – He is the person to whom the payment is made on the due date. He may be the drawer, banker or the endorsee.

Question 2.
Give a specimen form of ‘Bills of Exchange’.
Answer:
A specimen form of bill of exchange:

Question 3.
What is meant by Accommodation Bill?
Answer:
These bills are written between the two parties for mutual financial help. No debtor-creditor relationship exists in such condition.

Question 4.
Mention various characteristics of bill of exchange.
Answer:
The characteristics features of bill of exchange are:

1. It is an unconditional order
2. It must be in writing
3. The maker or the writer of the bill must sign on it
4. It is drawn on a particular person
5. It must be accepted by one person to whom it is drawn
6. It is payable on demand or on the expiry of a certain period
7. It is written for a certain amount.

Question 5.
Explain renewal of a bill.
Answer:
Renewal of a bill refers to the cancellation of old bill and preparation of new bill for an extended period of time. It is done by the drawer on the request of drawee when the expressor his inability to pay.

Question 6.
What do you mean by renewal of a bill? Explain with an example.
Answer:
Renewal of a Bill:
Sometimes the acceptor of the bill found himself unable to meet his acceptance of the bill on the due date. So, he may request the drawer of the bill for the extension of time. If he agrees, the old bill is cancelled and a fresh one is drawn in place of the old one. For this extension of period, interest is charged and the bill is made with the principal amount and interest.

Example : Ram cancelled the old bill of Rs. 4,000 and draw a new bill on Mohan by charging interest at the rate of 6%, for a period of three months. The new bill should include noting charges of Rs. 10 also.

Solution :
Calculation of amount of the new bill

Question 7.
What is meant by dishonour of a bill? Explain in detail.
Or
Explain the procedure of dishonour of a bill.
Answer:
Non – payment of bill on due date due to any reason is known as dishonouring of a bill. In such a case, the holder of the bill can recover the amount from any of the previous endorser or drawer.
Due to the following causes a bill may be dishonoured:

1. When the acceptor does not have adequate money to meet his acceptance
2. When the acceptor is declared as insolvent
3. When the payment is stopped by the Govt
4. When the acceptor becomes lunatic, mad or expires.

When a bill is dishonoured, it is essential to certify it by a notary public by the holder in due course. He requests the drawee to make the payment. If again he denies to make payment then he approaches the court to recover the amount from him.

Question 8.
What entries will be passed in the books of drawer in case of dishonour of a bill in following cases:

1. Bill is retained with drawer and he pays noting charges.
2. Bill is endorsed to Mr. X and Mr. X pays noting charges.

Answer:
1. If the bill retained with drawer and he pays noting charges:
Drawee’s A/c Dr. – –
To Bills Receivable A/c –
To Cash A/c –
(Being bill dishonoured and noting
charges paid)

2. If bill is endorsed to Mr. X and noting charges are paid by him:
Drawee’s A/c Dr. – –
To Mr. X’s A/c –
(Being bill dishonoured and noting charges paid)

Question 9.
What is a promissory note? Mention some features of promissory note.
Answer:
A promissory note is an instrument in writing containing an unconditional undertaking, signed by the maker to pay a certain sum of money to a person or to his order or to the bearer of the instrument. According to Indian Negotiable Instrument Act, “Promissory note is a promise to make the payment of certain specified amount to the creditor on demand or after expiry of certain period”.

In promissory note, acceptance is not required because the writer himself is the debtor. In’ transactions which are related to promissory note, there are mainly two parties one is maker (debtor) and second is payee (creditor). In this writer promises to pay the amount after certain period.

Special feature of promissory note:

1. It is a document in writing.
2. It must be a promise by the maker to make the payment in future.
3. The promise to pay must be unconditional.
4. It is a promise to pay specified amount.
5. Payment may be made on demand or after the expiry of certain period.
6. It must be signed by the maker of the instrument.
7. It should be properly stamped.

Bills of Exchange and Promissory Note Long Answer Type Questions

Question 1.
Differentiate between bill of exchange and promissory note.
Answer:
Difference between Bill of Exchange and Promissory Note:

Question 2.
Differentiate between bills receivable and bill payables.
Answer:
The following are the difference between receivables and bill payable:

Question 3.
Explain in the following:

1. Days of Grace
2. Endorsement of a bill
3. Retirement of a bill.

Answer:
1. Days of Grace:
Bill of exchange is written for a definite period. For the convenience of the acceptor, three extra days are allowed to him for making the payment. These extra day’s are known as ‘Days of Grace’. Three days are added to the due date of the bill.

2. Endorsement of a bill:
When the accepted bill is transferred by the drawer in favour of his creditors to pay off his debt is called endorsement. The person who endorses the bill is called endorser and to whom it is endorsed is called endorsee. When a bill is endorsed, the endorsee will be entitled to get the payment.

3. Retirement of a bill:
Sometimes the acceptor makes the payment of the bill before the due date. In this situation, he does not pay full amount of the bill. The drawer agrees to deduct some amount. This amount is called rebate. This is called ‘Retirement of bill under Rebate’.

Question 4.
Describe types of bills of exchange?
Answer:
Kinds of bills of exchange are as follows:

1. On the basis of place.
2. On the basis of use.
3. On the basis of time.
4. On the basis of receiver.
5. On the basis of Book – keeping.

1. On the basis of place:

• Inland bill – When drawer and drawee are both from same country then it is called Inland bill.
• Foreign bill – When drawer and drawee both are different countries then it is called foreign bill.

2. On the basis of use:

• Trade bill – A trade bill is used for purchase and sale of goods or commodity.
• Accommodation bill – This bill is drawer by drawer on drawee for meet financial need not for any business transaction.

3. On the basis of time:

• Sight bill – This type of bill are liable for payment at time of presentation. ,
• Tenure bill – This type of bill is to be made by acceptor on the date mentioned in the bill.

4. On the basis of receiver:

• Bearer bill – The payment of such bills is made to that person who present the bills for payment.
• Order bill – The payment of this bill is made to the person whose name is written on the bill on his order to any other person.

5. On the basis of Book – keeping

• Bills receivable – These bills are those, the payment of which is to be received by traders at certain ate.
• Bills payable – These bills are those the payment is made of purchases at certain date.

MP Board Class 11 Accountancy Important Questions

MP Board Class 11th Accountancy Important Questions Chapter 12 Provision and Reserves

Provision and Reserves Important Questions

Provision and Reserves Objective Type Questions

Question 1.
Choose the correct answers:

Question 1.
Which reserve is not shown in balance sheet –
(a) General reserve
(b) Specific reserve
(c) Secret reserve
(d) Capital reserve.
Answer:
(c) Secret reserve

Provision and Reserves Short Answer Type Questions

Question 1.
What is General Reserve? What are its objectives?
Answer:
Reserve mean amounts set aside out of profits and other surpluses to meet future uncertainties. In other words, a reserve is meant for meeting any unknown liability or loss in the future. General Reserves are not meant for any purpose but can be utilised for any exigencies. General reserves are created for the following purposes:

1. To compensate the unknown loss arising in future.
2. To strengthen the financial position of the business.
3. For reinvesting the profits in the business so as to expand the Current business.
4. In case of companies, to maintain the rate of dividends for the shareholders.

Question 2.
Define secret Reserve. Explain the objects of secret Reserve.
Answer:
The main objects of secret reserve are:

1. To strengthen the internal situation of the business.
2. To compensate uncommon losses.
3. To show reduced profit of the company.
4. To hide the errors committed by Managers.

Question 3.
Explain the methods of creating secret Reserve.
Answer:
Secret reserve is mainly created by showing Assets at a value less than its actual value or by way of showing Exaggerated liabilities. Some main methods adopted are:

1. To provide more than required depreciation on Fixed Assets.
2. Not to show Goodwill in the books.
3. Not disclosing Accrued Incomes in the balance sheet.
4. Not adjusting prepaid expenses.
5. To show liabilities at a higher value than its actual value.

Question 4.
Mention three characteristics of Reserve.
Answer:
The characteristics or features of ‘Reserves’ are:

1. It is created out of net profits or divisible profits. As such the reserves are also termed as ‘Retained Earnings’ or ‘Undistributed Profits.’
2. Creation of Reserves is not a legal necessity. It is created voluntarily for strengthening the financial position of the business and for meeting an unforeseen Exigencies in the future.
3. It is not created to meet any known liability or depreciation in the value of assets but for meeting an unknown liability or loss in the future.

Question 5.
What do you mean by bad debt reserve?
Answer:
Bad debt is a business loss for adjusting this loss, a reserve is maintained each year from the debtors. This reserve is known as bad debt reserve, it is the amount of provision to write off bad debt in future.

Question 6.
What do you mean by bad and doubtful debt?
Answer:
Provisions for Bad and Doubtful Debts: At the end of the year there are certains debtors from whom it is expected that some amount may be received and some amount may not be received and there may be debtors from whom it is expected that no amount will be received. Hence, provision made for such losses or doubtful amount is known as “Provision or Reserve for Bad and Doubtful Debts.” Its amount and time is not known exactly. Hence provision is made for an expected amount.

This provision is deducted from the amount of debtors in balance sheet. If provision made is more than the amount of doubtful debts then such excess will be termed as Reserve and will be shown in the liability side of balance sheet. Accounting Treatment: The amount of provision or reserve for bad and doubtful debts is shown in the debit side of Profit and Loss Account and is deducted from the amount of debtors in Balance Sheet in the asset side.

Provision and Reserves Long Answer Type Questions

Question 1.
Distinguish between Reserves and provisions.
Answer:
Difference between Reserves and Provisions:

Question 2.
Why a provision for discount on debtors and creditors are maintained in the business?
Answer:
Discount provision on sundry debtors:
When the sundry debtors make their payment before the prescribed time, they are allowed some concession. This concession is called cash discount. It is a loss to the business. In certain condition, the trader keeps a reserve to allow discount on debtors for future, in anticipation.

This reserve or provision is known as discount provision on sundry debtors. It is calculated after the deduction of further bad debt and new reserve from debtors at a percentage. This amount is shown in the debit side of profit and loss account and is also deducted from debtors in the balance sheet.

Discount provision on sundry creditors:
When the trader makes the payment before the stipulated time, he is allow’ed some discount. It is an income of the business. In certain condition, the trader keeps a reserve in anticipation that some discount may receive in future. This reserve on provision is called, ‘Discount provision on sundry creditors’. It is shown in the credit side of P&L A/c and is deducted from the sundry creditors in the balance sheet.

Question 3.
Distinguish between revenue reserve and capital reserve.
Answer:
Difference between Revenue and Capital reserve

Question 4.
Explain the various types of Reserve.
Answer:
Reserve can be classified as follows:

1. Revenue reserve – Revenue reserves are those reserve which are created out of profit (revenue) earned through the business activities. Any reserve which is not capital reserve is called capital reserve.

2. Capital reserve – Capital reserve is created by capital profit or capital receipt. The profit which has not been earned from general business activities of the firm are termed as capital profit.

3. Specific reserve – When any part of profit the of business is kept for any specific purpose and it is utilised for that specific purpose then such reserve are called as specific reserve.

4. General reserve – A part of reserve which is created out of revenue reserve to meet out future contingencies and risk is called as general reserve.

5. Secret reserve – It is not shown in liabilities. If any reserve which is not shown in balance sheet which is called secret reserve.

MP Board Class 11 Accountancy Important Questions

MP Board Class 11th Accountancy Important Questions Chapter 11 Depreciation

Depreciation Important Questions

Depreciation Short Answer Type Questions

Question 1.
What do you mean by depreciation? What is the need of providing Depreciation?
Or
Write objects of providing for depreciation.
Answer:
Due to constant use of fixed assets in the business, there is continuing diminution or decrease in their value, quantity and quality. This permanent and continuing diminution or decrease in the value of asset is called ‘Depreciation’.

The objects of charging depreciation are as follows:

1. Replacement of fixed assets:
Due to constant use of a fixed asset, it becomes useless after a period of time. Hence, it must be necessary to replace it. At that time the businessman can utilize the money which were written off as depreciation for the replacement of the asset.

2. Proper distribution of loss:
The value of a fixed asset decreases due to its constant use and their loss is relevant to the particular year, i.e., their loss must be accounted each year and that is possible by charging depreciation.

3. For saving tax:
Law provides depreciation as a deduction from income. This reduces the taxable income of the business. So, to save payment of income tax depreciation should be charged.

4. To know accurate profit:
Depreciation is an expense like any other expense. So, only after providing depreciation the real profit for the period can be found.

5. To know the true and fair financial position:
As the value of asset is continually diminishing, it would be very wrong to show them at the original purchase value in the balance sheet. It is only reducing depreciation that the net value of assets can be known.

Question 2.
Explain any five reasons for origin of depreciation.
Answer:
Causes for the Origin of Depreciation : Due to various reasons depreciation arises

1. Continuous use of assets:
In the business concern fixed assets are of daily use, resulting wear and tear, obsolescence and decline in the value of the assets. This decline of value of an asset is technically known as depreciation.

2. Obsolescence:
It means discard of an old machine which becomes uneconomic due to introduction of new machine of latest technique. The latest machine not only ensures cost minimization but the increase in production as well. Thus, for the sake of economy and efficiency of old machine is scrapped despite it being capable of giving service for few more years.

3. Exhaustion of original shape:
Some assets like mines, quarries, etc. exhaust considerably or completely as a result of excavation or removal of resources inherent therein. More and more, excavation / extraction leads to shrinkage or lessening of estimated available quantity. This decline in the value or quantity can be treated as depletion or depreciation.

4. Effluxion or expiration of time:
The value of old machines is always less than that of new machines. This is because, due to the passage of time and charging of depreciation every year the book value of old machine diminishes gradually. After a period of time the value becomes nominal or zero. For example, take leased land of Rs. 50,000 for 15 years. After 10 years its value may be less then half. This decline of value can also be treated as depreciation.

5. Fall in market price:
The market price of the fixed asset may rise or fall. This change in price is of temporary in nature. But the market price of an asset falls due to some special reasons, it can be trated as depreciation.

Question 3.
Write the characteristics of depreciation.
Answer:
The main characteristics of depreciation are as follows :

1. Depreciation is charged only on fixed assets.
2. Depreciation results in decrease of the value of a fixed asset.
3. By depreciation the value of the fixed asset is constantly declining.
4. Depreciation is a business expense.
5. Depreciation is related with the account of a particular asset only.

Question 4.
Write the demerits of reducing balance method.
Answer:
Demerits of reducing balance method are:

1. No provision for interest on capital – Like fixed instalment method there is no provision of interest on capital invested in the fixed assets.
2. High rate of depreciation – In this method, high rate of depreciation is essential. If the depreciation is charged on low rate, it will take many years to written off the assets.
3. The value of assets can never be zero – This method of depreciation can be applied only when there is some residual value of the asset. In this method, inspite of charging depreciation, the value of assets can never be zero.

Depreciation Long Answer Type Questions

Question 1.
Distinguish between Fixed Instalment method and Reducing Balance Method of Depreciation.
Answer:
Fixed instalment method is called straight line method because when depreciation is charged evenly for all years, the curve will come in this manner:

MP Board Class 11 Accountancy Important Questions

MP Board Class 11th Economics Important Questions Unit 6 Development Experience of India: A Comparison with Neighbours

MP Board Class 11th Economics Important Questions

Development Experience of India: A Comparison with Neighbours Objective Type Questions

Question 1.
Choose the correct option:

Question (a)
China republic was established in:
(a) 1945
(b) 1947
(c) 1949
(d) 1951
Answer:
(c) 1949

Question (b)
Which is the poorest nation:
(a) India
(b) China
(c) Pakistan
(d) Kerala
Answer:
(c) Pakistan

Question (c)
In year 2010 which was biggest importer:
(a) America
(b) Japan
(c) China
(d) India
Answer:
(c) China

Question (d)
Economics of India and Pakistan depends for G.T.P:
(a) On primary level
(b) Secondary level
(c) Tertiary level
(d) None of these.
Answer:
(c) Tertiary level

Question (e)
Which country adopted infant policy:
(a) India
(b) China
(c) Pakistan
(d) None of these.
Answer:
(b) China

Question 2.
Fill in the blanks:

1. Biggest contributor to India’s National Income is …………………………
2. In China great leap forward mission started in ………………………..
3. Pakistan has better situation in field of ………………………. than India and China.
4. In ……………………… urban population is least.
5. Emission of Carbon – di – oxide is maximum is …………………………..

Answer:

1. Service
2. 1958
3. Availability of facility
4. India
5. China.

Question 3.
Match the columns:

Answer:

1. (c)
2. (e)
3. (a)
4. (b)
5. (d).

Question 4.
State true or false:

1. In 1978 ‘Reform policy’ started by China get a great blow.
2. Ratio of people below poverty line is higher in India.
3. Economy of Pakistan achieved great help by remittance of labourers.
4. In comparison to China Indian human development index is higher.
5. The Great leap Forward programme was started in Pakistan.

Answer:

1. True
2. True
3. True
4. False
5. False.

Question 5.
Answer in one word:

1. Which model was adopted by Pakistan for development?
2. Renmanbi is the currency of which country?
3. Which price policy is there in China?
4. In 2014 HDI in India was?
5. Which is the poorest among India, Pakistan and China?

Answer:

1. Statism
2. China
3. Double
4. 0 – 609
5. Pakistan.

Development Experience of India: A Comparison with Neighbours Very Short Answer Type Questions

Question 1.
Write two indications of HDI?
Answer:

1. GNP per capita
2. Life expectancy.

Question 2.
When did China started five year plans?
Answer:
In 1953.

Question 3.
When did economic reforms started in India and Pakistan?
Answer:
Economic reforms were started in 1951 in India and in 1956 in Pakistan.

Question 4.
Name the two areas where India is ahead of Pakistan?
Answer:
Rate of GDP and Per Capita Income.

Question 5.
In which area China is ahead of India and Pakistan?
Answer:
Human development and GNP per capita.

Question 6.
What is liberty indicator?
Answer:
Liberty indicators means a tigers night to play in the governance of their country.

Question 7.
Name any two regional groups?
Answer:

1. SAARC
2. ASEAN.

Question 8.
When did India and Pakistan became Independent?
Answer:
In 1947.

Question 9.
When was People’s Republic of China established?
Answer:
In 1949.

Question 10.
What was common in the development strategy of India, China and Pakistan?
Answer:
Five Year Plans.

Question 11.
When was Great Leap Forward Movement started?
Answer:
In 1998.

Question 12.
What is Great Leap Forward?
Answer:
The Great Leap Forward was a campaign initiated in 1958 in China by Man’s which was aimed to Modernize China’s economy.

Question 13.
What is the objective of Great Leap Forward?
Answer:
Industrialization of nation on large scale.

Question 14.
What was the objective of commune?
Answer:
The objective of commune was collective farming.

Question 15.
When was the Great Proletarian Cultural Revolution started?
Answer:
In 1965.

Question 16.
What was the objective of Great Protestarion Cultural Revolution?
Answer:
To send students and professionals to work and learn from country side.

Question 17.
When did economic reforms started in China?
Answer:
In 1978.

Question 18.
When did economic reforms started in Pakistan?
Answer:
In 1988.

Question 19.
Why is density of population of China is less than India and Pakistan?
Answer:
Because the geographical area of China is big.

Question 20.
Which country adopted one child norm?
Answer:
China.

Question 21.
When was one child norm implemented in China?
Answer:
In the end of decade of 1970.

Development Experience of India: A Comparison with Neighbours Short Answer Type Questions

Question 1.
Mention some examples of regional and economic groupings?
Answer:
Following are some examples of regional and economic groupings:

1. SAARC
2. European Union
3. ASEAN
4. G – 8
5. G – 20
6. NAFTA
7. SAFTA.

Question 2.
What are the various means by which countries are trying to strengthen their own domestic economics?
Answer:
Following are the various means by which countries are trying to strengthen their own domestic economics:

1. Countries are forming regional and global groupings such as European Union, G – 8, G – 20, ASEAN, SAARC, etc.
2. Countries are making comparison of their policies with the policies of their neighbouring countries.

Question 3.
What similar developmental strategies have India and Pakistan followed for their respective developmental paths?
Answer:
Initially India and Pakistan adopted economic planning i.e., Five Year Plans as development strategy. Accordingly both the countries created a large public sector and raised public expenditure on social development. Till 1980 both the countries had similar growth rates and per capita income.

During this period, both the countries introduced a variety of regulated policy framework including tariff protection and direct import controls. During 1980s and 1990s, both the governments shifted their policy orientation to liberalisation and role of private sector. India introduced economic reforms in 1991 while Pakistan initiated economic in 1988.

Question 4.
Explain the Great Leap Forward Campaign of China as initiated in 1958?
Answer:
Great Leap Forward (GLF) campaign was initiated in China in 1958 as a strategy of economic development. Under this, the main emphasis was on the industrialisation of the country on a massive scale. People were encouraged to set up industries in their backyards. In rural areas, commune system was followed to promote collective forming. However, the Great Leap Forward compaign could not succeed.

Question 5.
China’s rapid industrial growth can be traced back to its reforms in 1978. Do you agree? Elucidate?
Answer:
Yes, we agree with the statement that China’s rapid industrial growth can be traced back to its reforms in 1978. Under the reforms, private sector firms and co – operative societies were allowed to produce goods. At this stage, state enterprises (State Owned Enterprises) were made to face competition.

Under dual pricing, farmers and industrial units were required to buy and sell fixed quantities of inputs and outputs on the basis of prices fixed by the government and the rest were purchased and sold at market prices. Besides, special economic zones were set up to attract foreign investors.

Question 6.
Describe the path of developmental initiatives taken by Pakistan for its economic development?
Answer:
Pakistan became independent in 1947. Pakistan announced its first Five Year Plan in 1956. Till 1998, Pakistan had eighth Five Year Plans. Pakistan follows the mixed economy model with co – existence of public sector and private sector. In the initial period of planning, Pakistan adopted a policy of regulated environment characterised by tariff protection and import substitution.

As a result of huge public investment, the production of foodgrains also increased. In 1970s, capital goods industries were nationalised. However, by 1980, the emphasis was shifted to denationalisation and promation of private sector. The government offered incentives to the private sector. Reforms were introduced in Pakistan in 1988.

Question 7.
What is the important implication of the “one norm” in China?
Answer:
The important implication of the “one norm” in the check on population growth. As a consequence, after a few decades, there will be more elderly people in proportion to young people. This will force China to take steps to provide social security measures with fewer workers.

Question 8.
Evaluate the various factors that led to the rapid growth in economic development in China?
Answer:
Following are the various factors that led to the rapid growth in economic development in China:

1. Government Control:
Since its establishment in 1949, China followed the strategy of socialism under which all the sectors of the economy, enterprises and land were under the government control.

2. Great Leap Forward:
Great Leap Forward campaign was launched in 1958 to promote industrialisation and collective fanning in agriculture.

3. Great Proletarian Cultural Revolution:
During 1966 – 1976, students and professionals were sent to work and learn from the countryside.

4. Economic Reforms:
Economic reforms were introduced in China in 1978. China introduced reforms in phases. In the initial phase reforms were introduces in agriculture, foreign trade and investment sectors. In the later phase, reforms were initiated in the indus¬trial sector. To attract foreign investors, special economic zones were set up.

Question 9.
Group the following features pertaining to the economics of India, China and Pakistan?

1. One – child norm
2. Low fertility rate
3. High degree of urbanization
4. Mixed economy
5. Very high fertility rate
6. Large population
7. High density of population
8. Growth due to manufacturing sector
9. Growth due to service sector.

Answer:
Grouping of features pertaining to the economics of India, China and Pakistan are as follows:

Question 10.
Give reasons for the slow growth and re-emergence of poverty in Pakistan?
Answer:
Following are the reasons for the slow growth and re-emergence of poverty in Pakistan:

1. Decline in the growth rate of agriculture sector which employs the largest proportion of work force.
2. Political instability in pakistan.
3. High rate of inflation.
4. Dependence on foreign loans.

Question 11.
What are the similarities in the developmental strategies of India, Pakistan and China?
Answer:
Following are the similarities in the developmental strategies of India, Pakistan and China:

1. All the three countries have started towards developmental path at the same time.
2. All the three countries followed the similar developmental strategies. All the three countries started their development through Five Year Plans and emphasis on pubic sector.
3. Till 1980s, all the three countries had similar growth rates and per capita income.
4. All the three countries have introduced economic reforms.

Question 12.
Compare and contrast India and China’s sectoral contribution towards GDP in 2008. What does it indicate?
Answer:
As far as sector wise contribution to growth is concerned in 2008, contribution of agriculture to GDP in China was 10% while in India it was 19%. On the other hand manufacturing contributes the highest to GDP in China at 47%, whereas, in India service sector contributes the highest at around 55%.

In the last two decades, the growth of agriculture sector has declined in both the countries. In the industrial sector, China has maintained a double-digit growth rate whereas for India industrial growth rate has declined. In the case of service sector, China has been able to raise its rate of growth in 2008 – 2010 while service sector growth in India has stagnated. China’s growth is mainly contributed by the manufacturing sector and India’s growth by service sector.

Development Experience of India: A Comparison with Neighbours Long Answer Type Questions

Question 1.
Mention the salient demographic indicators of China, Pakistan and India?
Answer:
The salient demographic indicators of China, Pakistan and India are discussed below:

1. The population of Pakistan is very small and accounts for roughly about one – tenth of China or India. Though, China is the largest nation and geographically occupies the largest area among the three nations its denstiy is the lowest.

2. One child norm was introduced in China in late 1970’s as population growth was the main reason. This was a measure led to a decline in the sex ratio, the proportion of females per 1000 males. Although sex ratio is based against females in all three countries are trying to adopt various measures to improve the situation. Due to one child norm, after few decades there will be more elderly people in proportion to young people.

3. The fertility rate is low in China and very high in Pakistan.

4. Urbanisation is high in both Pakistan and China with India having 28% of its people living in urban areas.

Question 2.
Mention the various indicators of human development?
Answer:
Following are the various indicators of human development:

1. Longevity or Life Expectancy at Birth: Longevity means the number of years of that a new bom infant can expect to live.
2. Knowledge: Knowledge is measured by a combination of adult literacy rate and combined primary, secondary and tertiary school enrolment ratios.
3. Decent standard of Living: It is measured by real per capita income at purchasing power parity in dollars.
4. People below poverty line.
5. Infant mortality rate:
6. Maternal mortality rate.
7. Adult literacy rate.
8. GNP per capita etc.

Question 3.
Compare and contrast the development of India, China and Pakistan with respect to some salient human development indicators?
Answer:
The following table presents the salient human development indicators in India, China and Pakistan:

Source:
Human Development Report 2011 and World Development Indicators (W. W. W. worldbank. Org)

Table shows the following points:

1. China is ahead of India and Pakistan in human development indicators. China has better ranking in terms of income indicator such as GDP per capita, or proportion of population below poverty line or health indicators such as mortality rates, access to sanitation, literacy, life expectancy or malnourishment.

2. Pakistan is ahead of India in reducing proportion of people below the poverty line with 37 – 2% people below poverty line in India while the ratio being 22 – 3% in Pakistan in 2004 – 2006.

3. Pakistan’s performance in education, sanitation and access to water is better than India.

4. Maternal mortality is very high in India and Pakistan as compared to China. In China, for one lakh births, only 38 women die whereas, in India and Pakistan, more than 200 women die.

5. All the three countries report providing improved water sources for most of its population.

6. Considering the international poverty rate of $ 1 a day, India has the largest share of poor among the three countries.

MP Board Class 11th Economics Important Questions

MP Board Class 11th Accountancy Important Questions Chapter 10 Rectification of Errors

Rectification of Errors Important Questions

Rectification of Errors Objective Type Questions

Question 1.
Choose the correct answer:

Question 1.
Errors are rectified in this book –
(a) Ledger book
(b) Journal proper
(c) Trial balance
(d) None of these.
Answer:
(b) Journal proper

Question 2.
Errors Committed by omitting entries in the Journal book is called –
(a) Error of commission
(b) Error of principle
(c) Error of omission
(d) None of these.
Answer:
(c) Error of omission

Question 3.
If the trial balance does not tally after many efforts then following Account is opened –
(a) Purchase account
(b) Suspense account
(c) Sales account
(d) None of these.
Answer:
(b) Suspense account

Question 4.
Errors committed due to lack of basis principle of Accounting are called –
(a) Compensating errors
(b) Error of principle
(c) Single sided error
(d) None of these.
Answer:
(b) Error of principle

Question 2.
Fill in the blanks:

1. Errors committed while totalling, balancing of Accounts are called ……………
2. …………… errors are disclosed by Trial balance.
3. If one error nullifies the effect of another error, such errors are called …………….
4. Suspense Account is a ……………. Account.

Answer:

1. Arithmetical errors
2. Arithmetical
3. Compensating errors
4. Temporary.

Question 3.
Match the following

Answer:

1. (d)
2. (c)
3. (a)
4. (b).

Question 4.
Answer in one word/sentence:

1. The entries passed in the Journal proper for rectifying entries are called.
2. The total of purchase book was written Rs. 200 instead of Rs. 2,000. This is an example of.
3. When two errors nullify each others effect, then such errors are called.
4. When are rectifying entries passed?

Answer:

1. Rectifying entries
2. Error of casting
3. Compensating errors
4. Beginning of the year.

Question 5.
State True or False:

1. Suspense Account is a Permanent Account.
2. Single sided errors are generally rectified directly in the ledger accounts before closing the accounts.
3. Final accounts are not affected through rectification of errors.
4. Single sided errors are rectified through Suspense Account.

Answer:

1. False
2. True
3. False
4. True.

Rectification of Errors Short Answer Type Questions

Question 1.
Write some errors which are disclosed by a trial balance?
Answer:
The following are some of the errors which are disclosed by a trial balance:

1. Wrong posting in an account.
2. Double posting of an entry in an account.
3. Entry of wrong amount in an account.
4. Entry of one side posting.
5. Error in bringing down the balance forward in new page.
6. Error in balancing of account.

Question 2.
How the errors can be rectified? Explain.
Answer:
After the errors are located, it is essential to rectify them. Rectification can be made into three ways. They are:

1. Cut the figures or by erasing the old figures and make it correct.
2. Write rectification entries directly in the books of accounts.
3. Write rectification entries in the journal.

Cut the figures or erasing the old figures and make it correct is wrong according to the principles of double entry system. By doing so, the validity of accounting is abolished. Rectification of entries in the ledger accounts or in the journal is made after the completion of financial year.

Question 3.
How the double sided errors are rectified? Explain.
Answer:
The double sided errors are rectified through journal entries, where one account is debited and the other account is credited.

For the rectification of double sided error, the following steps are to be remembered:

1. Make the correct entry as per the principles of double entry system.
2. Repeat the wrong entry, which is done in the books of accounts.
3. Make the opposite entry of wrong entry.
4. Compare the correct entry with opposite entry and strike off the common entry. The resulting entry is the rectification entry.

Example: Ram purchased a furniture, which was debited in purchases account.

Question 4.
What do you mean by suspense account? On which circumstances transactions are entered there?
Answer:
After the errors have been located, they must be rectified and the Trial balance should be tallied. This is done by transferring the difference into a special account called suspense account. It is temporary and fictitious account. In future, when the errors are located, the entries for their rectifications are done in this account. The suspense account will debited if the total of the credit column of trial balance exceeds the total of credit column, it will be credited in the other case.

In the following circumstances transactions are entered there:

1. A transaction is completely omitted
2. One sided errors
3. Unlocated errors
4. Disagreement of trial balance.

Rectification of Errors Long Answer Type Questions

Question 1.
How gross profit, net profit and balance sheet are affected by rectification of errors? Explain.
Answer:
The gross profit, net profit and balance sheet are affected by the rectification of errors. It is as follows:

1. Effect on gross profit –  If the credit side of trading account is increasing due to the rectification entry, the gross profit will also increase. On the other hand, if the debit side of the trading account is increased due to rectification, the gross profit will be reduced.

2. Effect on net profit – If the credit side of profit and loss account is increased due to. the rectification, the net profit will increase and vice versa. Thus rectification affects net profit.

3. Effect on balance sheet – The effect on net profit result the increase or decrease in capital balance, i.e., it will affect the total assets and liabilities in the balance sheet.

Question 2.
Mention the errors which are disclosed by trial balance.
Answer:
The following are some of the errors which are disclosed by a trial balance:

1. Wrong posting in an account.
2. Double posting of an entry in an account.
3. Entry of wrong amount in an account.
4. Entry of one side posting.
5. Error in bringing down the balance forward in new page.
6. Error in balancing of account.

MP Board Class 11 Accountancy Important Questions

MP Board Class 12th Business Studies Important Questions Chapter 2 Principles of Management

Principles of Management Important Questions

Principles of Management Very Short Answer Type Questions

Questions 1.
What do you understand by “Mental revolution” ?
Answer:
Principle of mental revolution assumes that even if there are large physical resources and other resources in an organization but if the human resources are not satisfied, there isn’t peace and prosperity and the moral of the human resources is not high till then the resources are simply resources. They can never take the form of production and services. Hence, managers must try to attain the maximum cooperation of the workers, to remove the gaps between labour and capital and to radicate mutual enmity.

Question 2.
What do you understand by principles of management ?
Answer:
Principles of management represent the techniques and principles which are related to management tasks and to show the correct path for achievement of the main objectives of the organization.

Question 3.
Explain Fayols principle of Initiatives ?
Answer:
According to this principle Fayol has suggested that the officers and employees of an organization should be given freedom to work on the new plans and to upgrade the old plans in order to increase the productivity. The employees should take the initiative in order to give suggestions to increase the productivity of the firm.

Question 4.
What is principle of equity ?
Answer:
This principle was formulated by Henri Fayol. Equity means fair dealings, equality of treatment and cooperative attitude among the employees in the enterprise. Equity results from a combination of kindness and justice. Employees expect equity from management.

Question 5.
How is efficiency developed through division of labour ?
Answer:
According to Henri Fayol all employees is an organization or institution do not have same efficiency. So according to their efficiency and interest they should be assigned the work. Labour should be divided into various groups. By doing this workers are motivated and this helps in increasing their efficiency.
The object of division of work is to derive benefits from specialization. The various functions of management like planning, organization cannot be done alone.

Question 6.
Distinguish is between principles of unity of command and principle of unity of direction.
Answer:
Difference between Principles of unity of command and Principle of unity of direction

principal of unity command:

1. it is concerned with the functioning of personnel.
2. 2.this principal makes the relation of and officers (authority) strong.

princpals of unity of direction:

1. it is concerned with the functioning of the department and sub-department comprising the business concern.
2. the principals help the unification of plans.

Question 7.
What do you mean by decentralization ?
Answer:
When the top level management gives more role and importance to its subordinates in management and organization, it is known as decentralization. The intensity of centralization of decentralization is decided by the top level management.

Question 8.
What do you mean by standardization ?
Answer:
According to Taylor standardization is essential for high quality product with low cost of production. It involves the standardization of tools and equipment conditions of work and materials so that the best product can be produced at a minimum cost.

Question 9.
Explain the principle of unity of direction formulated by Henri Fayol.
Answer:
Principle of unity of direction means there should be one head and one plan for a group of activities having the same objectives. While unity of command is concerned with the functioning of personnel unity of direction is concerned with the functioning of the body corporate. The departments and subdepartments comprising the business concern.

Question 10.
Explain Principle of scientific selection, training and development.
Answer:
According to Taylor, selection of employees should be done very carefully, because wrong selection may create disaster. This does not mean that only well qualified persons should be employed, but that person should be employed who can do that work or is capable of -handling that work. Taylor in his book, “The principle of scientific management” has written, that no matter how good your selection procedure is, but without training, the working capacity of the employees cannot be increased. Therefore, along with scientific selection method, arrangement for training should also be made. “A person should do the work not mere know the work.”

Question 11.
What is Taylor’s Eight Boss scheme ?
Answer:
Taylor has suggested functional organizational system. This organization is called Eight Boss scheme.
They are:

1. Gang Boss
2. Speed Boss
3. Repair Boss
4. Inspector
5. Shop disciplinarian
6. Route clerk
7. Instruction card clerk
8. Time and cost clerk.

Question 12.
ExpIain the principle of ‘I’ and ‘We’ propounded by Fayol ?
Answer:
According to this principle of Henry Fayol the industrialists should use the word we instead of ‘I’ in order to get maximum cooperation of the employees. Both the aspect should work in cave and harmony.

Question. 13.
Explain Taylor’s principle of task idea.
Answer:
Principle of task idea: This pertains to the norms of productivity of individual worker. It is a technique of forecasting and viewing ahead every step in a long series of separate operations. The standard task is the amount of work which an average worker does in congenial atmosphere during a working day. Taylor called it a fair day’s work. A worker usually works much below his capacity if no standard is set for him.

Question 14.
What do you mean by motion study ?
Answer:
It is the study of a machine operator and his movements for performing the job. The purpose is to eliminate useless motion and thereby establish a standard for performance. The study is undertook in order.

Question 15.
Explain the principle of unity of direction.
Answer:
Principle of unity of direction : It means, there should be one head and one plan for a group of activities having the same objectives while unity of command is concerned with the functioning of personnel, unity of direction is concerned with the functioning of the body corporate the departments and subdepartments comprising the business concern.

Question 16.
Who formulated scientific principles of management when and where did he die ?
Answer:
Principles of scientific management was formulated by F.W. Taylor. He died in 1915 at Filadalphiya.

Question 17.
How many parts did Henri Fayol divide the works of business ?
Answer:
Fayol has classified all the works of business in six parts :

1. Technical work
2. Commercial work
3. Financial work
4. Security work
5. Administrative work
6. Managerial work.

Question 18.
What do you mean by time study ?
Answer:
lt is done to observe and study the minimum time-period required to perform any task. Through time study the precise time required for man’s work is determined. It will help in fixing the standard time required to do a particular job.

Question 19.
what do you mean by Fatigue study ?
Answer:
Fatigue study : Excessive specialization of work and poor working conditions may cause monotony resulting in both physical and mental fatigue among industrial workers. Fatigue either a physical or mental always has an adverse effect on worker’s health and his efficiency. The idea of this study is to see that workers maintain their operational efficiency without any injury to their health and happiness.

Principles of Management Short Answer Type Questions

Question 1.
Name the 14 principles of management formulated by Henri Fayol.
Answer:
AnirFayol’s Principles of Administration of Management:

1. Principle of division of work
2. Principle of authority and responsibility
3. Principle of discipline
4. Principle of unity of command
5. Principle of unity of direction
6. Principle of priority to common interest
7. Principle of remuneration of personnel
8. Principle of centralization
9. Principle of scalar chain
10. Principle of order
11. Principle of equity
12. Principle of stability
13. Principle of initiative and Esprit de corps
14. Principle of coordination of management.

Question 2.
Differentiate the time study and motion study.
Answer:
Differences between time study and motion study :

Time study:

1. Time study is done at first.
2. In time study, study of time is done of time taken by machine and time taken by labours.
3. Stopwatch is used in time study.
4. Time study is related to increase the efficiency of labourers.

Motion study:

1. Motion study is done after time study In motion study the study of work done by labours is done.
2. Camera is used in motion study.
3. The object of motion study is to minimize the movement of labours.

Question 3.
why the principles of scientific management opposed by labourers ? Give any six reasons.
Answer:
Opposition by labourers : The maximum opposition of scientific management has been done by the labourers. The reasons for opposition of scientific management are following: .

1. Increase of labourers work: To adopt the scientific management, it is necessary to increase the efficiency of a labour and so the work load on labour is increased. The increased work load creates bad effect on the health of labourer. Hence, it is opposed by the labourers.

2. Strict control: Under the scientific management, strictness has to be observed and so the labourers are kept under the strict control which they do not like.

3. Fear of unemployment: Increased use of machines create a sense of fear in the minds of the workers, thereby making them inefficient. This may further lead to retrench-ment. Hence, they are against being the standards set;

4. Exploitation of labourers : In scientific management, wages of the labourers are not increased in proportion to the increased production. So, in this system, exploitation of the labourers are maximum.

Question 4.
describe the similarities of opinions of Taylor and Fayol.
Answer:
Followings are the similarities of opinions Taylor and Fayol:

1. Both wanted to bring change in managerial conditions
2. Both were great supporters of human factor
3. Both gave much importance to forecasting and planning
4. Both were management experts of the same time, i.e., both were contemporaries
5. Both accepted management as an earned talent
6. Both were experts in their own fields
7. Both emphasised working in a technical and scientific way
8. Both formulated principles of management.

Question 5.
To increase the production efficiency in industrial organization many principles were developed by Taylor. Explain them.
Answer:
To increase the production efficiency in industrial organization following principle are adopted by Taylor :

Principle of modern machines and equipment: Modem machines and equipments yield good quality of goods. Cost incurred is also reduced, therefore under production management, best of modem machines and equipments should be used.

Principle of standardization : Taylor says that, “For production, standard material, standard method, proper procedure and good workers qualifying the standard requirements should be made available, such that good quality of goods can be produced at lesser cost.”

Principle of ideal cost accounting system : For controlling the wastage in expenditure and misuse of materials suitable system of cost accounting should be adopted. Capable and experienced cost accounts should so appointed in the organization.

Question 6.
What are the dissimilarities in study of Taylor and Fayol ?
Answer:
Dissimilarity of Opinions : Taylor and Fayol

1. Taylor’s centre of study was labour whereas Fayol’s centre of study was manager.
2. Taylor’s principles were Principles of Scientific Management whereas Fayol’s Principles were known as Principles of Administration.
3. Taylor’s experiment point was factory whereas Fayol’s experiment point was top administration.
4. Taylor justified functional organization (Eight Boss Scheme) for an enterprise whereas Fayol justified unity of command (One-man order).
5. Taylor’s study and contribution was lower level, labour to manager whereas Fayol’s_ study and contribution was manager from the beginning and he used the words order, direction, authority, etc.
6. Taylor is called as Factory Expert whereas Fayol is known as Management Expert.
7. Taylor’s principles are not applied in practice whereas Fayol’s principles have been applied in so many enterprises.

Question 7.
Mention the objectives of scientific management.
Answer:
Following are the main objectives of scientific management: .

1. Increase in the rate of production by use of standardized tools, equipments and methods
2. Increase in quality of goods by research, quality control and inspection devices
3. Reduction in the cost of production by rational planning and regulation and using cost control techniques.

Question 8.
“Principles of management are concentrated on human behaviour”. Explain.
Answer:
Management is totally related with human behaviour. The success of principles of management is affected by human behaviour. Management is related with persons. Management gives proper directions to human behaviour. Management is also done by human being and the consumer for whom the organization, is prepared is also human being. So it is said that principles of “Management are concentrated on human behaviour”.

Question 9.
The work of Taylor and Fayol are complementary.’ Explain
Answer:
F. W. Taylor is regarded as “father of scientific management and Henry Payol is regarded as “father of modern principles of industrial management”. Both were contemporaries and both were top class engineers. Both emphasized working in a technical and scientific way. Both have contributed a lot in the field of management. These existed a difference in thinking and working method of both. Economics for instance, Taylor focussed on improving efficiency of labourers while Fayol focussed on management work. The both realised that in every stage. Employees and their management will be the basis of success of an industrial Concern. To solve such problem both suggested scientific solutions and their implementation.

Despit of dissimilarities between the principles propounded by both learned economists. We can say that their work is complementary to each other.

Question 10.
Write the importance of principles of management is three points.
Or
Explain the importance of principle of management.
Answer:
Significance of Importance of Principles of Management: The principles of management are very useful as they provide useful guidelines to managerial behaviour and influence managerial practices. Actually, principles guide Them in taking and implementing decisions. Their importance can be understood by the discussion of the following points :

1. They provide useful In-sights : The principles provide the managers with useful insights into real world situations. Following these principles they increase their knowledge, ability and understanding and can face adverse situations effectively. Thus, the principles increase managerial efficiency.

2. They help in utilization to Resources of the optimum : As we know resources both human and material are limited. They have to be put to optimum use. They should be uses in such a way that they give maximum benefit with minimum cost. Principles equip the managers foresee the.cause and effect relationships of their decisions and actions. Thus, the wastage associated with a trial-and-error approach can be overcome.

3. Highlight the True Nature of Management: Lack of understanding of management principles makes it difficult to define clearly the nature and scope of the managerial job. Principles are necessary if the true nature of management is to be clearly understood. Principles act as a checklist of the meaning and contents of management. They highlight the role of managers in concrete terms and serve as a criteria to judge the appropriateness of managerial decisions and actions.

4. Based on Objective Assessment: Management principles help in thoughtful decision making. They emphasis logic rather than blind faith. Management decisions taken on the basis of principles are free from bias and prejudice. They are based on the objective assessment of the situation

5. To Guide Research : Principles of management indicate the lines along, which research should be carried out to develop new guidelines and to ascertain the validity of existing guidelines. Thus, management principles serve as focal points for useful research in management.

6. To attain Social Goals: Manager coordinate the efforts of people so that individual objectives get translated into social attainments. The standard of living of people depends upon the quality of management. If management is efficient, the resources of society are better utilized and quality of life is improved. Development of management principle by increasing, efficiency, in the use of resources, would definitely have a revolutionary impact on the cultural level of society and on human progress.

Question 11.
Distinguish between managerial principles and managerial techniques.
Answer:
Differences between Managerial principles and Managerial techniques

Managerial principles:

1. Managerial principle is flexible.
2. Managerial principles are directions for managerial work.

Managerial techniques:

1. Managerial techniques are less flexible
2. These are managerial techniques which are made fulfil the targets.

Question 12.
How are principles of management arises ?
Answer:
Principles of management arises due to following reasons :

1. Deep observation: In every business in front of management some problems arises. During this time managers observe working of employees. They see their reactions. On the basis of these observations principles are made.

2. Experiments done again and again : In this method experiments are done on various employees frequently. On the basis of results the principles are made.

Question 13.
Explain the principle of “Esprit De Corps”
Answer:
By ‘Esprit De Corps’ we mean “Power of Organization”. According to this principle each employee should consider himself/herself as the member of teach. He/she should try to achieve the target of team. Management should try to create feeling of cooperation among the workers. By following this target group target is achieved.

Question 14.
While fixing the proper wages which points are to be kept in mind ?
Answer:
While fixing the proper wages these points are kept in mind :

1. Financial situation of institution or organization.
2. Minimum wages act of government.
3. Payment of bonus and wages done by competent.

Question 15.
How principles of management make administration more effective ? Explain with example.
Answer:
Principles of management discourages partiality and prejudice. It makes administration more effective. These principles encourages the scientific principles.

For example “Principle of unity of command” and “Principle of unity of direction” lead the orderly working of the organization. Principle of direction do assimilation of effort made by workers in a specific direction. Principle of scalar chain do the flow of information in a proper way.

Question 16.
Recognize those techniques of scientific management which are analysed by the following statements :

1. When any expert supervises each labour.
2. To know the best solution of doing any work.
3. Different wages paid to labours.
4. When equality is brought in material, machines tools and working methods and conditions after proper experimentation.
5. To fix the standard time for completing the fixed work.
6. Employee is for the enterprise and enterprise is for the employee.

Answer:

1. Creative foremanship
2. Method study
3. Differential wages
4. Stan-dardization of work
5. Time study
6. Mental revolution.

Question 17.
Distinguish between principle of unity of command and functional foremanship.
Answer:
The differences between principle of unity of command and functional foremanship:
Principle of unity of command

1. This principle requires that the employees should receive orders from one superior only for any action or activity.
2. In it planning and performing work is same.
3. It means workers in a department are required to be accountable to one superior for orders.

Functional foremanship

1. Under it each worker has to takeorder for performance of any work from foreman.
2. Under it planning and performance of work is different, (excutation of function)
3. This concept was extended to the lower level.

Question 18.
Distinguish between principles of management and principles of pure science
Answer:
Principles of management:

1. Principles of management are of more flexible nature.
2. These changes in business environment according to change.
3. These principles are implemented with creativity.

Principles of puree science:

1. These principles are more strong.
2. These principles do not change according to time.
3. These are implemented with fixed or proposed way.

Question 19.
When a salesman gets order from two high authority then what bad effects may take place ?
Answer:
When a salesman gets order from two different authorities then following bad effects may be found:

1. Suspicion may take place in mind of salesman.
2. He tries to avoid the work.
3. There may be difference of opinion regarding the orders by two persons.
4. It may be difficult to maintain discipline.

Question 20.
It is seen that in organization present position is due to the non-violation of principles of management. What is this present position ?
Answer:
Due to violation of principles of management following positions may be in the organization:

1. Necessary material may not be made available at die time of requirement of it. In search of material much time will be wasted.
2. Conditions may increases.
3. Possibility of accidents may increase.

Question 21.
Write the names of those officers who work under foremanship the following works:

1. To examine the quality of produced goods. To check the standard of goods and if the goods are of not standardize, then finding the reason of it.
2. To cheek if all the labours are working their own work according to fixed rate.
3. To ensure what will be the order of any work in completing the specific work.
4. To keep the machines and tools in working conditions.
5. To give direction to workers to do work by a specific method.
6. To ensure that each work is done in proper way.

Answer:

1. Inspector
2. Speed Boss
3. Rote clerk
4. Repairs Boss
5. Card clerk
6. Displinarian.

Principles of Management Long Answer Type Questions

Question 1.
Explain some merits of scientific management.
Answer:
some merits of scientific management are as follows :

1. Division of work : It stress on specialization and division of work. It helps the producer in completing of work effectively.
2. Industrial peace: The conflicts among labours are solved scientifically under scientific management. There is no place for conflicts which helps in main taining industrial peace.
3. Maximum work: It helps in getting the maximum work done from laboures. This helps in increase in profit as well.
4. Reduction in cost of production : If reduce the cost of production, it can achieve .success. ‘
5. Increase in Income: It increases the efficiency of worker which increase the income of labours.
6. Stability in employment: Efficient and able worker provide their service regularly it will increasestability in employment.

Question .2
What do you understand by scientific management ? Write its characteristics.
Answer:
Meaning of Scientific Management: Scientific management is made of two words science and management. Science is the application of logic, reasoning and it gives a new dimension to our study approach to different problems of life. When we apply scientific approach towards management concepts this is called as scientific management.
Following are the characteristics of scientific management:

1. The objectives of every job in scientific management is fixed and predetermined,
2. There is a fixed plan to attain objectives
3. Mutual cooperation among employees is essential in scientific management
4. Scientific management works on the objective of maximum production at minimum cast
5. Motivation is considered necessary for the completion of work
6. Scientific control system is implemented under scientific management
7. Time to time evaluation of standards is performed
8. Increase in efficiency of employees helps in increase in the income of employees
9. Researches and experiments plays an important role in the field of scientific management
10. Specialisation and division of work is also given importance
11. Much stress is given on right person for the right job
12. Responsibilities are assigned or fixed for every level of work.

Question 3.
Discuss the elements of scientific management. (Imp)
Answer:
In order to implement the principles of scientific management, Taylor and his associates developed the following techniques :

1. Time Study : In refers to the technique used to measure the time that may be taken by a worker of reasonable skill and efficiency to perform various elements of a job. The aim of time study is to fix ‘Time standards’ for each operation.

2. Motion Study : It refers to have close observation of the movements of a worker’s body involved in performing a job. The purpose of motion study is to avoid wasteful motions in working.

3. Fatigue Study ; Fatigue study seeks to find out how long a person can perform the standard task without any adverse effect on this health and efficiency. It helps to determine the mount and frequency of rest intervals in completing a job.

4. Method Study : The aim of this study is to maximize efficiency in the use of materials, machinery, manpower, and capital by improving work methods.

5. Scientific Task Setting : Scientific planning of a task is the technique of forecast¬ing and viewing ahead every step in a long series of separate operations. Each step has to be taken in the right place, of the right degree, and at the right time, so that work can be done with maximum possible efficiency. Scientific task is the amount of work which an average worker working under proper working conditions can perform during a working day.

6. Standardization : Standardization is the process of fixing well thought-out and tasted norms with a view to maximise efficiency of work standardization eliminates needles variety and thereby simplifies the process of production.

7. Scientific Selection and Training : Under scientific management right men are selected for right jobs. Employees are selected according to predetermined standard in an impartial way. Workers are specifically trained for the jobs, so that they can perform their jobs effectively and efficiently.

8. Mental Revolution : It requires that there should be perfect cooperation,coordination and adjustment between the efforts of labour and management.

Question 4.
describe the principles formulated by Taylor.
Answer:
‘The principles formulated by Taylor are in fact the principles of scientific management. Sir Taylor has formulated the principles of management after studying the scientific management minutely and deeply. Taylor has presented the principles of management in L scientific way. So, it is called as principles of scientific management. The following principles have been formulated by Taylor.

1. Principle of task idea : This pertains to the norms of productivity of individual worker. It is a technique of forecasting and viewing ahead every step in a long series of separate operations. The standard task is the amount of work which an average worker does in congenial atmosphere during a working day. Taylor called it a fair day’s work. A worker usually works much below his capacity if no standard is set for him.

2. Principles of experiment: Taylor suggested that the following studies be conducted by an organization so that it has an insight in knowing the method of doing a job, movement of a machine, time required for its completion and the fatigue that is associated with performing the job.

(i) Time study : It is done to observe and study the minimum time required to perform any task. Through time study, the precise time required for man’s work is determined. It will help in fixing the standard time required to do a particular job.

(ii) Motion study : It is the study of a machine operator and his movements for performing the job. The purpose is to eliminate useless motion and thereby establish a standard for performance. This study is undertook in order to develop a less time consuming system for accomplishing the work.

(iii) Fatigue study : Excessive specialization of work and poor working conditions may cause monotony resulting in both the physical and mental fatigue among the industrial workers. Fatigue either a physical or mental always has an adverse effect on worker’s health and his efficiency. The idea of this study is to see that workers maintain their operational efficiency without any injury to their health and happiness.

3. Principles of scientific selection and training : Scientific management requires a radical change in the methods and procedures of selecting workers for the plan. Hence, it is essential to entrust the task of selection to a central personnel department. After having selected the workers, every job must be entrusted to the’best worker in the factory. This depends upon the workers aptitude, skill and intelligence.

Under scientific management, the management has to undertake the training of workmen before allotting them certain tasks. Training should be imparted from time to time to improve the efficiency of labour.

4. Principles of justified division of work : According to the principle of division of work, work should be allotted to the right worker according to his choice and efficiency. This is called as right job to the right person.

5. Principles of incentive wage system : Taylor assumes that in addition to good wages, proper incentive should be given to the employees for getting proper attention towards the work. Taylor introduced ‘Differential Wage System’ in this regard. This implies that a worker who works as per the standards set should be paid more, in comparison to the inefficient worker, who does not work as per the standards set. In simple words, a worker who works more should receive more wages than the person who doesn’t.

Question 5.
Explain the principles of Fayol.
Answer:
Principles of administration or Management of Fayol: Fayol has mentioned 14 principles in his book, ‘General and Industrial Management’. As he has accepted administration and management as being synonyms, we can say it as principles of management.

These principles are as follows :

1. Principle of division of work : The object of division of work is to derive benefits from specialization. The various functions of management like planning, organization, coordination, control, etc., cannot be performed by a single proprietor or by a group of directors and they have to be entrusted to specialists in the related fields.

2. Principle of authority and responsibility: As management consists of getting the work done through others, it implies that the manager should have the right to give orders and the power to exact obedience. Thus, the manager gives order to his subordinates to perform the job as per his direction. A manager may exercise official authority and also personal authority. An individual to whom authority is given to exercise power must also be prepared to bear responsibility to perform the work.

3. Principle of discipline : Discipline is absolutely essential for the smooth running of the business. By discipline, we mean the obedience to authority, observance of the rules of service and norms of performance, respect for agreements, sincere efforts for completing the given job, respect to the superiors, etc.

Question 6.
Explain the nature of principles of management.
Or
Describe any six characteristics which clarify the nature of the principle of management.
Answer:
Nature/Characteristics of management principles: Management includes the qualities of both science and art that’s why management is called as a science or an art. The principles of management are not rigid and fixed like the principles of physics and chemistry. The main characteristics which highlight the nature of management principles are as follows:

(1) Universality of principles: Management principles can be applied to all manage
rial situations irrespective of the size (Small or large) and nature (Business government or social organization). That’s why Henri Fayol stressed on universality of management principles. Every organization or persons tries to achieve objectives through group efforts. Management principles can be implemented by the managers or directors in any level of management.

(2) Dynamic nature of principles : Management principles are dynamic in nature and flexible. These principles are not rigid and fixed like the principles of mathematics, physics and chemistry. Management principle changes due to cause and effect relationship. Management principles which were earlier important now have changed due to social changes. Management principles are dynamic in nature because these principles are directly related with human beings.

(3) Concentrated on human behavior: Management is totally related with human behavior. Management is related with persons. The success of management principles is affected by human behavior. Principles of management are directed towards enhancing human behavior so that the persons in organization give their best performance.

(4) Relative principles : Management principles are relative not absolute. These principles are implemented according to the needs of organization. It is not compulsory to apply these principles. Every organization, enterprise or society is having different type of nature. Thus due to different circumstances, assumptions, needs etc. accordingly the principles are applied in enterprises and organizations.

(5) Equal importance : All the principles of management are having equal importance. This is true that some principles are important for one organization while other principles may be important for other organization. But these principles are having some importance in all the organization.

(6) Cause and effect relationship : Management principles are always affected by cause and effect (result). Management principles establishes relationship between cause and result. These principles indicates the effect of an important decision on the activities of enterprise.

Question 7.
Write the characterstics of scientific management.
Answer:
Meaning of Scientific Management: Scientific management is made of two words science and management. Science is the application of logic, reasoning and it gives a new dimension to our study approach to different problems of life. When we apply scientific approach towards management concepts this is called as scientific management.

Following are the characteristics of scientific management:

1. The objectives of every job in scientific management is fixed and predetermined,
2. There is a fixed plan to attain objectives
3. Mutal cooperation among employees is essential in scientific management
4. Scientific management works on the objective of maximum production at minimum cast
5. Motivation is considered necessary for the completion of work
6. Scientific control system is implemented under scientific management
7. Time to time evaluation of standards is performed
8. Increase in efficiency of employees helps in increase in the income of employees
9. Researches and experiments plays an important role in the field of scientific management
10. Specialisation and division of work is also given importance
11. Much stress is given on right person for the right job
12. Responsibilities are assigned or fixed for every level of work.

MP Board Class 12 Business Studies Important Questions

MP Board Class 12th Accountancy Important Questions Chapter 1 Accounting for Non-profit Organization

Accounting for Non – profit Organization Important Questions

Accounting for Non – profit Organization Objective Type Questions

Question 1.
Choose the correct answer:

Question 1.
Advance Subscription received during a year is a:
(a) Income
(b) Expenses
(c) Liabilities
(d) Assets.
Answer:
(c) Liabilities

Question 2.
Receipts and payment account is prepared by:
(a) Firms
(b) Sole Trader
(c) Company
(d) Non-trading Concern.
Answer:
(d) Non-trading Concern.

Question 3.
Loss on sale of machine will be recorded in:
(a) Receipts & Payment A/c
(b) Income & Expenditure A/c
(c) Balance Sheet
(d) None of these. A/c
Answer:
(b) Income & Expenditure A/c

Question 4.
Entrance fee if no specific instruction is given will be treated as:
(a) Capital item
(b) Revenue item
(c) Assets
(d) None of these.
Answer:
(b) Revenue item

Question 5.
The system of accounting used by non-trading concern and professional person:
(a) Single Entry System
(b) Double Entry System
(c) Mixed Accounting System
(d) Cash System.
Answer:
(d) Cash System.

Question 6.
Balance Sheet is a:
(a) Statement
(b) Account
(c) Account & Statement
(d) None of these.
Answer:
(a) Statement

Question 2.
Fill in the blanks:

1. Opening Balance Sheet is prepared when opening balance of is not given…………….
2. The first (debit) side of Income & Expenditure Account shows ………………
3. Non-trading concern maintain their of account by ……………
4. Receipts and payment account is a summary of ……………
5. The aim of ……………… is not to earn profit

Answer:

1. Capital fund
2. Expenditure
3. Cash System
4. Cash book
5. Non-trading Concern

Question 3.
Match the columns:

Answer:

1. (d) Opening Capital
2. (a) Non-trading Concern
3. (e) School
4. (f) Real Account.
5. (b) Nominal Accounts
6. (c) Receipts & Payment A/c

Question 4.
Write true or false:

1. Receipts and payment account is like profit and loss account.
2. Among the various fund provided by government, scholarship given to the students will be debited in Income Expenditure Account.
3. If Sport Fund is shown then all the expenses related to sports will be shown in debit side of Income and Expenditure Account.
4. Receipts and Payment Account does not show the difference between capital and receipts.
5. The Receipt and payment account is a summary of all capital receipts and payment.
6. Donation for specific purpose will be always capitalized.
7. Receipts and payment account only record the revenue matured receipts and payment.

Answer:

1. False
2. False
3. False
4. True
5. False
6. True
7. False.

Question 5.
Write the answer in one word/sentence:

1. Income & Expenditure account is prepared on the basis of which account ?
2. Which type of institution prepare Income Expenditure account ?
3. Persons who earn income utilizing their intelligence and skills are called as ?
4. Non-trading concern keep their accounts by which system ?
5. Account which is the summary of cash book is known as ?

Answer:

1. Receipts & Payment A/c
2. Non-trading Concern
3. Professional person
4. Cash system
5. Receipts & Payment A/c

Accounting for Non – profit Organization Very Short Answer Type Questions

Question 1.
Write one important difference between receipts and payment account and Income and Expenditure account
Answer:
Receipts and payment account is a real account while Income and Expenditure account is a nominal account.

Question 2.
Write any one basis of difference between trading concern and non-trading concern.
Answer:
Aim of non-trading concern is to serve the society while the aim of trading concern is to maximize profit.

Question 3.
What do you mean by non-trading concerns ?
Answer:
Non-trading concerns are those concerns, whose aim is not to do business and earn profit but to serve the public. It includes hospitals, clubs, schools and colleges, etc.

Question 4.
Write the names of incomes and expenses of a non-trading concern.
Answer:
The following are the incomes and expenses of a non-trading concerns : Income : Annual membership fee, charity, interest, rent from sublet, income from the sale of waste materials, etc.
Expenses : Stationery, wages, charity, postal charges, electricity charges, subscription to newspapers, etc.

Question 5.
What do you mean by receipt and payment account ?
Answer:
Receipt and payment account is the summary of cash book in which all receipts are debited and all the payments are credited. In receipt and payment opening balance and closing balance of cash is also shown.

Question 6.
Why non-cash transactions are not entered in receipts and payment ac¬count ?
Answer:
Non cash transactions are not entered in receipts and payment account because it is prepared on the basis of cash book of accounting.

Question 7.
What do you mean by income and expenditure account and by whom it is prepared ?
Answer:
Income and expenditure account is a type of profit and loss account, which is prepared at the end of the accounting year with the help of receipts and payments by the non-trading concerns. Income and expenditure account is prepared by non-trading institutions and professional persons to know their annual income and expenditure.

Question 8.
What is the nature of income and expenditure account ?
Answer:
Income and expenditure is a nominal account.

Question 9.
Which account is prepared by non-trading concern is place of profit and loss account ?
Answer:
Income and expenditure account is prepared in place of profit and loss account.

Question 10.
What is surplus in income and expenditure account ?
Answer:
Excess of income over expenditure refers to surplus in an income and expenditure account.

Question 11.
What is the basis of preparing income and expenditure account ?
Answer:
Income and expenditure account is prepared on accrual basis.

Question 12.
A school collected Rs. 50,000 as donation for the construction of buildings. In which side of school’s balance sheet will it be showed ?
Answer:
In the liabilities side of balance sheet.

Question 13.
Following balance appeared in the books of Modern club in the beginning of the year :

• Fixed assets Rs. 50,000,
• Bank overdraft Rs. 5,000,
• Subscribed received in advance  Rs. 2,000.
• Prepared rent Rs. 1,000.

Find the opening capital.

Answer:
Capital fund = Rs. 50,000 + Rs. 1,000 – Rs. 5,000 – Rs. 2,000
= Rs. 51,000 – Rs. 7,000 = Rs. 44,000.

Accounting for Non – profit Organization Short Answer Type Questions

Question 1.
What is life time membership fees ?
Answer:
In non-trading organization some person becomes the life time member of the firm. The fee taken from such kind of persons is called as life time membership fee. This fees is not for a particular year but for the whole period. So it is treated as capital receipts and added to capital fund. It is also shown separately in the liabilities side.

Question 2.
What do you mean by endowment fund ?
Answer:
The cash or assets received by the members of the concern from the third person is called ‘endowment fund’. It is of capital nature, hence is written in receipt and payment account and is Shown in liability side of balance sheet.

Question 3.
state the meaning of ‘Not – for – Profit’ Organizations.
Answer:
Not – for – Profit Organizations (NPO) are set up with the prime objective of providing services and not to earn profit thereby enhancing the welfare of society. Such organizations include schools, hospitals, trade unions, religious organizations, etc. The person/s or the groups of individuals who govern and manage the working of an NPO are known as trustees.

NPO’s main sources of income are donations, subscriptions, life membership fees, grants etc. As these organizations are not set up with profit motive, they do not prepare Trading and Profit and Loss Account. Instead, they maintain Receipt and Payments Ac-count, Income and Expenditure Account and Balance Sheet.

Question 4.
State the meaning of Receipt and Payment Account.
Answer:
Receipts and Payments Account is a summary of the Cash Book. All cash receipts are recorded on the Receipts side (i’. e., Debit side) and all cash payments are recorded on the Payments side (i.e., Credit side) of Receipts and Payments Account. It is prepared on the basis of cash and bank transactions recorded in the Cash Book. It begins with the opening balance of cash and bank and ends with the closing balances of cash and bank (balancing figure) at the end of the accounting period.

It records all cash and bank transactions both of capital and revenue nature. It not only records the cash and bank transactions relating to the current accounting period, but also the cash and bank receipts (or payments) received during the current accounting period that may be related to the previous or next accounting period. This account only helps us to ascertain the closing balance of the cash and bank and helps in assessing the cash position of an NPO.

Question 5.
State the meaning of Income and Expenditure Account.
Answer:
Income and Expenditure Account (I&E) is similar to the Profit and Loss Account in the sense that while the former is prepared to ascertain surplus or deficit during an accounting period, the latter is prepared to ascertain net profit or net loss incurred during an accounting period. I&E Account is a nominal account and is prepared on the accrual basis. It records all transactions of revenue nature that are related to the current accounting period (whether outstanding or prepaid) for which the books are maintained.

All expenses and losses are recorded on the debit side (Expenditure side) and all income and gains are recorded on the credit side (Income side) of I&E Account. The closing balance or the balancing figure of I&E Account is termed as surplus (or deficit), if the sum total of the Income side exceeds (is lesser than) the sum total of the Expenditure side.

Question 6.
Write the objective of receipts and payment account.
Answer:
Following are the objectives of receipts and payment account:

1. Knowledge of cash: This account is summary of cash book on the basis of which the closing cash balance for a certain period can be known.
2. Knowledge of cash receipts: By the help of this account the cash receipts of the organization at the beginning, mid of the year and at the end of the year can be easily found out.
3. Knowledge of cash payments: Receipts and payment account shows all the cash payments made by the organization at the end of the year.
4. 4. Basis of income and expenditure a/c:  With the help of receipts and payment account, income and expenditure account is prepared.

What is subscription? How is it calculated?
Answer:
subscription is the main source of income for an NPO besides entrance fees, donations, grants, etc. Subscriptions refer to the amount of money paid by the members on periodic basis for keeping their membership with the organization alive. It is paid monthly, quarterly, half yearly or annually by the members.

It is shown in the debit side of the Receipt and Payment Account with the total amount received during the year that may be related to the current period and to the previous and next accounting period. While calculating subscription for the current period, advance subscription received for the current period in the previous period and outstanding subscription for the current period are added to the subscription received during the current period.

Whereas, on the other hand, advance subscription received for the next accounting period during the current period and outstanding subscription for the preceding period are deducted from the subscription received during the current period.

Calculation of Subscription:
Subscription received during the year
Add: Subscription received (in advance) during previous year for current year
Add: Subscription outstanding at the end of the year
Less: Subscription received in advance for the next year
Less: Subscription outstanding for the previous year
## Subscription shown in Income and Expenditure Account

This subscription is related to the current accounting period and is shown in the In-come side of the Income and Expenditure Account.

Question 8.
What is Capital Fund? How is it calculated?
Answer:
Capital fund is the excess of NPOs’ assets over its liabilities. In other words, the excess of assets over the liabilities for a profit earning organization is termed as capital and the same for an NPO is termed as capital fund. Any surplus or deficit ascertained from Income and Expenditure account is added to (deducted from) the capital fund. It is also termed as Accumulated Fund.

Calculation of Capital Fund
Capital Fund at the beginning of the year
Add: Surplus from Income and Expenditure Account
Add: Subscription Amount (Capitalized amount)
Add: Life membership fee.
Less : Deficit from Income and Expenditure Account
Capital Fund at the end of the year

Question 9.
Explain the statement: “Receipt and Payment Account is a summarized version of Cash Book”.
Answer:
Receipts and Payments Account is a summary of the Cash Book. This account is prepared by those organizations which maintain their books on cash basis. All cash receipts are recorded on the Receipts side (i.e., Debit side) and all cash payments are recorded on the Payments side (i.e., Credit side) of Receipts and Payments Account. It is prepared on the basis of cash and bank transactions recorded in the Cash Book.

It begins with the opening balance of cash and bank and ends with the closing balances of cash and bank (balancing figure) at the end of the accounting period. It records all the cash and bank transactions both of capital and revenue nature. It not only records the cash and bank transformations relating to the current accounting period, but also cash and bank receipts (or payments) received during the current accounting period that may be related to the previous or next accounting period.

This account only helps us to ascertain the closing balance of the cash and bank and helps in assessing the cash position of an NPO. It also forms the basis for the preparation of Income and Expenditure Account.

Question 10.
What steps are taken to prepare Income and Expenditure Account from a Receipt and Payment Account ?
Answer:
The following steps are taken to prepare Income and Expenditure Account (I&E) from Receipts and Payment Account (R&P).

Step 1:
All the revenue expenditures paid for the current accounting period are transferred from the Payments side of R&P to the Expenditure side of I&E.

Step 2:
All the revenue receipts for the current accounting period are transferred from the Receipts side of R&P to the Income side of I&E.

Step 3:
Expenses outstanding for the current period and expenses paid in advance (prepaid expenses) for the current period in the preceding accounting periods are to be added (adjusted) to their related expenses in the Step 1.

Step 4:
Income outstanding (accrued income) for the current period and income re-ceived in advance for the current period in the preceding accounting periods are to be added (adjusted) to their related incomes in Step 2.

Step 5:
Non-cash items like depreciation, appreciation for the current accounting period are to be adjusted in the I&E.

Step 6:
After adjusting all the revenue items for the current accounting period, the Income and the Expenditure sides are totaled. If the sum total of the Income side exceeds (or is lesser than) the sum total of the Expenditure side, then the balancing figure is termed as surplus (or deficit).

Accounting for Non – profit Organization Long Answer Type Questions

Question 1.
Differentiate the receipts and payments account and cash account, (any 2)
Answer:
Difference between receipts and payments account and cash account:
Receipts and Payments A/c:

1. It is maintained by non-trading concerns.
2. It is a summary of cash account.
3. Income and expenditure account is prepared from it.
4. Date is written at the top along with the heading.

Cash A/c:

1.  It is prepared by both the trading and non-trading concerns.
2. It is main account and write daily.
3. Receipts and payments account is prepared from it.
4. Date is written along with each transact-ion.

Question 2.
“Income and Expenditure Account of a Not – for – Profit Organisation is akin to Profit and Loss Account of a business concern”. Explain the statement.
Answer:
Income and Expenditure Account (I&E) is similar to Profit and Loss Account (P&L), in the sense that the former is prepared by Not-for-profit-Organisations and the latter is prepared by profit earning organisations. Both the accounts are prepared on the accrual basis.

Similar to the P&L, all the expenses and losses pertaining to the current accounting period are recorded on the debit side (Expenditure side) and all the gains and income of the current accounting period are recorded on the credit side (Income side) of the I&E.

The balancing figure of the I&E is surplus or deficit and that of the P&L is net profit or net loss. Both the accounts record only revenue items which are related to the current accounting period. Similarities between Income and Expenditure Account and Profit and Loss Account I&E Account of an NPO is akin to the Profit and Loss Account of a profit earning business in the following manners.

1. Nature of Account: Both the concerned accounts are nominal in nature.

2. Basis of Recording: Both the accounts record only revenue expenses and revenue income related to the current accounting period. The items of capital nature are not ignored while preparing these accounts.

3. Period: Transactions related to current year are recorded in Income and Expenditure account in the same manner in which profit and loss account is prepared. Transactions related to previous year or next year are excluded.

4. Adjustments: The treatment of adjustments like, outstanding expenses, prepaid expenses, income received in advance, income due but not received, depreciation, bad debts etc. is same as that in Profit and Loss Account. Thus, both the accounts are prepared on the accrual basis.

Question 3.
Why does non-trading concerns maintain their accounts on the basis of cash system ? Given any five reasons.
Answer:
Due of the following reasons, non-trading concerns are maintaining these books of accounts according to the cash system of book-keeping.

1. Easy method: Cash system is in easy method. It is a part of cash-book and its is maintained as a cash-book is prepared.
2. Less expensive system: Under this method, no need for keeping more accounts. Even untrained and un experienced persons can do this work.
3. Limited transactions: In non-trading concerns, the number of receipts and payments are limited.
4. Cash transaction: Only cash receipts and payments are entered here as in the cash-book. If there is more credit transactions it will be entered in memorandum book.
5. Checking of correctness: Correctness can be checked by comparing with cash-book.

Question 4.
What points should be kept in mind while preparing the receipts and payments account ?
Answer:
The following points should be kept in mind while preparing receipts and payments account:

1. In this account, enter first of all the opening cash balance. This balance might be closing balance of the previous year.
2. Only cash transaction, i.e., cash receipts and payments are entered and no credit transaction.
3. All types of capital and revenue nature transactions are entered here.
4. All types of receipts and payments whether they relate to previous, current or coming year should be entered.
5. No adjustment relating to outstanding, prepaid, as earned and accrued are done here.

Question 5.
Differentiate the receipts and payments account and income and expenditure account ? (any 4 points)
Answer:
Differences between receipts and payments and income and expenditure

Question 6.
Describe in brief the sources of income of non-trading concern.
Answer:
The various sources of income of non trading concern are :

(a) Subscription:
Subscription is the main source of income for the non-trading concern. It is the amount paid by the members of the organization monthly or yearly for keeping their membership with the organization alive.

(b) Donation:
Donation refers to the amount received by the organization as gift from the members or outsiders. If the amount of donation is merge, it will be treated as revenue income. But if the amount is huge and for specific purpose, then it is treated as capital receipt.

(c) Entry fee:
Amount paid by new member at the time of joining an organization is known as entry fee. It is paid by every member once at the time of becoming a member of the organization.

(d) Interest:
For increasing its sources of income, these non-trading organization invest money outside. The interest earned on this investment is also a source of income.

(e) Income from entertainment:
These organization organize various types of cultural programmes and collected income from the common people.

(I) Rent received:
By giving the building or some other portion in rent, the rent received is also a source of income for them.

Question 7.
What are the process of preparing income and expenditure account from receipts and payments account ?
Answer:
The following is the process of preparing income and expenditure account from receipts and payment account:

(a) Opening cash and bank balance:
It is not entered in income and expenditure account. It is shown in assets side of opening balance sheets.

(b) Closing cash and bank balance:
It is not recorded in income and expenditure account. It is shown in assets side of closing balance sheet.

(c) Capital receipts:
Capital receipts are not entered in income and expenditure account. It is shown in liabilities side of closing balance sheet. Example of capital receipts are donation fund, sports fund, prize fund etc.

(d) Reserve and fund:
Reserve and funds are not recorded in income and expenditure account. It is shown in liabilities side of balance sheet and the concerned expenses are deducted from it.

(e) Sale of fixed assets:
Sale of fixed assets is not shown in income and expenditure account. It is entered in assets side of balance sheet by deducting if from concerned assets.

(f) Capital payments:
Capital payments are not entered in income and expenditure account. It is shown in assets side of closing balance sheet. Example of capital payments are purchase of assets, investment fixed deposits etc.

Question 8.
How is capital fund ascertained in non-trading organization ?
Or
How is initial capital ascertained in non-trading organizations ? Explain.
Answer:
For calculating initial capital, an opening balance sheet is prepared with the help of last year’s assets and liabilities. The total of liabilities side is deducted from the total of assets side and the difference thus gained is called initial capital.
Capital = Total assets – Total liabilities on opening date.

MP Board Class 12 Accountancy Important Questions