Important Questions for CBSE Class 11 Accountancy Chapter 2 - Theory Base of Accounting

Very short answer questions – 1 Mark

1. What are the different bases of accounting?

Ans: The time when various financial transactions are documented is referred to as an accounting basis. The cash basis (EU VAT terminology: cash accounting) and the accrual basis are the two most used accounting methods for monitoring income and expenses.  Different bases of accounting are

 • Cash basis

 • Accrual basis

2. How is the total amount of capital calculated? 

Ans: Current assets less current liabilities is a common formula for calculating total working capital. This is a critical indicator that represents the amount of cash on hand to run your firm on a daily basis. Capital is defined as "retained earnings" in broad terms. Capital = Assets - Liabilities

3. What is GST?

Ans: The Goods and Services Tax (GST) is a destination-based tax on the consumption of goods and services.

4. Define accounting?

Ans: Accounting is defined as the process of detecting, measuring, collecting, documenting, classifying, analysing, and conveying financial data to users.

5. What are the basic accounting equations?

Ans: Liabilities + Capital = Assets It signifies that the overall monetary value of a company's assets is equal to the total claims, which include both insiders and outsiders.

Short Answer Questions – 2 Marks

1. What do you mean by the accrual basis of accounting?

Ans: Revenue and cost are recorded in the time in which they occur rather than when they are paid under this accounting technique.

2. Explain Money Measurement Concept?

Ans: Only those transactions and events in an organisation can be described in terms of money, according to the concept of money measurement.

3. What are the 5 accounting concepts?

Ans: The following are some fundamental accounting concepts: -.

• Going Concern Concept

• Matching Concept 

• Materiality Concept 

• Business Entity Concept 

• Consistency

4. Explain the Benefits of Accounting standards?

Ans: The benefit of accounting standards are as follow:

• Accounting standards aid in the preparation of financial statements by removing differences in accounting treatment.

• Accounting standards make it easier to compare financial accounts from different companies.

5. Which authority will levy and administer GST?

Ans: CGST and IGST would be levied and administered by the Centre, whereas SGST will be levied and administered by the states.

Short answer questions – 3 Marks

1.  Define the concept of Dual Aspect.

Ans: Every transaction has two parts: a debit and a credit, both of which have the same amount. It indicates that for every debit, there is a credit in one or more accounts of the same or equal value, and vice versa. Both the debit and credit elements of debit and credit are recorded in the books of accounts according to the Dual Aspect.

2. What is meant by IGST?

Ans: The Integrated Goods and Services Tax (IGST) is a tax that applies to both goods and services. The Integrated Goods and Service Tax Act of 2016 governs IGST. When goods or services are sold from one state to another, the IGST is applied. CGST and SGST are two other taxes that fall under the Goods and Service Tax umbrella. They define the concept of "one tax, one nation" when taken together.

3. What are the Components of GST?

Ans: GST is made up of three parts:

• CGST, or Central Goods and Service Tax, is a tax levied by the Central government on purchases made within a state.

• SGST, or State Goods and Service Tax, is a tax levied by the state government on purchases made within the state.

• IGST, or Integrated Goods and Services Tax, is a federal tax that is collected for interstate commerce.

4. Explain Three Limitations of Accounting Standards?

Ans: The following are the three limits of accounting standards:

• Accounting standards make it difficult to choose between alternative accounting treatments.

• It is firmly adhered to and does not allow for any flexibility in the application of accounting rules.

• The statute cannot be overridden by accounting standards. The standards must be framed in the context of the current situation.

5. What is GAAP?

Ans: GAAP is basic accounting principles and guidelines that serve as the foundation for more extensive and comprehensive accounting regulations, standards, and other industry-specific accounting practices.

Long Answer Questions- 5 Marks

1. Give all the types of taxes that are subsumed under the centre and state level GST?

Ans: Following are the types of taxes subsumed under central level and state level GST:

2. Explain IFRS? State its uses.

Ans: By using a single set of accounting rules, the International Financial Reporting Standards (IFRS) help to promote global standardisation. The International Accounting Standards Board (IASB) produced the International Financial Reporting Standards (IFRS) (IASB).

The International Financial Reporting Standards (IFRS) are used in the following ways: The International Financial Reporting Standards (IFRS) are beneficial in a variety of ways.

• The International Financial Reporting Standards (IFRS) make comparing financial accounts from different companies a breeze.

• Auditors and accountants can give better services to their clients by adopting IFRS, and a company's management can implement its business strategies on a worldwide scale by using IFRS.

3. State the differences between the accrual basis of accounting and the cash basis of accounting. 

Ans:: The difference between the accrual and cash accounting System are as follow:

4. Why is it necessary for accountants to assume that the business entity will remain a going concern?

Ans: The corporate entity is considered a going concern by the accountants since it provides the basis for reflecting the value of the assets on the balance sheet. This assumption allows the company to charge only the portion of the asset that has been consumed or used to generate revenue within a certain period. The remainder of the asset will be carried forward over the next few years.

5. When should revenue be recognized? Are there exceptions to the general rule? 

Ans: The appropriate time to recognise revenue is when it is realised, that is, when the legal right to receive the revenue emerges. For instance, when products have been sold or services have been delivered. As a result, even though the money is collected later, the credit sales will be counted as revenue. The following are some deviations to the revenue realisation principle:

1. When products are sold on hire purchase, the amount collected in instalments is treated as realised; in contracts such as building work.

2. when extended periods of time are involved, the amount collected in instalments is treated as realised. The revenue is deemed to be recognised on a regular basis in proportion to the amount of contract work accomplished in this situation.

Benefits of CBSE Important Questions for Class 11 Accountancy Chapter 2

With constant practice of these CBSE Class 11 Accountancy Chapter 2 important questions, students can reap the following benefits:

• Students will be able to improve their speed of solving the questions as they have practiced good questions from the chapter before the exam.

• By having a glance at the question, students get to know whether the question is a difficult, moderate, or easy one and how much time it will take to complete.

• They could easily write the accurate answer in the exam if the related questions are asked.

• It will give good practice to students to tackle different levels of questions and thus boost their confidence in the exam

• It will help in analyzing their weakness and where they need more practice. Thus working on those areas more will improve their performance in the final exam.

Extra Questions For Practice

1. What does the business entity concept assume?

2. Define the accounting period.

3. Explain the matching and consistency concepts briefly.

4. Define a single-entry system of accounting.

5. What are accounting standards?

6. Why is there a need for accounting standards?

7. Mention two benefits and limitations of accounting standards?

8. Why is there a need for IFRS?

9. Explain the term ‘GST’ briefly,

10. List different characteristics of Goods and Service Tax.

Conclusion

We hope this article helped you understand the important topics of Accountancy Chapter 2- Theory Based on Accounting. Practicing the important questions provided on this page gives you an idea of the chapter's important concepts from which questions can more likely be asked in the exam. It will also help you answer the related questions accurately in the exam. You can check out Vedantu’s website for Class 11 chapter-wise important questions, NCERT Solutions, and last-minute revision notes for all other subjects in free PDF format.

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