Financial Accounting NEP NotesMarch 15, 2023
Financial Accounting NEP Notes – Bangalore City University – B.Com 1st Year NEP
Source and Credits : Investopedia, Wikipedia, India times, Toppr and others.
TWO MARKS QUESTIONS AND ANSWERS
Unit 1: Theoretical Framework of Accounting
1) Define Accounting.
Ans) Accounting is the process of measuring, processing, and sharing financial and other information about businesses and corporations.
2) What are accounting standards?
Ans) An accounting standard is a common set of principles, standards, and procedures that define the basis of financial accounting policies and practices.
3) What do you mean by GAAP?
Ans) Generally Accepted Accounting Principles are a collection of commonly-followed accounting rules and standards for financial reporting.
4) What is the cash basis of Accounting?
Ans) Cash basis accounting is an accounting method that recognizes income and expenses only when cash is exchanged
Unit 2: Financial Statements of Sole Proprietors
1) Give the meaning of sole proprietor.
Ans) Sole trading concern is an organization where all the business activities are managed by one person including capital contribution and enjoys all the benefits by himself but also the loss.
2) What are financial statements?
Ans) Financial statements are written records that convey the business activities and the financial performance of a company. Financial statements are often audited by government agencies, accountants, firms, etc. to ensure accuracy and for tax, financing, or investing purposes.
3) What is a trading account?
Ans) Trading account is a statement which is prepared by a business firm. It shows the gross profit of business activities during a specific period. It is a part of the final accounts of the entity.
4) What is the need for preparing a trading account?
Ans) Trading Account is prepared to know profitability of business due to buying and selling or manufacturing and selling. It shows the profit from the main business; buying and selling other than the business isn’t included in Trading Account. Trading Account is the first stage in preparing a final account.
5) What is gross profit?
Ans) Gross profit is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services.
6) What is a Profit and Loss account?
Ans) Profit and Loss account is a financial statement showing a company’s net profit or loss in a given period.
7) What is a Balance Sheet?
Ans) The term balance sheet refers to a financial statement that reports a company’s assets, liabilities, and shareholder equity at a specific point in time.
8) What is the need of preparing a Balance Sheet?
Ans) A balance sheet gives insights into a company and its operations. It reveals a company’s liabilities, assets, and owners’ equity net worth.
Unit 3: Consignment Accounts
1) Define Consignment.
Ans) Consignment is a business arrangement wherein goods are left in the possession of another party, who sell the goods and keep a percentage of the sale.
2) What is meant by Proforma-invoice?
Ans) A proforma-invoice is a preliminary bill of sale sent to buyers in advance of a shipment or delivery of goods.
3) What is Del-credere Commission?
Ans) A Del-crede commission is a commission which is paid as direct commission instead of paying through someone else. Del Crede commission is that of a surety who is liable to the principal should the purchaser make default.
4) Why is Del-credere Commission allowed?
Ans) Del credere commission is allowed by the consignor to the consignee for taking responsibility of the bad debts that may arise.
Unit 4: Royalty Accounts
1) What is Royalty?
Ans) A royalty is compensation paid in exchange for the use of intellectual property or natural resources. The royalty is typically computed as a percentage of the sales or profit proceeds generated from the use of these assets
2) What is minimum rent?
Ans) It is the amount that has to be paid by the lessee to the lessor whether or not he has derived benefit from the asset.
3) Define Short workings.
Ans) Short Workings is nothing but the amount by which the minimum rent is more than the actual royalty. In other words, short workings are the difference between minimum rent and actual royalty.
4) What is meant by recoupment of short working?
Ans) The right of Recoupment means right given to the lessee by the lessor to carry-forward and set-off the short-workings from the surplus of royalties over the Minimum Rent.
Unit 5: Emerging Trends in Accounts
1) What is meant by digital transformation of accounting?
Ans) Digital Accounting refers to the formation, representation and transmission of financial data in an electronic format. Digital accounting is all about saving time, space and money.
2) Define Big data.
Ans) Big data refers to data that is so large, fast or complex that it’s difficult or impossible to process using traditional methods.
3) What is accounting through Cloud Computing?
Ans) In cloud computing, users access software applications remotely through the Internet or other network via a cloud application service provider. Using cloud accounting software frees the business from having to install and maintain software on individual desktop computers.
4) What is meant by Environmental Accounting?
Ans) Environmental accounting also known as green accounting refers to modification of the system of National Accounts to incorporate the use of natural resources. Environmental accounting is a vital tool to assist in the management of environmental and operational costs of natural resources.
5) Define HR Accounting.
Ans) Human resource accounting is the process of identifying and measuring data about human resources and communicating this information to interested parties.
6) What is database accounting?
Ans) A database is a shared collection of inter-related data tables which meet the various informational needs of an organization. Thus, an accounting database stores the accounting data. It is a collection of accounting data which is inter-related to depict the various aspects of the accounting information system.
7) What is inflation accounting?
Ans) Inflation accounting is the practice of adjusting financial statements according to price indexes. Numbers are restated to reflect current values in hyper inflationary business environments.