Solutions-Class-11-Commerce-Book Keeping and Accountancy-Chapter-1-Introduction to Book- Keeping and Accountancy-Maharashtra Board

Book-keeping is the process of recording all financial transactions of a business in a systematic and orderly manner in the books of accounts.

Goods means the items or products that a business buys or produces for the purpose of selling to earn profit.

Capital is the amount invested by the owner in a business, representing the owner’s equity. It increases with profits and decreases with losses or withdrawals.

Drawings are the cash, goods, or assets withdrawn by the owner from the business for personal use, reducing the owner’s capital.

Goodwill is an intangible asset that arises when one company acquires another for a price higher than the fair market value of its net assets.

It represents the premium paid for factors like brand reputation, customer loyalty, skilled workforce, and strong business relationships.

(1) Recording of business transactions – Book-keeping

(2) Amount invested in business by the proprietor – Capital

(3) A person to whom amount is payable – Creditor

(4) Exchange between two persons – Transaction

(5) Excess of expenses over income – Loss

(6) A person whose assets are sufficient enough to meet business obligations – Solvent

(7) Art and science of recording business transactions – Accounting

(8) Property of any description owned by proprietor – Asset

(9) Assets which remain in the business for a short time and can be easily converted into cash – Current Assets

(10) Allowance given on catalogue price of goods – Trade Discount

Surplus of income over expense is profit.

In cash basis of accounting, actual cash receipts and actual cash payments are recorded.

Amount which is not recoverable from customer is known as bad debts.

Accounts must be honestly prepared and they must disclose all material information is known as Disclosure Concept.

A commodity in which a trader deals is known as goods.

Goodwill means a reputation of a business valued in terms of money.

Cash flow statement is prepared and presented for the period for which the profit and loss account is prepared as per AS-3.

The immediate recognition of loss is supported by Principle of Conservatism.

Brief explanation of an entry is called as narration.

An act of exchange of things or services between the two parties is termed as transaction.

Statement: False

Reason: Book-keeping is only the process of recording financial transactions, whereas accounting includes recording, classifying, summarising, and interpreting financial information. Therefore, accounting is wider in scope than book-keeping.

Statement: True

Reason: The principle of conservatism means that losses and expenses should be recorded as soon as possible, but profits should be recorded only when they are certain. It follows a cautious or safe approach in accounting.

Statement: True

Reason: The double entry system is based on the Dual Aspect concept, which states that every business transaction has two aspects — debit and credit — and both must be recorded.

Statement: False

Reason: Bank overdraft is a liability because it is the amount borrowed from the bank that the business has to repay.

Statement: True

Reason: A person is said to be solvent when the total value of his assets is greater than his liabilities, meaning he is able to pay his debts.

Statement: False

Reason: Cash discount is recorded in the books of accounts. It is shown as discount allowed (expense) or discount received (income) in the Profit and Loss Account.

Statement: True

Reason: Only those transactions which can be expressed in terms of money (money or money’s worth) are recorded in the books of accounts.

Statement: True

Reason: Accounting is called the language of business because it records and communicates financial information of a business to users like owners, creditors, and investors.

Statement: False

Reason:  In ancient time, accounting was done and periodically prepared by the agents of wealthy people, who managed their properties and accounts, for their boss, means accounting was not done by owners.

Statement: True

Reason: To find out the tax liabilities of the business, business transaction classification is useful which is possible only in Book-keeping.

Disagree

Agree

Disagree

Disagree

Agree

Revenue arising as a result of business transactions is known as Income.

Excess of gross profit over operating expenses is operating profit.

An expenditure which is basically revenue in nature but benefit of which is not exhausted within one year is called as deferred revenue expenditure.

The amount deducted by the seller from the list price of goods at the time of sale is trade discount.

A person to whom business owes money for the goods or services is known as creditor.