NIOS Class 10 Question Paper with Solution April 2024 Pdf

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ACCOUNTANCY

(224)

Time: 3 Hours]                                                                                                                                          [ Maximum Marks: 100

Note :

(i) This question paper consists of 45 questions in all.

(ii) All the questions are compulsory. Internal choices are given in some questions.

(iii) Marks are given against each question.

(iv) Section – A consists of

Q.No. 1 to 20 that are Multiple Choice Questions (MCQs) carrying one mark each. Select and write the most appropriate option out of the four options given in each question. An internal choice has been given in some of questions.

(v) Section – B consists of

Objective type questions. Q. No. 21 to 23 carry 2 marks each and Q. No. 24 to 29 carrying 4 marks each. Attempt these questions as per the instructions given for each question.

(vi) Section – C consists of

(a) Q.No. 30 to 35 – Very Short Answer type questions carrying 2 marks each to be answered in the range of 30 to 50 words.

(b) Q.No. 36 to 41 – Short Answer type questions carrying 3 marks each to be answered in the range of 50 to 80 words.

(c) Q.No. 42 to 45 – Long Answer type questions carrying 5 marks each to be answered in the range of 80 to 120 words.

(1) Answers of all questions are to be given in the Answer-Book given to you. (2) 15 minutes time has been allotted to read this question paper. The question paper will be distributed at 2:15 p.m. From 2:15 p.m. to 2:30 p.m., the students will read the question paper only and will not write any answer on the Answer-Book during this period.

SECTION – A

1. The convention is based on the principle “Anticipate no profit, but provide for all possible losses”. 1

(A) Materiality                                    (B) Conservatism

(C) Business entity                                      (D) None of these

Ans. (B) Conservatism

OR

Going concern concept states that a business firm will continue to carry on its activities for a/an :

(A) limited life                                               (B) a very long life

(C) indefinite life                                          (D) long life

Ans. (C) indefinite life

2. Which of the following includes in external liabilities ? 1

(A) Capital                                                      (B) Interest on capital

(C) Reserves                                                  (D) Sundry Creditors

Ans. (D) Sundry Creditors

3. Accounting does not record non-financial transactions because of : 1

(A) Entity concept                               (B) Accrual concept

(C) Money measurement concept          (D) None of the above

Ans. (C) Money measurement concept

OR

Revenue is considered as being earned when :

(A) Commission Received                                        (B) Sale of goods

(C) Interest received                                                  (D) Cash received from Debtors

Ans. (B) Sale of goods

4. Which of the following is not included in internal liabilities? 1

(A) Capital                                                                                    (B) Reserves

(C) Profit of business                                                                (D) Bills payable

Ans. (D) Bills payable

OR

Out of the following, which can be recorded in the books of accounts?

(A) Purchase of Machinery for ` 1,00,000

(B) Delay in supply of raw Materials of ` 50,000

(C) Conflict between two managers causes a loss of ` 1,00,000.

(D) All of the above

Ans. (A) Purchase of Machinery for ₹1,00,000

5. Following the straight line method of depreciation on particular asset year after year is because of which convention? 1

(A) Conservatism                     (B) Materiality                (C) Consistency               (D) None of these

Ans. (C) Consistency

6. Dual aspect concept expressed in terms of fundamental accounting equation: 1

(A) Assets+Capital=Liabilities                                           (B) Assets−Capital=Liabilities

(C) Assets+Liabilities=Capital                                           (D) All of the above

Ans. (D) All of the above

7. Which of the following is a wasting asset? 1

(A) Goodwill                              (B) Machinery                                (C) Mines                               (D) Furniture

Ans. (C) Mines

OR

Which of the following is not an intangible asset?

(A) Goodwill                              (B) Trademarks                             (C) Patents                            (D) Cash

Ans. (D) Cash

8. Valuation of closing stock is considered at lower cost or market value because of: 1

(A) Convention of Disclosure                                  (B) Convention of Conservatism

(C) Convention of Consistency                               (D) Convention of Materiality

Ans. (B) Convention of Conservatism

9. On the basis of Traditional Classification, accounts are classified into: 1

(A) 2 categories              (B) 3 categories                             (C) 4 categories                             (D) 5 categories

Ans. (C) 4 categories

OR

Harish purchased furniture for ` 45,000. Furniture account is:

(A) Debited                                                                   (B) Credited

(C) Both Debited and Credited                               (D) Neither Debited nor Credited

Ans. (A) Debited

10. Which accounts will be affected in case of Rent paid of ` 5,000? 1

(A) Cash Account

(B) Rent Account

(C) Both Rent Account and Cash Account

(D) None of these

Ans. (C) Both Rent Account and Cash Account

11. Non cash voucher refers to : 1

(A) Debit voucher                                                                      (B) Credit voucher

(C) Transfer voucher                                                                (D) None of these

Ans. (C) Transfer voucher

OR

Credit vouchers are prepared for recording :

(A) Cash receipts

(B) Cash payments

(C) Both Cash Receipts and Cash Payments

(D) None of these

Ans. (A) Cash receipts

12. The process of recording transactions in the journal is called: 1

(A) Balancing                   (B) Posting                       (C) Journalising                             (D) None of these

Ans. (C) Journalising

OR

General Journal is also known as :

(A) Purchase book                                                      (B) Sales book

(C) Return outward book                                         (D) Journal proper

Ans. (D) Journal proper

13. “Goods returned by customer”. Which two accounts are affected? 1

(A) Cash Account and Return inward account

(B) Customer account and Return inward account

(C) Customer account and Return outward account

(D) None of these

Ans. (B) Customer account and Return inward account

14. Narration of Journal entry is recorded in the column of : 1

(A) Date                             (B) Particulars                               (C) Dr. Amount                              (D) Cr. Amount

Ans. (B) Particulars

15. The cash book records: 1

(A) All cash receipts

(B) All cash payments

(C) All cash receipts and cash payments

(D) None of these

Ans. (C) All cash receipts and cash payments

16. Which two accounts are involved in “Contra entry”? 1

(A) Cash account and Capital Account

(B) Cash account and Bank Account

(C) Bank Account and Capital Account

(D) None of these

Ans. (B) Cash account and Bank Account

OR

A separate cash book maintained to record small transactions is called:

(A) Simple Cash book                                                (B) Bank Cash book

(C) Petty Cash book                                                    (D) None of these

Ans. (C) Petty Cash book

17. The page number of the ledger book is posted in: 1

(A) Date Column                                                          (B) Voucher No. Column

(C) Ledger Folio                                                           (D) Amount Column

Ans. (C) Ledger Folio

18. Central Processing Unit (CPU) does not include: 1

(A) Control unit                                                           (B) Memory unit

(C) Arithmetic Logic Unit                                          (D) Output unit

Ans. (D) Output unit

19. The commonly used output devices include: 1

(A) Monitor                      (B) Plotter                        (C) Printer                        (D) All of the above

Ans. (D) All of the above

OR

What is the full form of TPS ?

(A) Transaction Processing System

(B) Transit Process System

(C) Transaction Processing Storage

(D) None of these

Ans. (A) Transaction Processing System

20. Which of the following is characteristics of computer? 1

(A) Diligence                                                                                (B) Storage

(C) Both (A) and (B)                                                                  (D) None of the above

Ans. (C) Both (A) and (B)

OR

Commonly used accounting software is :

(A) Tally                            (B) Window                     (C) Easy books                               (D) Credit Manager

Ans. (A) Tally

SECTION – B

21. Complete the following statements. (any two) 2×1

(i) Unsold goods are valued at cost price or market price, whichever is __________.

(ii) Convention of consistency states that the same accounting methods should be adopted every year for preparing __________ statements.

(iii) Sundry Creditors included in creditors for __________.

Ans. (i) Unsold goods are valued at cost price or market price, whichever is lower.

(ii) Convention of consistency states that the same accounting methods should be adopted every year for preparing financial statements.

(iii) Sundry Creditors included in creditors for goods and services purchased on credit.

22. Match the following. (any two) 2×1

(i) Debtor                                         (a) To whom money is owing

(ii) Creditor                                     (b) Cash or goods withdrawn for personal use

(iii) Drawings                                 (c) Who owes money

Ans. (i) Debtor – (c) Who owes money

(ii) Creditor – (a) To whom money is owing

(iii) Drawings – (b) Cash or goods withdrawn for personal use

23. Fill in the banks. (Any one) 2×1

(i) The computerised accounting system is capable of offering __________ and __________reporting.

(ii) __________ and __________ are the basic requirements of the computerised accounting system.

Ans. (i) The computerised accounting system is capable of offering accurate and real-time reporting.

(ii) Hardware and software are the basic requirements of the computerised accounting system.

24. Give one word answer for the following statements. (any four)                                              4×1

(i) Under which concept, the business and its owners are two separate entities.

(ii) Give an example of tangible asset.

(iii) Excess of business expenses incurred over the business revenue.

(iv) The concept assumes that, business enterprise should not be closed down in the near future.

(v) Inflow of money from sale of goods.

(vi) Convention which helps in minimising errors in calculation.

Ans. (i) Business Entity Concept
(ii) Machinery
(iii) Loss
(iv) Going Concern
(v) Revenue
(vi) Consistency

25. Write the two aspects (effects) of the following transactions. (any four) 4×1

(i) Goods purchased for cash

(ii) Purchased furniture for cash

(iii) Rent paid

(iv) Sold goods to Haresh on Credit

(v) Withdrew cash for personal use

(vi) Interest received

Ans.

Here are the two aspects (effects) of the transactions:

(i) Goods purchased for cash

• Debit: Goods/Inventory
• Credit: Cash

(ii) Purchased furniture for cash

• Debit: Furniture
• Credit: Cash

(iii) Rent paid

• Debit: Rent Expense
• Credit: Cash

(iv) Sold goods to Haresh on Credit

• Debit: Accounts Receivable (Haresh)
• Credit: Sales

(v) Withdrew cash for personal use

• Debit: Drawings
• Credit: Cash

(vi) Interest received

• Debit: Cash
• Credit: Interest Income

26. Match the following. (any four) 4×1

(a) Assets                                                        (i) Increase is credited and decrease is debited

(b) Cash voucher                                          (ii) Record of small expenses

(c) Liabilities                                                 (iii) Book of Original entry

(d) Petty cash book                                     (iv) Cash receipts and payments

(e) Combined entry                                     (v) Increase is debited and decrease is credited

(f) Journal                                                       (vi) Contains more than one debit or Credit or both

Ans.

(a) Assets – (v) Increase is debited and decrease is credited
(b) Cash voucher – (iv) Cash receipts and payments
(c) Liabilities – (i) Increase is credited and decrease is debited
(d) Petty cash book – (ii) Record of small expenses
(e) Combined entry – (vi) Contains more than one debit or Credit or both
(f) Journal – (iii) Book of Original entry

27. Identify whether the following are personal accounts, Real accounts or nominal accounts. (any four)

(i) Commission Received

(ii) M/s M.K. Agencies

(iii) Wages paid

(iv) Aditya Account

(v) Building A/c

(vi) Drawings Account

Ans. (i) Commission Received – Nominal Account (Income/Revenue)
(ii) M/s M.K. Agencies – Personal Account (Represents a specific individual or entity)
(iii) Wages Paid – Nominal Account (Expense)
(iv) Aditya Account – Personal Account (Represents a specific individual)
(v) Building A/c – Real Account (Asset)
(vi) Drawings Account – Nominal Account (Represents withdrawal of funds by the owner)

28. Match the following. (any four) 4×1

(a) Capital                                                                      (i) Raw-materials to be used

(b) Interest on Capital                                               (ii) Owner’s Claim

(c) Bills payable                                                           (iii) Creditors for loans

(d) Bank loans                                                              (iv) Amount invested by owners

(e) Wasting assets                                                      (v) Oil wells

(f) Stock                                                                          (vi) Liability

 

Ans. (a) Capital – (iv) Amount invested by owners
(b) Interest on Capital – (ii) Owner’s Claim
(c) Bills payable – (vi) Liability
(d) Bank loans – (iii) Creditors for loans
(e) Wasting assets – (v) Oil wells
(f) Stock – (i) Raw-materials to be used

29. State the following sentences True or False. (any four) 4×1

(i) Computer is a device that accepts and stores data.

(ii) Magnetic disk is an output unit.

(iii) Accounting documents cannot be prepared through computer.

(iv) The full form of OLTP is Online Transaction Processing.

(v) Computer is an electronic device that can perform only limited operations.

(vi) The computerised accounting is one of the data based oriented applications.

Ans.

(i) True – A computer accepts and stores data for processing.
(ii) False – A magnetic disk is a storage device, not an output unit.
(iii) False – Accounting documents can be prepared through a computer using accounting software.
(iv) True – The full form of OLTP is Online Transaction Processing.
(v) False – A computer is a versatile device that can perform a wide range of operations, not just limited ones.
(vi) True – Computerized accounting is a data-based oriented application.

SECTION – C

 

30. What is meant by a “Bank Column cash Book” ? Draw the format of it. 2

Ans. A Bank Column Cash Book is a specialized cash book that has separate columns to record cash and bank transactions. It records all the cash and bank receipts and payments made by the business. The bank column is used to record transactions that involve the bank, such as deposits, withdrawals, or cheques.

Explanation of Columns:

• Date: The date on which the transaction occurs.
• Particulars: A brief description of the transaction.
• L.F. (Ledger Folio): A reference number for ledger accounts.
• Cash (Dr.): Records the cash receipts (debits).
• Bank (Dr.): Records the bank receipts (debits).
• Cash (Cr.): Records the cash payments (credits).
• Bank (Cr.): Records the bank payments (credits).

OR

Write the accounting technique of :

(a) Cash paid into the bank

(b) Dishonour of a cheque

Ans.

(a) Cash paid into the bank:

When cash is deposited into the bank, the following journal entry is made:

• Debit: Bank Account (Increase in bank balance)
• Credit: Cash Account (Decrease in cash balance)

(b) Dishonour of a cheque:

When a cheque received from a customer is dishonoured, it is treated as an unpaid receivable. The following journal entry is made:

• Debit: Accounts Receivable (Increase in receivable amount)
• Credit: Bank Account (Decrease in bank balance)

31. State the advantages of double entry system. 2

Ans. The double entry system offers several advantages:

1. Accuracy: It ensures the correctness of records, as debits and credits must always balance.
2. Complete Records: Provides a comprehensive record of all transactions, detailing both assets and liabilities.
3. Financial Statements: Facilitates the preparation of accurate financial statements like the Income Statement and Balance Sheet.
4. Prevents Fraud: Helps in identifying errors and discrepancies, minimizing fraud.
5. Audit-friendly: Simplifies the auditing process by maintaining clear and traceable records.
6. Better Control: Improves financial management and decision-making with detailed and accurate records.

 

32. Explain the effects of complete omission on the trial balance. 2

Ans. A complete omission of a transaction means that both the debit and credit aspects of the transaction are entirely left out of the accounting records. As a result:

1. No Impact on the Trial Balance: Since both the debit and credit sides of the transaction are omitted, the totals of the trial balance remain unaffected. The trial balance will still tally.
2. Inaccurate Financial Statements: The omission will lead to incomplete records, which can result in inaccurate financial statements, as some transactions are not reflected.
3. Undetected Errors: This type of error cannot be identified through the trial balance because the omission does not disturb the equality of the debit and credit sides.

OR

Write any two limitations of a trial balance.

Ans. 1. Does Not Detect All Errors: A trial balance cannot identify errors such as complete omissions, compensating errors, or incorrect classification of accounts, as they do not affect the equality of debits and credits.

2. Accuracy of Transactions Not Ensured: Even if the trial balance tallies, it does not guarantee that all transactions have been recorded accurately or in the correct accounts.

 

33. What are the factors affecting the depreciation? 2

Ans. The factors affecting depreciation include:

1. Cost of the Asset: The total purchase cost, including installation and transportation, determines the base value for depreciation.
2. Useful Life: The estimated lifespan of the asset influences how long it will provide economic benefits and how depreciation is spread over time.
3. Residual Value: The expected salvage value of the asset at the end of its useful life reduces the depreciable amount.
4. Depreciation Method: The method chosen, such as straight-line or diminishing balance, affects the annual depreciation expense.
5. Usage Level: Higher usage or wear and tear accelerates depreciation.
6. Obsolescence: Technological advancements or market changes may shorten an asset’s useful life.

 

34. Write a short note on “Income statement”. 2

Ans. An Income Statement is a financial report that summarizes a company’s revenues, expenses, and profits or losses over a specific period, such as a month, quarter, or year. It shows the business’s performance by highlighting how much revenue was earned and how much was spent to generate it. Key components include:

1. Revenue: Total income earned from sales or services.
2. Expenses: Costs incurred, such as operating expenses, salaries, and taxes.
3. Net Profit or Loss: The result of subtracting expenses from revenue.

The income statement helps stakeholders assess profitability and make informed decisions.

 

35. Explain the treatment of outstanding expenses in the financial statements with a suitable example. 2

Ans. Outstanding Expenses are expenses incurred but not yet paid by the end of the accounting period. These are treated as liabilities and require proper adjustments in financial statements.

Treatment:

1. Income Statement: Outstanding expenses are added to the relevant expense account, increasing the total expense for the period.
2. Balance Sheet: The outstanding amount is shown under “Current Liabilities.”

Example:

Suppose rent for December is ₹10,000, but only ₹8,000 has been paid by year-end.

• In the Income Statement, total rent expense will be recorded as ₹10,000.
• In the Balance Sheet, ₹2,000 (unpaid rent) will appear as a current liability under “Outstanding Expenses.”

This ensures accurate representation of expenses and liabilities.

OR

From the following information, prepare Balance sheet of M/s Nigam Traders as on 31.03.2023.

Capital                 –                           Rs. 1,00,000

Building               –                           Rs. 75,000

Creditors            –                           Rs. 15,000

Debtors               –                           Rs. 12,000

Cash in hand     –                           Rs. 8,000

Cash at Bank     –                           Rs. 7,000

Net Profit           –                           Rs. 20,000

Investments      –                           Rs. 33,000

Ans.

Balance Sheet of M/s Nigam Traders as on 31.03.2023

Liabilities	Amount (Rs.)	Assets	Amount (Rs.)
Capital                                               1,00,000 Add: Net Profit                                   20,000 Creditors	1,20,000 15,000	Building Investments Debtors Cash in hand Cash at Bank	75,000 33,000 12,000 8,000 7,000
Total	1,35,000	Total	1,35,000

 

36. What are the steps followed for preparation of simple cash book. 3

Ans. The steps to prepare a simple cash book are:

1. Create Columns: Draw a table with two sides—Debit (Receipts) on the left and Credit (Payments) on the right. Include columns for Date, Particulars, and Amount.
2. Record Opening Balance: Enter the cash-in-hand as of the start of the period on the Debit side under the “Balance b/d” (brought down).
3. Enter Receipts: Record all cash inflows (e.g., sales, rent received) on the Debit side with the date, details, and amount.
4. Enter Payments: Record all cash outflows (e.g., purchases, wages) on the Credit side with the date, details, and amount.
5. Total and Balance:
   • Add both sides.
   • If Debit > Credit, the difference is “Balance c/d” (carried down) on the Credit side.
   • Bring this balance forward as “Balance b/d” on the Debit side for the next period.

This process ensures accurate tracking of cash transactions.

37. What is depreciation? Write the various objectives of providing depreciation. 3

Ans. Depreciation is the systematic allocation of the cost of a tangible asset over its useful life. It represents the wear and tear, obsolescence, or reduction in value of the asset due to its use or passage of time.

Objectives of Providing Depreciation

1. Accurate Profit Calculation: To reflect the true financial performance by accounting for the cost of using fixed assets.
2. Asset Valuation: To present a realistic book value of assets in the balance sheet.
3. Replacement of Assets: To accumulate funds for replacing assets at the end of their useful life.
4. Compliance with Accounting Standards: To adhere to accounting principles like matching and prudence.
5. Tax Benefits: To claim depreciation as an expense, reducing taxable income.
6. Prevent Overstated Profits: To avoid showing inflated profits by considering all expenses.

OR

What is diminishing balance method? Explain its merits and demerits.

Ans. The Diminishing Balance Method (or Written Down Value Method) calculates depreciation as a fixed percentage of the asset’s book value at the beginning of each year. Since the book value decreases annually, the depreciation amount reduces over time.

Merits

1. Realistic Allocation: Matches depreciation with the actual usage, as higher depreciation is charged in earlier years when the asset is more productive.
2. Suitable for Long-term Assets: Works well for assets like machinery and vehicles, which lose more value in initial years.
3. Tax Benefits: Higher depreciation in earlier years reduces taxable income, deferring tax liabilities.

Demerits

1. Complex Calculation: Requires consistent recalculation of the reducing book value.
2. No Full Depreciation: The asset’s value never fully reduces to zero under this method.
3. Not Ideal for Uniform Costs: Unsuitable for assets requiring equal annual depreciation, such as furniture.

This method is widely used when assets experience higher wear and tear in the initial years.

38. A plant is purchased for Rs. 1,00,000 on 1st April 2021. It is estimated that the residual value of the plant at the end of the working life of 10 years will be Rs. 20,000. Calculate the depreciation to be provided per year on Straight Line Method. You are also to show the plant account for 2 years. 3

39. Discuss the errors not disclosed by the trial balance. 3

Ans. The trial balance is used to check the equality of debits and credits, but it cannot detect all errors. The following are errors that may not be disclosed by the trial balance:

1. Omission of a Transaction: If both the debit and credit sides of a transaction are omitted, the trial balance will still tally, but the financial records will be incomplete.
2. Compensating Errors: When one error is offset by another, such as overstating an expense and understating an asset by the same amount, the trial balance may still balance.
3. Error of Principle: Incorrect accounting treatment, such as recording a revenue expenditure as a capital expenditure, does not affect the trial balance’s totals but leads to incorrect financial statements.
4. Error of Commission: A transaction may be recorded in the wrong account but with the correct amount. For example, if a purchase is recorded in the wrong supplier’s account, the trial balance will still balance.
5. Error of Original Entry: If both the debit and credit sides of a transaction are entered with the wrong amount (e.g., a sale of ₹1,000 recorded as ₹1,500), the trial balance will still tally, but the amounts will be incorrect.
6. Transposition Error: When figures are written in reverse order (e.g., ₹1,200 as ₹2,100), it may not affect the trial balance if the error is not significant enough to change the totals.
7. Casting Error: Incorrect addition of the total of a ledger or subsidiary book can cause errors that do not affect the trial balance’s equality.

These errors can lead to inaccurate financial records despite the trial balance being in balance.

40. Distinguish between ‘Trading account’ and ‘Profit & Loss account’. 3

 

41. What do you mean by financial statements? State the objectives of preparing financial statements. 3

Ans. Financial Statements are formal records that summarize a company’s financial activities. They include the Income Statement (Profit & Loss Statement), which shows revenues and expenses; the Balance Sheet, detailing assets, liabilities, and equity; the Cash Flow Statement, reporting cash inflows and outflows; and the Statement of Changes in Equity, reflecting changes in equity from transactions with owners.

Objectives of Preparing Financial Statements:

1. Provide Financial Information: Offer insights into a company’s performance and financial position to stakeholders.
2. Aid Decision Making: Help investors, creditors, and management make informed business decisions.
3. Evaluate Profitability and Financial Health: Assess profitability and the ability to meet obligations.
4. Ensure Legal Compliance: Meet regulatory requirements and accounting standards.
5. Measure Performance Over Time: Track progress and compare financial results across periods.
6. Facilitate External Reporting: Ensure transparency with investors, creditors, and authorities.
7. Monitor Business Strategy: Evaluate the effectiveness of business strategies and make necessary adjustments.

OR

From the following balances of M/s National Traders prepare a Profit and Loss Account for the year ended 31st March 2023.

Credit balance of Trading A/c                  –                            Rs. 1,25,000

Printing & Stationery                                  –                            Rs. 5,000

Freight outward                                           –                            Rs. 7,000

Salaries                                                            –                            Rs. 21,000

Interest received                                          –                            Rs. 5,000

Discount allowed                                         –                            Rs. 7,000

General expenses                                         –                            Rs. 18,000

Salary outstanding as on 31.03.2023    –                            Rs. 5,000

Ans.

Explanation:

1. Income: Interest received is added to the total income.
2. Expenses: Salaries are shown after adding the outstanding salary of ₹5,000.
3. Net Profit: The difference between total income (₹1,30,000) and total expenses (₹63,000) gives a net profit of ₹67,000.

 

42. What is meant by Journal? What are the purposes of preparing journal? Draw a format of it. 5

Ans. A journal is the first step in the accounting process, where all business transactions are recorded in chronological order. Each entry in the journal follows the double-entry system, which means every debit has a corresponding credit. It is also called the “book of original entry.”

Purposes of Preparing Journal:

1. Record Transactions Chronologically: To maintain a chronological record of all business transactions, ensuring that no transaction is overlooked.
2. Provide a Clear Audit Trail: To provide a detailed and systematic record for future reference, facilitating the tracking of transactions and ensuring transparency.
3. Ensure Accuracy: To follow the double-entry system and ensure that each transaction is properly recorded with both debit and credit entries.
4. Legal Compliance: To meet legal and regulatory requirements by maintaining accurate financial records.
5. Facilitate Preparation of Financial Statements: Journal entries serve as the basis for preparing the trial balance, income statement, and balance sheet.

Explanation:

• Date: Date of the transaction.
• Particulars: A description of the accounts involved.
• L.F. (Ledger Folio): The page number of the ledger where the account is posted.
• Debit and Credit: The amounts to be debited and credited.

In this example, ₹10,000 is being debited to the Cash A/c and credited to the Capital A/c.

OR

Explain the modern classification of Accounts and their fundamental rules of debit & Credit.

Ans. Modern Classification of Accounts

In modern accounting, accounts are classified into three major types based on the nature of transactions. Each category has specific rules for debit and credit.

1. Personal Accounts: These accounts relate to individuals, firms, companies, or other entities.
   • Examples: Accounts of customers, creditors, and owners.

Rules of Debit & Credit:

1. • Debit: The receiver of a benefit (i.e., an individual or business receiving goods/services).
   • Credit: The giver of a benefit (i.e., an individual or business providing goods/services).
2. Real Accounts: These accounts pertain to assets, including both tangible (physical) and intangible (non-physical) assets.
   • Examples: Land, buildings, machinery, cash, goodwill, etc.

aRules of Debit & Credit:

1. • Debit: When an asset is increased (e.g., buying a machine).
   • Credit: When an asset is decreased (e.g., selling an asset).
2. Nominal Accounts: These accounts represent expenses, losses, incomes, and gains.
   • Examples: Salaries, rent, interest, revenue, profit, etc.

Rules of Debit & Credit:

1. • Debit: When an expense or loss is incurred (e.g., paying salaries).
   • Credit: When income or gain is earned (e.g., receiving interest).

Fundamental Rules of Debit and Credit

1. Personal Accounts:
   • Debit the receiver
   • Credit the giver
2. Real Accounts:
   • Debit what comes in
   • Credit what goes out
3. Nominal Accounts:
   • Debit all expenses and losses
   • Credit all incomes and gains

These fundamental rules help ensure that all transactions are recorded accurately and in accordance with the double-entry accounting system, where every debit entry has an equivalent credit entry.

43. What is trial balance? Discuss the objectives of preparing a trial balance. 5

Ans.

What is a Trial Balance?

A trial balance is a statement that lists all the ledger account balances of a business at a specific point in time, showing both the debit and credit balances. It is prepared to check the mathematical accuracy of the bookkeeping entries and ensure that the accounting equation (Assets = Liabilities + Equity) holds true. The trial balance does not guarantee the absence of errors, but it helps in detecting some types of mistakes.

Objectives of Preparing a Trial Balance

1. Verify the Accuracy of Accounts: To ensure that the total debits equal the total credits in the ledger, confirming the correctness of bookkeeping entries.
2. Assist in the Preparation of Financial Statements: It acts as a foundation for preparing the final accounts (Income Statement and Balance Sheet), as it lists all relevant balances for further classification.
3. Detect Errors: It helps identify errors in journalizing and posting by providing a comparison between the debit and credit balances. However, it cannot detect all types of errors (e.g., compensating errors, errors of principle).
4. Provide a Summary of Accounts: The trial balance gives a concise summary of all account balances, making it easier for accountants to spot discrepancies or mistakes.
5. Facilitate Internal Control: By preparing a trial balance regularly, businesses can monitor financial transactions and detect any anomalies early.
6. Help in Auditing: It serves as an important tool for auditors to review the financial records of the company and verify whether the financial statements are based on accurate accounting data.

While it doesn’t guarantee the accuracy of the accounts, it helps streamline the accounting process and provides a check on the reliability of the recorded transactions.

OR

If the trial balance does not tally, it means there are some errors in books of accounts. State the procedure of locating errors.

Ans. Procedure for Locating Errors in Books of Accounts When the Trial Balance Does Not Tally

When a trial balance does not tally, it indicates the presence of errors in the books of accounts. The following steps can help locate and correct these errors:

1. Recheck the Calculation of Balances:
   • Ensure that the debit and credit balances of each ledger account are calculated correctly. Mistakes in addition or subtraction can cause imbalance in the trial balance.
2. Verify the Posting of Transactions:
   • Ensure that each transaction has been posted to the correct account (debit or credit side).
   • Check if any transactions have been omitted or posted twice.
3. Check for Transposition Errors:
   • Review if figures have been written incorrectly, such as reversing digits (e.g., ₹1,250 recorded as ₹2,150). These errors result in an imbalance in the trial balance.
4. Check for Casting Errors:
   • Recheck the totals of subsidiary books (sales, purchases, etc.) and ensure they match the amounts posted to the ledger. A casting error in totaling entries can cause discrepancies.

5. Ensure Correct Ledger Account Classification:

   • Make sure the correct accounts are being debited and credited. For example, posting an expense in the wrong account or misclassifying an asset as a liability.
6. Verify Opening Balances:
   • Double-check the opening balances carried forward from the previous period. Incorrect opening balances can cause the trial balance to fail.
7. Check for Unequal Debit/Credit Entries:
   • Review any transactions where the debit and credit entries do not match. For example, a cash receipt may have been recorded with one side missing or incorrectly recorded.
8. Look for Errors of Omission:
   • Check if any transactions have been entirely omitted from the journal or ledger. If an entry is missing from both sides (debit and credit), the trial balance will still tally, but the accounts will be incomplete.
9. Check for Errors in the Journal Entries:
   • Ensure that all journal entries are posted correctly. Errors such as posting to the wrong account or using incorrect amounts can cause an imbalance.
10. Verify Correct Ledger Folio (L.F.):

• Ensure that the ledger folio numbers are correctly assigned when posting transactions to the respective ledgers.

When Errors are Found:

• Correcting the Errors: Once the error is located, make the necessary corrections and recalculate the trial balance.
• Re-prepare the Trial Balance: After corrections, re-prepare the trial balance to ensure that the debits and credits are now equal.

By following these steps systematically, accountants can identify and correct the errors that cause the trial balance to be out of balance.

 

44. What do you mean by Position statement or Balance Sheet? What are the objectives of preparing balance sheet? Draw a proforma of Balance sheet. 5

Ans. What is a Position Statement or Balance Sheet?

A Balance Sheet, also known as the Position Statement, is a financial statement that presents the financial position of a business at a specific point in time. It shows the company’s assets, liabilities, and shareholders’ equity, providing a snapshot of what the company owns and owes. The balance sheet is based on the fundamental accounting equation:

 

Assets = Liabilities + Shareholders’ Equity

 

This equation ensures that the balance sheet always “balances,” meaning the total value of assets equals the combined total of liabilities and equity.

Objectives of Preparing a Balance Sheet

1. Assess Financial Position: To provide a clear picture of the company’s financial health at a specific date, showing what it owns (assets) and what it owes (liabilities).
2. Determine Liquidity: To evaluate the company’s ability to meet its short-term obligations with its current assets. This helps in assessing liquidity.
3. Monitor Financial Stability: To examine the proportion of debt (liabilities) versus equity, helping to determine the company’s long-term stability and solvency.
4. Aid in Decision-Making: Provides useful information for stakeholders (investors, creditors, and management) to make informed decisions regarding investments, lending, and business strategies.
5. Compliance and Reporting: To fulfill legal and regulatory requirements, ensuring transparency and accuracy in financial reporting.
6. Facilitate Comparisons: Enables comparisons with previous periods and with other companies in the industry to track performance over time.

Explanation of the Proforma:

• Liabilities: Show the company’s obligations, including shareholder equity, long-term liabilities (such as loans), and short-term liabilities (like creditors).
• Assets: Show the company’s resources, divided into non-current (fixed) and current assets (short-term).

In this proforma:

• The sum of Liabilities equals the sum of Assets, ensuring the balance sheet is in balance.

45. From the following Trial Balance and adjustments prepare Trading and Profit & loss A/c for the year ended on 31.03.2023 and Balance sheet as on 31.03.2023. 5

 

Debit Balances	Rs.	Credit Balances	Rs.
Purchases   Opening stock   Cash   Building   Salaries   Bills Receivable   Debtors   Carriage and freight   Rent & Taxes   Wages   General Expenses   Insurance	17,000   1,250   1,500   10,600   1,650   800   1,900   500   600   750   1,000   450	Sales   Discount   Bills Payable   Creditors   Capital   Commission   Dividend	17,500   1,275   900   4,000   13,000   800   525
	38,000		38,000

NIOS Class 10 Question Paper Accountancy 224 with Solution Exam 2024 – Download Now in Pdf – 

Adjustments :

(i) Value of stock as on 31.03.2023 was Rs. 4,500

(ii) Wages outstanding Rs. 250

(iii) Insurance prepaid Rs. 50

(iv) Provide depreciation on Building @ 10%

 

Ans. … 

Explanations:

1. Trading Account:
   • Gross Profit: The gross profit is calculated by subtracting the cost of goods sold (Opening Stock + Purchases + Wages + Carriage & Freight – Closing Stock) from the Sales.
2. Profit and Loss Account:
   • Expenses: Include salaries, wages, insurance, general expenses, rent & taxes, and depreciation on the building.
   • Net Profit: It is the difference between gross profit and the total expenses.
3. Balance Sheet:
   • Liabilities: Capital, bills payable, creditors, and outstanding wages.
   • Assets: Include building, bills receivable, debtors, prepaid insurance, cash, and closing stock.
   • The balance sheet “balances” as the total of liabilities matches the total of assets.

This completes the preparation of the Trading Account, Profit and Loss Account, and Balance Sheet.

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