Get summaries, questions, answers, solutions, notes, extras, theories, practicles, PDF, and guide of Chapter 1 Introduction to Book Keeping and Accountancy, NBSE Class 9 Book Keeping (BK) textbook, which is part of the syllabus of students studying under Nagaland Board. These solutions, however, should only be treated as references and can be modified/changed.
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Summary
Textbook solutions
Multiple Choice Questions (MCQs)
1. Accounting is :
(a) Only an Art
(b) Only a Science
(c) Art and Science both
(d) Neither Art nor Science
Answer: (c) Art and Science both
2. In accounts recording is made for :
(a) Only Financial Transactions
(b) Only Non-financial transactions
(c) Financial as well as non-financial transactions
(d) Personal transactions of the Proprietor
Answer: (a) Only Financial Transactions
3. Book Keeping means:
(a) To keep the books in an almirah
(b) To record the business transactions in the account books of the trading concern
(c) To record the business activities by a trader in his diary
(d) To write all the books
Answer: (b) To record the business transactions in the account books of the trading concern
4. Which of the following transactions is not of financial character ?
(a) Purchase of asset on credit
(b) Purchase of asset for cash
(c) Purchases of goods
(d) Strike by Employees
Answer: (d) Strike by Employees
5. Accounting cycle includes:
(a) Recording
(b) Classification
(c) Summarising
(d) All of the above
Answer: (d) All of the above
6. Book keeping is mainly concerned with:
(a) Recording of financial data
(b) Designing the systems of summarising the recorded data
(c) Interpreting the data for internal and external users
(d) Preparation of financial statements of the business enterprise
Answer: Recording of financial data
True/False
State whether each of the following Statement is true or false.
1. Book keeping and Accounting are one and the same thing.
Answer: False
2. Book keeping is the art of recording business transactions in a systematic manner.
Answer: True
3. In Book keeping only monetary transactions are recorded.
Answer: True
4. Accountancy helps in taking large number of decisions.
Answer: True
Assertion Reason Based Questions
Choose the correct option
A. Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of the Assertion (A).
B. Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of Assertion (A).
C. Only Assertion (A) is correct.
D. Only Reason (R) is correct.
1. Assertion: In Book keeping only monetary transactions are recorded.
Reason: In Book keeping only those transactions and events are recorded which are expressed in terms of money.
Answer: (A)
2. Assertion Book keeping the art of recording business transaction in a systematic way.
Reason: Book keeping provides enough information about the position of various accounts.
Answer: (B)
Statement Based Questions
Choose the correct option from the options given below :
A. Statement I is true and II is false.
B. Statement II is true and I is false.
C. Both the statements are false.
D. Both the statements are true.
1. Statement I: Book keeping records are backed by documentary evidence.
Statement II: The records are admitted by the courts as authentic evidence admissible in court cases.
Answer: (D)
2. Statement I: Book keeping is the initial step for recording business transactions.
Statement II Book keeping ignores the non-monetary transactions.
Answer: (D)
Short Answer Type-l Questions
1. Define Book Keeping.
Answer : Book Keeping is a combination of two words, i.e., ‘BOOK’ and ‘KEEPING’. Here, ‘BOOK’ means maintenance of books of business, and ‘KEEPING’ means to keep the books in a systematic manner and updated with the complete records of all the transactions. Book Keeping is that branch of knowledge which tells us to keep a record of financial transactions in a systematic manner. It is the initial step to record the financial transactions.
2. Mention the objectives of Book Keeping.
Answer : The objectives of Book Keeping are as follows:
(i) To maintain a permanent record of business transactions based on accounting rules, principles, and concepts. This helps to reduce errors while recording the transactions. For a permanent record of business, all transactions are first recorded in the Journal and then transferred to the Ledger.
(ii) To determine the profit or loss of the business at the end of a financial year. For this purpose, the trading and profit and loss account of the business is prepared, showing all incomes and expenses. If the total income exceeds total expenses, it results in NET PROFIT. Conversely, if expenses exceed income, it results in NET LOSS.
(iii) To ascertain the financial position of the business. For every businessman, knowing the profit or loss is not sufficient; they must also understand the financial health of the business. To achieve this, a Balance Sheet is prepared to know the financial position of the business, recording assets, liabilities, and capital.
3. Define Accountancy.
Answer : Accountancy refers to a systematic knowledge of accounting. It involves the procedural aspects of preparation of books of accounts, summarisation, and communication of accounting information to interested parties. Accountancy refers to the entire body of the theory and practice of accounting.
4. Write two advantages of Accountancy.
Answer : Two advantages of accountancy are:
(i) Replacement of Memory: Human memory is limited by its very nature. Therefore, the need arises to record financial transactions in different books of account. Accounting helps in keeping a systematic record of business transactions, which may be referred to from time to time.
(ii) Helpful in Planning: An efficient management always plans for the future targets, such as production, purchase of goods, sales, marketing of goods, acquisition of fixed assets, and funds in the next accounting period. All this has to be planned in a systematic manner. Without adequate accounting data, it is not possible to make effective planning.
Short Answer Type-Il Questions
1. Why Book Keeping is needed?
Answer : Book Keeping is needed for the following points:
- Need for Financial Information : Financial information of the business is required for preparing policies, budgets, etc. This is possible only when proper records are maintained. So, Book Keeping helps in maintaining proper records.
- Limited Human Memory : The capacity of human beings is limited to remember or learn a large number of transactions done in the business. Book Keeping helps them to store the information in a systematic way.
- Information Needs of Various Users : Book Keeping provides relevant information to the users whenever they need it. These users include investors, bankers, owners, etc.
- Provides Evidence : Book Keeping records are backed by documentary evidence, and therefore, they are admitted by courts as authentic evidence admissible in court cases.
- Preparation of Financial Statements : Every businessman wants to know the profit earned or loss suffered during the year and the financial position at the end of the year. Book Keeping provides necessary data for preparing the financial statements.
2. Write three objectives of Book Keeping?
Answer : Three objectives of book keeping are:
(i) The first main objective of Book Keeping is to keep a permanent record of all business transactions on the basis of accounting rules, principles, and concepts. This helps in reducing errors while recording the transactions.
(ii) The second main objective is to determine the profit or loss of the business at the end of a financial year. For this purpose, the trading and profit and loss account is prepared, showing all incomes and expenses. If the total income exceeds total expenses, it results in a net profit; otherwise, it leads to a net loss.
(iii) Another objective is to ascertain the financial position of the business. For this, a balance sheet is prepared to record assets, liabilities, and capital, which helps in understanding the financial health of the business.
3. What do you mean by Accountancy? Explain three objectives.
Answer : Accountancy refers to a systematic knowledge of accounting. It involves the procedural aspects of preparation of books of accounts, summarisation, and communication of accounting information to interested parties.
The main objectives of accountancy are as follows:
- Record of Financial Transactions and Events: The main objective of accountancy is to keep a systematic record of financial transactions or events of an organisation in the books of accounts according to specified rules. Complete record of business transactions can be used by different persons for different decision-making purposes and act as evidence of transactions.
- Determine Financial Position: For a businessman, merely ascertaining profit or loss of the business is not sufficient. The businessman must also know the financial health of the business. To achieve this objective, after preparing the Profit & Loss Account, a Position Statement (also called Balance Sheet) is prepared which serves as a barometer for ascertaining the financial position of the business on a particular date.
- Communicating Accounting Information to Users: Another main objective of accountancy is to communicate accounting information to the various interested parties like owners, investors, creditors, bankers, employees, and government authorities, etc., who analyse them as per their individual requirements.
4. What is an Accounting Cycle?
Answer : An accounting cycle is a complete sequence beginning with the recording of transactions and ending with the preparation of the final accounts. The steps involved in an accounting cycle include analyzing and recording financial transactions or events in the journal, posting them into the ledger, preparing the trial balance, summarizing the data, and finally communicating the information to users through financial statements like the Trading and Profit and Loss Account (Statement of Profit and Loss) and the Balance Sheet.
5. Explain four advantages of Accountancy.
Answer : Four advantages of accountancy are:
(i) Replacement of Memory: Human memory is limited by its very nature. Therefore, the need arises to record financial transactions in different books of account. Accounting helps in keeping a systematic record of business transactions, which may be referred to from time to time.
(ii) Helpful in Planning: An efficient management always plans for future targets, such as production, purchase of goods, sales, marketing of goods, advertisement, acquisition of fixed assets, and funds for the next accounting period. All this has to be planned systematically, and without adequate accounting data, effective planning is not possible.
(iii) Facilitates Control over Assets: Accountancy facilitates control over assets by providing information regarding Cash Balance, Bank Balance, Debtors, Fixed Assets, Stock, etc. The accounting records provide the necessary information to the management in this regard.
(iv) Facilitates to Ascertain Financial Performance: Accountancy facilitates the preparation of an Income Statement for an accounting period. The Profit & Loss Account prepared at the end of each accounting period discloses the net profit earned or loss suffered during that period. This evaluation of business performance gives vital information to the owners and various other interested parties.
Long Answer Type Questions
1. What is Book Keeping? Explain its need.
Answer : Book Keeping is a combination of two words, i.e., ‘BOOK’ and ‘KEEPING’. Here, ‘BOOK’ means maintenance of books of business, and ‘KEEPING’ means to keep the books in a systematic manner and updated with the complete records of all the transactions. Book Keeping is that branch of knowledge which tells us to keep a record of financial transactions in a systematic manner. It is the initial step to record the financial transactions.
Book Keeping is needed for the following points:
- Need for Financial Information : Financial information of the business is needed for preparing policies, budgets, etc. This is possible only when proper records are maintained. So, Book Keeping helps them to maintain proper records.
- Limited Human Memory : The capacity of human beings is limited to remember or learn a large number of transactions done in the business. So, Book Keeping helps them to store the information in a systematic way.
- Information Needs of Various Users : Book Keeping provides relevant information to the users whenever they need information. These users are investors, bankers, owners, etc.
- Provides Evidence : Book Keeping records are backed by documentary evidence; therefore, the same are admitted by the courts as authentic evidence admissible in court cases.
- Preparation of Financial Statements : Every businessman wants to know the profit earned or loss suffered during the year and the financial position at the end of the year. Book Keeping provides necessary data for preparing the financial statements.
2. Explain the advantages of Book Keeping.
Answer : The advantages of Book Keeping are as follows:
(i) Data : Book Keeping creates hard data which is used by business owners to take useful decisions. It facilitates effective decision-making, which leads to the growth and expansion of the business.
(ii) Reduced Tax Liabilities : Book Keeping helps the businessman to reduce tax liabilities because when proper books are maintained according to tax rules and laws, this will lead to tax deductions.
(iii) Minimise Errors : When a bookkeeper records all the transactions accurately, then the possibility of errors is minimised. The bookkeeper should have knowledge of recording the transactions properly.
(iv) Performance of Enterprise : Book Keeping helps the businessman to know the financial position of the enterprise, whether it is gain or loss, at the end of the year.
3. What is meant by Accountancy? Explain its process.
Answer : Accountancy refers to a systematic knowledge of accounting. It involves the procedural aspects of preparation of books of accounts, summarisation, and communication of accounting information to interested parties.
The process of Accountancy includes the following steps:
- Recording of Financial Transactions and Events: The main objective of accountancy is to keep a systematic record of financial transactions or events of an organisation in the books of accounts according to specified rules. For this purpose, all the business transactions are first recorded in Journal or Subsidiary Books.
- Classifying (Posting into Ledger): After recording the transactions in the Journal or Subsidiary Books, they are posted into the Ledger. Ledger is the storehouse of information where transactions are classified under respective accounts.
- Summarising: The recorded and classified data is then summarised to prepare the Trial Balance, which checks the arithmetical accuracy of the books.
- Preparation of Final Accounts: Based on the Trial Balance, the Trading and Profit & Loss Account (or Statement of Profit and Loss) is prepared to determine the profit or loss for the period. Additionally, a Balance Sheet is prepared to ascertain the financial position of the business on a particular date.
- Communicating to Users: The final step in the process of Accountancy is to communicate the accounting information to various interested parties like owners, investors, creditors, bankers, employees, and government authorities, who analyse it as per their individual requirements.
Extras
Additional questions and answers
Q. What is the meaning of ‘Book’ in Book Keeping?
Answer : In Book Keeping, ‘Book’ means the maintenance of books of business.
39. How does Accountancy assist management in planning and decision-making?
Answer : Accountancy assists management in planning and decision-making in the following ways:
- Helpful in Planning : An efficient management always plans for future targets, such as production, purchase of goods, sales, marketing, acquisition of fixed assets, and funds for the next accounting period. All this has to be planned systematically, and without adequate accounting data, it is not possible to make effective planning.
- Helpful in Decision Making : Accountancy helps in taking a large number of decisions, such as the amount to be withdrawn by the proprietor, the price at which goods should be sold, and other critical business decisions.
- Facilitates Control over Assets : Accountancy provides information regarding cash balance, bank balance, debtors, fixed assets, stock, etc., which helps the management exercise control over the assets of the business.
- Assisting the Management : Accountancy provides financial information to the management, which helps in taking sound and judicious decisions about the business entity.
Additional MCQs
1. What is the main purpose of Book Keeping?
A. To maintain employee records
B. To record financial transactions
C. To prepare marketing strategies
D. To manage inventory
Answer: B. To record financial transactions
Q. Which of the following is NOT a type of financial statement?
A. Balance Sheet
B. Trial Balance
C. Advertisement Report
D. Profit and Loss Account
Answer: C. Advertisement Report
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