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B.Com. (Semester-1 CCf ) Introduction [Theory]

Questions & Answers for Cu Exams 2025

1) What is Accounting Information?

●​ Accounting Information refers to the financial data and records that are collected,
processed, and summarized to provide insights into an organization's financial

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performance and position. This information is generated through the accounting
process and is used to prepare financial statements, such as the balance sheet,
income statement, and cash flow statement.

2) Uses of Accounting Information

K ●​ Financial Decision-Making: Helps business owners and managers make decisions
about investments, budgeting, and resource allocation.
●​ Performance Evaluation: Evaluates the organization's performance by comparing
actual results with budgeted figures and identifying areas for improvement.
●​ Compliance and Reporting: Ensures compliance with legal and regulatory
requirements by preparing and submitting financial statements to authorities.
●​ Investor Relations: Assists investors and shareholders in assessing the profitability
and stability of the organization, helping them make informed investment decisions.
●​ Credit Assessment: Enables lenders and creditors to evaluate the creditworthiness
of the organization and its ability to repay loans.

3) Qualitative Characteristics of Accounting Information

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●​ Relevance: Information should be timely and provide insights that influence
decision-making.
●​ Reliability: Information should be accurate, complete, and free from material errors.
It should also be verifiable.
●​ Comparability: Information should be consistent and comparable across different
periods and with other organizations.
●​ Consistency: The same accounting methods and principles should be applied over
time to allow for meaningful comparisons.
●​ Understandability: Information should be clear and straightforward, making it easy
for users to comprehend.
●​ Materiality: Information is considered material if its omission or misstatement could
influence decision-making.
●​ Faithful Representation: Information should accurately reflect the economic reality
of transactions and events, being complete, neutral, and free from bias.
4)Basic Accounting Equation

The basic accounting equation is the foundation of the double-entry bookkeeping system. It
represents the relationship between a company's assets, liabilities, and equity. The equation
is as follows:

Assets=Liabilities+Equity\text{Assets} = \text{Liabilities} + \text{Equity}

This equation must always balance, meaning that the total value of a company's assets must
equal the combined value of its liabilities and equity.

5)Assets

Assets are resources owned by a company that have economic value and can provide
future benefits. They are used to generate revenue and support the business's operations.
Examples of assets include:

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●​ Cash
●​ Accounts receivable (money owed to the company by customers)
●​ Inventory (goods available for sale)
●​ Property, plant, and equipment (such as buildings, machinery, and vehicles)
●​ Investments (such as stocks and bonds)
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6)Liabilities

Liabilities are obligations or debts that a company owes to external parties. They represent
claims against the company's assets and must be settled in the future. Examples of liabilities
include:

●​ Accounts payable (money the company owes to suppliers)

●​ Loans and mortgages
●​ Bonds payable
●​ Accrued expenses (expenses that have been incurred but not yet paid)
●​ Unearned revenue (money received in advance for services or goods to be provided
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in the future)

7)Equity

Equity, also known as owner's equity or shareholders' equity, represents the owner's claim
on the company's assets after all liabilities have been paid off. It is the residual interest in the
assets of the company. Equity can be calculated using the following formula:

Equity=Assets−Liabilities\text{Equity} = \text{Assets} - \text{Liabilities}

Components of equity include:

●​ Capital contributions (money or assets invested by the owners)

●​ Retained earnings (profits that have been reinvested in the business rather than
distributed as dividends)
 ●​ Common stock and preferred stock (shares issued to investors)

8)Revenues

Revenues are the income earned by a company from its business activities, such as the
sale of goods and services. They represent the inflow of resources that increase equity.
Examples of revenues include:

●​ Sales revenue (income from selling products)

●​ Service revenue (income from providing services)
●​ Interest revenue (income from interest earned on investments)

9)Expenses

Expenses are the costs incurred by a company in the process of generating revenue. They
represent the outflow of resources that decrease equity. Examples of expenses include:

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●​ Cost of goods sold (the direct cost of producing or purchasing goods sold to
customers)
●​ Salaries and wages
●​ Rent and utilities
●​ Depreciation (the allocation of the cost of tangible assets over their useful lives)
K ●​ Advertising and marketing expenses

10) Double Entry Bookkeeping

Double Entry Bookkeeping is a fundamental accounting system where every financial

transaction affects at least two accounts. This method ensures that the accounting equation
(Assets=Liabilities+Equity\text{Assets} = \text{Liabilities} + \text{Equity}) always stays
balanced. In double entry bookkeeping, each transaction has a "debit" and a "credit" entry of
equal amounts.

●​ Debit (Dr): An entry that increases asset or expense accounts, and decreases
liability, equity, or revenue accounts.
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●​ Credit (Cr): An entry that increases liability, equity, or revenue accounts, and
decreases asset or expense accounts.

For every debit entry, there must be a corresponding credit entry, ensuring the total debits
equal the total credits.

11) Accounting Cycle (8 Steps)

The Accounting Cycle is a systematic process used by businesses to record and manage
financial transactions over a specific period, typically a month or year. The accounting cycle
ensures that financial statements are accurate and complete.

8 Steps of the Accounting Cycle

Here are the 8 steps of the accounting cycle:

1.​ Identify Transactions:

○​ Record all financial transactions that occur during the accounting period. This
includes sales, purchases, payments, receipts, and other events that impact
the business's finances.
2.​ Journalize Transactions:
○​ Record each transaction in the journal, also known as the book of original
entry. Transactions are recorded in chronological order, with each entry
showing the accounts affected, the date, and the amounts.
3.​ Post to Ledger Accounts:
○​ Transfer the journal entries to the general ledger, where transactions are
organized by account. Each account shows the cumulative effect of all
transactions on that account.
4.​ Prepare a Trial Balance:
○​ At the end of the accounting period, prepare a trial balance to ensure that the

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total debits equal the total credits. This step helps identify any errors in the
journal or ledger.
5.​ Adjusting Entries:
○​ Record adjusting entries to account for items that were not captured in the
initial journal entries. This includes accruals (revenues earned or expenses
incurred but not yet recorded), deferrals (prepaid expenses or unearned
K revenues), and depreciation.
6.​ Prepare Adjusted Trial Balance:
○​ Prepare an adjusted trial balance that includes the adjusting entries. This
ensures that the financial statements will be accurate and complete.
7.​ Prepare Financial Statements:
○​ Use the adjusted trial balance to prepare the financial statements, which
include the income statement, balance sheet, and cash flow statement. These
statements provide a summary of the business's financial performance and
position.
8.​ Closing Entries:
○​ Record closing entries to transfer the balances of temporary accounts
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(revenues, expenses, and dividends) to permanent accounts (retained
earnings or capital). This step resets the temporary accounts to zero for the
next accounting period.

12) Cash Basis Accounting

Cash Basis Accounting is an accounting method where revenues and expenses are
recorded only when cash is received or paid. This means that transactions are recognized
when actual cash changes hands. Here's how it works:

●​ Revenues: Recorded when cash is received, regardless of when the goods or

services were provided.
●​ Expenses: Recorded when cash is paid, regardless of when the expense was
incurred.
Example:

●​ If you receive a payment from a customer in January, you record the revenue in
January, even if you provided the service in December.
●​ If you pay a supplier in February, you record the expense in February, even if you
received the goods in January.

13) Accrual Basis Accounting

Accrual Basis Accounting is an accounting method where revenues and expenses are
recorded when they are earned or incurred, regardless of when cash is received or paid.
This method provides a more accurate picture of a company's financial position by matching
revenues with related expenses.

●​ Revenues: Recorded when earned, even if cash is not yet received.

●​ Expenses: Recorded when incurred, even if cash is not yet paid.

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Example:

●​ If you provide a service in December but receive payment in January, you record the
revenue in December.
●​ If you receive goods from a supplier in January but pay in February, you record the
K expense in January.

14) Entity Concept

The Entity Concept is a fundamental accounting principle that treats a business as a

separate and distinct entity from its owners or other businesses. This means that the
business's financial records are kept separate from the personal finances of the owners or
any other entities. The entity concept ensures that the financial statements reflect only the
transactions and financial position of the business itself.

Key Points:
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●​ The business is considered an independent entity, separate from its owners.
●​ Financial transactions of the business are recorded separately from the owner's
personal transactions.
●​ The entity concept applies to various forms of business organizations, including sole
proprietorships, partnerships, corporations, and non-profits.

Example:

●​ If a business owner invests personal funds into the business, it is recorded as a

capital contribution in the business's financial records, not as the owner's personal
income or expense.
15) Money Measurement Concept

The Money Measurement Concept is an accounting principle that states that only
transactions and events that can be measured in monetary terms are recorded in the
financial statements. This concept ensures that all recorded information is quantifiable and
comparable.

Key Points:

●​ Only transactions with a monetary value are recorded. For example, sales,
purchases, and expenses are recorded, but employee morale or brand reputation is
not.
●​ Non-monetary items, even if significant, are not recorded. Qualitative aspects, such
as employee skills or customer satisfaction, are excluded.
●​ This concept ensures consistency and comparability in financial reporting.

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Example:

●​ A company buys machinery for $50,000. This transaction is recorded because it has
a monetary value.
●​ The leadership skills of the company's CEO, while important, are not recorded
because they cannot be measured in monetary terms.
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16) Going Concern Concept

The Going Concern Concept assumes that a business will continue to operate indefinitely
and is not expected to be liquidated or cease operations in the foreseeable future. This
concept underlies the preparation of financial statements, as it implies that the business will
continue to use its assets and meet its obligations.

Key Points:

●​ Financial statements are prepared with the assumption that the business will
continue to operate.
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●​ Assets are valued based on their ongoing use rather than their liquidation value.
●​ Liabilities are expected to be settled in the normal course of business operations.

Example:

●​ A business purchases a building for $1,000,000. Under the going concern concept,
the building is recorded as an asset to be used in operations, rather than being
valued at its potential resale price.

17) Cost Concept (Historical Cost Concept)

The Cost Concept, also known as the Historical Cost Concept, states that assets and
transactions are recorded at their original purchase cost. This means that assets are listed
on the balance sheet at the price paid for them, rather than their current market value.
Key Points:

●​ Assets are recorded at their historical purchase cost, not their current market value.
●​ This concept provides objectivity and reliability, as historical costs are verifiable and
based on actual transactions.
●​ The cost remains unchanged in the financial records, even if the market value of the
asset fluctuates over time.

Example:

●​ A company buys a piece of equipment for $20,000. The equipment is recorded on

the balance sheet at $20,000, even if its market value increases or decreases over
time.

18) Realization Concept (Revenue Recognition)

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The Realization Concept, also known as the Revenue Recognition Concept, states that
revenue should be recognized and recorded when it is earned, regardless of when cash is
received. This means that revenue is recorded when goods are delivered or services are
provided, not when payment is actually received.

Key Points:
K ●​ Revenue is recognized when the earning process is complete.
●​ This concept ensures that financial statements accurately reflect the company's
performance.
●​ It helps in matching revenues with the expenses incurred to generate those
revenues.

Example:

●​ If a company delivers a product to a customer in December but receives payment in

January, the revenue is recognized in December.
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19) Accrual Concept

The Accrual Concept is an accounting principle that states that transactions should be
recorded when they occur, not when cash is received or paid. This means that revenues and
expenses are recognized when they are earned or incurred, regardless of the timing of cash
flows.

Key Points:

●​ Revenues are recorded when earned, even if cash is not received.

●​ Expenses are recorded when incurred, even if cash is not paid.
●​ This concept provides a more accurate picture of a company's financial position and
performance.

Example:
 ●​ If a company provides a service in March but receives payment in April, the revenue
is recorded in March.
●​ If a company incurs an expense in February but pays the bill in March, the expense
is recorded in February.

20) Periodicity Concept (Time Period Concept)

The Periodicity Concept, also known as the Time Period Concept, states that the ongoing
activities of a business should be divided into specific time periods, such as months,
quarters, or years, for the purpose of financial reporting. This allows the business to
measure and report its financial performance and position regularly.

Key Points:

●​ Financial statements are prepared for specific periods (e.g., monthly, quarterly,
annually).

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●​ This concept ensures that financial information is timely and relevant.
●​ It allows users to compare financial performance over different periods and make
informed decisions.

Example:
K ●​ A company prepares monthly financial statements to track its performance and make
timely decisions.
●​ Annual financial statements are prepared at the end of the fiscal year to provide a
comprehensive view of the company's financial position.

21) Matching Concept

The Matching Concept is an accounting principle that states that expenses should be
recorded in the same period as the revenues they help generate. This ensures that financial
statements accurately reflect the relationship between revenues and expenses, providing a
true picture of a company's profitability.
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Key Points:

●​ Expenses are matched with the revenues they generate.

●​ This concept helps in measuring accurate profit or loss for a specific period.
●​ It ensures that financial statements provide a clear view of financial performance.

Example:

●​ If a company incurs costs to produce goods in January and sells those goods in
February, the expenses related to the production should be recorded in February
when the revenue from sales is recognized.
22) Consistency Concept

The Consistency Concept is an accounting principle that states that once an accounting
method is adopted, it should be used consistently in all periods unless there is a valid reason
to change it. This concept ensures that financial statements are comparable over different
periods, allowing users to identify trends and make informed decisions.

Key Points:

●​ Consistent use of accounting methods and principles.

●​ Enhances comparability of financial statements over time.
●​ Changes in accounting methods should be clearly disclosed and justified.

Example:

●​ If a company uses the straight-line method of depreciation for its assets, it should

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continue using this method in future periods. If the company decides to switch to a
different method, it must disclose and explain the change in its financial statements.

23) Prudence (Conservatism) Concept

The Prudence (Conservatism) Concept is an accounting principle that suggests that

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potential expenses and liabilities should be recognized as soon as they are reasonably
possible, but revenues should only be recognized when they are certain. This approach
ensures that financial statements do not overstate assets or income, providing a cautious
and realistic view of the company's financial position.

Key Points:

●​ Recognize expenses and liabilities as soon as they are reasonably possible.

●​ Recognize revenues only when they are certain.
●​ Prevents overstatement of assets and income, promoting a cautious approach.

Example:
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●​ If a company expects a potential lawsuit that could result in a liability, it should
recognize this liability in its financial statements. However, if the company expects to
receive income from a new project, it should only recognize the revenue when it is
actually earned and certain.

24) Materiality Concept

The Materiality Concept is an accounting principle that states that only significant items that
could influence the decision-making process of users should be recorded and reported in the
financial statements. In other words, information is considered material if its omission or
misstatement could affect the economic decisions of users based on the financial
statements.

Key Points:
 ●​ Material items are those that could impact the decisions of investors, creditors, or
other stakeholders.
●​ Immaterial items, which are insignificant, can be omitted or aggregated without
misleading users.
●​ The threshold for materiality varies based on the size and nature of the organization
and the specific circumstances.

Example:

●​ A small expense of $10 in a large corporation with millions in revenue may be

considered immaterial and may not need to be separately disclosed. However, a
$10,000 expense in a small business may be material and should be disclosed.

25) Full Disclosure Concept

The Full Disclosure Concept is an accounting principle that requires all relevant and

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necessary information to be disclosed in the financial statements. This ensures that users
have a complete and transparent view of the company's financial position and performance,
enabling them to make informed decisions.

Key Points:
K ●​ Financial statements should include all material information that could affect users'
understanding and decisions.
●​ Disclosures may be made in the financial statements themselves or in the
accompanying notes.
●​ This concept promotes transparency and accountability in financial reporting.

Example:

●​ If a company has significant pending lawsuits that could impact its financial position,
these should be disclosed in the notes to the financial statements, even if no financial
loss has yet occurred.
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26) What do you mean by Revenue? How is it recognized in Accounts?

Revenue refers to the income earned by a company from its business activities, such as the
sale of goods and services. It represents the inflow of resources that increase equity,
resulting from the company's primary operations.

Revenue Recognition:

●​ Revenue is recognized when it is earned and realizable, regardless of when cash is

received. This means that revenue is recorded when the company has delivered
goods or provided services and there is reasonable certainty of payment.

Key Points for Revenue Recognition:

1.​ Delivery or Performance:

 ○​ Revenue is recognized when goods are delivered to customers or services
are provided, meaning the earning process is complete.
2.​ Measurability:
○​ The amount of revenue can be reliably measured.
3.​ Collectability:
○​ There is reasonable assurance that payment will be received.

Example:

●​ If a company provides consulting services in March and the client agrees to pay in
April, the revenue is recognized in March when the service is completed, even
though the cash is received later.

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GOBIND KUMAR JHA 9874411552
B.Com. (Semester – I)
Financial Accounting – I
Leaked Question Paper (Practice)
Expected Question Pattern for CU Exam, 2025

Group – A (10 X 3 = 30) (Answer any 3 out of 5 questions)

1. Plant and Machinery to the value of ₹ 40,000 was purchased on 1 st January, 2021. On 1st July, 2024, the
machinery was replaced by a new machine costing ₹ 52,000, the vendor taking the old machine in part
exchange at a valuation of ₹ 8,200.
Write up the Plant and Machinery Account for the four years ended 31 st December, 2024 providing for
depreciation by writing 10% off the diminishing value of the plant and machinery employed at the end of
each year.

2. The following errors were discovered after preparation of Trial Balance but before preparation of Final
Account. Show journal entries to rectify the above errors:-
(a) A sale of ₹ 3,400 made to Mr. X was correctly entered in the Sales Day Book but wrongly posted to
the debit of Mr. Y as ₹ 340.
(b) Goods of the value of ₹ 2,500 returned by Mr. Sengupta were entered in the Sales Day Book and
posted there from to the credit of his account.
(c) A cheque of ₹ 5,348 received from Mr. Sarkar after allowing him a discount of ₹ 58 was endorsed to
Mr. Karmakar in full settlement for ₹ 5,400. The cheque was finally dishonoured but no entries for
dishonour were passed in the books.
(d) A payment of ₹ 8,500 towards cost of stamps and registration of new building acquired was posted to
the Legal Charges Account as ₹ 5,800.

3. From the following particulars for the year ended 31 st December, 2024, prepare Sales Ledger Adjustment
Account in the General Ledger:-
₹
Sales (including cash sales ₹ 6,000) 30,000
Cash received from customers 19,000
Bills receivable received 4,500
Bills endorsed 1,960
Bills dishonored 600
Returns from customers 769
Bills receivable as endorsed dishonored 480
Cheque dishonored 400
Bills receivable discounted 750
Bad Debts written off 200

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GOBIND KUMAR JHA 9874411552
Bad Debts written off previously now recovered 240
Sundry charges debited to customers 60
Interest on customers overdue accounts 430
Cash discount allowed 1,400
Transferred from Bought Ledger 650
Sales Ledger as on 01.01.2024 ₹ 26,800; Provision for Doubtful Debts ₹ 2,500.

4. Trial Balance as on 31st December, 2024 of Mr. S. Saha contains the following items:-
₹
Provision for Doubtful Debts 15,000
Bad Debts 10,000
Sundry Debtors 1,40,000
On enquiry it was ascertained that debtors include:-
(a) ₹ 15,000 due from Mr. B and creditors include ₹ 20,000 due to Mr. Sen.
(b) ₹ 10,000 due on account of sale of furniture.
(c) Bad debts ₹ 7,500.
Prepare Provision for Doubtful Debts Account and Bad Debts Account.
Provision for Doubtful Debts is to be created at 5% on trade debtors.

5. (a) Theory
(b) Mention which of the following transaction is a capital expenditure and which one is revenue
expenditure:-
i. Purchase of machinery worth ₹ 50,000.
ii. Paid Customs Duty of ₹ 10,000 for importing machinery from foreign country.
iii. Paid office rent ₹ 5,000.
iv. Spent ₹ 30,000 for repairing of building.
v. Paid ₹ 10,000 as registration fee for registering Patent Right.

Group – B (15 X 3 = 45)

1. A summary of receipts and payments of Medical Aid Society for the year ended 31.12.2024 is given
below:-
Receipts ₹ Payments ₹
To Balance (01.01.2024) 7,000 By Payment for Medicines 30,000
,, Subscription 50,000 ,, Honorarium to Doctor 10,000
,, Donations 14,500 ,, Salaries 27,500
,, Interest on Investments @ 7% p.a. 7,000 ,, Sundry Expenses 500
,, Charity Show Proceeds 10,000 ,, Equipment Purchased 15,000
,, Charity Show Expenses 1,000
,, Balance (31.12.2024) 4,500
88,500 88,500
Additional Information (in ₹):-

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GOBIND KUMAR JHA 9874411552
01.01.2024 31.12.2024
Subscription Due 500 1,000
Subscriptions received in advance 1,000 500
Stock of Medicines 10,000 15,000
Amount due to Medicine Suppliers 8,000 12,000
Value of Equipment 21,000 30,000
Value of Buildings 40,000 38,000
You are required to prepare Income and Expenditure Account for the year ended 31.12.2024 and the
Balance Sheet as on that date.
Or
Mr. X, a small trader, maintains books under Single Entry System. From the following information you
are asked to prepare Trading and Profit & Loss Account and Balance Sheet as on 31 st December, 2024:-
Particulars 1st Jan., 2024 31st Dec., 2024
(₹) (₹)
Debtors 20,000 25,200
Creditors 15,000 14,100
Sewing Machine 15,000 14,200
Furniture 12,000 11,800
Bills Receivable 7,000 6,000
Bills Payable 3,000 5,000
Stock 4,000 3,000
Bank Summary
Particulars ₹ Particulars ₹
Opening Balance 21,000 Payment to Creditors 42,000
Collection from Debtors 75,200 Bills Payable 2,800
Bills Receivable 5,600 Rent 2,000
Capital 13,000 Wages 2,000
Printing 2,000
Drawings 24,000
Salaries 12,000
Closing Balance 28,000
1,14,800 1,14,800
Additional Information:-
He allowed discount to debtors ₹ 2,400 and received discount from creditors for ₹ 3,900. He endorsed
bills receivable of ₹ 1,200 to her creditors.

2. (a) Theory
(b) The following transactions took place during the month of January, 2024 in DCX Limited.
Jan. 1 Opening Stock 500 units @ ₹ 35 Jan. 15 Purchases 1,200 units @ ₹ 34
Jan. 5 Purchases 1,000 units @ ₹ 38 Jan. 18 Sales 1,000 units
Jan. 7 Sales 300 units Jan. 23 Purchases 900 units @ ₹ 30
Jan. 12 Sales 800 units Jan. 28 Sales 1,200 units
Calculate the Cost of Closing Stock based on FIFO Method.

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GOBIND KUMAR JHA 9874411552

(c) From the following particulars, calculate profit under Accrual Basis of Accounting for the year ended
31.03.2024:-
₹
Profit under Cash Basis 92,000
Outstanding salaries on 01.04.2023 7,000
Outstanding salaries on 31.03.2024 5,000
Depreciation 12,000
Bad Debts written off 3,000
Pre-received rent on building let out 5,000

3. The following trial balance was extracted from the books of Mr. X as on 31.03.2024:-
Particulars ₹ Particulars ₹
Plant and Machinery 2,50,000 Capital 5,00,000
Wages 20,000 Sundry Creditors 36,000
Salaries 36,000 12% Bank Loan (01.07.2023) 1,50,000
Carriage Inward 5,000 Return 7,000
Carriage Outward 8,000 Provision for Bad Debts 6,000
Buildings 3,00,000 Sales 11,10,000
General Expenses 33,000
Return 7,500
Sundry Debtors 56,000
Stock (01.04.2023) 40,000
Purchases 10,00,000
Bad Debts 3,500
Discount Allowed 1,500
Interest on Bank Loan 8,500
Cash at Bank 35,000
Cash in Hand 5,000
18,09,000 18,09,000
Prepare the Trading and Profit & Loss Account for the year ended 31.03.2024 and Balance Sheet as on
that date taking into consideration the following information:-
(a) Stock in hand as on 31.03.2024 was:- Cost Price – ₹ 48,000; Net Realizable Value – ₹ 46,000.
(b) Depreciation on plant and machinery @ 10% p.a.
(c) ₹ 5,000 is due from Mr. P, as customer and at the same time ₹ 8,000 is due to him, as supplier. Create
provision for doubtful debts @ 5% on general debtors.
(d) Goods distributed as free sample worth ₹ 5,000.
(e) Cash found short by ₹ 500 at the time of cash counting.
(f) A cheque of ₹ 2,000 issued to supplier on 25.03.2023, correctly recorded in the books but not encashed
by the supplier till 31.03.2024.