DK Goel Solutions Class 11 Chapter 2 Basic Accounting Terms
Read below DK Goel Solutions Class 11 Chapter 2 Basic Accounting Terms. These solutions have been prepared based on the latest DK Goel Accountancy book issued for this academic year.
The book is really useful as it explains in detail the basic accounting terms such as profit, loss, revenue, revenue expenditures, current assets, fixed assets, intangible assets, business transactions, capital, liabilities, and its types, etc., to the Class 11 commerce students.
It includes a lot of simple to understand examples explaining the meaning of the terms and pointing out the basic differences between them. These DK Goel solutions for class 11 are free and will help you to prepare for Class 11 Accountancy.
Basic Accounting Terms DK Goel Class 11 Accountancy Solutions
Students can refer below for solutions for all questions given in your DK Goel Accountancy Textbook for Class 11 in Chapter 2
Question 1: Define basic accounting terms.
Solution 1: Basic accounting terms are those accounting terms that are routinely used to document accounting transactions.
Question 2: Give three examples of revenues.
Solution 2: Below are the examples of revenues:-
(i) Sale of goods
(ii) Sale of fixed assets
(iii) Commission received
Question 3: Distinguish between profit and gain.
|Profit is the excess of sales over expenditures during an accounting period. Profit is intermittent in nature, and is periodically recoded in books account. Examples: Sale of goods as it is created on a regular basis.
|Gain is an unusual or non-recurring type, such as profit on the selling of fixed assets or investment and winning a lottery prize, etc.
Question 4: Distinguish between fixed assets and current assets.
|Fixed assets are those assets that are retained for continued use of the company and are not intended for resale.
|Current assets are those assets held by the company for a limited period of time, say one year, to be converted into cash. To offer an example—stock.
Question 5: Distinguish between revenue expenditure and capital expenditure
|The sum spent on purchasing goods and services used during an accounting period is referred to as tax expenditure. For instance, rent, interest, etc.
|Where an investment benefit is earned for more than one year, it is referred to as capital expenditure. Example: Machinery Purchase.
Question 6: Distinguish between expense and expenditure.
|Costs paid for receiving income by a corporation are known as expenditures. For instance, rent, salaries, wages, interest, etc.
|Spending money or incurring a liability for acquiring assets, goods or services is called expenditure. Types of expenditure are 1.) Revenue Expenditure 2.) Capital Expenditure 3.) Deferred Revenue Expenditure
Question 7: Distinguish between expenses and losses.
Solution 7: Expense is a value that has elapsed during the accounting period where, as a deficit, there is an excess of a period’s expenditures over its associated profits that could result from regular business operations.
Question 8: Give two characteristics of a business transaction.
Solution 8: Below are the characteristics of business transactions:-
(i) Business transactions are always represented in monetary term.
(ii) The performance of a business transaction affects the company’s financial status.
DK Goel Solutions Class 11 Chapter 2 – Very Short Question
Question 1: What is Capital?
Solution 1: Capital is the amount spent in the company by the proprietor or the partner. It may be in form of money or money-worthy properties. It is a corporation responsibility to the proprietor or partner.
This is because a company is considered a separate and distinct entity from its owners under the “Business Entity Concept”. Fewer liabilities are often equivalent to assets.
Capital = Assets – External Liabilities
Question 2: What are Drawings?
Solution 2: It is the amount removed or goods taken for personal use by the proprietor. Goods taken by the proprietor are valued at the cost of purchase. Drawings minimize the owners’ investment or money.
Question 3: What are Liabilities?
Solution 3: Liabilities are obligations that an enterprise has to pay at some time in the future. They represent creditor’s claims on the firm’s assets. Both small and big business find it necessary to borrow money at one time or the other, and to purchase goods on credit.
Question 4: What are Assets?
Solution 4: Assets are economic resources of an enterprise that can be usefully expressed in term of money. Assets are items of value used by the business in its operations. For instance: land, building, machinery, furniture, stock, debtors, cash and bank balance etc.
Question 5: What are the Current Assets?
Solution 5: Current assets are those assets held by the company for a limited period of time, say one year, to be converted into cash. To offer an example—stock.
Question 6: Give two examples of current assets.
Solution 6: Below are the examples of current assets:-
Question 7: Give two examples of tangible assets.
Solution 7: Below are the examples of tangible assets:-
Question 8: Give two examples of intangible assets.
Solution 8: Below are the examples of intangible assets:-
Question 9: What are fictitious assets?
Solution 9: Fictitious assets are assets that are not material assets or immaterial assets, but are liabilities or costs that are yet to be written off. Examples include: profit and loss balance debit account and deferred marketing cost etc.
Question 10: What are the current liabilities?
Solution 10: Current liabilities are commitments or obligations due to a financial year, such as Creditors, bill payable etc. during the accounting period.
Question 11: Give two examples of current liabilities.
Solution 11: Below are the two examples of current liabilities:-
(ii) Bill payable
Question 12: What are the internal liabilities?
Solution 12: Company and owners have a different body according to accounting standards. Capital is regarded as the company’s creditor and a company is responsible for paying its shareholders.
All the sums a corporation owes its shareholders are intrinsic liabilities. Money and income, for example.
Question13: What is the expense?
Solution 13: Costs paid for receiving income by a corporation are known as expenditures. For instance, rent, salaries, wages, interest, etc.
Question14: What are the revenue?
Solution 14: Revenue means the sum which is applied to the capital as a result of operations, i.e. the selling of goods or services. Revenue is an inflow of cash, resulting in a rise in the equity of the owner. Receipts from the selling of goods, rent, commission, etc. are examples of income.
Question 15: What is income?
Solution 15: Income is considered the excess of revenue over the expenditures. We can calculate income by this formula:- Income = Revenue – Expenses.
Question 16: What is a voucher?
Solution 16: The proof of company purchases is vouchers. Cash notes, invoices, bills, receipts, debit notes, credit notes, etc. are examples of vouchers.
Question 17: What is a trade discount?
Solution 17: Offering deduction of agreed percentage of list price at the time selling goods is on way of giving discount. Such discount is called trade discount.
Question 18: What is a cash discount?
Solution 18: A deduction is given at the time of payment on the amount payable called cash discount.
Question 19: What is meant by purchases?
Solution 19: The word purchased is used only for products purchased for resale by a corporation. It is the procurement of finished products in the event of trade concerns and the purchase of raw materials in the manufacturing sector. Purchases may be purchases of money or purchases of credit.
Question 20: What is meant by sales?
Solution 20: Sales are total revenues from goods or services sold or provided to customers. Sales may be cash sale of or credit sales. When items are sold for cash, they are referred to as cash sales and they are referred to as credit sales when sold on credit.
Question 21: Define merchandise.
Solution 21: Merchandise are Goods for sale.
Question 22: Profit is earned on the sale of a fixed asset. What should be the accounting treatment of this profit?
Solution 22: It is a receipt of capital or income from capital; it should be allocated to an account for a capital reserve.
Question 23: Give two examples of revenue expenditure.
Solution 23: Below are the examples of revenue expenditure:-
(i) Cost of goods sold
Higher Order Thinking Skills (HOTs) of DK Goel Solutions Class 11 Chapter 2
Question 1: Godrej Ltd. imported from Germany one machinery for sale in India and other machinery for production purposes. Will you treat them goods or fixed assets?
Solution 1: First machinery will be treated:- Goods,
Secondary machinery will be treated:- fixed asset.
Question 2: Mr. Jaspal Singh dealing in electronic goods sold 20 TV sets costing Rs.30,000 each at Rs.40,000 each. Out of this Rs., 5,00,000 were received in cash and the balance is not yet received. State the amount of revenue.
Solution 2: Total Revenue generated = Price per TV × Number of TV Sets
Total Revenue generated = Rs. 40,000 × 20
Total Revenue generated = Rs. 8,00,000
Rs. 5,00,000 is called cash sales and Rs. 3,00,000 is used as credit selling here. The gross revenue is going to be Rs. 8,00,000. The income includes both cash sales and credit. Revenue is the sum that the selling of goods and services earns or receives.
Question 3: Mr. Dinanath who owed us Rs. 50,000 became insolvent and paid only 40% of this amount. What is the term used for the amount not received?
Solution 3: Bad debts are term used for the amount not received.
Question 4: Explain a few basic accounting terms.
Solution 4: Few basic accounting terms are.
1.) Business Transaction:- Term Business Transaction means whether the parties have entered and reported financial transactions or events in books of accounts.
It is a financial case, which can be represented by changing the financial condition of a business in terms of money. It involves the transfers or exchanges of goods or services between two parties or accounts.
2.) Liability:- Liabilities are obligations that an enterprise has to pay at some time in the future. They represent creditor’s claims on the firm’s assets. Both small and big business find it necessary to borrow money at one time or the other, and to purchase goods on credit.
3.) Capital:- Amount invested by the owner in the firm is known as capital. It may be brought in the form of cash or assets by the owner for the business entity capital are an obligation and a claim on the assets of business.
4.) Goods:- Wares are the physical element of a trade and are a term for products which constitute a company’s sales or purchases. It is therefore the stock market of a business, which is bought or created for sale.
Goods are for a business concerned with household appliances, such as air conditioners, microwave, etc. Likewise, stationery is goods for a stationer.
Value-Based Questions (VBQ) of DK Goel Solutions Class 11 Chapter 2
Question 1: What is the value involved in classifying the assets into current and non-current?
Solution 1: Classifying current assets and non-current assets helps to define the company’s fair value or liquidity status.
Current assets are the short-term assets that can be converted to cash in a year, while non-current assets are the long-term assets that are used in regular business operations. E.g. land, construction, machinery, etc.
Question 2: Discuss the value involved in classifying the receipts into capital and revenue?
Solution 2: For the preparation of the final account, classification of capital receipts and income receipts is important, since income receipts are reported on the credit side of the trading and profit and loss account, while capital receipts are shown on the balance sheet.
Revenue receipts are those receipts that occur through regular business activities, such as money earned through the selling of business goods, while capital receipts are those receipts that occur through non-commercial operations, such as money received through the sale of fixed assets.
Question 3: Identify the value involved in classifying the expenditure into capital and revenue.
Solution 3: For the preparation of the business firm’s final account, a classification of capital expenditure and revenue expenditure is required.
As capital expenditure is reported in the balance sheet, while income expenditure is written on the trade or profit and loss account debit hand. It is the amount spent on purchasing goods and services, called tax spending, that is used during an accounting period.
For example: rent, interest, etc. while it is referred to as capital expenditure if the gain of expenditure is earned for more than one year. Example: Machinery Purchase.
Question 4: What is the reason that the capital expenditure is shown in the balance sheet?
Solution 4: The money expended on fixed asset acquisitions is treated as capital expenditure. Capital expenditure appears because it is useful over a long period of time on the asset side of the balance sheet.
As explained in DK Goel Solutions class 11 Chapter 2 The Basic Accounting Terms depicts the word used in the world of commerce. These are the most common phrases used in businesses, such as account payable, balance sheet, profit, accounts receivable, loss, and many more.
Profits are the excess of revenues generated from a sale after cutting off the expenses. Profits can be predictable through a proper analysis of the financial reports. At the same time, gains are usually unpredictable and may occur due to an incidental event such as winning a lottery.
Capital refers to the principal amount invested in a business by the proprietor. Capital is usually determined by subtracting external liabilities from assets.
Liabilities can be termed as the burden carried by a company. In simple words, it is the fund that the company owes to the outsiders. On the other hand, assets are the keys to success for the firms. They are the precious resources that every company must preserve and multiple to climb the ladder of financial success.
Fixed Assets are the assets that are conserved by the firms for a longer time. The companies hold these assets for a longer period. In contrast, current assets are short-term assets. The firm sells these assets for cash within one or two years of ownership.
Although most things expenses to be a type of loss, it is not. Expenditure exhausted with a fixed amount of time is termed as expenses. While, when the expenses occurring for a prolonged period of time overtake the revenues, it is quoted as a loss. Strategical expenses can uplift a firm, while unwanted losses can push it down.