DK Goel Solutions Chapter 3 Accounting Principles

Read below DK Goel Solutions for Class 11 Chapter 3 Accounting Principles. 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 core principles of Accountancy, which includes basic Characteristics of Accounting Principles, explanation of the Basic Accounting Equation, a brief Separate and Business Legal Entity, money Measurement Concepts, to the Class 11 commerce Accountancy students.

DK Goel Solutions for Class 11 Chapter 3 includes a lot of simple to understand examples explaining the meaning of the terms and pointing out the basic differences between them. DK Goel Solutions for Class 11 Chapter 3 solutions are free and will help you to prepare for Class 11 Accountancy.

Accounting Principles 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 3

Question 1: 

Solution 1: The basic concepts of accounting are referred to as the fundamental concepts or fundamental assumptions underlying financial accounting theory and practice and are broad operating rules for all accounting practices established by the accounting profession. As follows, the essential principles were listed:

  • Business entity
  • Revenue recognition
  • Money measurement
  • Matching
  • Going concern
  • Full disclosure
  • Accounting period
  • Consistency
  • Cost
  • Conservatism
  • Dual aspect
  • Materially
  • Objectivity

Question 2: 

Solution 2: The business entity concept suggests that enterprise has similar and distinct bodies from its members. Thus, company and its shareholders must be viewed as two independent companies for the purpose of accounting.

Question 3: 

Solution 3: Accounts need to presume that a corporate enterprise would remain an issue and there is no distinction between cash and stock if it does not arise (goods). We believe that in the near term, properties are not going to be sold.

Question 4: 

Solution 4: Basic accounting equation is as under:-

Assets = Liabilities + Capital

Question 5: 

Solution 5: Below is the characteristics of Accounting Principles are:-

(1) The rules of accounting are manmade. Such directors are man-made with years of experience and purpose.

(2) Accounting standards are, in essence, versatile. Such values are not rigid, but they provide an ability to adapt due to the user’s current policies and desires over time.

(3) In general, accounting rules are accepted.

Very Short Question of DK Goel Solutions for Class 11 Chapter 3Accounting Principles

Question 1: 

Solution 1: Two characteristics of accounting principles are as under:-

(i) Accounting principles are Man-made. 

(ii) Accounting principles are Flexible

Question 2: 

Solution 2: An entity has independent and separate existence from its owner. According to this concept, an enterprise is regarded as an entity which is separate and distinct from the owner of that entity.

Therefore, purchases are reported and evaluated and, from the point of view of the company and not of the individual, financial statements are prepared. Company, thus, is regarded as an individual independent from its owners and different from them.

Question 3: 

Solution 3: The concept of money measurement indicates that only such transactions exist in an entity. It should be reported in the books of accounts and can be represented in terms of money. The transaction documents must also be maintained not in tangible units, but in monetary units.

Question 4: 

Solution 4: The concept of going concern assumes that a business firm would continue to carry out its operations indefinitely, i.e. for a fairly long period of time and would not be liquidated in the foreseeable future.

This is an important assumption of accounting as it provides the very basis for showing the value of assets in the balance sheet.

Question 5: 

Solution 5:The accounting period refers to the period of time at the close of which an enterprise’s financial accounts are prepared to assess if it has made a profit or suffered losses over that period, and to what is precisely the status of its assets and liabilities at the end of that period.

Question 6: 

Solution 6: The cost concept requires that all assets are recorded in the book of accounts at their purchase price, which includes cost of acquisition, transportation.

Installation and making the asset ready to use. For instance A Plant Purchases Rs. 50,000 and installation Expenses for this machinery is Rs. 5,000 So, the total cost of machinery is Rs. 55,000.

Question 7:

Solution 7: Dual aspect is the foundation or basic principle of accounting. It provides the very basis for recording business transactions into the book of accounts.

This concept states that every transaction has a dual or two-fold effect and should therefore be recorded at two places. For instance, Rakesh commenced business with capital Rs. 5,00,000. It increases cash in assets side and capital in liabilities- side by Rs. 5,00,000. 

Rs. 5,00,000 (Cash) = Rs. 5,00,000 (Capital).

Question 8: 

Solution 8: Any cost generated in an accounting period should be balanced with income for the same period, according to the balancing definition. Both costs paid during a given period shall be charged on the income of the net profit determination period.

Question 9: 

Solution 9: Any cost generated in an accounting period should be balanced with income for the same period, according to the balancing definition.

Depreciation for the current year is paid against the profits for the current year. In the year of purchases, the valuation of the commodity is not a cost, because it is split over its usable life.

Question 10: 

Solution 10: Revenues and costs are recognised in the period in which they occur rather when they are paid. A distinction is made between the receipt of cash and the right to received cash and payment of cash and legal obligation to pay cash.

Question 11: 

Solution 11: According to this concept, all relevant details pertaining to the financial activity of a corporate entity should be registered and published in the financial records in a full and understandable manner.

Question 12: 

Solution 12: According to this theory, accounting techniques can be applied continuously, year after year, once they are selected and implemented. For a number of years, this would ensure a meaningful study of the company’s results.

If the legislation or accounting standard specifies it, any accounting procedure may be modified to make the financial information more meaningful and clear.

Question 13: 

Solution 13: According to the theory of populism, all potential gains need not be reported in the financial books, but all possible expenses should be recorded instantly.

Question 14: 

Solution 14: As per this concept, only certain transactions which have a material impact and are accessible to consumers should be revealed.

It is mandatory to report all material facts, but it does not mean that even certain statistics that are meaningless must be included in the financial statements. Whether or not an object is material depends on the essence of it.

Question 15: 

Solution 15: The Full disclosure principle states that the financial statements should disclose all significant information.

Question 16: 

Solution 16: ‘Closing stock is valued at lower of cost or realisable value’ the principle is accounting is Convention of Prudence or Conservatism.

Question 17: 

Solution 17: The continuity principle of accounting should be practiced by any organization, since financial statements must be comparative from year to year. Only if the accounting rules are unchanged and implemented the same year after year is that possible.

Question 18: 

Solution 18: Fixed assets are reported and viewed at the price at which they were bought in historical cost accounting and the fair value of those assets is overlooked.

Question 19: 

Solution 19: The entire corporate life is broken into time periods so the sales cost and capital expenditure can be calculated and the amount of profit gained or the company’s loss can be determined.

Higher Order Thinking Skills (HOTS)

Question 1: 

Solution 1: In order to maintain uniformity and consistency in accounting records, certain rules or principles have been developed which are generally accepted by the accounting profession.

GAAP refers to the rules or guidelines adopted for recording and reporting of business transactions. GAAP stands for General Accepted Accounting Principles.

Question 2:

Solution 2: According to Business entity concept the proprietor of the business is treated as a creditor to the extent of his capital.

Question 3: 

Solution 3: Yes, this knowledge is material-related and recipients of financial statements should be aware of it. So, as per the convention of full disclosure, it must be disclosed.

Question 4: 

Solution 4: No, the management isn’t perfect. In the books of accounts per year, only real gains and losses can be reported. As per the definition of the accounting cycle, it is broken into separate time frames for the determination of benefit.

Question 5: 

Solution 5: The calibre or quality of the management is not disclosed in the balance sheet it is Money measurement concept.

Question 6: 

Solution 6: All anticipated losses should be recorded but all anticipated profits should be ignored it is in Conservatism Principle.

Question 7: 

Solution 7: The depreciation is to be charged as per one particular method year after year is Consistency concept.

Question 8: 

Solution 8: Because of the principle of concern, the full cost of an item is not regarded as an investment in the year of its purchase; it is presumed that the company will continue to operate for a long time in the future.

Therefore, the asset’s loss is spread over its working period and only the decay of the current year is viewed as an expense.

Question 9: 

Solution 9: The convention on materiality will be followed in dealing with this object. As per the definition, it is not appropriate to report things having an insignificant impact or being meaningless to consumers of financial statements.

It will then be viewed as an expense and the stationery account will be debited.

Question 10: A

Solution 10: Yes, all expected losses should be recorded in the books of accounts is in Conservatism Principle.

Question 11:

Solution 11: Business entity concept will be violated if Goods withdrawn by the proprietor for his personal use has not been recorded in the books of accounts.

Question 12: 

Solution 12: Two accounting principal should be as under:-

1.) Conservatism Principle

2.) Consistency concept 

Question 13: 

Solution 13: Yes, the accountant is right that he has adopted the principle of the materiality convention. Those products that have a marginal impact on the organization will not be disclosed or may be written off.

DK Goel Solutions for Class 11 Chapter 3Value-Based Questions

Question 1:

Solution 1: Closing stock is valued at lower cost price or realisation value it is according to Prudence or Conservatism principle.

Question 2:

Solution 2: Prospective benefit need not be reported according to this theory, but any prospective losses should be recorded immediately.

Below are the principle involve in above situation:- 

(i) Not to overstate the profit of the enterprise

(ii) Transparency

Question 3: 

Solution 3: The convention of conservatism will have two result:-

(i) Profit and loss account shows less profit.

(ii) The balance sheet reveals the undervalued side of assets and the overvalued side of liabilities.

Question 4: 

Solution 4: We are unable to figure out the net gains and damages if the notion of a different corporation is absent, so the company’s financial status will not be established.

Question 5: 

Solution 5: Below are the principles included on the above situation:-

(i) The purchase of an asset is not regarded as an expense on the grounds of this assumption. By implementing depreciation, the cost of the asset is segregated over the productive life of it.

(ii) The disparity between capital and income expenditures may be discovered from this assumption.

Question 6: 

Solution 6: Fixed assets are not shown at fair value in the books because:-

(i) The valuation of fixed assets reported at their original expense is historically specified.

(ii) It is believed that properties cannot be traded in the future in the presence of the present definition, so that the fair valuation of assets is meaningless.

Question 7: 

Solution 7: The life of an organization is separated into smaller cycles according to this theory, so that its output can be calculated at frequent intervals.

Question 8: 

Solution 8: The principle of Prudence or Conservatism is violated in the above situation.

Question 9: 

Solution 9: Plant and equipment losses are material facts for an organization and should be revealed. The organization has broken the principle of full transparency in this case.

Question 10: 

Solution 10: No, as per the price principle, this treatment is not right. A fixed asset is listed in the accounts at its initial expense, according to the cost principle.

Question 11: 

Solution 11: No, as per the Prudence or Conservatism Theory, this treatment is not right. If the business is reported at its expense, so the company has broken the accounting principle of conservatism. Current assets are priced at expense price or realizable value, whichever is lower, according to this theory.

Question 12: 

Solution 12: Yes, the business may also adjust the deprecation form and rate. All the modifications should be disclosed according to the presumption of continuity. The only condition is that it should be fully reported in the financial report when a transition is desirable, along with its effect on the income statement and balance sheet.

Question 13: 

Solution 13: No, under the corresponding theory, Mohan is unable to report this transaction as a sale because the goods have not been shipped, so that the transaction is not yet finished. Under the matching concept, only where the cost paid to earn the revenue is also recorded as an expense in that time is revenue recognized as earned.

Question 14:

Solution 14: Below are the values on the full disclosure principle:-

(i) Transparency

(ii) Honesty

(iii) Reliability

DK Goel Solutions for Class 11 Chapter 3
Why should the students refer to DK Goel Accounts Solutions Class 11 for Chapter 3 Accounting Principles?

Accounting principles is one of the most important chapters of Class 11 Accounts. Therefore, it requires a thorough understanding of the main concepts. The DK Goel Solutions are the most comprehensive resource for quick revision. It helps the students frame several notes while preparing for the exams. Through regular practice from the solutions, the students can easily learn complex topics like Matching concepts, GAAP, Convention of prudence, and much more.

What is the Accounting Period?

The accounting period is quoted as the time interval for preparing the profit and loss balance sheets for a firm. This gives the firms a clear picture of the financial transactions and helps them make better decisions within an appropriate time frame. The accounting period is typically a time period of one year

Explain the Prudence Principle?

The Prudence Principle depicts that the assumed profit of a firm should not be recorded, but the assumed losses must be quickly recorded. The sole aim behind this principle is to prevent the firm from anticipating any extra profit. However, to record the predictable losses to help alternative methods to prevent them and blend out the most fruitful results.

What are the characteristics of Accounting Principles?

The most prominent characteristics of Accounting Principles are as follows –
● Accounting principles bring a set of pre-defined guidelines designed to frame the most accurate financial statements for a firm.
● These principles may differ as they are prepared from experience on practical grounds.
● All the accounting principles are non-static. Therefore, it can be modified as per the needs of the users or change in the policies.

What is the Accrual Concept?

The accrual concept depicts that when revenue is recorded in case of sales or for rendering services, the transfer of cash will completely be immaterial.

Why should the companies follow the consistency concept?

The consistency concept is one of the primary characteristics of accounting principles, which highlights that the financial statements of the firms must mandatorily be comparable from year to year, provided there are no modifications in the principles. This helps the companies analyze the financial transactions and rectify their lacking areas.