KSLU Solved Question Papers
Financial Accounting
Previous Year Question Paper with Solution
B.B.A. LL.B. (Five Years) · Sem 1
2013 Jun Examination
munotes.in
Mumbai
B.B.A. LL.B. (Five Years) Sem 1 Financial Accounting 2013 Jun Question Paper with Solutions
First published on munotes.in on 21 October 2026.
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The question paper reproduced here is the paper as set by Karnataka State Law University at the 2013 Jun examination.
Contents
The questions below are the paper as Karnataka State Law University set it at the 2013 Jun examination, in the order it was set.
MarksPage
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2013 Jun examination, reproduced as Karnataka State Law University set them, in the order it set them. Long reading passages are shortened to their first and last lines and our summary; the original paper prints them in full. Only the answers are ours. See the original question paper.
Duration 3 hours · Total marks 100 · 20 questions answered
Instructions printed on the paper
- N.B. (1) Answer all 5 questions. (2) One essay type and one short note question or problem from each Unit have to be attempted, which is referred as Part (a) and (b) in all Units. (3) Figures to the right indicate marks. (4) Answers should be written in English completely. (5) Use simple calculator.
How to use this volume
Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.
Q1
Unit I
(a)What is Accounting ? Explain different Accounting Concepts.[15]
Answer
For full marks, cover: what accounting is, with the AICPA definition of 1941 and the American Accounting Association's of 1966; the stages of the accounting process; its branches and its users; what an accounting concept is and why concepts are needed; then the concepts one by one (business entity, money measurement, going concern, accounting period, cost, dual aspect, realisation, accrual, matching, objective evidence), each with its meaning, an example and its effect on the books; and a summary table.
What is accounting?
Every business, however small, must know three things. It must know what it earned, what it owns and what it owes. Accounting is the discipline that answers these questions from the records of the business.
The American Institute of Certified Public Accountants defined accounting in 1941 as "the art of recording, classifying and summarising in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character, and interpreting the results thereof". This definition stresses the work done on the records.
The American Accounting Association, in 1966, described it as "the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by users of the information". This definition stresses the purpose: information that helps people decide.
The accounting process
Read together, the two definitions give the stages of the work.
- Identifying the events that are financial and belong to the business.
- Measuring them in money.
- Recording them in the journal and the subsidiary books.
- Classifying them by posting to ledger accounts of the same kind.
- Summarising the accounts in a trial balance and the final accounts.
- Analysing and interpreting the results, for example by comparing this year's profit with last year's.
- Communicating the results to the people who need them.
Branches and users
Financial accounting records the transactions and prepares the profit and loss account and the balance sheet for the owners and outsiders. Cost accounting finds the cost of each product or job. Management accounting turns both into information for planning and control inside the business.
The users are many. Owners want the profit and the safety of their capital. Managers want figures for decisions. Lenders and suppliers want to know whether they will be paid. Investors compare returns, the tax authorities assess tax, and employees look at the firm's ability to pay wages and bonus.
Accounting concepts: meaning and need
So many people use the same accounts that the accounts must be prepared on rules everyone understands. Accounting concepts are the basic assumptions on which the whole system rests. They are not laws of nature. They were accepted because they make accounts reliable and comparable, and together with the conventions they form the generally accepted accounting principles.
Without concepts, one trader might value a machine at its cost and another at its resale price. One might count a credit sale as income and another only the cash received. Their profits could not be compared, and neither could be checked. The concepts below remove these differences.
1. Business entity concept
The business is treated as a unit separate from its owner. Only the business's transactions are recorded, and the owner is treated as a person who has lent the business its capital.
Example. Meena runs a tailoring shop. The rent of Meena's home is not a shop expense. If shop cash pays it, the amount is Meena's drawings. Capital is shown as a liability of the business to Meena.
2. Money measurement concept
Only events that can be expressed in money are recorded. The books show 40 sewing machines as their cost, not as a count. A skilled workforce, a loyal customer base or a quarrel between partners matters a great deal. Yet none of it enters the books until it has a money effect.
Limit. The rupee changes in value over time, but the books treat a rupee of 1990 and a rupee of today as equal.
3. Going concern concept
The business is assumed to continue for the foreseeable future, with no intention or need to close down. That is why fixed assets are shown at cost less depreciation and not at what they would fetch in a forced sale. It is also why a prepaid expense counts as an asset: the business will be there to use the benefit.
If closure is expected, the assumption fails, and assets are then shown at what they will realise. AS 1 treats going concern as a fundamental accounting assumption.
4. Accounting period concept
The life of a business is divided into equal periods, usually a year, so that results can be measured and compared in good time. In India most businesses keep a year from 1 April to 31 March. This concept is the reason for the year-end adjustments: outstanding, prepaid and accrued items are needed only because profit is measured period by period.
5. Cost concept
An asset is recorded at the price paid to acquire it, including costs to bring it into use. Its later market value is not recorded. Land bought for ₹ 5,00,000 stays at ₹ 5,00,000 in the books even if its market price doubles.
Why. Cost is backed by a document and is not a matter of opinion. Limit. Old assets may be shown far below their present worth.
6. Dual aspect concept
Every transaction has two aspects, a giving and a receiving, and both are recorded. This is the basis of double entry. It leads to the accounting equation: assets equal liabilities plus capital.
Example. Meena starts with capital of ₹ 50,000 and borrows ₹ 20,000. The shop then has cash of 50,000 + 20,000 = 70,000, matched by capital and loan together. The shop buys a machine for ₹ 15,000 in cash: one asset rises and another falls, and the equation still holds.
7. Realisation concept
Revenue is recognised when it is earned, that is, when the goods are delivered or the service is completed and payment is reasonably certain. It does not wait for the cash. An order received is not a sale. AS 9 recognises revenue from a sale when the significant risks and rewards of ownership pass to the buyer. No significant uncertainty about the payment may remain.
Example. Cloth stitched and delivered in March and paid for in April is March's income.
8. Accrual concept
Income and expenses are recorded when they are earned or incurred, not when cash moves. Wages earned by workers in March but paid in April are an expense of March. AS 1 names accrual as a fundamental accounting assumption.
9. Matching concept
The expenses of a period are matched with the revenue of that period. The cost of goods sold is set against the sales of the same goods. Depreciation spreads the cost of a machine over the years in which it earns. The closing stock is carried forward because its cost belongs to next year's sales.
10. Objective evidence concept
Every entry should be supported by a document that can be checked, such as an invoice, a receipt, a cash memo or a voucher. This keeps personal opinion out of the books and makes audit possible.
The concepts at a glance
| Concept | The rule | Where it shows |
|---|---|---|
| Business entity | Business apart from owner | Capital and drawings accounts |
| Money measurement | Record only what money measures | No entry for staff skill or goodwill built up |
| Going concern | The business will continue | Fixed assets at cost less depreciation |
| Accounting period | Results measured year by year | Year-end adjustments |
| Concept | The rule | Where it shows |
|---|---|---|
| Cost | Assets at the price paid | Land at cost, not market value |
| Dual aspect | Two sides to every transaction | Double entry; assets equal liabilities plus capital |
| Realisation | Revenue when earned | Credit sales counted as sales |
| Accrual | Income and expenses when earned or incurred | Outstanding and prepaid items |
| Matching | Costs set against their revenue | Closing stock, depreciation |
| Objective evidence | Every entry backed by a document | Vouchers and invoices |
How the concepts work together
The concepts fit together like parts of one machine. Entity decides whose transactions are recorded, money measurement decides which, and objective evidence decides on what proof. Dual aspect decides how they are recorded. Going concern and cost decide how assets are valued. Accounting period, realisation, accrual and matching together decide the profit of each year.
Conclusion. Accounting identifies, measures, records, classifies, summarises, interprets and communicates financial information, so that owners and others can judge and decide. Its concepts are the basic assumptions that make this work reliable. They include business entity, money measurement, going concern, accounting period, cost and dual aspect. Realisation, accrual, matching and objective evidence complete them. AS 1 lists going concern, consistency and accrual as fundamental accounting assumptions.
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