KSLU Solved Question Papers
Financial Accounting
Previous Year Question Paper with Solution
B.B.A. LL.B. (Five Years) · Sem 1
2015 Jun Examination
munotes.in
Mumbai
B.B.A. LL.B. (Five Years) Sem 1 Financial Accounting 2015 Jun Question Paper with Solutions
First published on munotes.in on 21 October 2026.
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Contents
The questions below are the paper as Karnataka State Law University set it at the 2015 Jun examination, in the order it was set.
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2015 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 · 13 questions answered
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.
Q1What is double entry system of Book Keeping ? Explain accounting concepts in detail.[16]
Answer
For full marks, cover: the meaning of the double entry system of book keeping, its principle and its rules of debit and credit, with an example; its features and advantages in brief; then the accounting concepts in detail (business entity, money measurement, going concern, accounting period, cost, dual aspect, realisation, matching, accrual), each with its meaning, an example and its effect; how the dual aspect concept ties the two parts of the question together; and a summary table.
Part 1: the double entry system of book keeping
Meaning. The double entry system of book keeping records every transaction in two accounts. One account is debited and another is credited with an equal amount. Every transaction has two aspects, a receiving and a giving, and the system records both. Luca Pacioli described it in print in 1494, and it is the basis of all modern accounting.
Principle. Because each debit has an equal credit, the total of all debits in the books always equals the total of all credits. The accounting equation, assets = capital + liabilities, therefore stays true after every transaction.
Rules of debit and credit (traditional approach).
- Personal accounts: debit the receiver, credit the giver.
- Real accounts: debit what comes in, credit what goes out.
- Nominal accounts: debit expenses and losses, credit incomes and gains.
An example. A trader buys machinery for ₹ 60,000 on credit from Shakti Engineering. Machinery, a real account, comes in and is debited 60,000. Shakti Engineering, a personal account, gives and is credited 60,000. Assets rise by 60,000 and liabilities by 60,000, so the equation still balances.
Features and advantages in brief. Every transaction is recorded twice in equal amounts, and personal, real and nominal accounts are all kept. So the record is complete, its arithmetical accuracy can be tested by a trial balance, and the profit and the financial position can be found. Fraud and errors are harder to hide. Companies must keep their books on this system: section 128 of the Companies Act, 2013 requires books "on accrual basis and according to the double entry system of accounting".
Part 2: accounting concepts in detail
Meaning. Accounting concepts are the basic assumptions on which accounting records are built. They are not laws but generally accepted ideas. They make sure that the same transaction is recorded in the same way by every accountant, so that accounts can be relied on and compared.
1. Business entity concept. The business is a separate entity from its owner. Only the business's transactions are recorded, and the owner is treated as a creditor for the capital. Example: the owner pays his family's electricity bill from the business bank account; it is recorded as drawings, not as electricity expense. Effect: the profit shown is the business's profit alone.
2. Money measurement concept. Only events that can be measured in money are recorded. Example: the purchase of 300 kg of rice is recorded at its price, say ₹ 15,000. A dispute between the owner and a supplier is not recorded. Effect: unlike items can be added together. Limit: money's value changes, and important non-money facts are left out.
3. Going concern concept. The business is assumed to continue for the foreseeable future. Example: a delivery van is shown at cost less depreciation, not at its break-up value. Effect: long-term assets and prepaid expenses are carried forward. AS 1 treats going concern as a fundamental accounting assumption; if it is not followed, the fact must be disclosed.
4. Accounting period concept. The life of the business is divided into periods, usually a year, and results are measured for each period. Example: a company's financial year ends on 31 March under section 2(41) of the Companies Act, 2013. Effect: incomes and expenses are allotted to periods, giving rise to outstanding and prepaid items.
5. Cost concept. Assets are recorded at their cost of acquisition, including the costs of bringing them into use. Example: a building bought for ₹ 40,00,000 with registration costs of ₹ 2,40,000 is recorded at 40,00,000 + 2,40,000 = 42,40,000. A later rise in its market price is not recorded. Effect: the figures are objective and can be verified from documents.
6. Dual aspect concept. Every transaction has two equal aspects. Example: a cash sale of ₹ 9,000 increases cash and records revenue of the same amount. Effect: it is the logic of the double entry system and of the accounting equation.
7. Realisation concept. Revenue is recognised when it is earned, usually when goods are delivered or services rendered. Example: an advance of ₹ 20,000 received for goods to be delivered next month is not this month's sale; it is a liability until delivery. AS 9 recognises a sale when the significant risks and rewards of ownership have passed to the buyer. Effect: profit is not anticipated.
8. Matching concept. Expenses are matched with the revenue of the same period. Example: the salesman's commission on March sales is charged in March, even if paid in April. Effect: the profit of each period is correctly measured.
9. Accrual concept. Revenue and expenses are recorded when they arise, not when cash moves. Example: interest of ₹ 3,000 earned on a deposit but not yet received is shown as accrued income. Effect: outstanding and accrued items appear in the accounts. AS 1 names accrual as a fundamental assumption, with going concern and consistency.
Double entry and single entry compared
Some small traders keep only cash and personal accounts. This incomplete method is called single entry. It records one aspect of many transactions and keeps no real or nominal accounts in full. A trial balance cannot be drawn up from it, and the profit can only be estimated by comparing capital at two dates. The double entry system removes these weaknesses, because every transaction is recorded on both sides.
How the concepts guide each entry
Take a single entry: goods worth ₹ 25,000 are sold on credit to Meena on 30 March, and she pays on 10 April. The business entity concept says the sale is the firm's, not the owner's. Money measurement records it at 25,000. Realisation and accrual put the sale in March, the month of delivery, though the cash comes in April. Matching charges the cost of those goods against March's sales. Dual aspect makes Meena a debtor and credits Sales with the same amount. One ordinary transaction thus calls on most of the concepts at once.
The link between the two parts
The dual aspect concept is the bridge between the two halves of this question. The double entry system is the method; the dual aspect concept is the idea behind it. Every concept above is applied through double entry. Cost fixes the amount entered, entity decides whose transaction it is, and accrual and matching decide the period in which the entry falls.
Concepts at a glance
| Concept | Main idea | Effect on the accounts |
|---|---|---|
| Business entity | Business apart from owner | Drawings, capital |
| Money measurement | Only money facts | Non-money facts left out |
| Going concern | Business continues | Assets at cost less depreciation |
| Accounting period | Results by periods | Outstanding and prepaid items |
| Cost | Recorded at cost | Market changes ignored |
| Dual aspect | Two equal aspects | Double entry; equation balances |
| Realisation | Revenue when earned | Advances are liabilities |
| Matching | Costs with revenues | Correct periodic profit |
| Accrual | When arising, not when paid | Accrued and outstanding items |
Limits of the concepts
The concepts make accounts uniform but not perfect. The cost concept ignores inflation, so old assets look cheap. Money measurement leaves out the skill of staff and the goodwill of customers. The accounting period forces estimates such as depreciation and provisions. These limits are reduced, though not removed, by the accounting standards issued by the Institute of Chartered Accountants of India.
Conclusion. The double entry system records every transaction as an equal debit and credit. It follows the rules for personal, real and nominal accounts and keeps the accounting equation in balance. Accounting concepts are the basic assumptions behind those records. They are business entity, money measurement, going concern, accounting period, cost, dual aspect, realisation, matching and accrual. The dual aspect concept is the idea on which the double entry system rests.
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