KSLU Solved Question Papers
Financial Accounting
Previous Year Question Paper with Solution
B.B.A. LL.B. (Five Years) · Sem 1
2017 Dec Examination
munotes.in
Mumbai
B.B.A. LL.B. (Five Years) Sem 1 Financial Accounting 2017 Dec Question Paper with Solutions
First published on munotes.in on 21 October 2026.
Published by munotes.in, Mumbai.
Model answers written and edited by the munotes.in editorial desk.
Passages from this volume may be quoted, in print, online or by an AI system, with credit: name munotes.in and link to this volume's page. The volume may not be reproduced as a whole. Full terms at munotes.in/content-license.
munotes.in is an independent study resource for students of Karnataka State Law University. It is not affiliated with Karnataka State Law University, and is not endorsed by it.
The University does not publish an official answer key for this paper. The answers in this volume are model answers, written to show how a full-mark answer is built. They are a study aid, not an authority on what an examiner marked.
The question paper reproduced here is the paper as set by Karnataka State Law University at the 2017 Dec examination.
Contents
The questions below are the paper as Karnataka State Law University set it at the 2017 Dec examination, in the order it was set.
MarksPage
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2017 Dec 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 are the Accounting concepts and conventions ? Explain any six concepts and four conventions.[16]
Answer
For full marks, cover: a definition of accounting and why it needs agreed principles; the meaning of accounting concepts, then at least six concepts (entity, money measurement, going concern, accounting period, cost, dual aspect, realisation, matching, accrual), each with its meaning, an illustration and its effect on the statements; the meaning of accounting conventions, then the four conventions (consistency, conservatism, full disclosure, materiality), each in the same way; a table distinguishing the two; and the position under AS 1.
Accounting and the need for principles
Accounting is "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". The American Institute of Certified Public Accountants gave this definition in 1941. The American Accounting Association, in 1966, stressed its purpose: identifying, measuring and communicating economic information so that users can make informed judgements and decisions.
Accounts are read by people who did not prepare them. An owner, a banker, an investor and a tax officer must all be able to rely on the same figures. That is possible only if every accountant works on the same base. The base has two layers: accounting concepts and accounting conventions. Together they are often called generally accepted accounting principles.
Accounting concepts: meaning
Accounting concepts are the basic assumptions or postulates on which the whole structure of accounting rests. They are accepted without proof, because accounting could not work without them. They decide what is recorded and how it is measured.
The main accounting concepts
1. Business entity concept. The business is treated as separate from its owner. Only business transactions are recorded. Illustration: Sunil starts a firm with ₹ 5,00,000. The firm records capital of 5,00,000 owed to him. When he pays his child's school fees from the firm's bank account, the firm records drawings, not an expense. Effect: the profit shown is the profit of the business alone.
2. Money measurement concept. Only facts that can be expressed in money are recorded. Illustration: the purchase of 200 chairs is recorded as ₹ 1,60,000; the skill of a chief engineer is not recorded. Effect: items of different kinds can be added together. Limit: the value of money changes, and important non-money facts are left out.
3. Going concern concept. The business is expected to continue for the foreseeable future. Illustration: a machine bought for ₹ 4,00,000 with a ten-year life is shown at cost less depreciation. It is not shown at the low price it would fetch in a forced sale. Effect: prepaid expenses and long-term assets are carried forward. AS 1 treats going concern as a fundamental accounting assumption.
4. Accounting period concept. The life of the business is divided into equal periods, usually a year, and results are measured for each. Illustration: a company's financial year ends on 31 March under section 2(41) of the Companies Act, 2013. Effect: incomes and expenses are split between years, which gives rise to outstanding and prepaid items.
5. Cost concept. An asset is recorded at the price paid to acquire it, including the costs of bringing it into use. Illustration: land bought for ₹ 20,00,000 with stamp duty of ₹ 1,20,000 is recorded at 20,00,000 + 1,20,000 = 21,20,000. It stays there even if its market price rises. Effect: figures are objective and can be checked from documents.
6. Dual aspect concept. Every transaction has two aspects, equal in amount. Illustration: a bank loan of ₹ 2,00,000 raises cash and a liability by the same amount. Effect: the accounting equation, assets = capital + liabilities, always holds, and the double entry system follows from it.
7. Realisation concept. Revenue is recognised when it is earned, normally when the goods are delivered and the buyer becomes liable to pay. Illustration: an order received in March for goods delivered in April is April's sale. AS 9 sets this rule: the seller must have transferred the significant risks and rewards of ownership. Effect: profit is not anticipated from orders.
8. Matching concept. The expenses of a period are matched against the revenue of that period. Illustration: only the cost of the goods sold is charged against sales; unsold goods are carried forward as closing stock. Effect: the profit of each period is fairly measured.
9. Accrual concept. Revenue and expenses are recorded when they are earned or incurred, not when cash is received or paid. Illustration: March's electricity bill paid in April is a March expense, shown as outstanding. Effect: outstanding and accrued items are brought into the accounts. AS 1 treats accrual as a fundamental assumption.
Accounting conventions: meaning
Accounting conventions are the customs and traditions that accountants follow by general agreement when they prepare and present financial statements. They are not laws, and they are not logical necessities like the concepts. They grew out of practice, and they guide the accountant where the concepts leave a choice open.
The four accounting conventions
1. Convention of consistency. The same accounting methods are used from one period to the next. Illustration: a firm that values stock on the first-in, first-out basis keeps to it every year. Why it matters: only then can the results of different years be compared. Change: a method may be changed for a good reason, such as a new standard. The change and its effect on profit must then be disclosed.
2. Convention of conservatism (prudence). "Anticipate no profit, but provide for all possible losses." Illustrations: closing stock is valued at cost or net realisable value, whichever is lower, as AS 2 requires. A provision is made for doubtful debts, and a contingent gain is not recorded. Why it matters: the profit and the assets are not overstated. Limit: excessive caution creates secret reserves and understates profit, which misleads in its own way.
3. Convention of full disclosure. All information material to the users is disclosed, in the statements or in the notes. Illustrations: a guarantee given for another firm's loan is shown as a contingent liability; the method of valuing stock and of depreciation is stated. Why it matters: users are not misled by what is left out. For companies, Schedule III of the Companies Act, 2013 sets the form and the notes of the financial statements.
4. Convention of materiality. An item is given separate, careful treatment only if it is large enough to influence the decisions of users. Illustration: a stapler costing ₹ 300 is written off as an expense in the year of purchase, though it will last for years. Why it matters: the accounts are not cluttered with trivial detail. What is material depends on the size of the business and the nature of the item.
Concepts and conventions distinguished
| Point | Accounting concepts | Accounting conventions |
|---|---|---|
| Meaning | Basic assumptions of accounting | Customs followed in preparing statements |
| Origin | The logic and theory of accounting | Long practice and general agreement |
| Stage | Recording and measuring transactions | Preparing and presenting statements |
| Choice | No choice; must be followed | Leave room for judgment |
| Examples | Entity, money measurement, going concern, dual aspect | Consistency, conservatism, disclosure, materiality |
| Effect if ignored | The records lose their basis | Statements lose comparability, caution or clarity |
The position under AS 1
AS 1, Disclosure of Accounting Policies, names three fundamental accounting assumptions: going concern, consistency and accrual. If any of them is not followed, the fact must be disclosed. It also names three considerations in selecting accounting policies: prudence, substance over form and materiality. On prudence it says that profits "are not anticipated but recognised only when realised though not necessarily in cash". So two traditional conventions, conservatism and materiality, now guide the choice of policies. Consistency, once a convention, is now a fundamental assumption.
Why both matter together
Concepts make sure that the same transaction is recorded in the same way by every accountant. Conventions make sure that the statements built from those records are comparable, cautious, complete and clear. The accounting standards issued by the Institute of Chartered Accountants of India rest on both.
Conclusion. Accounting records, classifies, summarises and interprets financial transactions in money. Its concepts are the basic assumptions on which records rest: business entity, money measurement, going concern, accounting period, cost, dual aspect, realisation, matching and accrual. Its conventions are the customs that guide reporting: consistency, conservatism, full disclosure and materiality. AS 1 now treats going concern, consistency and accrual as fundamental assumptions, and prudence and materiality as considerations in choosing policies.
The rest of the answers
The first answer is free. The rest come with the KSLU B.B.A. LL.B. Semester 1 solved papers.
You have read the question paper and its first answer in full. Buy the solved papers once and you can read every answer of every solved paper in this semester.
Solved papers: ₹499 Already bought it? Sign in
The question paper itself stays free, and so does the syllabus.
Found an error in this volume? Report it and we will check it against the paper.