CBSE Sample Papers for Class 11 Accountancy Set 4 with Solutions

Students must start practicing the questions from CBSE Sample Papers for Class 11 Accountancy with Solutions Set 4 are designed as per the revised syllabus.

CBSE Sample Papers for Class 11 Accountancy Set 4 with Solutions

Time : 3 Hr.
Max. Marks : 80

General Instructions:

This question paper contains two parts, A and B.
All questions in both the parts are compulsory.
All parts of the questions should be attempted at one place.

Part-A (56 Marks)
Financial Accounting-I

Question 1.
Which of the following is not an internal user of financial accounting?
(a) Chief Executive officer
(b) Financial Manager
(c) Employees
(d) Potential investors [1]
Answer:
(d) Potential investors

Explanation: Potential investors refer to those persons or parties that will invest in our business in future. These are the external users of financial accounting.

Question 2.
Under basis of accounting, revenues are recognised when they are received. [1]
Answer:
Cash basis

Question 3.
Both cash receipts and cash payments are recorded in ……………………. Book. [1]
Answer:
32

Question 4.
How are business transactions that are to be recorded in the books of accounts identified? [1]
Answer:
Through source documents

Question 5.
……………. account should be debited if wages are paid for installation of machinery. [1]
Answer:
Machinery

Question 6.
Double column cash book records :
(A) All transactions
(B) Cash and bank transactions
(C) Only credit transactions
(D) Only cash transactions [1]
Answer:
(B) Cash and bank transactions

Explanation: Double column cash book contains two columns of amount on either of one for cash and another for bank transactions. the external users of financial accounting.

Question 7.
State whether the following statement is true or false :
Petty cash book is a book having record of big payments. [1]
Answer:
False

Question 8.
Un favourable bank balance means :
(A) Credit balance in pass book
(B) Credit balance in cash book
(C) Debit balance in cash book
(D) None of These [1]
Answer:
(B) Credit balance in cash book

Explanation: Unfavourable balance as per pass book refers to the overdraft balance in our bank account and overdraft balance shows the credit balance as per pass book.

Question 9.
If the overdraft as per the pass book is taken as the starting point, then cheques issued but not presented are to be ………….. in the bank reconciliation statement. [1]
Answer:
Added

Question 10.
……………….. means writing off the intangible assets such as patents, copyrights, trademarks. [1]
Answer:
Amortisation

Question 11.
Which of the following transactions are recorded in journal proper?
(A) Opening Entries
(B) Closing Entries
(C) Transfer entries
(D) All of these [1]
Answer:
(B) Closing Entries

Explanation: The journal proper is used for recording only those transactions which cannot be recorded (or passed) in any of the subsidiary books.

Question 12.
Furniture purchased for ₹ 10,000 was recorded through purchase book. This is an error of:
(A) Principle
(B) Commission
(C) Compensatory
(D) None of These [1]
Answer:
(A) Principle

Explanation: Furniture purchased is a capital expenditure but it was passed through purchase book means it was considered as revenue expenditure.

Question 13.
Which of the following is a type of error for the purpose of rectification of errors?
(A) Two-sided errors
(B) One-sided errors
(C) Both (A) and (B)
(D) None of the above
Answer:
(C) Both (A) and (B)

Read the hypothetical text given below and answer the Questions 14 to 17.
Ratan and company started its business on lst August 2020. With ₹ 50,000 cash, ₹ 1,00,000 machinery. On 2nd August, it purchased goods of ₹ 20,000 from kamal, on 5th August. It paid ₹ 2,000 as salary to vijay. On 10th August, the company ordered the goods of ₹ 10,000. On 20th August company sold goods of by cash of ₹ 25,000.

Question 14.
which of the following account will be debited for the transaction on 1st August?
(A) CashA/c
(B) Machinery A/c
(C) Both (A) and (B)
(D) Capital A/c [1]
Answer:
(C) Both (A) and (B)
Explanation: Following entry will be passed for the transaction:

[Being business started]

Question 15.
Which account will be debited for the transaction on 10th August?
(A) Purchase A/c
(B) Cash A/c
(C) Customer’s A/c
(D) None of These [1]
Answer:
(D) None of These

Explanation: As per the text, only order has been given. Economic consideration is not invalued. So no journal entry will be passed for this.

Question 16.
Which account will be credited for the transaction on 2nd August?
(A) Purchase A/c
(B) Cash A/c
(C) Kamal’sA/c
(D) None of These [1]
Answer:
(C) Kamal’sA/c

Explanation: Following entry will be passed for the above transaction:

[Being goods purchased on credit]

Question 17.
What is the nature of the account to be debited for the transaction on 5th August?
(A) Personal A/c
(B) Real Account
(C) Nominal A/c
(D) None of These [1]
Answer:
(C) Nominal A/c

Explanation: The account to be debited for the transaction on 5th August is salary A/c which is a nominal account as it is an expense.

‘Read the hypothetical text given below and answer the Questions 18 to 21.
A new Accountant of Rafta and company prepared the following Trial Balance:
Trial Balance As on 31st March, 2020

Question 18.
Identify the correct statement regarding trial Balance:
(A) It is a personal Account
(B) It shows the financial position of the firm.
(C) It ascertains the arithmetical accuracy of the book of accounts
(D) None of These
Answer:
(C) It ascertains the arithmetical accuracy of the book of accounts

Explanation: Trial balance is not an account while it is a statement and balance sheet shows the financial position of the firm but not the trial balance. It ascertains arithmetical accuracy of book of accounts.

Question 19.
Identify the account which is in wrong side ol the triai Balance:
(A) Capital
(B) Debtors
(C) Salaries
(D) Bills Payable [1]
Answer:
(B) Debtors

Explanation: Debtors have a debit balance, hence should be shown in the debit side of trial balance.

Question 20.
Identify the nature of Return Inwards Account.
(A) It has debit balance
(B) It has credit balance
(C) It is not shown in trial balance separately
(D) None of These [1]
Answer:
(A) It has debit balance

Explanation: Return inwards represent the goods that have been returned by the customers to us. Hence it is sales return which has debit balance.

Question 21.
What should be the correct total of the debit side of the trial Balance?
(A) 1,20,000
(B) 1,35,000
(C) 1,33,000
(D) 1,29,000 [1]
Answer:
(D) 1,29,000

Explanation: The following items will appear on the debit side of the trial balance: Debtors, Assets, Purchase, Return inwards, Salaries, Rent paid.
Hence Total of debit side is = 1,29,000

Question 22.
Show an accounting equation on the basis of the following transactions:

Started business with cash ₹ 80,000 and goods ₹ 70,000.
Withdrew cash for personal use ₹ 20,000.
Bought furniture for ₹ 15,000 on credit and paid salaries ₹ 8,000. [3]

State the meaning of debit and credit. [3]

Answer:
Accounting Equation:

Transaction	Assets					=	Liabilities	+	Capital
Transaction	Cash	+	Goods	+	Furniture	=	Creditors
Started business with cash ₹ 80,000 and goods ₹ 70,000	80,000	+	70,000					+	1,50,000
Withdrew cash for personal use Rs. 20,000	(20,000)								(20,000)
New Equation	60,000	+	70,000			=	0	+	1,30,000
Bought furniture for Rs. 15,000 on credit and paid salaries Rs. 8,000.	(8,000)				15,000		15,000		(8,000)
Final Equation	52,000	+	70,000	+	15,000	=	15,000	+	1,22,000

OR
A debit denotes:

In case of a person, that he has received either cash or any goods or service.
In case of goods or assets, that the stock and/or value of such goods or assets has increased.
In case of nominal accounts, that the firm has enjoyed some benefit or service or has lost money or has incurred some expense. From another point of view a debit denotes increase in assets, decrease in liabilities and capital and increase in expenses/losses.

A credit denotes:

In case of a person, that he has given either cash or any goods or services.
In case of goods or assets, that the stock and/or value of such goods or asset has decreased.
In case of nominal account, that the firm has made a gain or has earned income. From another point of view, a credit denotes decrease in assets, increase in liability and capital and increase in income. [3]

Question 23.
Explain in brief any four limitations of accounting. [4]

Explain the following accounting principles:

Full disclosure
Materiality [4]

Answer:
Following are the limitations of Accounting:
(i) Only monetary transactions: Accounting records only those transactions which can be measured in terms of money. Transactions and events, that are not measurable how-so-ever important for business they may be, do not find a place in the accounts.

(ii) Ignorance of market price of assets: Assets are recorded at their costs and not at their market prices. Hence, financial statements fail to show real worth of the business.

(iii) Personal judgement: Based on the personal judgement of the accountant, certain accounting policies are adopted. As a result, financial statements may not be objective and comparable.

(iv) Not exact: Accounting information is sometimes based on estimates. Hence, the financial statements do not reflect the true position of the business.

(v) Not a good tool for management: Accounts record the past facts which do not help the management for decision-making. Accounts do not provide for evaluation of business policies and plans. (Any four) [4]

Commonly Made Error

Students are not able to write the limitations of accounting.

Answering Tips

Properly understand what are the limitations of accounting.
Concepts should me made clear for the same.

(i) Principle of full disclosure: The principle of full disclosure means that financial statements should disclose all significant information relating to the economic affairs of the firm. The significance of the principle is that there is a sufficient disclosure of information which is of material interest to proprietor, creditors, investors, etc. For this purpose, facts or items which do not find place in financial statements are shown as footnotes,schedules, etc.

Examples are:

(a) Contingent liabilities appearing as a footnote.
(b) Market value of investments appearing as a footnote.

(ii) Principle of Materiality: According to principle of materiality, all material facts relating to business should be disclosed in financial statements. All information which is necessary for an average person arriving at decision is material information.

There is unlimited information which can be provided in financial statements. But in order to make financial statements more meaningful, accountants should report only material information. This principle is a guide for accountant for deciding what should be disclosed in financial statements. The concept of materiality is relative. What is material for a small company may not be material for a big company.

For Example: Cost of loose tools maybe material for a small repair workshop but may not be material for a big company like L&T. [4]

Commonly Made Error
While writing the answer students get confused between the concepts of the two principles.

Answering Tip
Properly read the two principles and understand the difference between the concepts of both the principles.

Question 24.
From the following particulars, prepare a Bank Reconciliation Statement showing the balance as per cash book on
31st December, 2015 :
Overdraft as per pass book was ₹ 25,000.
(i) Three cheques of ₹ 2,000, ₹ 3,000 and ₹ 5,000 were paid into bank in December, 2015 but were not credited by the bank in the month of December.

(ii) A cheque of ₹ 1,800 which was received from a customer was entered in the bank column of the cash book in December, 2015 but was omitted to be banked in December, 2015.

(iii) Cheques for ₹ 20,000 were issued in December, 2015 but not debited in bank till 31st December, 2015.

(iv) Interest on investment ₹ 500 collected by the bank appeared only in the pass book.

(v) A cheque of ₹ 2,000 deposited into bank on 26th December but not entered in the cash book, was dishonoured on 2nd January, 2016. [4]
Answer:
Bank Reconciliation Statement
as on 31st December, 2015

Commonly Made Error
This question is wrongly answered by many students.

Answering Tip
Students should be careful while reading the question whether it is overdraft as per cash book or overdraft as per pass book.

Question 25.
Post the following into the Ledger :
Returns Outward Book

Answer:
In the books of …
Dr. M/s Rajindra Prakash and Sons Account Cr.

Dr. M/s Modern Electric Co. Account Cr.

Dr. Returns Outward Account Cr.

Commonly Made Error
Students are not able to identify whether “Return outward A/c” has a debit balance or credit balance. Some students post the entries on credit side of the ledger.

Answering Tip
Students should properly understand the nature of each account.

Question 26.

Explain the accounting principle of verifiability and objectivity of evidence.
What are the exceptions of revenue recognition principle? Explain in brief. [6]

Answer:
(i) (a) According to this principle the accounting data should be verifiable and bias-free. Thus, only those transactions should be recorded in the accounting books, which are evidenced and supported by business documents.

(b) Normally, we follow historical cost accounting, in which accounting books are based on original documents, such as vouchers, cash memos, invoices, receipts, etc. As these transactions are based on documentary evidences, they are therefore, verifiable.

(c) Books of accounts based on evidences are considered bias-free as the users of financial statements feel that data supported by documents are reliable and are not subject to the bias of either accountants or management. If this principle is not followed, there may be disputes with regard to value to be shown in accounting books because of different valuations of items by different valuers.

Commonly Made Errors

Most of the students are not able to answer this question.
Students are not able to understand this prindple .

Answering Tip
Pmperly read and understand the concept of verifiability and objectivity.

(ii) Following are the exceptions of the revenue recognition principle:
(a) Long term contracts: When a contract is for work which cannot be completed for a long period of time, the payments are received in instalments on the basis of work completed and certified. In such cases, revenue is considered realised on some reasonable basis, normally in a proportion o work completed.

(b) Ready market: Some goods have a ready market.

For example: gold, silver, etc. In such cases revenue is considered recognised as soon as these are manufactured as these can be sold in the market easily.

(c) Uncertainty: When realisation of revenue is uncertain, revenue is not considered realised even when goods are delivered to customer.

For example: sale of goods on installment basis or on hire purchase basis. In such cases, revenue is recognised in the proportion of instalments realised to total instalments.

Commonly Made Error
Most of the students are not able to answer this question properly.

Answering Tip
Learn the exceptions of this principle along with their expbnation.

Question 27.
From the following transactions of a business firm prepare Machinery Account for two years:
1.4.2011 Purchased a second- hand machinery for ₹ 80,000.
1.4.2011 Spent ₹ 20,000 on repairs for making it serviceable.
30.9.2011 Purchased another machinery for 40,000.
31.12.2011 Repairs and renewals of machinery ₹ 5,000.
Depreciation is charged at 10% p.a. on fixed installment basis. The accounts are closed on 31st March every year. [6]
Answer:
Dr. Machinery Account Cr.

Working Notes:
1. ₹ 1,00,000 x 10/100 = ₹ 10,000
2. ₹ 40,000 x 10/100 = ₹ 4,000

Note: Repair charges spent on 1.4.2011 for making the Machinery serviceable is treated as capital expenditure and as such it has been recorded in Machinery Account.

Repair charges of ₹ 5,000 has been spent on 31.12.2011 whereas the machinery was purchased on 30.9.2011. As such, this expenditure, being revenue in nature will not be recorded in Machinery A/c rather it will be debited to Profit & Loss A/c

Question 28.
Give the rectification Journal Entries for the following transactions :

A builder’s bill for ₹ 50,000 for creation of small shed for cycles was debited to Repairs A/c.
A Bill of Exchange (received from Prateek) for ₹ 25,000 had been returned by bank as dishonoured and had been credited to Bank A/c and debited to Bills Receivable A/c.
Purchase of goods from Vmod amounting to ₹ 6,000 has been wrongly passed through Sales Book.
An amount of ₹ 3,600 due from Vrinda, which had been previously written off as bad debt, was unexpectedly recovered and was posted to the personal account of Vrinda.
A cheque of ₹ 5,500 received from Riddhi was dishonoured and had been posted to the debit of Sales Returns A/c.
Purchased machinery for ₹ 1,25,000 was passed through Invoice Book.
Return of Goods worth ₹ 2,350 by Abhinav were taken into stock but not entry was passed.
Goods worth ₹ 3,900 returned to Mayank was passed through Sales Returns Book.
An amount of ₹ 2,000 spent on repair and installation of second hand machinery purchased was debited to Repair and Maintenance A/c. [8]

Give the rectifying Journal Entries in the books of Mehra and Company:

Sale of old furniture worth 11,500 treated as sales of goods.
Sales Book added ₹ 2,500 short.
Total of Bills Receivable Book ₹ 2,700 left unposted.
Rent of Proprietor’s residence, ₹ 3,250 debited to Rent A/c.
Payment of ₹ 800 to Rishabh posted to his credit as ₹ 8,000.
Goods worth ₹ 5,985 returned by Mishra posted to his debit as ₹ 5,895.
A return of ₹ 290 to Gaurav posted as ? 920 in his A/c.
An amount of ₹ 1,500 paid to Aman credited to Alam.
Total of debit side of Expenses A/₹ has been cast in excess by ₹ 500. [8]

Answer:
In the Books of ………….
Journal Entries

In the Books of Mehra and Company
Journal Entries

Commonly
Sometimes students are not able to understand the error made in point (iv)
Error is committed by students in rectifying the entry of point (vi).

Answering Tips
Understand what is given in the question. Since rent is paid for proprietor’s business, it means it is a drawing and should therefore, be debited to drawings A/c. Goods Returned should be posted to the credit of his account. Therefore, to nullify the effect of error made, Mishra’s A/c is to be credited by ₹ 11,880.

Part-B [24 Marks]
Financial Accounting-II

Question 29.
Give an example of capital receipt. [1]
Answer:
Issue of shares

Question 30.
The main purpose of balance sheet is to show . [1]
Answer:
Financial Position

Question 31.
………….. is an example of indirect expenses. [1]
Answer:
Printing and stationery expenses (or any other).

Question 32.
Formula to calculate cost of goods sold:
(A) Cost of goods sold = Net sales – Gross profit
(B) Cost of goods sold = Opening stock + Net Purchases + Direct expenses — Closing stock
(C) Both (A) and (B)
(D) None of the above [1]
Answer:
(C) Both (A) and (B)

Question 33.
Identify the adjustment for prepaid expenses:
(A) Added to expenses in Trading and Profit & Loss Account and shown on liabilities side of Balance Sheet.
(B) Deducted from expenses in Trading and Profit & Loss Account and shown on assets side of Balance Sheet.
(C) Added to expenses in Trading and Profit & Loss Account and shown on assets side of Balance Sheet.
(D) Deducted from expenses in Trading and Profit & Loss Account and shown on liabilities side of Balance sheet. [1]
Answer:
(B) Deducted from expenses in Trading and Profit & Loss Account and shown on assets side of Balance Sheet.

Question 34.
Which of the following are the users of financial statements?
(A) Owners
(B) Management
(C) Bankers
(D) All of these [1]
Answer:
(D) All of these

Question 35.
Gross Loss Cost of Goods sold . [1]
Answer:
Net sales

Explanation: Gross Loss represents the excess of cost of goods sold over the sales proceeds.

Question 36.
Why are adjustments necessary while preparing final accounts? [3]
Answer:
Necessity of Adjustments:

To make a record of such incomes which have accrued but have not been received.
To make a record of such expenses which have accrued but have not been paid,
To rectify the errors committed in the books of accounts.
To make a record of the transaction omitted from the books.
To ascertain the true net profit and loss of the business.
To ascertain the true financial position of the business.
To provide for depreciation and other provisions.

Question 37.
Read the following hypothetical Trial Balance extracted from the books of Sh. Agneshwar Som and answer the given questions:
In the Books of Sh. Agneshwar Som
Trial Balance as on 31/12/2019

(i) What is the nature of the account postage given in the trial balance and where will it be shown in the final accounts?

(ii) How will income tax be dealt in final accounts?

(iii) What is the amount of gross profit earned by the firm? [2]
Answer:
(i) Postage as it is an expenditure ‘nominal account’ in nature. Postage is an indirect expense. Hence will be shown in profit and Loss A/c.

(ii) It will be shown in balance sheet by way of subtracted from capital.

(iii) ₹ 38,500 121

Question 38.
Prepare Trading and Profit & Loss Account for the year ending 31st March, 2015 and a Balance Sheet as on that date from the following Trial Balance:

Adjustments:

Closing Stock was ₹ 52,000.
₹ 1,000 were to be written off as bad debts and provision for doubtful debts was to be created on sundry debtors @ 5%.
Interest on capital is to be provided @ 6% p.a.
An additional capital of ₹ 20,000 introduced by proprietor on 1st Oct., 2014.
Plant and Fixtures to be depreciated by 10% p.a.
Salaries outstanding on 31st March, 2015 amounted to ₹ 1,000.
Accrued Interest on investment amounted to 1,500. [8]

From the following balances for the year ended 31st March, 2014 and additional information, prepare Trading and Profit & Loss Account and Balance Sheet of M/s Ram Lai and Sons :

Additional information:

Closing stock was valued as ₹ 20,000.
Provide depreciation on building @ 5% and on furniture @ 10%.
Outstanding salaries ₹ 1,000.
Unexpired (prepaid) insurance ₹ 50.
Accrued commission ₹ 300.
Provide for Manager’s Commission at 5% on Net Profit after charging such commission. [8]

Answer:
Trading and Profit & Loss A/c
Dr. for the year ended 31st March, 2015 Cr.

Balance Sheet
as at 31st March, 2015

Commonly Made Error
Some students don’t show accrued interest on investment in Profit & Loss A/c.

Answering Tip
Understand the treatment of accrued interest. It is to be shown on the credit side of Profit & Loss A/c as well

Trading and Profit & Loss Account
Dr. for the year ended 31.03.2014 Cr.

Balance Sheet
as on 31.03.2014

Working Notes:
Manager’s Commission:
Net Profit Before Commission = ₹ 12,000
Manager’s Commission (12,000 x 5/105) = ₹ 571

Commonly Made Errors
Students wrongly show Rent A/c in Trading A/c. Some students make mistake while calculating manager’s commission.

Answering Tips
Since it is not mentioned that rent is paid for factory, it will be treated as part of Profit & Loss A/c. Carefully calculate Manager’s commission when it is given as a percentage of net Profit.