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Ramesh
Director
Royal Educational Institutions
hyd
(CONTINUED FROM IPE VIDYA PAGE 12-03-2010)
COMMERCE - I
VERY SHORT QUESTIONS & ANSWERS (2 MARKS)
1. Extractive Industry
A. These industries are mainly concerned with extraction of products from
Natural resources such as earth, water, air etc.
Example : Agriculture, mining, hunting etc.
2. Define Commerce
A. Commerce is concerned with the exchange of goods. It includes all those
activities which are related to the transfer of goods from the place of
production to the ultimate consumers. It includes ‘trade’ and ‘aids to
trade’.
Commerce = Trade + Aids to trade
3. Entrepot Trade
A. It is also known as reexport trade, it involves importing of foreign goods
with a view to reexport them to other countries.
Example : India buys wheat from Australia and supplies the same to
Bangladesh
4. Kartha : The head of the family is known as kartha. He has the right to
manage the affairs of the business and other members assist him. He is
also called manager. The kartha makes all the contracts on behalf of the
firm. His liability is unlimited.
8. Minor Partner : A minor is a person who has not attained the age of 18
years. He can never become a partner because of his incapacity for making
contracts. A minor, however, be admitted to the benefits of partnership
with the consent of all partners. The liability of minor partner is limited.
PART - II
A. The amount invested by the owner for running the business is called
capital. This can be in the form of goods or cash.
A. Cash, goods drawn by the owner, investor for personal consumption are
called as Drawings.
A. Over Draft is the unfavourable balance of the depositor with the bank i.e.,
withdrawals are more than deposits. In other words it is the amount due to
bank by the customer. In case of favorable balance Cash Book shows credit
balance whereas Pass Book shows debit balance.
Impersonal accounts can be further divided into real and nominal accounts.
Thus, there are three kinds of accounts maintained by business.
1. personal accounts 2) real accounts 3) nominal accounts
1. Personal Accounts : Accounts of persons with whom the business deals
are known as personal accounts. The word persons is used in a special sense here.
It indicates individuals, partnerships, companies etc.
Debit : The receiver
Credit : The Giver
2. Real Accounts : Accounts in which the business records the real things
owned by it i.e. the assets of the business are known as real accounts.
Example : Buildings A/c, Machinery A/c., Furniture A/c, Cash A/c., etc.
Debit : What comes into business
Credit : What goes out of the business
3. Nominal Accounts : Accounts which record expenses, losses, incomes
and gains of the business are known as Nominal Accounts.
Example : Rent A/c., Salaries A/c., Postage A/c. Commission received, interest
received A/c., bad debts etc.
Debit : All expenses and losses
Credit : All incomes and gains
IMPORTANT ESSAY QUESTIONS
(10 MARKS) :
1. Define Sole Trading Business? Write its Merits and Demerits?
2. Write the differences between Private Limited Company and Public Limited Company?
3. What is meant by Memorandum of Association? Write the clauses?
4. Discuss the merits and demerits of Company Organisation?
5. Define Partnership Business? Write its Merits and Demerits?
6. What is Debenture? Explain different types of debentures?
7. Write different types of business finance?
8. What is preference share? Explain different types of preference shares?
Adjustments :
1. Closing stock Rs.42,000
2. Outstanding wages Rs.4,500
3. Writ off Rs.1,000 as bad debts
4. Provide 5% depreciation on machinery
5. Charge 5% interest on capital
A. Trading and Profit and Loss Account for the year ending 31.12.2000 :
Dr. Cr.
Particulars Amount Amount Particulars Amount Amount
Rs. Rs Rs. Rs
2004 Rs.
Purchases Book
2004
Total 24,000
K. RAMESH
Head of Dept. of Commerce
Royal Educational Institutions
Hyderabad
COMMERCE - I
VERY SHORT QUESTIONS & ANSWERS (2 MARKS)
2. Define Commerce
A. Commerce is concerned with the exchange of goods. It includes all those activities which
are related to the transfer of goods from the place of production to the ultimate consumers.
It includes ‘trade’ and ‘aids to trade’.
Commerce = Trade + Aids to trade
3. Entrepot Trade
A. It is also known as reexport trade, it involves importing of foreign goods with a view to
reexport them to other countries.
Example : India buys wheat from Australia and supplies the same to Bangladesh
4. Kartha : The head of the family is known as kartha. He has the right to manage the
affairs of the business and other members assist him. He is also called manager. The
kartha makes all the contracts on behalf of the firm. His liability is unlimited.
5. Mithakshara Law : It is applicable to the whole country except Assam and West Bengal.
According to this law only male members in the family get the right of inheritance by
birth. The female members don’t possess such right.
6. Dayabhaga law : This law is applicable only to Hindus in the states of Assam and West
Bengal According to this law, the right to property devolves on the co-parceners by
succession and not by birth.
7. Partnership Deed : A partnership arises out of an agreement between the partners. The
agreement may be in written or oral. A written agreement avoids the disputes in future.
Such written agreement is called partnership deed or partnership agreement.
8. Minor Partner : A minor is a person who has not attained the age of 18 years. He can
never become a partner because of his incapacity for making contracts. A minor, however,
be admitted to the benefits of partnership with the consent of all partners. The liability
of minor partner is limited.
PART - II
A. “Book keeping is the science and art of keeping record of business transactions in such a
systematic manner that the true state of the financial affairs of a business house can be easily
ascertained”
A. The amount invested by the owner for running the business is called capital. This can be
in the form of goods or cash.
A. Cash, goods drawn by the owner, investor for personal consumption are called as
Drawings.
A. Capital Expenditure consists of expenditure the benefit of which is not fully consumed
in one accounting period but spreads over several years or the amount spent in increasing the
earning capacity of a business is called as Capital Expenditure.
A. Contra Entry is the transaction which is recorded on both the sides of Triple Column
Cash Book i.e., Cash and Bank coloumns on the opposite sides. In other words the double
entry aspect of the transaction is completed in the Cash Book itself.
A. Petty Cash Book is a cash book maintained to record petty / small payments made in
cash, to meet day to day requirements. It is maintained on imprest system and recorded
in analytical form.
A. Over Draft is the unfavourable balance of the depositor with the bank i.e., withdrawals
are more than deposits. In other words it is the amount due to bank by the customer. In
case of favorable balance Cash Book shows credit balance whereas Pass Book shows
debit balance.
A. Suspense Account is the account prepared to transfer difference in Trial Balance if any
to be rectified in future.
A. Errors of principle is an error which any one has committed due to defective knowledge
of recounting principle.
The principle of double entry is based on the fact that there can be no giving without
receiving nor can be receiving without some one giving. The receiving aspect is known as
‘Debit’ and is entered on the debit side of the account. The giving aspect is known as ‘Credit’
and is entered on the credit side of the account. The principle under which both debit and credit
aspects are recorded is known as the principle of double entry. Every debit must have a
corresponding credit and vice versa. Double entry is the only scientific system of maintaining
books of accounts.
Advantages :
A. An account is a statement in the ledger which records the transactions relevant to the
persons, asset, expense or profit named in the heading. Accounts can be divided into
1. Personal Accounts 2) Impersonal Accounts
Impersonal accounts can be further divided into real and nominal accounts. Thus, there
are three kinds of accounts maintained by business.
1. personal accounts 2) real accounts 3) nominal accounts
1. Personal Accounts : Accounts of persons with whom the business deals are known as
personal accounts. The word persons is used in a special sense here. It indicates individuals,
partnerships, companies etc.
Debit : The receiver
Credit : The Giver
2. Real Accounts : Accounts in which the business records the real things owned by it i.e.
the assets of the business are known as real accounts.
Example : Buildings A/c, Machinery A/c., Furniture A/c, Cash A/c., etc.
Debit : What comes into business
Credit : What goes out of the business
3. Nominal Accounts : Accounts which record expenses, losses, incomes and gains of the
business are known as Nominal Accounts.
Example : Rent A/c., Salaries A/c., Postage A/c. Commission received, interest received A/c.,
bad debts etc.
Debit : All expenses and losses
Credit : All incomes and gains
K. RAMESH
Head of Dept. of Commerce
Royal Educational Institutions
Hyderabad