Here in this Post, we will discuss the Most Important Repeatedly asked BBA 1st Semester Short Question Answer. 

BBA 1st Semester Short Question Answer

Q.1.        Give the Reasons for the Necessity of Bookkeeping.

Ans.       Bookkeeping has become necessary, due to the following reasons :

Necessary Information: A Trader cannot remember every transaction of it business for a long time, In the absence of it he cannot get the necessary information. Thus in order to prevent frauds, errors, and wastes & to keep supervision over the business activities the proper account should be maintained by the trader.

Ascertaining Sales Price: Whenever the existing business is to be sold the sale price of the business can easily be ascertained if correct bookkeeping records are maintained.

Payment of Income Tax: If proper and satisfactory accounts are not maintained, the correct, assessments of tax will not be possible. Therefore to make the payment of Income Tax, proper accounts are to be maintained.

Insolvency cost: At the time of insolvency, the cost may deal the cases leniently if proper accounts are maintained.

Complete Record: It keeps a complete record of such transactions.

Check On Arithmetical Accuracy: It provides a check on the arithmetical accuracy of the books of account.

Details Available: With the help of these accounts, details with regards to any account are easily available.

Frauds are Detected: Since the system is very much scientific the chances of fraud are minimized.

Profit and Loss be Ascertained: With the help of it, profits or losses can easily be as curtained.

Balance Sheet: A balance sheet can easily be prepared at any time showing the actual amount of capital invested and the assets and liabilities.

Q.2.        Write a short note on  “Bookkeeping is a science or an Art”.

Ans.       Bookkeeping is a science as well as an art. Science is knowledge and art is an action. Principles of keeping the record is a science, and actual keeping of records is an art. Thus without having a thorough grounding in the principles of accountancy, nobody can become an efficient bookkeeper.

Bookkeeping is only a means to an end being the ascertainment of the financial position of the concern, special emphasis has to be given on the study of the principles of bookkeeping. The Books of accounts are the tools and in order to be a skillful worker. The bookkeeper must be fully acquainted with his tools. Hence, Bookkeeping is a science as well as art also.

Q.3.         What down the essential features of accounting principles.

Ans.       The ledger is known as the principal book because it contains the accounts showing the results of various transactions. The accounts are prepared on the basis of the cash book, the purchase book, the sales book, the journal etc. Transactions are first entered in these books and then on their basis, ledger accounts are written up. These books are known as subsidiary books. They are also known as books of primary entry. Subsidiary books, therefore, may be defined as books where transactions are first entered and Properly Classified. The cash book is a subsidiary book because cash transactions are first entered here. But it is also a principle book because it Shows the balance at the bank and the cash in hand. Final results of carrying on the business cannot be ascertained without considering cash in hand and at a bank.

Q.4.        What are the basic principles of Accounting?

Ans.       In addition to the basic assumption, accounting has to develop the following basic principles :

Dual Aspect (2001, 04): According to this principle, “Every business transaction has a double effect. There are two sides of every transaction. This is evident when we study the accounting terms like assets, capital and liabilities”.

The system of recording transactions based on principle is called a double-entry system. The relationship between assets, liabilities, and capital is at present known as the accounting equation which can also be expressed as under :

Assets   = Capital + Liabilities

Or                                                   Capital  = Assets + Liabilities

Or                                              Liabilities   = Assets – Capital

We record all the business transactions on the basis of dual aspects and call the system a double-entry system.

Verifiability— Objectivity and Evidence: This principle of verifiable objectivity means that every business record must be based and supported by documentary evidence. We do not pass any entry or make any posting in subsidiary books unless there is a voucher for it. Receipts, bills, invoices, cash memos, salary bills, and deeds are some of the vouchers used as documents for recording the business transaction.

According to the principles of objectivity, accounting should be definite, verifiable, and free from manipulation and personal bias.

Historical Cost: According to the historical cost principles, “All business transactions must be recorded in the books of accounts at their monetary cost of acquisition. This principle is called historical, because the balance of assets and liabilities is carried forward from year to year at its acquisition cost, irrespective of increase or decrease in the market value of assets.

e.g. an asset is purchased for ₹ 6,00,000 and if at the time of preparing final accounts, its market value is said ₹ 4,00,000 or 7,00,000 yet it will be recorded on the basis of its purchase price ₹ 6,00,000.

Revenue Recognition Principles: In accounting terminology, ‘revenue’ is the amount received or receivable from the sale of goods. The principles explain when we should assume some revenue to have been earned. It will enable us to identify the period for which the revenue has been earned. According to the accounting period, assumption revenue must be concerned with the specific accounting period. We can determine the revenue as realized on the sales basic, cash basis, and production basis.

Matching Concept (2004,06): This is based on the accounting period concept. The principal objective of running a business is to earn profit. In order to determine the profit made by the business during a period, it is necessary that the revenue of the period should be matched with the costs for the period. Thus the matching principle holds the Expenses should be recognized in the same period as associated revenue.

e.g. if goods costing ₹ 20,000 are sold for ₹ 30,000 and it is reasonably certain that revenue will be realized, then ₹ 20,000, i.e. cost of sales should be matched with revenue to give net result of ₹ 10,000 as profit.

Q.5.        What are the limitations of Accounting?

Ans.       Accounting has the following limitations :

Incomplete Information: Accounting records only those transactions which are of financial nature. It Records only the quantitative aspect of our transaction this Accounting cannot record the non-financial transaction. Such as changes in economic, government policy, competition in the market, etc. are not recorded in accounting, though they affect the financial soundness of the business.

Inexactness: Accounting calculates profit or loss of the business on the basis of real and assumed estimation. Accounting makes the valuation of stock, determine the method of depreciation and maintain various reserves and provision in any way they like. Different firms adopt different methods, so the result of the business will change with the change in practice.

Representing Valueless Assets: There are certain assets that do not have real value but they are shown in our balance sheet. These assets are patents, trademarks, goodwill, discount on issues of shares etc. As such the financial analysis based on past events has to be suitably modified before it can be used for forecasting.

Unsuitable for Forecasting: Financial accounting are only a record of past data, whereas continuous changes take place in the demand of the product, position of competition, consumer performance etc. As such the financial analysis based on past events has to be suitably modified before it can be used for forecasting.

Manipulation; Accounting results are based upon the information supplied to it. The management may be based and feed manipulative information to prove its point of view. Accounting can show the result of business, as desired by the owners of the business.

Not free from Bias: In many situations, the account has to exercise his personal judgment and make a choice out of various alternatives available, e.g. choice in the method of depreciation, FIFO, LIFO, etc. Thous, Accounting is not free from bias.

Ignorance about the Present Value of Business: While maintaining books of accounts we follow the going concern concept, i.e, the business will be carried on for an indefinite period. With this purpose show the value of our assets in the balance sheet at its book value, not the market value. So, accounting in this way, fail to show the present sale value of the Business.