Chapter 1 Introduction to Accounting Materials

📘 CHAPTER 1: INTRODUCTION TO ACCOUNTING
(All previous years' questions – with answers)

🔹 Multiple Choice Questions (1 Mark each)

1. Note books purchased by a stationery shop comes under

a) Assets    b) Income    c) Purchases    d) Liabilities

(2018 Mar – 1 Mark)

Answer: c) Purchases (for a stationery dealer, notebooks are stock‑in‑trade, recorded as purchases).

2. Which one of the following events is NOT a business transaction?

a) Furniture purchased for cash.
b) Goods are ordered for next month.
c) 10% of debtors are treated as bad
d) Salary outstanding to the employee.

(2018 Imp – 1 Mark)

Answer: b) Goods are ordered for next month (an order is not a transaction; no exchange has occurred).

3. A person to whom the business owes money is called

a) Debtor   b) Creditor   c) Manager   d) Partner

(2022 Imp – 1 Mark)

Answer: b) Creditor (the business owes money to a creditor).

4. Pick out the wrong pair

a) Land – Building
b) Cash – Stock
c) Debtors – Machinery
d) Copyright – Patent

(2019 Mar – 1 Mark)

Answer: c) Debtors – Machinery (both are assets, but they are not a natural pair; usually wrong pair is considered c).

5. Creative Traders provides accounting information to its users whenever it is required for. Specify the qualitative characteristics of accounting.

a) Understandability   b) Relevance   c) Comparability   d) Reliability

(2019 Imp – 1 Mark)

Answer: b) Relevance (timely information meets user needs).

6. Find out the wrong Pair.

a) Salary – Revenue expenditure
b) Furniture – Capital expenditure
c) Bank loan – Revenue receipt
d) Sale of machinery – Capital receipt

(2019 Imp – 1 Mark)

Answer: c) Bank loan – Revenue receipt (bank loan is a capital receipt, not revenue).

7. The Person who owes money to the business is called

a) Debtor   b) Creditor   c) Partner   d) None of these

(2020 Mar – 1 Mark)

Answer: a) Debtor.

8. Choose an internal user from the given users of accounting information

a) Creditors   b) Bank   c) Managers   d) Government

(2020 Imp – 1 Mark)

Answer: c) Managers.

9. Cash or other assets invested by the owner in the business is

a) Fixed Asset   b) Capital   c) Current Asset   d) None of these

(2021 Mar – 1 Mark)

Answer: b) Capital.

10. Which among the following is an intangible asset ?

a) Goodwill   b) Building   c) Cash   d) Stock of goods

(2021 Imp – 1 Mark)

Answer: a) Goodwill.

11. Costs incurred by a business in the process of earning revenue are called as

a) Capital Expenditure   b) Expenses   c) Capital   d) Assets

(2022 Mar – 1 Mark)

Answer: b) Expenses.

12. A person to whom the business owes money is called

a) Debtor   b) Creditor   c) Manager   d) Partner

(2022 Imp – 1 Mark)

Answer: b) Creditor (same as Q3).

13. Amount invested by the owner in the business is called

a) drawings   b) investment   c) capital   d) asset

(2023 Mar – 1 Mark)

Answer: c) capital.

14. Heavy expenditure incurred on advertising is

(incomplete – presumably 1 Mark question)

Answer: Usually treated as Deferred Revenue Expenditure (if heavy and benefits last long).

15. The person who owes money to the firm is

a) Debtor   b) Creditor   c) Owner   d) Manager

(2023 Imp – 1 Mark)

Answer: a) Debtor.

16. The documentary evidence in support of a transaction is

a) Inventory   b) Debtor   c) Circular   d) Voucher

(2024 Mar? – 1 Mark)

Answer: d) Voucher.

17. Which of the following is not a qualitative characteristic of accounting information ?

a) Reliability   b) Relevance   c) Comparability   d) Measurability

(2025 Mar – 1 Mark)

Answer: d) Measurability (not a qualitative characteristic).

🔹 Short Answer Questions (2 Marks)

18. Classify the following items as Revenue, Expense, Gain and Profit.

a) Profit on sale of investments
b) Interest received
c) Goods sold at above cost
d) Depreciation

(2018 Imp – 2 Marks)

Answer: a) Gain, b) Revenue, c) Profit, d) Expense.

19. Give examples for each of the following terms :

i. Revenue   ii. Gain   iii. Short-term liability   iv. Fixed assets

(2019 Imp – 2 Marks)

Answer: i. Sales, commission received. ii. Profit on sale of machinery. iii. Creditors, bills payable. iv. Land, machinery, building.

20. Match the following :

A	B
(a) A person who owes money to an enterprise	(i) Profit
(b) Withdrawal of money or goods by the owner	(ii) Assets
(c) Excess of revenue over expenses	(iii) Drawings
(d) Economic resources of an enterprise	(iv) Debtor

(2021 Mar – 2 Marks)

Answer: a-iv, b-iii, c-i, d-ii.

21. Complete the series from the items given in the brackets.

I. Revenue Expenditure   II. Capital Expenditure   III. Revenue Receipts   IV. Capital Receipts

(Bank Loan, Machinery, Salary, Rent received)

(2021 Mar – 2 Marks)

Answer: Bank Loan – IV (Capital Receipt); Machinery – II (Capital Expenditure); Salary – I (Revenue Expenditure); Rent received – III (Revenue Receipt).

22. Fill in the blanks as shown in example. Example : The person who owes money to the business – Debtor

(a) The person to whom the business owes Money ?
(b) Money invested by businessman into the business ?

(2021 Imp – 2 Marks)

Answer: (a) Creditor; (b) Capital.

23. Fill the blank as per the hint given : Hint : Investment by the owner in the firm – Capital

(a) Assets held for a short period of time –
(b) .................... – Debtor

(2022 Mar – 2 Marks)

Answer: (a) Current assets; (b) Person who owes money to the business.

24. State the qualitative characteristics of accounting information.

(2022 Imp – 2 Marks)

Answer: Reliability, Relevance, Understandability, Comparability.

25. Complete as per hint given (incomplete; skip or mention)

Answer: (Not enough information)

26. List out the qualitative characteristics of Accounting information.

(2023 Imp – 2 Marks)

Answer: Reliability, Relevance, Understandability, Comparability, Materiality, Faithful representation, etc. (any four).

27. Choose the correct answer from brackets. [Revenue expenditure, Capital expenditure]

(1) Expenditure incurred to increase the earning capacity of business : ?
(2) Expenditure incurred to maintain the earning capacity of business : ?

(2025 Mar – 2 Marks)

Answer: (1) Capital expenditure; (2) Revenue expenditure.

🔹 Short Answer (3 Marks)

28. What are the objectives of accounting (Any Three)

(2020 Mar & 2022 Mar – 3 Marks)

Answer: 1) To maintain systematic records. 2) To ascertain profit/loss. 3) To know financial position. 4) To provide information to users. (any three).

29. Explain briefly about any Three branches of accounting

(2020 Imp – 3 Marks)

Answer: 1) Financial accounting – recording and reporting. 2) Cost accounting – cost determination and control. 3) Management accounting – helps in decision making.

30. Briefly explain about any 3 qualitative characteristics of accounting.

(2021 Mar – 3 Marks)

Answer: 1) Reliability – information must be free from error. 2) Relevance – influences decisions. 3) Comparability – allows comparison over time / between firms.

31. Classify the following users of accounting information into internal and external users :

(a) Chief Executive Officer (b) Customers (c) Finance Officer (d) Plant Manager (e) Labor Unions (f) Banks

(2021 Imp – 3 Marks)

Answer: Internal: a) CEO, c) Finance Officer, d) Plant Manager. External: b) Customers, e) Labor Unions, f) Banks.

32. Categorize the following as Revenue income, Revenue expenditure, Capital income and Capital expenditure

(a) Rent paid (b) Machinery purchased (c) Commission received

(2022 Imp – 3 Marks)

Answer: a) Revenue expenditure; b) Capital expenditure; c) Revenue income.

33. State any three objectives of accounting.

(2023 Mar – 3 Marks)

Answer: 1) Systematic recording, 2) Ascertainment of profit/loss, 3) Depict financial position.

34. Explain briefly any three objectives of Accounting.

(2023 Imp – 3 Marks)

Answer: (same as Q28/33) – systematic recording, ascertain profit, know financial position, assist decision making.

35. Explain any three qualitative characteristics of accounting information.

(2024 Mar – 3 Marks)

Answer: e.g., Relevance, Faithful representation, Comparability. (brief explanation).

36. Name the accounting term mentioned in the following :

(1) Deduction given at the time of sale, usually based on the quantity purchased
(2) The excess of revenue over expenses
(3) Economic resources owned by a business that are expected to provide future benefits

(2025 Mar – 3 Marks)

Answer: (1) Trade discount; (2) Profit; (3) Assets.

🔹 Long Answer (4 Marks)

37. Accounting has certain objectives to business. Explain.

(2021 Mar – 4 Marks)

Answer: Objectives: systematic recording, determination of profit/loss, financial position, providing information to users, assisting decision making, fulfilling legal needs. (explain each point).

38. Name the following :

(a) Withdrawal of money by the owner from the business for personal use.
(b) The amount of goods lying unsold at the end of an accounting period.
(c) Excess of income over expenditure of a business organization.
(d) The documentary evidence in support of a transaction.

(2021 Imp – 4 Marks)

Answer: (a) Drawings; (b) Closing stock; (c) Profit; (d) Voucher.

39. Briefly explain.

(a) Capital (b) Expenses (c) Drawings (d) Current Assets

(2024 Mar – 4 Marks)

Answer: a) Capital – owner’s investment/claim. b) Expenses – costs for earning revenue. c) Drawings – withdrawal for personal use. d) Current assets – short-term assets (debtors, cash, stock).

40. Explain briefly the objectives of accounting.

(2025 Mar – 4 Marks)

Answer: (detailed explanation of 4–5 objectives).

41. Match the following : (incomplete – omitted)

Answer: (No data provided, skip)

📌 Note: Answers are based on standard accounting principles and previous years’ answer keys. For numerical/long problems always refer to your textbook.