Theory Base Of Accounting - Class 11 Commerce Accountancy - Extra Questions

Discuss about the full disclosure concept of accounting.

This concept states that all relevant information will be disclosed in the accounting statements. A lot of external users depend on these financial statements for their information to make investing decisions. The principle of full disclosure requires that all material and relevant facts concerning the financial performance of an enterprise must be fully and completely disclosed in the financial statements and their accompanying footnotes.


What are Accounting Standards?

Accounting standards are written policy documents covering the aspects of recognition, measurement, treatment, presentation, and disclosure of accounting transactions in financial statements. An accounting standard is an authoritative statement issued by ICAI, a professional body of accounting in our country. 


Match the items in column-1 with the items in column-2 :

A. Materiality concept: According to the convention of materiality, all relevant items, the knowledge of which might influence the decision of the users of the financial statements, sholud be disclosed in the financial statement.
B. Going concern concept:  It is known as assumption of continuity. It is assumed that the enterprise has neither the intention nor the necessity to wind up the business in the foreseeable future.
C. Historical cost concept: Historical cost is a measure of value used in accounting in which the price of an asset on the balance sheet is based on its nominal or original cost.
D. Consistency concept:  According to this principle, the accounting policies adopted by the enterprise should be followed consistently from one period to another.  


What is Matching concept? Why should a business concern follow this concept? Discuss.

The matching concept is an accounting practice whereby firms recognize revenues and their related expenses in the same accounting period. Firms report "revenues," that is, along with the "expenses" that brought them. The purpose of the matching concept is to avoid misstating earnings for a period.
The business entities follow this concept mainly to ascertain the true profit or loss during an accounting period.This leads to either overcasting or undercasting of the profit or loss, which may not reveal the true efficiency of the business and its activities in the concerned accounting period.


Discuss about the conservatism concept of accounting.

The conservatism principle is the general concept of recognizing expenses and liabilities as soon as possible when there is uncertainty about the outcome, but only recognize revenues and assets when they are assured of being received. It requires that profits should not be recorded until realized but all losses, even those which may have a remote possibility, are to be provided for in the books of account. This approach of providing for the losses but not recognizing the gains until realized is called the conservatism approach.


Class 11 Commerce Accountancy Extra Questions