HIGHER ORDER THINKING SKILLS (HOTS) QUESTIONS
Q1. What is the traditional function of Accounting?
Ans: Recording of financial transactions
Q2. Is the basic objective of Book-keeping to maintain systematic records to ascertain net results of operations of financial transactions?
Ans: The basic objective of book-keeping is to maintain systematic records of financial transactions.
Q3. Recording of financial transactions and preparing the financial statements are the only objectives of accounting. Do You agree?
Ans: No. Besides these two, accounting has the objective of providing useful information to the management and communication of financial information to the users.
Q4. What is the first step of Accounting Process?
Ans: Recording of transactions in the books of accounts.
Q5. What is the last step of Accounting Process?
Ans: Communicating the final results to the users who analyse them as per their individual requirement.
Q6. On 1st Jan., 2011, Mr. Robert was appointed as Marketing Manager of the firm with a salary of 50,000 per month. State whether this event will be recorded in the books of accounts.
Ans: No. The appointment will not be recorded because it has not resulted in any change in the financial position of the firm. (It will be recorded only when the salary is paid.)
Q7. A firm follows a practice of giving the figures of previous year alongwith the figures of current year. Now the Accountant of the firm wants to discontinue this practice. Do you justify this decision?
Ans: No. Comparability of current year figures with that of pervious year is a qualitative characteristic of financial information. Discontinuation of this practice will result in discontinuation of a good practice being following by the firm.
Q8. Give two examples of transactions which are not recorded in accounting.
Ans: (i)Resignation by General Manager.
(ii) Value of human resources/
Q9. A firm has received a large order to supply the goods. Will it be recorded in the books?
Ans: No. Only the receipt of order has not resulted in any change in the financial position of the firm.
Q10. Accounting records transactions and events that can be measured in money terms. Is this, in your opinion, a limitation of accounting or an advantage? Give reasons.
Ans: Yes. Accounting records only financial transactions. But there are other important events which may have farreaching effect on business. They are not recorded because they cannot be measured in money terms. For example, production loss due to machine break-down. Thus, it is a limitation to that extent.
Q11. Resignation by a Marketing Manager is not recorded in the books of accounts. Why?
Ans. It is not recorded because it cannot be measured in money terms.
Q12. Book Keeping is not a part of accounting. Do you agree with the statement?
Ans: No. Book Keeping is a part of accounting. Two processes of accounting, i.e., collecting and recording of financial transactions and events are the processes of Book Keeping.
Q13. Is the basic objective of Book Keeping to maintain systematic records or to ascertain net results of operations of financial transactions?
Ans: The basic objective of Book Keeping is to maintain systematic records of financial transactions.
Q14. Recording the transactions and events correctly and preparing financial statements are the only objectives of accounting. Do you agree?
Ans: No. Besides recording them correctly and preparing financial statements, accounting has the objectives of facilitating management control and communicating financial information to the users.
Q15. Which type of accounting information shows profit earned or loss incurred?
Ans: Profit and Loss Account in case of firms and Statement of Profit and Loss, in case of companies.
Q16. Which type of accounting information shows surplus or deficit in the ease of Not-For -Profit Organisation?
Ans: Income and Expenditure Account
Q17. State whether the following statements are True or False with reason:
(i) Accounting may be influenced by the personal judgment.
(ii) Financial Statements are not comparable.
(iii) Accounting Information must be presented in such a way that only accounting people understand it.
(iv) Accounting Information must be reliable.
Ans: (i) True: Accountant has to exercise his personal judgment in respect of various items.
(ii) False: Financial Statements may be comparable if different firms in the same industry adopt the same accounting principles year to year.
(iii) False: Accounting Information must be presented in such a simple and logical manner that they are understood easily by the users.
(iv) True: Accounting Information must be reliable, i.e., the information must be factual and verifiable.