Q1: Define Process of Accounting
Ans: Accounting process of a company starts with the identification of the company’s transaction and then recording, categorizing, and summarizing of a business transaction, which helps in preparation of trial balance and financial statement.
Q2: What is the cash basis of accounting?
Ans: In cash basis of accounting, incomes are note recorded unless they are received in cash. Similarly, expenses are recorded only when they are paid in cash.
Q3: What is accrual basis of accounting?
Ans: In this process, incomes are registered when it is accrued or earned, whether the cash is collected or not, for instance, for a sales done on credit will be registered in the total sales of the term. Likewise, expenses are registered when it becomes due or incurred and not when the cash is paid for them.
Q4: In which basis of accounting outstanding expenses are not recorded?
Ans: In cash basis of accounting the outstanding expenses are not recorded.
Q5: Write two advantages of accrual basis of accounting.
Ans: The two advantages of accrual basis of accounting are.
(i) It reveals true profit or loss for a specific period.
(ii) It adheres to the matching principle of accounting.
Q6: Which basis of accounting is recognized under the Companies Act, 2013.
Ans: The accrual basis of accounting is recognized under the Companies Act, 2013
Q7: Does the cash basis of accounting violate GAAP? IF, yes, how?
Ans: Yes, the cash basis of accounting violate GAAP because it does not follow the principle and accrual concept.
Q8: Explain in details all the steps followed in the process of accounting.
Ans: The steps included in the process of accounting are.
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