CA Foundation Exam > CA Foundation Videos > Principles and Practice of Accounting > Quick Revision of Accounting for NPO
Quick Revision of Accounting for NPO Video Lecture | Principles and Practice of Accounting - CA Foundation
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68 videos|160 docs|83 tests
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FAQs on Quick Revision of Accounting for NPO Video Lecture - Principles and Practice of Accounting - CA Foundation
| 1. What are the basic principles of accounting? |  |
Ans. The basic principles of accounting include the accrual principle, the consistency principle, the going concern principle, the matching principle, the materiality principle, the monetary unit principle, the prudence principle, and the revenue recognition principle. These principles provide a framework for recording, reporting, and interpreting financial transactions and are essential for producing accurate and reliable financial statements.
| 2. What is the difference between cash basis and accrual basis accounting? | |
Ans. Cash basis accounting records revenue and expenses when cash is received or paid, while accrual basis accounting recognizes revenue when it is earned and expenses when they are incurred, regardless of the timing of cash flows. The accrual basis provides a more accurate picture of a company's financial performance and position since it reflects the economic impact of transactions rather than just the timing of cash transfers.
| 3. How does depreciation affect financial statements? | |
Ans. Depreciation is the systematic allocation of the cost of an asset over its useful life. It affects financial statements by reducing the value of the asset on the balance sheet and increasing expenses on the income statement. The depreciation expense reduces the net income and, consequently, the retained earnings. It also impacts the cash flow statement by reducing the cash flow from operating activities due to the non-cash expense.
| 4. What is the purpose of the trial balance? | |
Ans. The purpose of the trial balance is to ensure the accuracy of the accounting records by comparing the total debits with the total credits. It lists all the accounts and their balances, including assets, liabilities, equity, revenues, and expenses. If the debits and credits are equal, it indicates that the recording of transactions has been done correctly. However, if there is a discrepancy, it suggests an error in the accounting entries that needs to be identified and corrected.
| 5. How does the accounting equation relate to financial transactions? | |
Ans. The accounting equation, also known as the balance sheet equation, states that assets equal liabilities plus equity. This equation represents the fundamental relationship between a company's resources, its obligations to creditors, and the residual interest of its owners. Every financial transaction affects the accounting equation by changing the values of assets, liabilities, or equity. For example, if a company borrows money from a bank, it increases both its assets (cash) and liabilities (loan payable), keeping the equation in balance.
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Nov 21, 2024 Last updated |
Video Description: Quick Revision of Accounting for NPO for CA Foundation 2024 is part of Principles and Practice of Accounting preparation.
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