CBSE Class 11 Accountancy Revision Worksheet Set 01

VERY SHORT ANSWER TYPE QUESTIONS

Qno1. Define noting charges.
Answer: Noting charges are the fees charged by a Notary Public for officially recording the dishonour of a bill of exchange or promissory note. When a bill is dishonoured on maturity, the holder gets it noted by a notary public to obtain official evidence of dishonour. These charges are initially paid by the holder, but are ultimately recoverable from the party responsible for the dishonour (usually the drawer or debtor).
In simple words: Noting charges are the official fee paid to a notary public to record that a bill was not paid on its due date.

Exam Tip: Always remember that noting charges are ultimately borne by the drawee/debtor, even if paid initially by the holder.

Qno2. Define Retiring of a bill
Answer: Retiring of a bill refers to the process where the drawee or acceptor of a bill of exchange makes payment of the bill before its due date. In consideration of early payment, the holder of the bill usually allows a rebate or discount to the drawee for the unexpired period.
In simple words: Retiring a bill means paying the bill amount before the due date, usually in exchange for a cash discount called rebate.

Exam Tip: Mention the term 'rebate' while defining the retirement of a bill, as rebate is the incentive for early payment.

Qno3. Define Date of Maturity.
Answer: The date of maturity is the date on which a bill of exchange or a promissory note becomes due for payment. It is calculated by adding three days of grace to the nominal due date (the date determined by the period of the bill).
In simple words: Maturity date is the exact day when the bill must be paid, including the statutory 3 days of grace.

Exam Tip: Do not forget to include the 3 days of grace when calculating the maturity date unless the bill is payable on demand or at sight.

Qno4. Define Bill at sight.
Answer: A bill at sight is a bill of exchange that is payable immediately upon presentation or demand to the drawee, without any fixed period of time or days of grace being allowed for payment.
In simple words: A bill at sight must be paid immediately when it is shown to the drawee.

Exam Tip: Note that bills payable at sight do not have days of grace because payment is demanded immediately upon presentation.

Qno5. State the Treatment of closing stock appearing in a trial balance
Answer: When closing stock appears inside the Trial Balance, it means that the adjustment for closing stock has already been made through the purchases account (i.e., Adjusted Purchases is given). Therefore, closing stock is shown ONLY on the asset side of the Balance Sheet and is NOT included in the Trading Account.
In simple words: Closing stock in the trial balance goes only to the Balance Sheet as an asset, not to the Trading Account.

Exam Tip: This is a frequent trap in final accounts. Items inside the trial balance appear in only one financial statement.

Short Answer Type Questions

Qno6. Explain order of Liquidity
Answer: The order of liquidity is a method of arranging assets and liabilities in the Balance Sheet based on how easily and quickly they can be converted into cash (for assets) or paid off (for liabilities). Under this order, the most liquid asset (such as Cash in Hand or Cash at Bank) is presented first, and the least liquid asset (such as Goodwill or Land and Building) is presented last. Similarly, current liabilities are listed first and long-term liabilities last.
In simple words: Order of liquidity means arranging assets and liabilities starting from the most liquid (cash) to the least liquid (permanent assets).

Exam Tip: Contrast this with the 'order of permanence', where permanent assets are placed at the top.

Qno7. Give any three differences between Trading and Profit and Loss Account and Balance sheet.
Answer: 1. Nature: Trading and Profit and Loss Account is a nominal account reflecting revenue and expenses for a period, whereas a Balance Sheet is a statement showing assets and liabilities on a specific date.
2. Purpose: The main objective of the Trading and Profit and Loss Account is to ascertain the net profit earned or net loss incurred during an accounting period, while the purpose of a Balance Sheet is to show the financial position of the business.
3. Balance Carry Forward: Balances of Trading and Profit and Loss accounts are closed at the end of the year by transferring them to Capital, whereas Balance Sheet items are permanent balances carried forward to the next accounting year.
In simple words: Trading and P&L shows profit or loss for the year, while a Balance Sheet shows financial position on a particular day.

Qno8. State the parties to a promissory note.
Answer: The parties to a promissory note are:
1. Maker (Debtor/Promisor): The person who makes the promissory note and promises to pay a certain sum of money.
2. Payee (Creditor/Promisee): The person to whom or to whose order the amount stated in the promissory note is payable.
In simple words: A promissory note has two main parties: the maker who promises to pay, and the payee who receives the money.

Exam Tip: Do not confuse a promissory note (2 parties) with a bill of exchange (3 parties: drawer, drawee, payee).

Qno9. Ashok drew on Rakish three bill of exchange respectively on 29th, 30th, and 31st January 2008. The term in each case is 1 month. What will be the due date of payment in each case?
Answer: 1. Bill drawn on 29th January 2008 for 1 month:
Nominal due date = 29th February 2008 (Note: 2008 is a leap year, so February has 29 days).
Adding 3 days of grace = 29th February + 3 days = 3rd March 2008.
2. Bill drawn on 30th January 2008 for 1 month:
Nominal due date = 28th February 2008 (Since February 2008 ends on 29th, but standard practice in month-end adjustments for non-leap years uses 28th, let us verify: 28th February is the last day of the month).
Adding 3 days of grace = 28th February + 3 days = 2nd March 2008.
3. Bill drawn on 31st January 2008 for 1 month:
Nominal due date = 28th February 2008 (last day of the month).
Adding 3 days of grace = 28th February + 3 days = 2nd March 2008.
In simple words: Add one month to the date, then add 3 grace days. Adjust for month-end dates when February ends early.

Exam Tip: Always check if the maturity month has 28 or 29 days (leap year check: 2008 is divisible by 4).

Qno10. From the following information, prepare the Trading Account for the year ending 31st march 2008.
Adjusted purchases Rs 660000, Sale Rs 744000, Closing Stock Rs 50400, Freight and Carriage inwards Rs 3600, Wages Rs 6000, Cartage inward Rs 2000
Answer:

In simple words: When adjusted purchases are given, opening stock and closing stock are ignored in the Trading Account calculation.
Exam Tip: Since adjusted purchases already account for opening and closing stock, do not add closing stock to the credit side of the Trading Account.

Qno11. B owed A Rs 4000 on 1st January, 2008. B accepted a 3 months bill for Rs 3900 being in full settlement of he claim. At its due date the bill is dishonoured. Noting charges are paid by A. Give journal entries in the books A and B.
Answer:
Journal Entries in the Books of A (Drawer / Creditor):
1. 2008 Jan 1: Bills Receivable A/c Dr. 3900
Discount Allowed A/c Dr. 100
To B's A/c 4000
(Being acceptance received from B in full settlement of claim)
2. 2008 April 4 (Due date): B's A/c Dr. 3950
To Bills Receivable A/c 3900
To Cash/Bank A/c 50
(Being bill dishonoured on maturity and noting charges paid by A)
Journal Entries in the Books of B (Drawee / Debtor):
1. 2008 Jan 1: A's A/c Dr. 4000
To Bills Payable A/c 3900
To Discount Received A/c 100
(Being acceptance given to A for Rs 3900 in full settlement)
2. 2008 April 4: Bills Payable A/c Dr. 3900
Noting Charges A/c Dr. 50
To A's A/c 3950
(Being bill accepted in favour of A dishonoured and noting charges liability incurred)
In simple words: When a bill is dishonoured, reverse the entry and debit the debtor with the full amount including noting charges.

Exam Tip: Discount allowed is debited by A and discount received is credited by B at the inception of the bill due to full settlement.

Qno12. From the following Trial balance prepare a Trading and Profit and Loss Account for the year ending March 31, 2008 and the balance sheet as on that date. Closing Stock was valued at Rs 54000
Answer:
Trading and Profit and Loss Account for the year ended March 31, 2008

Balance Sheet as on March 31, 2008 (Order of Liquidity)

In simple words: Net profit is added to capital, returns are deducted from purchases and sales, and assets/liabilities are placed in liquidity order.
Exam Tip: Always double-check trial balance debit/credit allocations (e.g., Cash and bank overdraft has debit Rs 42000 and credit Rs 72000 representing cash asset and bank overdraft liability).

Qno13. Prepare format of Balance Sheet in order of Liquidity.
Answer:
Proforma Balance Sheet (Order of Liquidity)

In simple words: Order of liquidity lists cash first on the assets side and current liabilities first on the liabilities side.
Exam Tip: Clearly label the format as 'Balance Sheet (In order of Liquidity)' to secure full credit in exams.