Q.Tick the Correct Answer 1. Which of the following is not a business transaction?
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Start your 14-day free trial to unlock the full solution →Answers: 1-(c), 2-(d), 3-(c), 4-(a), 5-(a). These cover the business entity concept, relevance, the last step of accounting, and the characteristics of understandability and comparability.
| # | Answer |
|---|---|
| 1 | (c) Paid son's fees from her personal bank account ₹20,000 |
| 2 | (d) Similar building cost in August, 2005 ₹25,00,000 |
| 3 | (c) Communication of information |
| 4 | (a) Understandability |
| 5 | (a) Comparability |
1. Under the business entity concept the business is treated as separate from its owner, so only dealings affecting the firm's own resources are business transactions. Paying the son's fees from a personal bank account (c) touches only the owner's private funds and is not recorded in the business books. Buying furniture (a), paying salaries (b) and paying the son's fees from the business - recorded as drawings - (d) all change the firm's financial position, so (c) is the odd one out.
2. Relevance means information must be capable of influencing a decision at the time it is taken. For a purchase being made today, the most recent price - the August 2005 figure of ₹25,00,000 (d) - best reflects current market value. The 2000, 2003 and 1998 figures are outdated and lack relevance.
3. Accounting as an information process runs through identifying, recording, classifying, summarising, analysing, interpreting and finally communicating information to users. Communication (c) is therefore the last step; recording (a) is one of the earliest, while summarising (b) and analysis/interpretation (d) come in the middle. …
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