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Accountancy · Class 11 Commerce

Ch 2Conceptual Framework of Accounting — Class 11 Accountancy, concept-first.

If every accountant were free to record and report transactions however they liked, financial statements from different businesses could never be compared, and even the same business's figures could not be trusted from one year to the next.

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Q&A

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Concepts

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Key concepts

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Business Entity and Money Measurement Concepts

The Business Entity Concept treats the business as separate from its owner, so the owner's personal transactions never mix with the business's books and capital/drawings are recorded as if with an outsider.

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Chapter contents

The NCERT structure, section by section. Open a section to see its questions, then read the concept-first solution.

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Generally Accepted Accounting Principles (GAAP)

If every accountant were free to record and report transactions however they liked, financial statements from different businesses could never be compared, and even the same business's figures could n…

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Business Entity and Money Measurement Concepts

Business Entity Concept. The business is treated as an entity separate and distinct from its owner(s).

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Going Concern, Cost and Dual Aspect Concepts

Going Concern Concept. It is assumed that a business will continue to operate for a foreseeable, indefinitely long period, and has neither the intention nor the necessity of closing down or drasticall…

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Accounting Period, Matching and Realisation Concepts

Accounting Period Concept. Although a business is assumed to continue indefinitely (Going Concern), its life is artificially divided into shorter, uniform periods — usually one year — at the end of wh…

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Accounting Conventions

Conventions are customs that have evolved through long accounting practice, adopted for practical convenience and prudence rather than derived from a single formal rule.

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Accounting Standards

Accounting Standards are written policy documents issued by a recognised expert body — in India, the Institute of Chartered Accountants of India (ICAI), with corporate financial reporting now governed…

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The Accounting Equation

The Dual Aspect Concept expressed mathematically is the Accounting Equation:

Exercises

+Show 10 questions10 questions
  1. Q1Explain the Business Entity Concept and state why capital is shown as a liability in the Balance Sheet.Free
  2. Q2Why does the Money Measurement Concept ignore facts such as the skill of a firm's employees or a pending labour strike, even though these cl…Free
  3. Q3A business's machinery, bought for ₹5,00,000 three years ago, would now sell for only ₹3,00,000 in the market, but would cost ₹6,50,000 to r…Free
  4. Q4Mr. Kumar started a business on 1st April 2025 with ₹3,00,000 cash. During the year, following transactions took place: (i) Purchased furnit…Preview
  5. Q5If a firm's total assets are ₹8,50,000 and its capital is ₹5,50,000, find its total liabilities using the Accounting Equation.Preview
  6. Q6Distinguish between the Matching Concept and the Realisation Concept, using the example of a sale made in March 2026 but paid for in April 2…Preview
  7. Q7A trader values his closing stock at cost price ₹1,20,000, even though its current market/net realisable value is ₹1,45,000. Which accountin…Preview
  8. Q8A company has been using the Straight Line Method of depreciation for the past five years, and this year proposes switching to the Written D…Preview
  9. Q9Why does India require companies to follow Accounting Standards issued by the ICAI, rather than allowing each company to choose its own acco…Preview
  10. Q10State which accounting concept or convention is being applied in each of the following situations: (i) A company writes off the cost of a ₹1…Preview

Sample & Board Papers

Sample papers and previous-year board questions for this subject.

+Show 16 questions16 questions
  1. Q1GAAPs are : (a) Generally Accepted Accounting Principles (b) Generally Accepted Accounting Provisions (c) Generally Accepted Accounting Poli…Preview
  2. Q2Accounting equation signifies : (a) Capital of a business is equal to Liabilities (b) Capital of a business is equal to Assets (c) Assets of…Preview
  3. Q3In India, Accounting Standards are issued by : (a) Supreme Court of India (b) Reserve Bank of India (c) The Institute of Chartered Accountan…Preview
  4. Q4Write short notes on Going Concern concept.Preview
  5. Q5'Only monetary transactions are recorded in accounting'. Explain the statement.Preview
  6. Q6The concept which assumes that a business will last indefinitely is : (a) Periodicity (b) Business Entity (c) Conservatism (d) Going ConcernPreview
  7. Q7GAAPs are : (a) Generally Accepted Accounting Principles (b) Generally Accepted Accounting Provisions (c) Generally Accepted Accounting Poli…Preview
  8. Q8The incorrect accounting equation is : (a) Liabilities = Assets + Capital (b) Assets = Liabilities + Capital (c) Capital = Assets - Liabilit…Preview
  9. Q9Accounting equation signifies : (a) Capital of a business is equal to Liabilities (b) Capital of a business is equal to Assets (c) Assets of…Preview
  10. Q10The concept which assumes that a business will last indefinitely is : (a) Periodicity (b) Business Entity (c) Conservatism (d) Going ConcernPreview
  11. Q11A firm has Land and Building ₹ 40,000 Plant and Machinery ₹ 80,000 and the Capital ₹ 1,00,000. Its Liability to the outsiders would be : (a)…Preview
  12. Q12Briefly explain about Realisation concept.Preview
  13. Q13Show the effect of following business transactions on the accounting equation. (i) Anbu started business with cash ₹ 20,000, goods ₹ 12,000…Preview
  14. Q14The rule of stock valuation 'cost price or market value whichever is lower' is based on the accounting principle of: (a) Materiality (b) Mon…Preview
  15. Q15Complete the accounting equation (a) Assets = Capital + Liabilities ₹1,00,000 = ₹70,000 + ? (b) Assets = Capital + Liabilities ₹2,00,000 = ?…Preview
  16. Q16"Only monetary transactions are recorded in accounting". Explain the statement.Preview