Mastering Accountancy: A Comprehensive Guide to CBSE Board Exam Theory Questions and Answers(Day 2)

 Question And Answers: 

1. What are Accounting and its objectives?

Ans. Accounting is the process of recording, classifying, and summarizing financial transactions to provide useful information for decision-making. The objectives of accounting are to:

• Record financial transactions accurately and in a timely manner
• Classify financial transactions into meaningful categories
• Summarize financial transactions into financial statements
• Communicate financial information to stakeholders
• Analyze financial information to support decision making

2. What are Financial Statements? Explain its components.

Ans. Financial statements are documents that provide information about a company's financial performance and position. The three main components of financial statements are:

Income Statement: This statement shows a company's revenue, expenses, gains, and losses over a period of time.

Balance Sheet: This statement shows a company's assets, liabilities, and equity at a specific point in time.

Cash Flow Statement: This statement shows a company's inflows and outflows of cash during a period of time.

3. What are partnerships and their features?

Ans. A partnership is a type of business organization in which two or more people come together to carry on a business to profit. Its features are:

• There must be a partnership agreement outlining the partnership's terms and conditions.
• The partners share the profits and losses of the business according to the partnership agreement.
• Partners have unlimited liability for the debts and obligations of the partnership.
• Each partner is an agent of the partnership and can act on behalf of the partnership.
• The partnership can be dissolved by mutual consent, retirement or death of a partner, or court order.

4. What are the Retirement and Death of a partner in a partnership firm?

Ans. The retirement of a partner in a partnership firm occurs when a partner leaves the partnership by choice or due to reaching retirement age. Death of a partner occurs when a partner passes away. In both cases, the partnership is dissolved, and the remaining partners can either continue the business or wind it up.

5. What are the Dissolution of a Partnership Firm and its various modes?

Ans. Dissolution of a partnership firm occurs when the partnership is terminated. The various modes of dissolution are:

• Dissolution by agreement: When the partners agree to dissolve the partnership.
• Dissolution by notice: When one partner gives notice to the other partners of his intention to dissolve the partnership.
• Dissolution by court order: When the court orders the dissolution of the partnership due to some legal or other reasons.
• Compulsory dissolution: When a partner becomes insolvent, incapacitated, or behaves in a way that harms the partnership's reputation or business.

6. What are Debentures and their types?

Ans. Debentures are long-term debt instruments that are issued by companies to raise funds from the public. The types of debentures are:

• Secured Debentures: These are debentures that are backed by a charge on the company's assets, which means that in case of default, the debenture holders have the first right on the company's assets to recover their investment.
• Unsecured Debentures: These are debentures that are not backed by any security and are issued solely based on the company's creditworthiness.
• Convertible Debentures: These are debentures that can be converted into company equity shares after a specified period.
• Non-Convertible Debentures: These are debentures that cannot be converted into equity shares of the company.

7. What are Cash Flow Statements and their uses?

Ans. A cash flow statement is a financial statement that shows the inflows and outflows of cash and cash equivalents during a period. Its uses are:

• To assess the ability of a company to generate cash from its operations.
• To assess the liquidity of a company.
• To identify the sources and uses of cash in a company.
• To evaluate the cash flow patterns of a company over time.

8. What are Ratio Analysis and its advantages?

Ans. Ratio analysis is a tool used to analyze a company's financial performance by comparing different financial ratios. Its advantages are:

1. To identify the strengths and weaknesses of a company's financial performance.
2. To assess the company's liquidity, profitability, and solvency.
3. To compare a company's financial performance with industry benchmarks.
4. To assist in decision-making regarding investment, lending, and other financial transactions.

9. What is the Reconstitution of Partnership and its types?

Ans. Reconstitution of partnership refers to the changes that occur due to a partner's admission, retirement, or death. The types of reconstitution of partnership are:

1. Admission of a partner: When a new partner is admitted into the partnership, the existing partnership is reconstituted. The new partner may bring in capital or expertise, and the profit-sharing ratio of the partners may be adjusted.
2. Retirement of a partner: When a partner retires from the partnership, the existing partnership is reconstituted. The retiring partner may be paid out his share of the partnership assets, and the profit-sharing ratio of the remaining partners may be adjusted.
3. Death of a partner: When a partner dies, the existing partnership is reconstituted. The legal heirs of the deceased partner may be paid out his share of the partnership assets, and the profit-sharing ratio of the remaining partners may be adjusted.

10. What are Ratio Analysis and its significance?

Ans. Ratio analysis is a technique of financial analysis that involves calculating and interpreting the financial ratios of a company. Financial ratios are calculated by dividing one financial statement item by another. Ratio analysis helps in assessing the financial health and performance of a company by analyzing its liquidity, solvency, profitability, and efficiency. Ratio analysis is significant because it helps in:

• Assessing the financial health and performance of the company.
• Comparing the performance of the company with its competitors.
• Identifying the strengths and weaknesses of the company.
• Evaluating the efficiency of the management of the company.

In conclusion, these are some of the most occurring questions in the CBSE Board examination for the Accountancy subject for Class 12th. Studying and understanding these topics will help students prepare well for the exam and score good marks. It is important to note that these are not the only topics that can come in the exam, and students should be well-versed in all the topics and concepts covered in the syllabus.