important Theory Questions
1. Show difference between private company and public company
| Private Company | Public Company |
|---|---|
| It is a company where number of shareholders is limited. | It is a company where number of shareholders can be unlimited. |
| It is compulsory to use word "Pvt. Ltd." after its name. | It is compulsory to use word "Ltd." after its name. |
2. Show differences between Preference share and Equity Share
| Equity Shares | Preference Shares |
|---|---|
| Equity shares represent ownership in a company, and shareholders have voting rights and share in the company's profits and losses | Preference shares represent ownership in a company with a fixed dividend rate and priority in receiving dividends and assets in case of liquidation. |
| The dividend rate is not fixed. | Dividend rate is fixed. |
| Equity shareholders have voting rights. | Preference shareholders do not have voting rights. |
3. Define Authorized capital, Subscribed capital, Paid-up capital, and Called-up capital
Authorized capital: The maximum amount of capital that a company is authorized to raise through the sale of its shares to the public.
Subscribed capital: The portion of the authorized capital that has been subscribed or taken up by the shareholders of a company.
Paid-up capital: The portion of the subscribed capital that has been paid for by the shareholders of a company.
Called-up capital: The portion of the subscribed capital that the company has requested to be paid by the shareholders.
4. Show the difference between share and debenture
| Aspect | Shares | Debentures |
|---|---|---|
| Ownership | Shares represent ownership in a company | Debentures represent debt owed by the company to the debenture holder |
| Returns | Shareholders receive returns in the form of dividends | Debenture holders receive fixed interest payments |
5. Write about MOA, AOA and Prospectus
Memorandum of Association (MOA): A legal document that includes name of company, registered office, objectives.
Articles of Association (AOA): A document that outlines the rules and regulations for the internal management of the company, such as the powers and duties of directors, shareholder meetings, and voting rights.
Prospectus: A formal document that provides important information about the company while issuing shares or debentures to the public. It includes financial statements, management structure, risks etc.
6. Define cumulative and non-cumulative preference share.
Cumulative preference shares are known as the preference shares that have the power to collect dividends which are not paid in the future years, in case the same is not paid during a year.
If the dividend is not accumulated over the unpaid dividends in a particular year, it is called Non-cumulative shares.
7. Write meaning and objectives of Cost Accounting and Financial Accounting
| Aspect | Cost Accounting | Financial Accounting |
|---|---|---|
| Definition | Cost accounting is the process of recording, classifying, analyzing, and allocating costs associated with the production of goods or services in a company. | Financial accounting is the process of recording, classifying, summarizing, and communicating financial information of a company to external stakeholders. |
| Objectives |
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8. Types of Overhead
| On basis of Function | On basis of Elements | On basis of Behaviour | On basis of control |
|---|---|---|---|
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9. Various types of Costing
| Types of Costing | Definition | Purpose | Example |
|---|---|---|---|
| Job Costing | A method of cost accounting used to determine the cost of producing unique or customized products or services | To determine the cost of each job or project | designing a software program |
| Process Costing | A method of cost accounting used to determine the cost of producing same products through continuous processes | To determine the average cost of each unit of product | Cost of producing a unit of Biscuit |
| Batch Costing | A method of cost accounting used to determine the cost of producing a specific batch or group of products | To determine the cost of each batch or group of products | Cost of producing a batch of cookies |
| ABC Costing | A method of cost accounting used to allocate costs to specific activities that contribute to the production of products or services | To accurately determine the cost of each product or service | Cost of producing a custom-made car |
| Contract Costing | Contract costing is a form of particular order costing that contractors apply for orders of a long duration | To determine the cost of undertaken contracts | Costing of a Road Construction |
10. What is allocation of overhead?
Allocation of overheads means charging all the amount of cost to a particular department or cost center.
11. What are the two duties of storekeeper?
The two duties of storekeeper are: Inventory Management, Record Keeping, Stock Verification.
12. Difference between centralized purchase and decentralized purchase
| Centralize Purchase | Decentralize Purchase |
|---|---|
| A purchase model in which all purchasing decisions are made by a central purchasing department or team | A purchase model in which individual departments or business units are responsible for their own purchasing decisions |
| Decisions are made by a central team or department | Decisions are made by individual departments |
| Company can enjoy huge discount on purchase | Company can enjoy huge discount on purchase |
13. What is Bin Card?
A record that tracks the receipt, issue, and balance of inventory within a particular time for stock/store management.
14. What is bar code?
A series of lines or patterns printed on a product or packaging that can be scanned electronically to retrieve information about the product, such as its price, location, or other data.
15. What are the motives of holding inventories?
The motives of holding inventories are to meet customer demand, protect from uncertainties, smooth production, take advantage of quantity discounts.
16. Difference between Time rate wage system and Piece rate wage system.
| Aspect | Time Rate Wage System | Piece Rate Wage System |
|---|---|---|
| Definition | The wage rate system in which wages is paid on the basis of time worked by the worker | The wage rate system in which wages is paid on the basis of unit produced by the worker |
| Advantages | Simplicity, High Quality | High Production, Promote efficient worker |
| Disadvantage | Low Production, Discourage efficient worker | Low Quality, Discrimination among worker |
17. What is computerized accounting system (CAS)?
Computerized Accounting System refers to the processing of accounting transaction through the use of computer in order to produce accounting records and reports.
18. What are the elements of computer system in accounting?
The elements of computer systems in accounting are Hardware, Software, People, Procedures, Data and Internal Controls (Security measures).
19. What are the applications of computer in accounting?
- Recording of business transactions.
- Store Accounting
- Payroll Accounting
- Bank Reconciliation
- Budgeting
20. Write features, importance, uses and limitations of accounting software
| Features | Importance | Uses | Limitations |
|---|---|---|---|
| Flexibility | Fast processing Accuracy | Improve Accounting | High installation cost |
| Maintenance | Cost and Updated Information | Speed up accounting calculations | Cost of Training |
| Training Needs | Accurate Information | Improve data security | Fear of Unemployment |
| Easier availability of Information | Efficiency | Generate accurate reports | Size of Organization |
| Increase productivity | System Failure | ||
| Health Impact | |||
| Transfer of data | |||
| Level of secrecy |
All the best for your exams!