# Chapter 2 Theory Base of Accounting Case Study Questions

Please refer to the Chapter 2 Theory Base of Accounting Case Study Questions with answers provided below. We have provided Case Study Questions for Class 11 Accountancy for all chapters as per CBSE, NCERT and KVS examination guidelines. These case based questions are expected to come in your exams this year. Please practise these case study based Class 11 Accountancy Questions and answers to get more marks in examinations.

## Case Study Questions Chapter 2 Theory Base of Accounting

Case Based Questions

Read the following case study and answer questions

Olly and Robin are two friends graduated from a top college of the country. After the college, they decide to build a start up in their hometown, Bengaluru. They decided to start a subscription service of fruits in the nearby cities. For obtaining high-quality fruits, they made 5-year contracts with farmers in and around Karnataka. They also decided to purchase machinery for cleansing and quality check of the fruits. The business of the company started booming. Two years down the line, they had built a strong brand and reputation. To leverage the same, the company decided to venture into other states as well with the similar service line. They first expanded to Tamil Nadu and got great demand. While accounting, company usually booked a normal loss to account forspoiled fruits that they might get. Moreover ,   they charged depreciation on the machinery to ensure that expenses are distributed over the years. With all these good practices, after four more years of operations, the company attained a unicorn status.

Question. “They first expanded to Tamil Nadu and got great demand.” Which type of GST is applicable on this supply to Tamil Nadu?
(a) Centre GST
(b) State GST
(c) Integrated GST
(d) Both (a) and (b)

Answer

C

Question. Which AS will be applicable to evaluate the reputation and brand value of firm?
(a) AS-20
(b) AS-26
(c) AS-30
(d) AS-2

Answer

B

Question. The principle highlighted in the line, “Moreover, they charged depreciation on the machinery to ensure that expenses are distributed over the years” is matching principle.
(a) True
(b) False
(c) Partially false
(d) Can’t say

Answer

A

Question. Which concept is highlighted in the fact that company made long-term contracts with the farmers?
(a) Going concern concept
(b) Accrual concept
(c) Consistency concept
(d) Both (a) and (b)

Answer

A

Question. Which principle is highlighted in the line, “While accounting, company usually booked a normal loss to account for spoiled fruits that they might get”?
(a) Business entity principle
(b) Prudence principle
(c) Materiality principle
(d) Full disclosure principle

Answer

B

Read the following case study and answer questions

Golu Plastic Ltd (GPL) is a leading plastic articles manufacturing company. It was listed on Indian stock market in 1999. The founders and promoters of the company hold the highest number of shares of the company, approximately around 55%. All these founders belong to a single family. Unfortunately, all of them died in a car accident recently. However, the company continued to exist and grow.In the year 2004, the company imported multiple machines for producing low – cost plastic sheets. The machines were recorded at  the price prevailing in 2004 and have been subjected to depreciation year on year based on written down value method. The depreciation is treated as a non-cash expense while preparing the cash flow statement. When GST was implemented in 2017, it benefitted the company by streaming  the processes. A single rate of GST was charged on the supply of the goods and the process of filing was very simple.

Question. Which principle is highlighted in the line, ‘‘The machines were recorded at the price prevailing in 2004”?
(a) Full disclosure principle
(b) Conservatism principle
(c) Duality principle
(d) Historical cost principle

Answer

D

Question. “A single rate of GST was charged on the supply of the goods …”. Who levy GST on this common base?
(a) Centre government
(b) State government
(c) Union territory government
(d) Both (a) and (b)

Answer

D

Question. Which principle/concept is highlighted in the line,” … and have been subjected to depreciation year on year based on written down value method.”?
(a) Full disclosure principle
(b) Business entity principle
(c) Consistency concept
(d) Accrual concept

Answer

C

Question. Which principle is highlighted in the fact that the company continued even after death of the founders?
(a) Business entity principle
(b) Money measurement principle
(c) Duality principle
(d) Historical cost principle

Answer

A

Question. Which AS is required to be followed to prepare cash flow statements?
(a) AS-1
(b) AS-2
(c) AS-3
(d) AS-4

Answer

C

Read the following case study and answer questions

Dukuma is an MSME business in the Alwar district of Rajasthan. It is 40 years old business of selling hardware parts to local traders of the district and some other retailers of Rajasthan. The company has multiple SKUs and the inventories ar e valued by their  accountant. The accountant of the enterprise also happens to be a good friend of the owner of the enterprise. Therefore, the fees of the accountant was not paid in the year when pandemic set in as the firm was going through cash-crunch. However, the accountant entered the amount of his fees as expense even though cash was not paid. He justified his act by stating some accounting concepts. The accountant further completed the books of accounts for the year ended 31st December, 2020. Over the years, the company has developed a reputation in market by supplying high quality products and customer-friendly service. The owner of the firm asked the accountant to enter this fact but accountant denied and gave the correct reasons. The owner was contended.

Question. Which AS would have been followed by accountant to value inventories?
(a) AS-1
(b) AS-2
(c) AS-3
(d) AS-4

Answer

B

Question. The company follows the calendar year as accounting year. Which principle is highlighted in the fact that firm divided the whole life of firm into small financial years?
(a) Dual aspect principle
(b) Materiality principle
(c) Prudence principle
(d) Accounting period principle

Answer

D

Question. Which principle/concept of accounting is highlighted in the line, “Therefore, the fees of the accountant was not paid in the year when pandemic set in as the firm was going through cash-crunch. However, the accountant entered the amount of his fees as expense even though cash was not paid”?
(a) Dual aspect principle
(b) Accrual concept
(c) Consistency concept
(d) Cost principle

Answer

B

Question. “The owner of the firm asked the accountant to enter this fact but accountant denied and gave the correct reasons.” Which principle was used by accountant to explain the owner?
(a) Dual aspect principle
(b) Money measurement principle
(c) Full disclosure principle
(d) Accounting period principle

Answer

B

Question. The supplies of the company would be subjected to Integrated GST.
(a) True
(b) False
(c) Partially true
(d) Can’t say

Answer

B