account important question of class 12

Company

1.       What the meaning of joint stock company. (Define company)

A company is a voluntary association of many persons for profit with capital divisible into  transferable shares with limited liabilities. It is an artificial person created by law with perpetual succession and common seal. It is registered under Nepal company act 2063 B.S. so a voluntary association formed with a contribution of transferable common shares of many persons for the sake of common business purpose is called company.

2.       Write any three characteristics of a company.

1.       Voluntary association: a company is a voluntary association of many persons who take part in its capital by investing  transferable shares

2.       Limited liability: shareholders” liabilities are limited up to their investment of shares. They do not bear any financial loss in case of liquidation of an company.

3.       Transferability of shares: share issued by the company are easily transferable. The ownership can be transferred from one person to another through stock exchange market.

3.       Write any three advantages (features) of public limited company.

Three advantage of public limited company are:

1.       Huge capital: the company collected capital by selling share to the public. So it can form a very huge capital.

2.       Limited liability: shareholders” liabilities are limited up to their investment of shares. They do not bear any financial loss in case of liquidation of an company.

3.       Transferability of shares: share issued by the company are easily transferable. The ownership can be transferred from one person to another through stock exchange market.

4.       Write the meaning of private limited company.

A company established by a single person or with the provision of limited person’s i.e. limited upto 50 members is known as private limited company. Such a company cannot issues to the common peoples the common people for collection of capital and it does not publish a prospectus also. It uses the words “pvt.ltd”. At the end of the company’s name.

5.       Write the meaning of public limited company.

A company established by having at least 7 members in minimum with no limitation for maximum number of members is known as public limited company.it can issue transferable shares openly to all common to all peoples for the collection of capital. It publishes a publishes a prospectus to general people. it uses the word “ltd.” At the end of the company name.

6.       Writes any three difference between a private and public limited company.

Or

Show 3 distinct between private company and public ltd. Company

Private LTD. company	Public ltd. Company
One single person also can establish this company and maximum number can be 50.	It needs at least 7 members for its formation and no limitation for maximum number.
It distributes share among its members only, not for public.	It issues shares openly for all people.
It must use the world “pvt.ltd” at the end of its name.	It must use the word “ltd”. At the end of its name.

7.       Write any three privileges of private company as provided by company act.

Three privileges of private company as provided by company act are.

1.       It can be started even by a single person.

2.       It can start its business immediately after registration.

3.       It does not need to publish and issue prospectus.

8.       Write the meaning of memorandum of association.

It is main document of a company that describes the objectives and right of the company. It is the life giving documents of a company. It includes the following:-

a.       Name of the company

b.      Location of the company

c.       Amount of capital

d.      Number of share

e.      Objectives of the company.

9.       Write the meaning of article of association.

It is the main document of a company that describes the internal rules and regulations of the company to conduct it. It is compulsory under the Nepal company act 2063. It is the document that defines the mode and manner in which the company’s business is to carried out to achieve its objectives. It includes:-

a.       Appointments, rights and responsibilities of directors and their remunerations

b.      Procedures for holding meetings and

c.       Rules and regulations of internal managements

10.   Writes the meaning of prospectus.

It is an invitation to the public inviting them to purchase shares or debentures of the company. It is a kind of notice or advertisement issued to encourage public to invest their money in shares and debentures of the company. It includes the following contents:-

a.       Information about the company.

b.      Information about capital structure like authorized shares, issued shares, subscribed shares, called up and paid up capital.

c.       Terms and conditions of the payment of share capital or debentures.

d.      Estimated income and expenditure of the company at least for coming three years.

e.      Expected dividend, voting rights and other information.

Share and debentures

1.       What is meant by share capital?

Share capital is the capital collected by issuing shares to general people. The capital collected by issuing ordinary shares or preference shares is known as share capital. In other words, the capital formed by means of shares issued to the public is called share capital.

2.       Define equity share.

The share which has no preferential rights to get dividend at the time of profit and liquidation of the company is known as equity share. In other words, equity shares are the shares which are supposed to get the dividend and repayment of capital only after the claims of preference shares are settled and satisfied. It is the share which has a voting rights to elect the board of directors to conduct the company. Equity share is also known as ordinary share or common stock.

3.       Write any three features (characteristics) of equity share.

1.       Permanent in nature: it is transferable from one person to another but it is not redeemed or repaid unless the liquidation of the company. So it is permanent in nature.

2.       Declaration of dividend: rate of dividend is not prefixed and the amount of dividend is distributed after the dividend paid to preference shares.

3.       Voting rights: every equity shareholder has a voting rights to elect the board of directors.

4.       Define preference share.

Preference share is that part of share capital in which shares holders gets dividend at first, before equity shareholders, which could either be a fixed amount or an amount calculated as a fixed rate. These shares carry preferential rights to get dividend and repayment of capital on winding up of the company. Preference share may of different types according to certain terms and conditions such as redeemable preference share, convertible preference share etc.

5.       Write any three differences between equity and preference shares.

The following are the differences between equity and preference shares.

Equity shares	Preference shares
Equity dividend is paid after the payment of preference dividend.	Preference dividend is paid before the payment of equity dividend.
Equity share is neither redeemable nor convertible during the life time of company.	Preference share may be redeemable and convertible after the expiry of certain time.
Equity shareholders enjoy voting rights.	Preference shareholders do not have voting rights.

6.       Write about calls in arrears and calls in advance.

The installment as call amount of share remained unpaid till the date of payment is known as calls in arrears. In other words, any installment of share called up but the money is not still received on due date is called calls in arrears. Interest is charged on such calls in arrears amount. It is not compulsory to open calls in arrear account. It is a part if assets.

Any call amount received in advance before making that call is known as calls in advance. In simple words, any amount received in advance before making call is called call in advance. It is the pre received amount and so it is treated as liability.

7.       What is forfeiture of shares?

If a shareholder doesn’t pay the amount of allotment and call money within the time specified, the company cancels his or her shares and sizes the already paid amount by passing a resolution by the board of directors. It is known as forfeiture of shares. In other words, forfeiture of shares is a process of canceling the shares allotted and seizing the amount already paid by the defaulters.

8.       Difference between issued capital and subscribed capital.

Issued capital	Subscribed capital
It is the part of authorized capital.	It is the part of issued capital
It is the share issued by the company to the public.	It is the share subscribed by the people
Issued capital may not be more than authorized capital.	Subscribed capital may be less, equal or even more than the issued capital.

9.       Write the meaning of debenture.

Debenture is a contract or bond which guarantees the payment of annual interest at a fixed rate any payment of principal amount at a specified date. In simple words, debenture is a loan or borrowed capital. The person holding debenture is known as debenture – holder. The company has to pay interest to debenture at an agreed rate.

10.   State any three features (characteristics) of debenture.

The main features of debentures are

1.       It is a written Acknowledgement of debt that form a loan capital.

2.       Its interest is pre- fixed and paid half yearly.

3.       It consist the conditions or options in case of redeemable debenture.

11.   Differentiate between equity share and debentures.

 The main three differences share and debenture are.

Share	Debenture
It is real and owner’s capital.	It is a loan capital.
Return on share investment is called dividend	Return on debenture investment is called interest.
Shares are always perpetual.	Debentures may be perpetual or redeemable.

Final account / financial statement analysis

1.       Write the meaning of financial statement (financial account).

Financial account is the records of the financial transaction in the books maintained in order to state the true result of a concern or firm for a particular period. It is the account prepared by every firm to ascertain period and a true financial position of a firm on certain date. So, it concerns with the preparation of income statement and a balance sheet. It is the financial statement which provides financial information required by shareholder, bankers, agencies and government.

2.       Write briefly on fixed assets and current assets with suitable examples.

The assets which can be used for generating income and cash inflow foe longer period of time are called fixed assets. They are of long term nature and not easily convertible into cash in short period of time. Furniture, land and building, machinery are the examples of fixed assets.

 The Assets which are easily convertible into cash within a year is called current assets. They are of short term nature. They are also known as floating assets. Cash in hand, cash at bank, debtors, stock etc. are examples of current assets.

3.        Define current liabilities with suitable examples.

The liabilities for short period of time is called current liabilities. In other words, the liabilities which should be repaid within a year is known as current liabilities. They are the short term debts of the companies. Creditors, bill payable, outstanding expenses, bank overdrafts are the example of current liabilities.

4.       What is financial statement analysis?

Financial statement analysis is the way of analyzing the financial statement of the business organization. It is the process of identifying the financial strength and weakness of the firm by properly establishing relationship between the items or figures of financial statement .it measures the profitability, liquidity, solvency and activity situations of a business of a business firm.

5.       Write three importance (objectives / function) of financial statement analysis.

i.                     It measures the firm’s liquidity, profitability and solvency position.

ii.                   It measures the firm’s operating efficiency, financial status and performance.

iii.                  It fulfills the interest of the creditors, investors, management and other authorities.

6.       Write any three limitation of financial statement analysis.

i.                     Lack of uniformity: the data and information provided by financial statement do not show uniformity, so it creates confusion and problems while analyzing them.

ii.                   Lack of qualitative analysis: financial statement record only those transactions and events which can be expressed in terms of money, so it lack qualitative factors.

iii.                  Lack of detailed cost information: it requires a detailed cost information to evaluate the actual performance of business at each stage. But financial statement does not provide detailed cost information of units, departments, and processes.

Ratio analysis

1.       Define ratio analysis.

Ratio analysis is a method or technique of analysis and interpretation of financial statement through mathematical expression. It is the mathematical expression of the relationship between two accounting figures. It short, ratio analysis means one number expressed in terms of another. It helps to provide information relating to financial soundless and weakness of the business enterprise.

2.       State five objectives or purposes of ratio analysis

The purposes of objectives of ratio analysis are stated below.

a.       To simplify accounting information and analyze the financial statements

b.      To judge the operating efficiency of the business and find weakness of the business.

c.       To help in decision making, policy making and forecasting.

3.       Write the limitations of ratio analysis.

The limitation of ratio analysis are:

i.                     Ignores qualitative factors: it provides only quantitative information, but not quantitative information, but not qualitative information. So it ignores qualitative factors.

ii.                   Limited to historical figure: it considers only historical figures, so it cannot represent the true financial position to date.

iii.                  Personal bias: it is not free from bias. Different people may interpret the same ratio in different ways.

4.       Write about gross profit margin and profit margin.

Gross profit is the profit ascertained by deducting cost of goods sold from the net sales of the period. Gross profit margin is the state of earning capacity of the firm. It show the relationship between gross profit and net sales. Mathematically it can be expressed as the following formula.

Gross profit margin =gross profit /net sales * 100

Net profit is the actual profit ascertained by deducting all operating expenses like administrative, selling and distributing expenses from gross profit and other indirect income. Net profit margin is the state of net return on sales and investments. It shows the relationship between net profit and sales. Mathematically it can be expressed as the following formula:

Net profit margin = net profit / net sales* 100

5.       Write the meaning of average collection period.

The period in which the debt monies are collection on an average basis is called average collection period. It is also known as receivable collection period. So receivable collection period indicates the period of time within which debts are collected. It can be calculated by using the following formula:

Average collection period = day or months in a year/Debtors turnover ratio

COST ACCOUNTING

1.       Write the meaning of cost accounting

Cost accounting is a branch of accounting developed to provide necessary cost Information of business activities. It includes the classification, allocation, apportionment, absorption and communication of cost. So, cost accounting deals with the use of costs, planning of costs and control of the costs. It helps to trace the cost of every order, job, contract, process, service or product accurately it also helps to evaluate the performances and efficiency of the business in the use of materials, labour and overhead costs

2.       Write any four objective of cost accounting

Objectives of cost accounting can be highlighted on the following points:

i.                     Cost estimation: it is one the objective to estimate the future costs useful for bidding and diversification of programmes etc.

ii.                   Valuation of stock: it is also an importing objective of cost accounting is to analyses the cost and keep control over it. It help to avoid unnecessary cost.

iii.                  Control the cost: the main objective of cost accounting is to analyses the cost and keep control over it. It helps to avoid the unnecessary cost.

iv.                 Fixation of selling price: another objective of cost accounting is to fix the selling price of product and services appropriately.

3.       Write the limitations of cost accounting.

i.                     Lack of uniformity: different person use different rules and techniques for the estimation of cost. So there is no uniformity in costing the product.

ii.                   Ignores inflationary situations: it ignores inflationary situation because cost accounting cannot control and handle the inflationary and futuristic situations.

iii.                  Expensive: this system is very expensive for small firms. They cannot run a cost accounting department separately.

iv.                 Unsuitability: this system is unsuitable for trading and concern of small size.

4.       Write differences between financial and cost accounting.

Financial accounting	Cost accounting
Financial accounts are maintained compulsorily under company act.	Cost accounting is not compulsory for any firm. It is voluntary.
It is generally involved in recording the financial transaction but not concerned with controlling aspects.	It is involved in controlling costs through methods like standard costing, budget etc.
It shows the net result of total activities of the firm.	It shows the net result of particular job, order, department, process or product only.
It’s main objective is to provide information about profit or loss and financial position of the firm.	It’s main objective is to provide necessary detailed cost information to management for taking necessary.

Cost classification and overhead

1.       Write with examples about fixed and variable costs.

Fixed cost are the overhead expenses which always remain fixed irrespective of the level of output. In the words, the costs which do not increase or decrease as per the increase or decrease in output are fixed costs. For example rent of building, salary to officers, depreciation etc.

Variable costs are the costs which varies proportionately with the increase and decrease of the level of output. It changes in direct proportion to a change in level of activity. Direct material cost, direct wages, power and fuel etc. are the examples of variable cost which increase and decrease as per the increase and decrease of the level of output.

2.       Differentiate between variable and fixed costs.

Variable cost	Fixed cost
It changes proportionately with volume of output or services.	It does not change with volume of output or services. it is fixed.
Variable cost per unit always remains constant.	Fixed cost per unit changes according to the volume of output.
Amount of variable cost is zero when the production is zero.	Total amount of fixed cost never be zero.

3.       What do you mean by direct cost and indirect cost?

The cost which are directly absorbed by any goods or services and easily identified to a unit or a job cost or a department cost are known as direct cost. It is also called prime cost. It includes direct material cost, direct labour cost and other direct expenses.

The costs which are not directly absorbed by any goods or services and cannot be easily identified to a unit or a job cost or a department cost are known as indirect costs. It is also called overhead. It includes indirect material cost, indirect labour cost and other indirect expenses.

4.       Write in short about element wise classification of cost.

a.       Material cost: it is the cost of row materials used in the process of manufacture of goods. The example of raw materials are crude oil, iron-ore, fiber, cotton etc. material costs are good in two heads-    i. direct material, and ii. Indirect material.

       b. labour cost: the cost incurred for the service taken from workers or employees are labour cost          such as wages, salaries, bonus to workers. It can also be grouped in two heads- i. direct labour, and ii. Indirect labour.

c. overhead cost: overhead are the cost other than material and labour costs. In other words, all the costs other than material and labour costs are overhead such as rent, insurance, lighting and heating, depreciation, advertisement etc. it can also be group in two heads- i. direct overhead and ii. Indirect overhead.

5.       Write about controlled and uncontrollable costs with suitable examples.

The costs which can be controlled with the effort of management are known as controlled cost. In other words, all those costs which costs which can be controlled by any means are controllable costs. Generally the variables costs like direct material, direct labour and other direct expenses are the examples of controllable costs.

The costs which can not be easily controlled easily are known as uncontrollable costs. In the words, all those costs which costs which are not within the control of the management are uncontrollable costs. Generally fixed costs like rent, salary etc. are the examples of uncontrollable costs.

6.       What is allocation of overhead?

Charging the overhead expenses appropriately to a particular section or department is called allocation of overhead. The cost allocation is concerned with the allotment of the whole cost to a particular product, department or cost Centre. Allocation can be made only when the exact amount of overhead incurred in a cost centre is definitely known. Indirect materials, indirect wages, depreciation of machinery etc. Can be easily be allocated to various department in which they are incurred.

7.       What is a apportionment

Certain overhead costs which cannot be directly charged to a cost center or department are common to a number of cost center. Division of such common overhead costs among various department is known as “apportionment”. Such common overhead expense is allotted to different cost center proportionately on some suitable basis. The example of such overhead expenses are salary of managers, fire insurance, lighting and heating and other welfare expenses.

Material control and store keeping

1.       What is material control (inventory control)?

Material control is a systematic control over the purchasing, storing and using materials in order to minimize the cost of material. Since material cost is major part of the total expenditure of a product. So it is necessary to make proper control on purchase of material, its storing and its proper use avoiding unnecessary wastage. As thus, the most efficiently purchasing of material, storing and using is material control.

2.       Write any three objective of material control (inventory control).

The three major objective of material control are:

i)                    To purchase the required material in economic quantity.

ii)                   To avoid wastage and maximize profitability.

iii)                To protect material from theft, misuse, mishandling etc.

3.       Write in short about the need and essential of material (inventory) control.

Material include physical commodities used to manufacture the final or finished product. This is the first and most important element of cost. Material control is necessary to have the minimum possible cost of material. So it is necessary to make a systematic control over on the purchasing, storing and using of material.

The essentials of material control are as follows:

i)                    There should be proper coordination among the department of purchasing, receiving, inspection, storage, sales, production and accounting.

ii)                   Purchase should be centralized.

iii)                 There should be proper classification and codification of materials.

iv)                 Storage should be well planned to maintain internal check and control.

v)                  Perpetual inventory system should be operated.

4.       What is bin card?

It is a card which contains the information of details of receipt, issue and balance of materials and stock. It is the card which also shows the maximum level, minimum levels and re order level of the material. Entries are made immediately on receipt and issue of a material. The record so made in bin card are in terms of quantity only, not the value of material. Separate bin card is maintained for each item of store and kept along with.

5.       What do you mean by perpetual inventory system?

Perpetual inventory system is a technique of controlling stock items by maintaining store record in a manner that the stock balance are readily and continuously available. Under this system, stock balance are calculated after each transaction of receipt and issue of materials.

So, the perpetual inventory system means recording of stores receipts and issue of materials in order to find out stock balance and continuously verifying of the physical stock with bin card and store ledger in order to maintain a continuous availability of materials required for production work.

6.       What do you mean by classification and codification of materials?

Classification of material means grouping of materials according to their nature in suitable categories. For example copper iron, aluminum may be classified as metal and item like soap, cotton, lubricant etc. may be classified as consumable stores.

On the other hand codification is the procedure of systematic assignment of symbol for each items of store.

7.       What is stores layout?

Stores layout is a systematic designing and arranging of store room to store the materials. Layout of stores generally depends upon the shape and size of materials. So, store layout is a well-managed store room which provide easy access of racks and places where materials can be properly stored, and which facilitates easy movement of materials.

8.       What is decentralized stores? State its three advantages.

Decentralized store means independent store in each department which is situated and they can draw materials from their respective stores. The purchasing and handling of materials are does by the buyer of each department separately.

Following are the main advantages of decentralized stores:

i)                    Easy to get materials.

ii)                   Less transportation cost.

iii)                 Less risk at one time.

9.       State any three objective of store keeping.

i)                    To receive and issue the materials smoothly with protection from spoilage and loss.

ii)                   To maintain stock of material at desired level and avoid over stocking and under stocking.

iii)                 To protect materials from spoilage, theft and loss.

10.   Write any three duties and responsibilities of a store keeper.

The following are the three duties and responsibilities of a store keeper:

i)                    To maintain the record of materials received and issued.

ii)                   To store the materials in their correct places and make available to job order when necessary.

iii)                 To regularly issue materials according to the requisition note and maintain control from loss and scrap of materials.

11.   What is centralized store? State its three advantages.

In centralized store materials are received and issued by one store department and all materials are kept in one central store. This is the usual and common practice in most of the organizations. Following are the main advantages of centralized stores.

i.                     Better supervision and control.

ii.                   Economy is cost.

iii.                  Less space is required as stores are kept in minimum.

Wage payment

1.       What are the different methods of wage payment?

There are two basic methods of wage payment. They are:

1.       Piece rate system: The system of paying wage to the worker on the basis of quantity of work done by them is piece rate system of wage payment. The quantity of work is measured in terms of unit produced, job completed or the work completed.

2.       Time rate system: The system of paying wage to the worker on basis of time spent by the worker in their work is time rate system of wage payment. The time spent by worker is measured in terms of hours, day, week or month.

2.       State the differences between time rate system and piece rate system of wage payment.

Time rate system	Piece rate system
Wages are paid on basis of time spent by the worker in this system.	Wages are paid on basis of production units is this system.
Production quality can be maintained in this system	Production quality cannot be maintained in this system.
Supervision cost becomes high in this system.	Supervision cost becomes low in this system.

3.       Write any three advantages of time rate systems of wage payments.

i.                     Easy to calculate and understandable for workers coz it is very simple.

ii.                   Qualitative production is possible.

iii.                  It makes wage distribution on equal principle and so it is unbiased.

4.       Write any three disadvantages of time rate system of wage payments.

i.                     It discourages efficient workers because there is no incentives to efficient workers.

ii.                   It make production and supervision costs high.

iii.                  It creates a chances of low production.

5.       Write the advantages of piece rate system of wage payments.

i.                     Easy to adopt in practice.

ii.                   Increases the working capacity of the workers and increases the number of production.

iii.                  Reduce production and supervision costs.

6.       Write any three disadvantages of piece rate system of wage payments.

i.                     It decreases the production quality.

ii.                   It is irregular and uncertain system of wage payment

iii.                  The wage rate may vary from one worker to another, thus the trade union oppose it.