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Financial Statements - 1
What is meant by Grouping and Marshalling of assets and liabilities. E...

What is meant by Grouping and Marshallin | Class 11 Accountancy Chapter Financial Statements - 1, Financial Statements - 1 NCERT Solutions

Welcome to the NCERT Solutions for Class 11 Accountancy - Chapter Financial Statements - 1. This page offers a step-by-step solution to the specific question from Exercise 2, Question 4: . With detailed answers and explanations for each chapter, students can strengthen their understanding and prepare confidently for exams. Ideal for CBSE and other board students, this resource will simplify your study experience.

Question 4:

What is meant by Grouping and Marshalling of assets and liabilities. Explain the ways in which a balance sheet may be marshalled.

Answer:

Grouping In a balance sheet, assets and liabilities should be properly grouped and classified under appropriate headings. The individual balance of each Debtors and Creditors account need not be shown. Debtors and creditors should be shown in total. The grouping together of dissimilar assets will make the balance sheet misleading. Hence, it can be said that grouping means putting together the items of similar nature under a common heading.

Marshalling The term marshalling means the order in which assets and liabilities are stated on the balance sheet as the balance sheet exhibits the financial position of a concern even to a non-technical observer. It is of great importance that the different assets and liabilities should be arranged in the balance sheet on certain principles. The balance sheet is generally marshalled in three ways.

(i) The order of Liquidity or Realisability According to this method, assets are entered up in the balance sheet following the order in which they can be converted into cash and the liabilities in the order in which they can be paid off. The following is a format of a balance sheet based on this order.

(ii) The order of Performance This method is the reverse of the first method. Under this method, the assets are stated according to their permanency, i.e., permanent assets are shown first and less permanent are shown one after another. Similarly, the fixed liabilities are stated first and the floating liabilities follow. The following is a specimen of a balance sheet based on this order.

(iii) Mixed Order of Arrangement This method is the combination of the first two methods. Under this method, the assets are arranged in order realisability and liabilities are arranged in order of performance.

The first method is adopted by sole proprietors, firms and partnership concerns.
The second method is adopted by companies and the third method is adopted by banking concerns.

Other Questions of Chapter Financial Statements - 1

Which of the following is correct :
(i) Operating Profit = Operating profit – Non-operating expenses – Non-operating incomes
(ii) Operating profit = Net profit + Non-operating Expenses + Non-operating incomes
(iii) Operating profit = Net profit + Non-operating Expenses – Non-operating incomes
(iv) Operating profit = Net profit – Non-operating Expenses + Non-operating incomes

State True or False :
(i) Gross profit is total revenue.
(ii) In trading and profit and loss account, opening stock appears on the debit side because it forms the part of the cost of sales for the current accounting year.
(iii) Rent, rates and taxes is an example of direct expenses.
(iv) If the total of the credit side of the profit and loss account is more than the total of the debit side, the difference is the net profit.

Choose the correct chronological order of ascertainment of the following profits from the profit and loss account :
(i) Operating Profit, Net Profit, Gross Profit
(ii) Operating Profit, Gross Profit, Net Profit
(iii) Gross Profit, Operating Profit, Net Profit
(iv) Gross Profit, Net Profit, Operating Profit

Distinguish between capital and revenue expenditure and state whether the following statements are items of capital or revenue expenditure :
(a) Expenditure incurred on repairs and whitewashing at the time of purchase of an old building in order to make it usable.
(b) Expenditure incurred to provide one more exit in a cinema hall in compliance with a government order.
(c) Registration fees paid at the time of purchase of a building.
(d) Expenditure incurred in the maintenance of a tea garden which will produce tea after four years.
(e) Depreciation charged on a plant.
(f) The expenditure incurred in erecting a platform on which a machine will be fixed.
(g) Advertising expenditure, the benefits of which will last for four years.

Match the items given under ‘A’ with the correct items under ‘B’
(i) Closing stock is credited to (a) Trial balance
(ii) Accuracy of book of account is tested by (b) Trading account
(iii) On returning the goods to seller, the buyer sends (c) Credit note
(iv) The financial position is determined by (d) Balance sheet
(v) On receiving the returned goods from the (e) Debit note
buyer, the seller sends

What is the purpose of preparing trading and profit and loss account?

What are the objectives of preparing financial statements ?

Explain the concept of cost of goods sold?

What are closing entries? Give four examples of closing entries.

What are financial statements? What information do they provide.

Popular questions of class 11 Accountancy

Mr. Sunrise started a business for buying and selling of stationery with ₹ 5,00,000 as an initial investment. Of which he paid ₹ 1,00,000 for furniture, ₹ 2,00,000 for buying stationery items. He employed a sales person and clerk. At the end of the month he paid ₹ 5,000 as their salaries. Out of the stationery bought he sold some stationery for ₹ 1,50,000 for cash and some other stationery for ₹ 1,00,000 on credit basis to Mr. Ravi. Subsequently, he bought stationery items of ₹ 1,50,000 from Mr. Peace. In the first week of next month there was a fire accident and he lost ₹ 30,000 worth of stationery. A part of the machinery, which cost ₹ 40,000, was sold for ₹ 45,000.

From the above, answer the following :
1. What is the amount of capital with which Mr. Sunrise started business?
2. What are the fixed assets he bought?
3. What is the value of the goods purchased?
4. Who is the creditor and state the amount payable to him?
5. What are the expenses?
6. What is the gain he earned?
7. What is the loss he incurred?
8. Who is the debtor? What is the amount receivable from him?
9. What is the total amount of expenses and losses incurred?
10. Determine if the following are assets, liabilities, revenues, expenses or none of the these: sales, debtors, creditors, salary to manager, discount to debtors, drawings by the owner.

Q: Explain the qualitative characteristics of accounting information.

Complete the following sentences with appropriate words:
(a) Information in financial reports is based on .....................
(b) Internal users are the ..................... of the business entity.
(c) A ..................... would most likely use an entities financial report to determine whether or not the business entity is eligible for a loan.
(d) The Internet has assisted in decreasing the ..................... in issuing financial reports to users.
(e) ..................... users are groups outside the business entity, who uses the information to make decisions about the business entity.
(f) Information is said to be relevent if it is ......................
(g) The process of accounting starts with ............ and ends with ............
(h) Accounting measures the business transactions in terms of ............ units.
(i) Identified and measured economic events should be recording in ............ order.

Q: Describe the role of accounting in the modern world.

Q: What do you mean by an asset and what are different types of assets?

Differentiate between source documents and vouchers.

What is a journal? Give a specimen of journal showing at least five entries.

Define accounting and state its objectives.

Enumerate informational needs of management.

Complete the following work sheet:
(i) If a firm believes that some of its debtors may ′default′, it should act on this by making sure that all possible losses are recorded in the books. This is an example of the ___________ concept.
(ii) The fact that a business is separate and distinguishable from its owner is best exemplified by the ___________ concept.
(iii) Everything a firm owns, it also owns out to somebody. This co-incidence is explained by the ___________ concept.
(iv) The ___________ concept states that if straight line method of depreciation is used in one year, then it should also be used in the next year.
(v) A firm may hold stock which is heavily in demand. Consequently, the market value of this stock may be increased. Normal accounting procedure is to ignore this because of the ___________.
(vi) If a firm receives an order for goods, it would not be included in the sales figure owing to the ___________.
(vii) The management of a firm is remarkably incompetent, but the firms accountants can not take this into account while preparing book of accounts because of ________ concept.

Recently Viewed Questions of Class 11 Accountancy

Give four examples each of ‘provision’ and ‘reserves’.

Explain the concept of ‘secret reserve’.

If the opening capital is Rs. 50,000 as on April 01, 2016 and additional capital introduced Rs. 10,000 on January 01, 2017. Interest charge on capital 10% p.a. The amount of interest on capital shown in profit and loss account as on March 31, 2017 will be :
(a) Rs. 5,250 (b) Rs. 6,000
(c) Rs. 4,000 (d) Rs. 3,000

Name the parties to a promissory note.

Credit balance of bank account in cash book shows :
(i) Overdraft
(ii) Cash deposited in our bank
(iii) Cash withdrawn from bank
(iv) None of these

Q: Explain the qualitative characteristics of accounting information.

‘An accounting report is essential a report which must be able to fulfil certain basic criteria' Explain? List the various types of accounting reports.

List the distinctive advantages of a computer system over a manual system.

State the relationship between information and decision.

Rahul’s trial balance provide you the following information :
Debtors Rs. 80,000
Bad debts Rs. 2,000
Provision for doubtful debts Rs. 4,000

It is desired to maintain a provision for bad debts of Rs. 1,000
State the amount to be debited/credited in profit and loss account :
(a) Rs. 5,000 (Debit) (b) Rs. 3,000 (Debit)
(c) Rs. 1,000 (Credit) (d) none of these.

Study Tips for Answering NCERT Questions:

NCERT questions are designed to test your understanding of the concepts and theories discussed in the chapter. Here are some tips to help you answer NCERT questions effectively:

Read the question carefully and focus on the core concept being asked.
Reference examples and data from the chapter when answering questions about Financial Statements - 1.
Review previous year question papers to get an idea of how such questions may be framed in exams.
Practice answering questions within the time limit to improve your speed and accuracy.
Discuss your answers with your teachers or peers to get feedback and improve your understanding.

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