DQ FOR ACCOUNT

📘 Unit 1: Introduction to Financial Accounting

Q1. Analyze how the Going Concern Concept affects the valuation of a company’s assets and liabilities on the balance sheet.
Answer:
The Going Concern Concept assumes a business will continue to operate indefinitely. This affects asset valuation because assets are recorded at cost rather than liquidation value. Liabilities are treated as obligations to be settled in the normal course of operations, not immediately. If a company is not a going concern, assets must be adjusted to net realizable value, often leading to lower values.

Q2. Critique the effectiveness of the Dual Aspect Concept in ensuring the accuracy of financial records.
Answer:
The Dual Aspect Concept ensures every transaction affects at least two accounts, maintaining the balance of the accounting equation (Assets = Liabilities + Equity). It promotes accuracy and helps detect errors through tools like trial balance. However, it does not prevent fraudulent entries and requires correct classification to be effective.

📘 Unit 2: Accounting Process & Rules

Q1. Compare journal and ledger entries. How do they serve different purposes in the accounting cycle?
Answer:
Journal is the book of original entry where transactions are recorded chronologically. Ledger is the book of final entry where entries from journals are posted account-wise. While journal provides a complete transaction log, ledger helps in summarizing financial information per account to prepare trial balance and financial statements.

📘 Unit 3: Financial Statements

Q1. Explain how a company’s financial stability is reflected in its balance sheet.
Answer:
A strong balance sheet shows a high asset base, low leverage, and healthy equity, indicating financial stability. Liquidity ratios, debt-equity ratio, and reserves help assess whether the company can meet obligations and withstand economic shocks.

📘 Unit 4: Preparation of Financial Statements

Q1. If a company reports high gross profit but low net profit, what could be the reasons and suggested corrective actions?
Answer:
Possible reasons include high operating or administrative expenses, interest costs, or non-operating losses. Management should control indirect costs, refinance high-interest debt, or optimize operational efficiency to improve net profit margins.

📘 Unit 5: Financial Reporting Standards I

Q1. How do accounting standards enhance transparency and investor confidence?
Answer:
They ensure consistency, comparability, and reliability of financial reports, allowing stakeholders to make informed decisions. Standardized formats reduce manipulation and make financial reports more trustworthy.

📘 Unit 6: Financial Reporting Standards II

Q1. Evaluate the challenges Indian companies face in IFRS convergence.
Answer:
Challenges include lack of trained professionals, system overhaul costs, and complexities in reconciling local practices with global standards. Smaller firms may face resource issues, and even large firms must retrain staff and update software.

📘 Unit 7: Corporate Financial Statements

Q1. Compare and contrast Basic EPS and Diluted EPS.
Answer:
Basic EPS = Net Profit / Weighted Avg. Shares.
Diluted EPS considers potential shares from options, convertibles, etc. Diluted EPS is always ≤ Basic EPS and gives a more conservative, realistic view of shareholder value in future scenarios.

📘 Unit 8: Statement of Cash Flows

Q1. Explain how indirect method of cash flow provides deeper insight than direct method.
Answer:
The indirect method reconciles net profit with operating cash flows by adjusting for non-cash items and working capital changes. It links income statement and balance sheet, offering a better view of actual liquidity and operational efficiency.

📘 Unit 9: Analysis of Financial Statement I

Q1. How does the debt-equity ratio influence investor risk perception?
Answer:
A high debt-equity ratio implies greater financial risk due to fixed interest obligations. While it may boost returns during expansion, it can erode investor confidence if cash flows cannot support debt, especially during downturns.

📘 Unit 10: Analysis of Financial Statement II

Q1. How can common-size analysis and trend analysis together enhance decision-making?
Answer:
Common-size analysis standardizes data to % values, aiding comparison across time or peers. Trend analysis shows changes over time. Together, they identify patterns, performance deviations, and financial health trends useful for stakeholders and management.

📘 Unit 11: Ethics in Accounting

Q1. Discuss the importance of integrity in professional accounting practice.
Answer:
Integrity ensures accuracy, honesty, and compliance with laws. It builds public trust, prevents manipulation, and avoids scandals. Accountants must uphold confidentiality, avoid conflicts of interest, and act in the public interest.

📘 Unit 12: Emerging Trends in Accounting

Q1. Analyze the impact of artificial intelligence on future accounting roles.
Answer:
AI automates routine tasks, enhancing efficiency and accuracy. Accountants will need skills in data analytics, strategic decision-making, and technology tools. While reducing manual effort, AI demands stronger analytical and advisory roles.

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