2. It includes summarizing, interpreting and communicating the financial data to the users of financial statements. Give two reasons. Good answers! Also please add English NCERT Solutions too. Answer: Accounting can be defined as a process of reporting, recording, interpreting, and summarizing economic data. a. Let us discuss the meaning and objectives of accountancy. The following attributes or characteristics can be drawn from the definition of Accounting: (1) Identifying financial transactions and events, (6) Analysing and interpreting financial data, (7) Communicating the financial data or reports to the users. This system of accounting recognises and records both the aspects of the transaction. Introduction to Accounting class 11 Notes Accountancy According to American Institute of Certified Public Accountants, “Accounting is the art of recording, classifying and summarising in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character, and interpreting the results thereof.” Answer: Debtors ar… (ii) Profit and loss account For this, all the transactions are recorded in chronological order in Journal and then posted to principle book i.e. To know more, stay tuned to BYJU’S. Under this system, both aspects are not recorded for all the transactions. define accounting and state its objectives. Objectives of Accounting: 1. Do you agree with this statement? (i) Sales account (2)Recording : For recording, we use ‘Journal’ or Subsidiary Books. (iv) Sales return account. Communicating the financial data to the users on time is the final step of Accounting so that they can make appropriate decisions. 'Accounting information should be comparable'. Sold goods to Bhanu costing ₹ 10,000/- for ₹ 12,000. Systematic recording helps in the easy detection and rectification of frauds, errors and inefficiencies, if any. Accounting helps management in business planning, decision making and in exercising control. Differentiate between source documents and vouchers. Accounting is used to maintain a systematic record of all the financial transactions in a book of accounts. the value of the assets, amount of liabilities owed, net increase or decrease in his/her capital. Question 1 Define Accounting. (ii) Determining profited loss :- The second main objectives of accounting is to determine correct net profit & by preparing profit& loss A/C. The following are the main branches of accounting: Financial Accounting is that branch of accounting which involves identifying, measuring, recording, classifying, summarising the business transactions, i.e. Under this system by preparing ‘Profit & Loss A/c’ we get to know about the profit earned or loss incurred. Accountancy act as a language of finance. Accounting process is the process of collecting, recording, classifying, summarising and communicating financial information to the users for judgement and decision-making. To keep systematic and complete record of business transaction in the books of accounts according to specified principles and rules to avoid the possibility of omissions and fraud. As compared to the other systems, this system of recording transactions is more scientific and useful to achieve the objective of accounting. Accounting records only those transactions and events which are of financial nature. By analysing financial data and providing interpretations in the form of reports, accounting assists management in handling business operations effectively. d. Purchase a Laptop of `50,500 for Business. owner, government, creditor, investors, etc. It is performed by Junior Staff. Management accounting refers to that branch of accounting which is concerned with presenting the accounting information in such a way that helps the management in planning and controlling the operations of a business and in decision making. 4. Since both the aspects of transactions are considered there is a complete recording of each and every transaction. Why should a business concern follow this concept? position of assets and liabilities is depicted. The role of accounting has changed over the period of time- Do you agree? Following are the limitations of accounting: Users may be categorised into internal users and external users. It gives information regarding how much of goods have been purchased and sold, expenses incurred and amount earned during a year. (3) Classification of transactions : Classification means segregation of transactions on the basis of nature and posting them in a format known as Ledger Account. (5) Analysis & Interpretation : It includes an assessment of the financial reports and making some meaningful conclusions. Accountancy refers to systematic knowledge of the principles and the techniques which are applied in Accounting. The periodic total of purchases return journal is posted to : The periodic total of sales return journal is posted to : Explain the qualitative characteristics of accounting information. Recording business transactions systematically− It is necessary to maintain systematic records of every business transaction, as it is beyond human capacities to remember such large number of transactions. Purchased goods from Naman for cash ₹ 40,000, 3. Accounting can be defined as a process of reporting, recording, interpreting and summarising economic data. (iv) Furniture account, The periodic total of sales return journal is posted to : (iii) Purchase returns account The introduction of accounting helps the decision-makers of a company to make effective choices, by providing information on the financial status of the business. It is available with numerous questions and answers, along with the test papers. The main aim is to maintain systematic records of financial transactions. Ledger. Systematic accounting records help in settlement of various tax liabilities. 2. What is matching concept? Like, profit earned or loss incurred over a period and financial position at a particular point of time. Another important objective is to determine the financial position of the business to check the value of assets and liabilities. Trail Balance and Rectification of Errors. So, first of all, such transactions and events are identified. Accounting is a process of identifying the events of financial nature, recording them in the journal, classifying in their respective accounts and summarising them in profit and loss account and balance sheet and communicating results to users of such information, viz. Administration and management are able to take decisions on the basis of factual information under the double-entry system of accounting. Ledger. Prepare the accounting equation on the basis of the following data. Enumerate informational needs of management. 6. Assessing the progress of the business− Accounting helps in assessing the progress of business from year to year, as accounting facilitates the comparison both inter-firm as well as intra-firm. All Rights Reserved. Determining profit earned or loss incurred− In order to determine the net result at the end of an accounting period, we need to calculate profit or loss. Using these records we are able to compute profit or loss easily. Detecting and preventing frauds and errors− It is necessary to detect and prevent fraud and errors, mismanagement and wastage of the finance. Harsha started business with cash ₹ 2,00,000, 2. Today, accounting is used by everyone and a good understanding of it is beneficial to all. Today, accounting is used by everyone and a good understanding of it is beneficial to all. notes provided is very helpful to the students, Your email address will not be published. This assists the users to understand and interpret the accounting data in a meaningful and appropriate manner without any ambiguity. This purpose Trading and profit and loss Account and value of the.... And decision-making mismanagement and wastage of the principles and the techniques which are understandable by the on! Goods to Bhanu costing ₹ 10,000/- for ₹ 12,000 been viewed 29553 times, expenses and... This system by preparing the balance sheet that facilitates in ascertaining the true financial of... 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