Class 11 Accountancy - Chapter Introduction to Accounting NCERT Solutions | Define accounting and state its objectiv
Define accounting and state its objectives.
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. owner, government, creditor, investors, etc.
According to American Institute of Certified Accountants, 1941, “Accounting is the art of recording, classifying and summarising in a significant manner and in terms of money, transactions and events that are, in part at least, of financial character and interpreting the results thereof.”
In 1970, American Institute of Certified Public Accountants changed the definition and stated, “The function of accounting is to provide quantitative information, primarily financial in nature, about economic entities, that is intended to be useful in making economic decisions.”
Objectives of Accounting:
1. 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. Skipping the record of any one of the transactions may lead to erroneous and faulty results.
2. 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. For this purpose trading and profit and loss account are prepared. It gives information regarding how much of goods have been purchased and sold, expenses incurred and amount earned during a year.
3. Ascertaining financial position of the firm− Ascertaining profit earned or loss incurred is not enough; proprietor also interested in knowing the financial position of his/her firm, i.e. the value of the assets, amount of liabilities owed, net increase or decrease in his/her capital. This purpose is served by preparing the balance sheet that facilitates in ascertaining the true financial position of the business.
4. Assisting management− Systematic accounting helps the management in effective decision making, efficient control on cash management policies, preparing budget and forecasting, etc.
5. 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.
6. Detecting and preventing frauds and errors− It is necessary to detect and prevent fraud and errors, mismanagement and wastage of the finance. Systematic recording helps in the easy detection and rectification of frauds, errors and inefficiencies, if any.
7. Communicating accounting information to various users− The important step in the accounting process is to communicate financial and accounting information to various users including both internal and external users like owners, management, government, labour, tax authorities, etc. This assists the users to understand and interpret the accounting data in a meaningful and appropriate manner without any ambiguity.
More Questions From Class 11 Accountancy - Chapter Introduction to Accounting
- Q:-
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.
- 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?
- Q:-
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:-
Enumerate informational needs of management.
- Q:-
'Accounting information should be comparable'. Do you agree with this statement? Give two reasons.
- Q:-
Giving examples, explain each of the following accounting terms:
* Fixed assets * Revenue * Expenses
* Gain * Profit * Capital
* Short-term liabilities - Q:-
Distinguish between debtors and creditors.
- Q:-
The role of accounting has changed over the period of time- Do you agree? Explain.
Popular Questions of Class 11 Accountancy
- Q:-
Name any two types of commonly used negotiable instruments.
- Q:-
Why is it necessary to record the adjusting entries in the preparation of final accounts?
- Q:-
State the meaning of incomplete records?
- Q:-
What is ‘Depreciation’?
- Q:-
Briefly state how the cash book is both journal and a ledger.
- Q:-
State the meaning of a trial balance?
- Q:-
State the four basic requirements of a database applications.
- Q:-
State the different elements of a computer system.
- Q:-
Why is it necessary for accountants to assume that business entity will remain a going concern?
- Q:-
State the need for the preparation of bank reconciliation statement?
Recently Viewed Questions of Class 11 Accountancy
- Q:-
‘Accounting software is an integral part of the computerised accounting system’ Explain. Briefly list the generic considerations before sourcing an accounting software.
- Q:-
State whether the following statements are true or false:
- Depreciation is a non-cash expense.
- Depreciation is also charged on current assets.
- Depreciation is decline in the market value of tangible fixed assets.
- The main cause of depreciation is wear and tear caused by its usage.
- Depreciation must be charged so as to ascertain true profit or loss of the business.
- Depletion term is used in case of intangible assets.
- Depreciation provides fund for replacement.
- When market value of an asset is higher than book value, depreciation is not charged.
- Depreciation is charged to reduce the value of asset to its market value.
- If adequate maintenance expenditure is incurred, depreciation need not be charged.
- Q:-
A purchase of machine for cash should be debited to:
(i) Cash account
(ii) Machine account
(iii) Purchase account
(iv) None of these - Q:-
A bill of exchange must contain “an unconditional promise to pay” Do you agree with a statement?
- Q:-
Differentiate between source documents and vouchers.
- Q:-
Define the purpose of maintaining subsidiary journal.
- Q:-
State the meaning of:
(a) Outstanding expenses
(b) Prepaid expenses
(c) Income received in advance
(d) Accrued income - Q:-
Name the parties to a promissory note.
- Q:-
Fill in the Correct Words :
(a) Cash book is a ......... journal.
(b) In Journal proper, only......... discount is recorded.
(c) Return of goods purchased on credit to the suppliers will be entered in ...... Journal.
(d) Assets sold on credit are entered in .........
(e) Double column cash book records transaction relating to ......... and .........
(f) Total of the debit side of cash book is ......... than the credit side.
(g) Cash book does not record the ......... transactions.
(h) In double column cash book ......... transactions are also recorded.
(i) Credit balance shown by a bank column in cash book is .........
(j) The amount paid to the petty cashier at the beginning of a period is known as ......... amount.
(k) In purchase book goods purchased on ......... are recorded. - Q:-
What is matching concept? Why should a business concern follow this concept? Discuss?
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Good answers! Very detailed and informative! Very Useful! It will be even more useful if you add all the chapters NCERT Solutions and Other Commerce subjects like economics and business studies NCERT Solutions for class 11. Also please add English NCERT Solutions too.
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