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CHAPTER 1. INTRODUCTION TO ACCOUNTING SOLUTION, Class-11

byCOMMERCEINTELLIGENT May 26, 2021

ACCOUNTS

INTRODUCTION TO ACCOUNTING

1.1 Meaning of account

Public Accountants (AICPA) had defined accounting as the art of recording, classifying, and summarizing in significant manner and in terms of money, transactions and events which
are, in part at least, of financial character, and interpreting the results therewith greater economic development resulting in changing role of accounting, its scope, became broader. In 1966, the American Accounting Association(AAA) defined accounting as ‘the process of identifying, measuring and
communicating economic information to permit informed judgments and decisions by users of information’. the Accounting Principles Board of AICPA also emphasized that the function of accounting is to provide quantitative information, primarily financial in nature, about economic entities, that is intended to be useful unmaking economic decisions. Accounting can therefore be defined as the process of identifying, measuring, recording and communicating the required information relating to the economic events of an organization to the interested users of such

Question type answers

Q1.Give the meaning of ' Accounting.
Ans: Accounting is a process of identifying financial translocation measuring them in money terms recording them in primary books, classifying, summering analyzing interpreting them and communicating the result to the users.
 
Q2. List any two functions of Accounting. 
Ans:Two function of Accounting.
(i) Identifying financial transaction; and (ii )recording them in the books of accounting 
 
Q3.What are the steps involved in the process of accounting? 
Ans:The steps involved in the process of accounting are :
(i)Identifying financial transaction and events
(i)Recording in the books of account 
(iii)Classifying the record entries;
(iv)Preparations of trial balance
(v)preparations of final account 
(vi)Analysis and interpretations of financial statements; and 
(vii)Communicating to the users;
 
Q4. Name the branch of commerce, which keeps a record of monetary transaction in a set of books.
Ans: Book keeping .
   
Q5.Define book keeping.
Ans: Book keeping is an art of accounting in the books of account the monetary aspect of commercial and financial transaction.

Q6. what is the function of book keeping?
Ans: The function of book keeping is to identify financial transaction and events, measuring them in money terms, recording them in the books of account and classifying the recorded transaction.
 
Q7.Name any two objective of Accounting.
Ans: The two objective of Accounting 
(i)Ascertaining profit or loss and       
(ii) Ascertaining financial position

Role of Accounting in Business

Basic accounting terms
Business transaction
                                 An economic activity that affect financial position of the business and can be measured in terms of money e.g.,purchase of goods of use in business.
 
Capital:- Amount inverted by the owner in the firm is known as capital. It may be brought in the form of cash or assets by the the owner. It is a liability of the business entity to its owners.
 
Drawings:- The money or goods or both withdrawn by owner from business for personal use is known as drawings. Example: purchase of car for personal use by withdrawing money from business.
 
Liabilities:-  Liabilities are obligations or debts that an enterprise has to play after some time in the future.

 Liabilities can be classified

1.Current liabilities: Current liabilities are obligation or debts that are payable within a period of one year. for examples; creditors , Bil payable etc.

2.Non-current liabilities: Non-current liabilities are those obligations or debts that are payable after a period of one year. Example: bank loan debentures etc.

Asset:-  Assets are valuable and economic resource of an enterprise useful in  its  operations. Assets can be broadly classified as:
 
1.Current assets: Current assets are those assets which are held for short period and can be converted into cash within one year. For examples: debtors, stock etc.
 
2.Non-Current assets: Non-Current assets are those assets which are hold for long period and used for normal business operation. For examples: land building ,machinery etc they are further classified into:

(a)Tangible assets: Tangible assets are those assets which have physical existence and can be seen and touched. for examples: furniture, machinery etc.
 
(b)Intangible assets: Intangible assets are those assets which have no physical existence and can be felt by operation. For examples: goodwill, patents, trade mark etc.
 

Expenses:- costs incurred by a business for earning revenue are known as expenses. For examples: rent wages ,salaries , interest etc.

Expenditure:- spending money or incurring a liability for acquiring assets ., goods or services is called expenditure. The expenditure is classified as:

 


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