90+ ACADEMY Accounts Class XI

CHAPTER-I INTRODUCTION TO ACCOUNTING

Q1. What is Book Keeping? Ans. Book-Keeping is the process of recording financial transactions in the books of Accounts. Features: a) Identifying Financial Transactions & Events. b) Measuring them in terms of money c) Recording business transactions & events in the books of accounts. d) Classifying recorded transactions and events ( Posting into the ledgers) Q2. What is meant by Accounting? Ans. Accounting is the process of collecting, recording, summarizing and communicating financial information to user for correct decision making. Users of Accounting Information:Investors, Management, Employees, Bankers & Financial Institutes, Customers, Govt. Public, Creditors. Advantages of Accounting:1) Facilitate to ascertain the financial results by preparing trading & P&L accounts. 2) Facilitating in accessing the financial position of the firm. 3) Facilitate in comparing the past performance & making the budget. Objectives of Accounting:a) Ascertain the Profits or Losses suffered during the accounting period. b) Ascertain the financial position of the unit at the end of accounting period. What is the difference between Book-Keeping and Accounting? Book-Keeping Identifying Financial transactions measuring them in terms of money recording & classifying (Ledger Posting) Accounting Summarizing the recorded transactions. (Tr. A/c., P&L A/c, B/S). Interpreting & communicating the results to users. Secondary Stage Senior Staff perform the functions. Ascertain financial results & position &

Scope

Stage

Primary Stage

Performance Junior Staff can perform the function. Objective Systematic record of financial transactions

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90+ ACADE Accounts Clas

communicate to users. Relation Basis of Accounting Accounting begins where book-keeping ends. Skill It is routine nature of work does not require special skills. Require special skills & ability to analysis & interpret.

Name the three different fields of Accounting:(i) Financial Accounting. (ii) Management Accounting. (iii) Cost Accounting. Limitations of Accounting:(1) Does not record the events and transactions not measured in terms of money. (2) Accounting does not indicate price changes concept. Define Double Entry System of Book-Keeping:It is the system of Accounting in which every transaction is recorded under two aspects. 1) Book-Keeping is mainly concerned with Recording Financial datas relating to business transactions. 2) Identify the Business (Economical) transactions is the first-step of Accounting Process. 3) Communication of Financial information in the (Last) vital step of Accounting. 4) Assist the Management in performing functions effectively is the basic object of financial accounting. 5) Cost Accounting is related to ascertaining the Cost of goods and Services rendered. 6) According deals with Quantifiable Information. 7) Accounting is the Language of business. 8) Accounting aims to communicate financial information to the users. 9) Scope of Accounting is wider than that of book-keeping. 10) Book-Keeping is a systematic record of all Business Financial Transactions. 11) Accounting Records can be produced as Evidence in the court. 12) In every transaction, at least two parties are involved. 13) Accounting Information should be reliable & understandable. Qualitative Features of Accounting Informations:1) 2) 3) 4) Accounting Information is True & Fair (As per the knowledge of Auditors). Accounting Information should be Reliable. Accounting Information should be Understandable. Accounting Information should be comparable.

For Internal Circulation only. Reproducing it in any form will invite legal action Nidt 90+ Classes 5/375 Chiranjiv Vihar,Ghaziabad. 9810059159,9 312808889