CBSE TEST PAPER-03

Class - XI Accountancy (Introduction to Accounting)

Topic : Introduction to Accounting
ANSWERS

1. Qualitative characteristics are :

(a) Reliability
(b) Relevance
(c) Understandability
(d) Comparability

2. Under Single Entry System only one aspect of transaction is recorded in the books of
accounts i.e. only cash and personal accounts are maintained.

3. Double Entry System is based on dual concept, which states, “for every debit there is a
credit”. Every transaction has two side effects and both the effects are recorded in the books
of accounts.

4. Under Double Entry System both the aspects of a transaction are recorded in the books of
accounts. It facilitates a check on the arithmatic accuracy of the accounting books.

5. The main disadvantage of this system is that a mistake committed at the time of journalising
or an omission of a transaction from journalising cannot be detected easily under this
system.

6. Accounting cycle commences with

recording of financial transactions and it
ends with the communication of financial
information to the users. Accounting Cycle
is shown through a diagram.

7. Accounting is known as the language of

the business because it is through accounting that various transactions recorded by a book-
keeper are analysed and interpreted and the results are communicated to the concerned
parties. Accounting serves as a source of communication.

8. Balance sheet is prepared to know the financial position of a business.

9. Income statement is prepared to know the profitability of the business.

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10. Financial Institution and Bankers are interested in the solvency and profitability of the
business. Through This they judge the repayment capacity of loans to be provided to them.

11. The main purpose of using accounting information of business is to assess income tax,
duties and sales tax etc. Government is also interested in checking whether accounts are
prepared in a lawful manner as prescribed.

12. Accounting plays important role in recording each and every business transaction of
financial nature. These records can be used as a proof or evidence in the court of law.

13. Reliability

14. Qualitative aspect of accounting cannot be expressed in terms of money but it plays very
important role in a business. Example of qualitative aspect ; changes in management,
efficiency of management, quality goods, satisfaction of customers and reputation of
business etc.

15. End product of accounting are Trading Account, Profit and Loss Account and Balance Sheet.
These financial statements are prepared at the end of the year to know the profitability and
financial position of the business.

Challenge 1. Recording of Financial Data

Challenge 2. Only Financial Transactions

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