CBSE TEST PAPER-01

Class - XI Accountancy (Introduction to Accounting)

Topic : Introduction to Accounting
ANSWERS

1. Accounting is the art of identifying, recording, classifying, summarising and communicating

financial information to the users.

2. According to Robert N. Anthony, “Accounting system is a means of collecting, summarising,

analysing and reporting in monetary terms the information of business”.

3. Accounting is needed because it is helpful in having a complete and systematic record of

business transactions. It helps in ascertaining the cost, profit/loss, efficiency and financial
position of the business.

4. Accounting is the process of identifying, measuring and communicating economic

information to permit informed judgements and decisions by users of the information.

5. Steps involved in Accounting Process are :

(i) Collecting and identifying financial transactions
(ii) Recording the Financial Transactions
(iii) Classifying the Financial Transactions
(iv) Summarising the financial transactions
(v) Analysing the financial transactions
(vi) Interpretation
(vii) Communication to the users

6. Hindustan Lever, Atlas Cycles

7. Adani Enterprise, Mother Dairy

8. Bajaj Capital, Muthoot Finance

9. Tata Consultancy Services, Wipro

10. All financial transactions are first of all recorded in a book called journal according to some
specified rules. In a large scale business transactions can be recorded directly to the cash
book, purchase book, sales book, purchase return book, sales return book etc.

11. Classification is concerned with grouping the transactions of one nature at one place.
Classification is done in a book called ‘Ledger’. In ledger various accounts are opened and

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 the concerned transactions are recorded in the concerned account. i.e. all cash transactions
in cash book and purchase transactions in purchase account etc.

12. Summarisation is mainly concerned with the balancing of different accounts. Summarising
it the art of presenting the classified data in a prescribed manner which proves useful to
the user of accounting information.

13. Analysis and interpretation is the important function of accounting. The recorded financial
data is analysed and interpreted in a manner that the end users can make a meaningful
judgement about the financial condition and profitability of the business.

14. Accounting provides important financial information to the users i.e. creditors, debtors,
financial institutions, employees, government, tax authorities etc. Users can analyse the
same accounting information as per their requirement.

15. Accounting records only those transactions which are of financial nature. There are so
many transactions which are very important from the point of view of business but not
considered because they are not of financial nature i.e. appointment of manager, death of
employee, strike and dispute among the employees and management.

Challenge 1 : No, appointment of marketing manager is not a financial transaction. Hence, it

should not be recorded in the books of accounts.

Challenge 2 : C, D, E and F are not business transaction.

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