Chapter - 1 ( Introduction to Accounting)

Stream- Commerce
Session- (2021-2022)
Class- XI
SUBJECT:- Accountancy
Assignment-1

Introduction to Accounting

Accounting is the process of identifying, measuring and communicating the economic information of an
organisation to its users who need the information for decision making.

Definition of accounting

" Accounting system is a means of collecting, summarising, analysing and reporting in monetary terms
the information of business."

- Robert N. Anthony

Objectives of accounting

1. Systematic recording of business transactions:

Accounting systematically records all financial transactions and events of the enterprise in the books of
accounts. Complete record of business transactions helps to avoid the possibility of omission and fraud.

2. To Ascertain profit or loss of the business:

Business is run to earn profits. Whether the business earned profit or incurred loss is ascertained by
accounting by preparing profit and loss account or income statement.

3. Providing accounting information to its users:

Another important objective of accounting is to provide accounting information to its users to enable
them to take sound and realistic decisions. The accounting information is communicated in the form of
annual report

4. To Ascertain financial position of the business:

Accounting also aims at ascertaining the financial position of the business concern which can be done by
preparing a position statement also called a balance sheet.
5. Protecting business assets:

Accounting helps the management to protect its assets and exercise proper control over them by
keeping a record of the assets owned by the business.

6. Assisting the management:

Accounting assists the management by providing financial information to it, which is required by
management for decision-making, exercising control, budgeting and forecasting etc.

Characteristics/attributes of accounting

1. Identification of financial transactions and events

accounting helps in recording those transactions and events which contains financial connector

2. Measuring the transactions

accounting measure the transactions and events in terms of money because money is a common
measurement unit .

3. Recording

As it has already said that accounting is an art of recording business transactions and events in the books
of accounts. It means that recording is the process of incorporating business transactions of financial
character in the books of original entry i.e., journal book.

4. Classification

accounting is also and art of classifying business transaction as income, expense, acids, liability or
capital. Classification is a process of collecting similar transaction at one place ( posting transactions
from journal to ledger).

5. Summarising

accounting also summarises the financial transactions. It means getting final results and positions with
the help of thousand of transactions and events in the artistic way. It involves presenting the data in an
understandable and useful manner in the form of trading and profit and loss account and balance sheet.

6. Analysis and interpretation

financial data is analysed and interpreted in a professional manner so that the users of financial data can
make a meaningful judgement of the financial results and financial position of the business.
7. Communication

finally, objective of accounting is to provide accounting information to users , both internal and
external , who analyse them as per their needs .The accounting information must be provided in time .

Topic : practice questions

Q1. The first step of accounting process is :
(A) identifying a transaction
(B) recording a transaction
(C) summarising a transaction
(D) none of the above
Q2. What is accounting?
Q3. Explain any four objectives of accounting?
Q4. Will loss occurred due to strike by employees be recorded in
accounting?
Q5. Which of the following events present business transaction
(A) machinery is purchased for cash
(B) goods are ordered for delivery next month
(C) the owner of the firm dies
(D) an employee is dismissed from his job
Q6. The main objective of accounting is to see the
(A) financial position of the firm
(B) position of sales
(C) position of purchases
(D) position of the cash
Q7. The work of accounting begins
(A) to record the business transactions into the journal
(B) to post the business transactions into the ledger
(C) to balance accounts opened in the ledger
(D) to prepare the profit and loss account and balance sheet
Q8. The characteristics of accounting are
(A) recording and classification
(B) summary
(C) analysis and interpretation
(D) all of the above
Q9. State true or false
(A) accounting explain the qualitative aspects of the business.
(B) if an employee is dismissed from the job is called a business
transaction
(C) promise to send the goods is an accounting transaction.
(D) accounting records a private transactions of the businessman.
(E) the main objective of accounting is to show the earning capacity
and financial position of the business.
Q10. What is the last step of accounting process?
Q11. Name two transactions which are not recorded in accounting
books?
Q12. what is a primary reason for business students and others to
study accounting discipline?