Accountancy Chapter 1 - Introduction to Accounting
1. Define accounting.
Ans: Accounting is a method of identifying the occasions of monetary nature
and recording them in a magazine, classifying in their respective ledgers,
summarizing them in earnings and Loss Account and Balance Sheet and
providing the consequences to the users of such information, viz. owner/s,
government, creditors, traders etc.
According to the American Institute of Certified Accountants, 1941, "Accounting
is an art of recording, classifying and summarizing in a significant manner and
in terms of money transactions and events that are, in part at least, of a financial
character and interpreting the results thereof."
2. State what is the end product of financial accounting?
Ans:
1. Income statements (Trading and/or Profit and Loss Account) - An
income statement that includes Trading and Profit and Loss Account, ascertains
the financial results of a business in terms of gross (or net) profit or loss.
2. Balance Sheet - It indicates the real monetary positions of a commercial
enterprise that gives required facts of and liabilities of an enterprise company,
to folks that require information like owners, creditors, investors, authorities, and
many others.
,3. Enumerate the main objectives of accounting.
Ans: The primary objectives of accounting are given under
1. To preserve a systematic report of all transactions which occur.
2. To predict and calculate the income earned or loss incurred all through an
accounting duration via getting ready income and loss accounts.
3. To expect the financial position of the enterprise at the cease of every
accounting period by means of getting ready to balance sheets.
4. To assist the management for selection making, effective manipulation,
forecasting, etc.
5. To forecast the destiny choices for the betterment of the business.
6. To come across and save you frauds and errors
7. To communicate statistics to diverse customers
4. Who are the users of accounting information?
Ans: Users customers of accounting records are divided into two classes as -
inner customers and outside users.
1. Inner users
Inner customers are typically referred for the employees of the enterprise. They
have a direct right of entry to the monetary statements of a commercial
enterprise. Examples are given below.
i. Owners
ii. Management
iii. Personnel and people
2. External users
External customers are individuals who aren't an employee of the corporation
and are inquisitive about the monetary affairs of the business. Those customers
do not have direct access to the economic statements of the business. the
subsequent come below the pinnacle of external customers.
i. Banks and Financial Institutions
ii. Investors and Potential Investors
, iii. Creditors
iv. Tax Authorities
v. Government
vi. Consumers
vii. Researchers
viii. Public
5. State the nature of accounting information required by long-term
lenders.
Ans: Accounting information required with the aid of the long term creditors are
repaying potential of the enterprise, profitability, liquidity, operational efficiency,
a capacity increase of business, and so forth.
6. Who are the external users of information?
Ans: External users of statistics are the individual or the groups that have direct
or indirect hobby inside the commercial enterprise firm; however, are not a part
of the control. They do now not have direct access to the internal records of the
firm and makes use of posted records or reports like income and loss accounts,
stability sheets, annual reviews, press releases, etc. a few examples of external
customers are government, tax government, exertions unions,, etc.
7. Enumerate the informational needs of management.
Ans: The informational desires of control are worried about the activities given
underneath.
1. Assists in choice-making and business planning
2. Getting ready reviews associated with funds, prices and income to check the
soundness of the enterprise
3. Comparing contemporary monetary statements with their very own historic
monetary statements and of different similar corporations to evaluate the
operational performance of the commercial enterprise.
8. Give three examples of revenues.
Ans: Three examples of revenue are given below.
1. Sales revenue
1. Define accounting.
Ans: Accounting is a method of identifying the occasions of monetary nature
and recording them in a magazine, classifying in their respective ledgers,
summarizing them in earnings and Loss Account and Balance Sheet and
providing the consequences to the users of such information, viz. owner/s,
government, creditors, traders etc.
According to the American Institute of Certified Accountants, 1941, "Accounting
is an art of recording, classifying and summarizing in a significant manner and
in terms of money transactions and events that are, in part at least, of a financial
character and interpreting the results thereof."
2. State what is the end product of financial accounting?
Ans:
1. Income statements (Trading and/or Profit and Loss Account) - An
income statement that includes Trading and Profit and Loss Account, ascertains
the financial results of a business in terms of gross (or net) profit or loss.
2. Balance Sheet - It indicates the real monetary positions of a commercial
enterprise that gives required facts of and liabilities of an enterprise company,
to folks that require information like owners, creditors, investors, authorities, and
many others.
,3. Enumerate the main objectives of accounting.
Ans: The primary objectives of accounting are given under
1. To preserve a systematic report of all transactions which occur.
2. To predict and calculate the income earned or loss incurred all through an
accounting duration via getting ready income and loss accounts.
3. To expect the financial position of the enterprise at the cease of every
accounting period by means of getting ready to balance sheets.
4. To assist the management for selection making, effective manipulation,
forecasting, etc.
5. To forecast the destiny choices for the betterment of the business.
6. To come across and save you frauds and errors
7. To communicate statistics to diverse customers
4. Who are the users of accounting information?
Ans: Users customers of accounting records are divided into two classes as -
inner customers and outside users.
1. Inner users
Inner customers are typically referred for the employees of the enterprise. They
have a direct right of entry to the monetary statements of a commercial
enterprise. Examples are given below.
i. Owners
ii. Management
iii. Personnel and people
2. External users
External customers are individuals who aren't an employee of the corporation
and are inquisitive about the monetary affairs of the business. Those customers
do not have direct access to the economic statements of the business. the
subsequent come below the pinnacle of external customers.
i. Banks and Financial Institutions
ii. Investors and Potential Investors
, iii. Creditors
iv. Tax Authorities
v. Government
vi. Consumers
vii. Researchers
viii. Public
5. State the nature of accounting information required by long-term
lenders.
Ans: Accounting information required with the aid of the long term creditors are
repaying potential of the enterprise, profitability, liquidity, operational efficiency,
a capacity increase of business, and so forth.
6. Who are the external users of information?
Ans: External users of statistics are the individual or the groups that have direct
or indirect hobby inside the commercial enterprise firm; however, are not a part
of the control. They do now not have direct access to the internal records of the
firm and makes use of posted records or reports like income and loss accounts,
stability sheets, annual reviews, press releases, etc. a few examples of external
customers are government, tax government, exertions unions,, etc.
7. Enumerate the informational needs of management.
Ans: The informational desires of control are worried about the activities given
underneath.
1. Assists in choice-making and business planning
2. Getting ready reviews associated with funds, prices and income to check the
soundness of the enterprise
3. Comparing contemporary monetary statements with their very own historic
monetary statements and of different similar corporations to evaluate the
operational performance of the commercial enterprise.
8. Give three examples of revenues.
Ans: Three examples of revenue are given below.
1. Sales revenue
