What went wrong when the king rode under the arch?

It was too low and knocked off his crown

How does the chain of blame unfold in the poem?

Each accused person blames another, ending with the king's own changes

Why is accounting called the language of business?

Because it communicates the financial results and position of a business to its various internal and external users for decision-making.

Who are the internal and external users of accounting information?

Internal users are the chief executive, managers and supervisors within the firm; external users include investors, creditors, banks, tax authorities, regulators and customers.

Distinguish between debtors and creditors.

Debtors are persons who owe money to the enterprise for credit purchases of goods or services, while creditors are persons to whom the enterprise owes money for goods or services received on credit.

What is the difference between profit and gain?

Profit is the excess of revenues over related expenses from normal business operations, whereas gain arises from events incidental to business, such as the sale of a fixed asset.

Distinguish between an expense and an expenditure.

Expense is the cost incurred to earn revenue whose benefit is exhausted within a year, while expenditure is spending whose benefit may last beyond a year, such as the purchase of machinery.

What is meant by a voucher?

A voucher is the documentary evidence in support of a transaction, such as a cash memo, invoice or receipt.

Introduction to Accounting

Q: State the main objectives of accounting.

To maintain records of business transactions, calculate profit or loss, depict the financial position, and provide information to various users.

Q: Name the qualitative characteristics of accounting information.

Reliability, relevance, understandability and comparability.

Q: What are the three branches of accounting?

Financial accounting, cost accounting and management accounting.

Class 11 Accountancy · Financial Accounting Part I · Chapter 1

163 members in the CBSE community

View all

CBSE Class 11 · AccountancyTrending

Financial Accounting-I: 56 of 80 theory marks

Marks booster + cheatsheet: key concepts in 2 lines each, common traps
44 marks: Unit 2, recording to depreciation
Journal formats and special purpose books
Traps from all seven chapters
Bank reconciliation adjustments
Depreciation formulas, book's worked figures

Page 1 free about 8 min read, Full kit about 55 min read

₹159See the full kit

CBSE Class 11 · Accountancy

Financial statements: 24 of 80 theory marks

Marks booster + cheatsheet: key concepts in 2 lines each
12 exam traps, listed
Five calculations the paper keeps asking
Each adjustment: one entry, two effects
Both formats: trading and P&L, balance sheet
Yogita illustration solved line by line

Page 1 free about 8 min read, Full kit about 55 min read

₹159See the full kit

View all 44 amazing Marks Booster kits →

Summary

Accounting is the process of identifying, measuring, recording and communicating the economic events of an organisation to the interested users of such information. The AICPA in 1941 described it as the art of recording, classifying and summarising transactions of a financial character, while the American Accounting Association in 1966 stressed identifying, measuring and communicating economic information for informed decisions. The accounting process begins with the identification of business transactions, then measures them in monetary terms, records them in a chronological manner, and finally communicates the summarised information through reports. Because it conveys financial information, accounting is called the language of business. Its users are grouped into internal users (chief executive, managers, supervisors) and external users (investors, creditors, banks, tax authorities, regulators, customers). The discipline has branched into financial accounting, cost accounting and management accounting. Useful accounting information should possess the qualitative characteristics of reliability, relevance, understandability and comparability. The main objectives of accounting are to maintain systematic records of transactions, calculate profit or loss, depict the financial position through a balance sheet, and provide information to its users. The chapter also introduces basic terms such as entity, transaction, assets, liabilities, capital, drawings, sales, revenue, expenses, profit, gain, loss, debtors, creditors, stock, voucher and goods.

Meaning and definition of accountingAccounting as a source of information and its usersQualitative characteristics of accounting informationObjectives and role of accountingBasic terms in accounting

Key terms

Accounting

The process of identifying, measuring, recording and communicating the economic events of an organisation to interested users of the information.

Assets

Economic resources of an enterprise expressed in monetary terms that provide future benefit, classified as current and non-current.

Liabilities

Obligations or debts that an enterprise has to pay in the future; they represent creditors' claims on the firm's assets.

Capital

The amount invested by the owner in the business; it is a claim of the owner on the assets and is shown on the liabilities side.

Drawings

Withdrawal of money or goods by the owner from the business for personal use, which reduces the owner's investment.

Qualitative Characteristics

The attributes—reliability, relevance, understandability and comparability—that make accounting information useful for decision-making.

Extra questions & answers

Try one from this chapter

Accounting is best defined as the process of identifying, measuring, recording and:

Flashcards & interactive practice