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CBSE NOTES ⇒ Class 11th ⇒ Accounts ⇒ 1. Introduction to Accounting

1. Introduction to Accounting

Book Keeping


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Book Keeping:

A knowledge that educates us to maintain the financial records. 

  • It is the part of accounting. 
  • Recording of financial data in the books of accounts. 
  • Identifying financial transactions and events.
  • Measuring them in terms of money. 
  • Classifying recorded transactions and events, i.e posting them into ledger accounts. 

Accountancy: 

Accountancy is a systematic knowledge of accounting. It explain how to deal with Various aspects of accounting. 

It educate us 

(i) How to maintain the books of accounts

(ii) How to summarise the accounting information.

(iii) How to comunicate it to the users: 

Objectives of accounting:

1.  Record of financial transactions and events: 

2. Determine profit or loss.

3. Determine financial position

4. Assisting the management

5. Communicating accounting information to users

6. Protecting Bussiness assets: 

Users of Accounting Informations:

(1) Internal or Primary Users: of accounting information:

(i) Management: For analyzing the organization's performance and position and taking appropriate measures to improve the company results.

(ii) Employees: for assessing company's profitability and its consequence on their future remuneration and job security.

(iii) Owners: for analyzing the viability and profitability of their investment and determining any future course of action.

(2) External users (Secondary Users) of accounting information:

(i) Creditors: for determining the credit worthiness of the organization. 

(ii) Tax Authourities: for determining the credibility of the tax returns filed on behalf of the company.

(iii) Investors: for analyzing the feasibility of investing in the company. Investors want to make sure they can earn a reasonable return on their investment before they commit any financial resources to the company.

(iv) Customers: for knowing the financial position of its suppliers which is necessary for them to maintain a stable source of supply in the long term.

(v) Regulatory Authorities: for ensuring that the company's disclosure of accounting information is in accordance with the rules and regulations set in order to protect the interests of the stakeholders who rely on such information in forming their decisions.

 

 

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