Introduction to Accounting Class 11 Notes CBSE Accountancy Chapter 1 [Free PDF Download]

Accounting

Accounting is an art of recording, classifying and summarizing the monetary transactions in an efficient manner and interpreting the results.

Functions of Accounting

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• Identifying: Identifying the business transactions from various sources is the first step of accounting.it involves observing all business activities and identifying those which are considered as financial transactions.

• Recording: Only those transactions are recorded in books of accounts which can be measured in terms of money. It involves recording them in a journal and keeping a systematic record of all of them.

• Classifying: After recording the transactions they are classified. Classification refers to the grouping of all the transactions of same nature at one place.

• Summarising: It is the process of putting the balances of all accounts at one place i.e. Trial balance.

• Communicating: Accounting also includes the communication of financial data like financial statements to the users who analyse them as per individual requirements.
  
  

Objectives of Accounting

1. To maintain proper records of business transactions according to specified rules which helps them to minimize the chance of omission and fraud.

2. To ascertain the net profit or loss suffered on account of business transactions during a particular period and to know the exact reasons leading to profit or loss.

3. To ascertain the financial position of business by means of financial statement i.e,Balance sheet.

4. To ascertain the progress of business from year to year and to detect errors and frauds.

5. To provide accounting information to various interested parties like owners, creditors, banks, employees etc. who perform an in depth analysis as per the requirement of the stakeholders.
   
   

Advantages of Accounting

1. Accounting provides permanent records for all business transactions and provides reliable information to various parties.

2. Accounting provides the Profit and loss of a business for a given period of time.

3. Accounting provides the facility of comparative study of the various aspects of business like profit sales, purchase,etc. with that of previous years and helps businessmen to make decisions.

4. Accounting forms a basis in the process of performance evaluation to improve the performance of employees, divisions,activities, etc.

5. Accounting records act as an approved evidence in legal matters.
   
   

Limitations of  Accounting

• One of the major limitations of accounting is that it considers only monetary transactions. Non monetary aspects like quality, honesty, skills are ignored in accounting.

• It considers only historical transactions and the figures given in the financial statement do not consider price level changes.

• It is influenced by personal judgements and not free from personal bias which affects its credibility.

• It is affected by window dressing which means manipulation of accounts so that financial statements describe a more favourable position than the actual position.

• Financial accounts are unsuitable for forecasting because they are only records of past events.
  
  

Book-Keeping-Base of Accounting

Book keeping is an art of recording the transactions in the books of accounts. Only those transactions which bear a monetary value are recorded. It is the first step of accounting. Its main purpose is record keeping or maintenance of books of accounts, It should not be confused with accounting. Differences between the two are as follows.

Subfields of Accounting

1. Financial Accounting:The main purpose of this branch is to record the business transactions in a systematic manner, to ascertain profit or loss and to present the financial position of the business with the help of a balance sheet.

2. Cost Accounting: The main purpose of cost accounting is to ascertain the total cost and per unit cost of goods produced and services rendered by business.

3. Management Accounting: The main purpose of this branch is to present the accounting information in such a way as to assist the management in planning and controlling the operations of business.

4. Tax Accounting: This branch is used for tax purposes. Income tax and gst are computed on the basis of this accounting.
   
   

Qualitative Characteristics of Accounting Information

Accounting information should be prepared and presented in such a way that is able to depict a clear view of business enterprise.

1. Reliability: It implies that information must be factual and verifiable. And free from errors.

2. Relevance: Accounting information must be relevant to the objectives of enterprise. To be relevant, information must help the users of accounting information in making decisions.

3.Understandability: Accounting information should be presented in such a manner that they are understood easily by their users such as investors, employees, etc.

4. Comparability: It is a very useful quality of accounting information. Financial statements should contain previous year data so that it can be compared with current year so that current performance be compared with past performance.

Accounting Terms

1. Business Transaction: A Business transaction is an economic activity of business that changes its financial position.

2. Account: It is a record of all business transactions relating to a particular person or item. It is a T Shaped proforma.

3. Capital: It refers to the amount invested by the owner in a business. The amount invested could be in the form of cash, goods, etc.

4. Drawing: Any cash or goods withdrawn by the owner for personal use made out of business funds are known as drawings.

5. Profit: It is the excess of total revenue over total expense of a business. Profit =Revenue-Expenses.

6. Loss: The excess of expenses over related revenue is known as loss. Loss= Expenses-Revenue.

7. Gain: It is a monetary benefit resulting from events or transactions which are incidental to business like profit on sale of fixed assets.

8. Stock: It includes goods unsold on a particular date.

9. Purchases: It refers to the amount of goods bought by business for resale or use in production.it can be of cash or credit.

10. Purchase return: When purchased goods are returned to suppliers, it is referred to as purchase return.

11. Sales: It means transfer of goods or services for money in the normal course of business.

12. Sales return: When customers return the goods sold to them it is known as sales returns.

13. Debtors: It refers to those persons whose business has been sold goods on credit and payment has not been received yet.

14. Creditors:It refers to those persons whose business buys goods on credit and payment has not been done yet.

15. Voucher: A voucher is a written document which is created in support of  a particular transaction. It may be in the form of a cash memo, invoice or receipt. Voucher is a necessary component of auditing.

16. Income: It is the difference between revenue and expense.

17. Expense: It is the amount used in order to produce and sell goods and services.

18. Discount: It is the rebate given by the seller to the buyer. It is of 2 types: Cash Discount and Trade Discount.

19. Cash Discount: When discount is allowed to customers for making prompt payment.It is always recorded in books of accounts.

20. Trade Discount: This is a type of discount allowed by the sellers to their customers at a fixed percentage on the list price of goods. and also it is not entered in the books of accounts.

21. Bad Debts: It  refers to the amount that debtor has not paid even after repeated reminders and has no intention of paying in the future.
    
    

Assets

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Liabilities

Liabilities refers to financial obligations of business.it denote the amount which a business owes to others.ex- Creditors,loan,etc.It is of 2 types;

1. Non current liabilities: It refers to those which fall due for payment in  a relatively longer period. For ex- long term loans.

2. Current liabilities: It refers to those which  are to be paid in the near future. Ex-Creditors, Outstanding expenses.
   
   

Expenditure

It involves spending cash or incurring a liability for the purpose of acquiring assets,goods or services. It is of 3 types.

1. Revenue Expenditure: It refers to any expenditure,the full benefit of which is received during one accounting period.ex-salaries,rent.

2. Capital Expenditure: It refers to expenditure,the benefit of which is received during more than one year. Ex- Machinery.

3. Deferred Revenue Expenditure: It refers to  expenditure which are revenue in nature but benefit of which is likely to be derived over no of years. Example-Advertisement.

   
   

Accountancy Class 11 Chapter 1 Notes Introduction to Accounting – A Quick Glimpse

The first chapter in the Class 11 Accounts book deals with the theoretical base required for the practice of accountancy. It defines in detail the Basic Accounting Terms which students will come across repeatedly in their studies. Our offered Introduction to Accounting PDF is structured and written by experts with many years of experience in teaching. Consequently, the study materials in the revision notes are precise and offer a comprehensive and easy understanding of the various topics. 

The Accounting Notes from the chapter allow students to grasp difficult concepts such as recording financial and economic events, analysis of events to understand its classification, etc. easily. 

The points and notes in the Introduction to Accounting Class 11 PDF treat all the concepts in a manner that aids students in easily memorising and understanding them. 

It will further help them to exercise such knowledge in further chapters in Accounts Class 11. Our revision notes cover all key points pertinent to the chapter.

Accountancy Class 11 Chapter 1 Notes Introduction to Accounting – Benefits of Revision Notes

Let us check some of the benefits which are rendered by Class 11 Accountancy Chapter 1 Notes which is basically a revision material for the students:

• Accountancy Chapter 1 Revision Notes will help the students to revise the entire chapter in a capsulated manner, this will lessen their exam preparation pressure.

• Revision is a must for a student, and when it comes to the concepts of Accountancy, then this must be taken seriously. 

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• These capsulated revision studies will help the students to revise the content in less time, this will be especially beneficial at the time of their exam. 

Accountancy Class 11 Chapter 1 Notes Introduction to Accounting - Topics Covered 

Following are the topics covered which are covered:

• Meaning of Accounting

• Accountancy, Accounting, and Book-keeping

• Relationship between Accountancy, Accounting, and Book-keeping

• Distinguish between Book-keeping and Accounting

• Users of Accounting information

• Advantages and limitations of Accounting.

• Basic Accounting terms

• Double Entry System of Book-keeping

Accountancy Class 11 Chapter 1 Notes Introduction to Accounting - Extra Questions (Solved) for Practice

1. What are three examples of Revenue? 

Ans. The three examples of revenue are as follows:

• Dividends

• Sales Revenue

• Interest Received

2. Why must two accounting information be compared?

Ans. Two reasons why accounting information must be compared are as follows:

• The accounting information of a particular entity must be compared against the competitor’s accounting information in order to know where the entity stands in the market. 

• The accounting information of an entity must be also compared to its own information taken out over the years; this will help the management to know their progression and the entity’s trend can also be determined. 

3. What are the two types of users of accounting information?

Ans. The two types of users of accounting information are:

• External Users

• Internal Users

How Do I Study Class 11 Accountancy? Tips to Study Better

Take note of some suggested tips on how to study accountancy better:

• Accountancy is a subject that requires continuous practice. Thus, practice is the key to scoring excellent marks in accountancy. 

• In order to totally understand the chapters of Accountancy, you are required to study the concept priorly and then go through the illustrations given in the textbook after which you can solve the practical problems. 

• Revise the chapters well from these revision notes.

• One can also study the NCERT Notes in order to know the Accountancy Class 11 Exam pattern accurately. 

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