Revision Notes for CBSE Class 11 Accountancy Chapter 2 - Free PDF Download
Accounting Principles
Accounting statements disclose the profitability and solvency of business to various parties. It is necessary to prepare such a statement in a standard language following a standard set of rules and regulations. These rules are known as “Generally Accepted Accounting Principles” or GAAP.
Features of Accounting Principles:
Accounting principles are man made.
Accounting principles are generally accepted .
Accounting principles are flexible in nature.
Need of Accounting Principles
To make the accounting information meaningful to its external and internal users, it is necessary that financial statements are prepared according to these principles.
Types of Accounting Principles
Going concern concept: As per this concept it is assumed that the business will continue to exist for a long period in future and the transactions are recorded in the books of business on the assumption that it is a continuing enterprise.
Consistency concept: It states that accounting principles and methods should remain consistent from one year to another. It helps them to compare the profit and loss of different periods and draw meaningful conclusions.
Accrual concept: As per this concept revenue is recorded when sales are made and it is immaterial whether cash received or not and same applies to expenses also.It provides more appropriate information about business enterprise as compared to cash basis.
Business entity concept: As per this concept,business organisations are treated as separate entities and owners and persons are separate entities.
Dual aspect concept: It is the basis for the double entry system of book keeping that means all business transactions recorded in accounts have two aspects- debit and credit.The value of benefit received is equal to benefit given.
Money measurement concept: As per the accounting conventions only those transactions are recorded which can be expressed in monetary terms. Example- the event of machinery breakdown is not recorded as it does not have a monetary value.
Cost concept: As per this concept, an asset is ordinarily recorded at the price actually paid or incurred to acquire it.
Accounting period concept: An accounting period is the interval of time ,at the end of which the financial statements are prepared to ascertain the financial performance of business.The accounting period is normally considered to be a period of 12 months.
Matching concept: Matching the revenues earned during an accounting period with the cost associated with the period to ascertain the accurate result of business concern during that period is called matching concept.
Revenue recognition or Realization concept: As per this concept,revenue should be accounted for only when it is actually realised or it has become certain that the revenue will be realized.
Objectivity concept: This principle of accounting specifies that the transactions should be recorded in an objective manner and should be unbiased in nature.
Accounting Conventions
It may be defined as a custom or generally accepted practice which is adopted either by general agreement or common consent among accountants.
1. Convention of full disclosure: Accounting statements should disclose fully and completely all the significant information, based on which, decisions can be taken by various interested parties.
2. Convention of Materiality: It requires the disclosure of the significant information,exclusion of which would influence the decisions. Unimportant information can be merged with other items.
3. Convention of Conservatism: The essence of this principle is ‘anticipate no profit and provide for all possible losses’.This means that all prospective losses are taken into consideration.
Systems of Accounting
Accounting Standards
Accounting standards are those written statements, which are issued from time to time by the accounting professionals body, specifying uniform rules or practices for the preparation of the financial statements.
Need for Accounting Standards
Accounting standards are needed to improve reliability and bring uniformity in accounting practices and to ensure transparency, consistency and comparability in financial information.
Benefits of Accounting Standards
Accounting standards makes the financial statements more reliable.
Accounting standards help in resolving conflict of financial interest among various groups.
Accounting standards ensure the consistency and comparability of financial statements.
Accounting standards significantly reduce the chances of manipulations and frauds.
Note- Accounting standards are applicable everywhere except the purely charitable organization.
International Financial Reporting Standards (IFRS)
The term IFRS refers to financial reporting standards issued by the International Accounting Standards Board (IASB). In order to make financial statements more consistent and transparent they should comply with all the requirements of IFRS.
Need for IFRS
The need for IFRS arises from the following reasons-
Easy access to global capital markets.
Easy to make Comparisons.
Uniformity in financial reporting.
True and fair valuation of assets.
Difficult to commit fraud and manipulate the accounts.
Goods and Service Tax (GST)
Goods and Services Tax is an indirect tax levied on supply of goods and services with consideration in the course of furtherance of business. GST is built on the principle of One Nation one Tax. It is a comprehensive, multistage, destination-based tax. GST extends to whole India including Jammu & Kashmir.
Features of GST
It is a consumption based tax.
Burden can be shifted in respect of GST.
Taxpayers do not receive a direct pinch while paying indirect taxes.
It is regressive in nature and it promotes social welfare
It is levied on commodities and services.
Advantages of GST
Ease of doing business.
Reduce Tax Evasion.
Tax system becomes more clear, systematic and foreseeable.
Decrease in the cost of goods, since tax on tax is eliminated in the GST regime.
Note: There are 3 taxes applicable under GST:
Central Goods and Services Tax (CGST)
State Goods and Services Tax (SGST)
Integrated Goods and Services Tax/ Union Territory Goods and Services Tax. (IGST/UTGST)
Revision Notes of CBSE Class 11 Accountancy Chapter 2 Theory Base of Accounting - Benefits of the Notes
Let us check out the benefits of CBSE Class 11 Accountancy Chapter 2 Notes:
Students of Class 11 Accountancy can study the chapter Theory Base of Accounting in a capsulated manner.
These revision notes will promote smart revision study with a lesser time limit.
The revision notes are prepared by expert teachers at Vedantu and thus they can reliably revise the chapters from our revision notes.
Revising these chapters will freshen the concepts already studied by the students and thus revision from these revision notes is a must.
Students get to revise from the easy-to-revise and read-to-revise study material which comes in the form of a convenient free pdf.
CBSE Class 11 Accountancy Chapter 2 Theory Base of Accounting - Topics Covered
The following topics are covered in the theory base of accounting notes –
Different Features of Accounting Principles
The accounting principles are formed largely by trial and error method. Such principles are usually accepted across the board, and those can be modified according to requirement.
Types of Accounting Principles
Accountancy class 11 chapter 2 notes mention different types of accounting principles –
A business entity or accounting entity principle
Money measurement principle
Accounting period principle
Full disclosure principle
Materiality principle
Conservatism principle
Cost principle
Matching principle
Dual aspect principle
Fundamental Accounting Assumptions
Accounting assumptions pertain to such conduct or action that is put into effect being consistent with practice and experience. The fundamental assumptions include –
Going concern assumption: Enterprise retains indefinite experience.
Consistency assumption: Specific accounting practice should be adopted.
Accrual assumption: Revenues and costs are only recognised when earned or incurred, respectively.
Accounting Bases
There are two bases of accounting – cash basis and accrual basis.
Accounting Standards
Accounting standards are formulated by accounting institutions from time to time which specifies uniform practices and rules for financial statements.
Objectives of Accounting Standards
The main purpose of accounting standards is to bring in a degree of uniformity in accounting policies and practices. The reliability of such statements also increases in that regard.
With clear accounting standards, manipulations and frauds in statements can be controlled, and the process also becomes easier for auditors.
Different Financial Statements Produced Under IFRS
Some of the financial statements include – Comprehensive Income Statement, Statement of Financial Position, Statement of Cash Flow, Statement of changes in equity etc.
Advantages of IFRS
IFRS allows for a global comparison within the financial statements of various companies or institutions. The statements would invariably include country-specific standards. Such information equips investors to make better decisions.
Nature of Accounting Standards
Accounting standards incorporate such guidelines which lay down an effective framework for framing financial statements. Such standards can be altered from time to time, keeping in with the changing business environment.
These accounting practices are uniform in nature which leads to further comparability and consistency. Accounting standards are flexible, and an enterprise is also free to adopt any alternative accounting practice. Moreover, accounting standards are mandatory.
CBSE Class 11 Accountancy Chapter 2 Theory Base of Accounting - Extra Questions to Practice (With Solution Hints)
How would you define ‘Accounting’?
What is GST?
Define - Accrual Basis of Accounting.
What are the benefits of Accounting Standard?
What are the components of GST?
Hints:
Process of detecting, measuring, collecting, documenting, classifying, analyzing, and conveying financial data.
Destination-based tax
Revenue and cost are recorded when they occur.
The benefits of Accounting Standard are:
aid in the preparation of financial statements
easier to compare financial accounts
CGST, IGST, SGST
Tips to Study Accountancy Better
Follow these tips which can help you to study Accountancy in a better way:
Accountancy is a subject that demands constant practice. So, practice accountancy practical sums on a regular basis.
Accountancy will be better understood once you study the concepts given in the chapters well and then proceed with your sums.
Revise the subject on a regular basis.
Revise the formulae of accountancy.
Take help of the revision notes and NCERT study material provided by us.
While preparing the topic from Accountancy class 11 chapter 2 notes, students have to keep an eye out for all the minute details related to such topics. If a student needs greater clarity, then Vedantu's online classes may prove to be effective. To get started, download the app today!
FAQs on Theory Base of Accounting Class 11 Notes CBSE Accountancy Chapter 2
1. What are the major advantages of IFRS?
International Financial Reporting Standards or IFRS, is explained in class 11 Accounts chapter 2 notes. It includes a definite set of rules for financial statements to remain transparent and consistent all across the world.
Accounts class 11 chapter 2 notes explains the major benefits of IFRS to be – (1) comparability among different financial statements, (2) standardisation, (3) transparency and consistency, (4) accessibility to investments and capital markets.
2. What are the fundamental assumptions of accounting?
Class 11 Accountancy chapter 2 notes indicate some of the major assumptions made in accounting – (1) accrual assumption, (2) conservatism assumption, (3) consistency assumption, (4) economic entity assumption, (5) going concern assumption, (6) reliability assumption, and (7) time period assumption.
3. What are the different objectives of accounting standards?
The objectives of accounting standards as mentioned in Theory Base of Accounting NCERT solutions class 11 are – (1) bringing in uniformity, (2) increasing reliability of statements, (3) simplification of accounting information, (4) prevention of manipulation and fraud.
Furthermore, such accounting standards help auditors to properly interpret the financial statements in accordance with guidelines, codes and policies.
4. What is the syllabus for accountancy Class 11 apart from Chapter 2?
The syllabus for Class 11 for accounts is divided into 3 parts: parts A, B and C. Part A consists of 2 units. Unit1- Theoretical Framework, Unit2-Accounting Process. Part B also consists of 2 units. Unit3 - Financial statements of sole proprietorship from complete and incomplete records, Unit 4- Computers in accounting. Part C consists of your projects, practicals, and application of the theory in reality. The syllabus provided to you is revised for the session 2024-25 and is per the curriculum provided by CBSE. For more information, visit Vedantu website (vedantu.com).
5. How to make accountancy notes for Class 11 Chapter 2?
To score high marks in accountancy you have to have an understanding of the basics. Notes are one way to ensure that you study consistently and understand the fundamentals of the chapters. You can make notes by paying attention in class, reading chapters by yourself, and jotting down important terms and definitions. You can also download NCERT notes for Class 11 Accountancy free of cost from the vedantu website (vedantu.com). You can use these as references to make yours or you can straightaway learn from them.
6. What are the important topics covered in chapter 2 of the class 11 accountancy book?
Chapter 2 is important in accountancy as it holds some of the most prominent and reoccurring terms of the accountancy world. The topics that you should pay attention to are; features of accounting principles, types of accounting principles, fundamental accounting assumptions, accounting bases, accounting standards, objectives of accounting standards, different financial statements produced under IFRS, advantages of IFRS, and nature of accounting standards. While these are topics of major importance, students should also pay attention to minute facts and information mentioned in the chapter as well.
7. How many questions are there in Chapter 2 Of Class 11 Accountancy?
There are a total of 57 questions for chapter 2 in NCERT solutions. 7-8 questions are based on theory and the rest of the questions are practical questions. There are plenty of numerical questions in NCERT solutions for you to practice from. Solving these questions will improve your understanding of the chapter and application theory in real-life situations. You can refer to CBSE class 11 accountancy chapter 2 revision notes while solving these questions and also get the notes on the vedantu app.
8. How do NCERT solutions help me in Class 11 Accountancy?
If you are looking for a career in the business world, then you need to secure a good grade in accountancy. Most students who have commerce as their stream find accounts a tough nut to crack. NCERT solutions help you to understand the fundamentals of the chapter. NCERT solutions provide you solutions to NCERT exercises with detailed explanations and step by step guide for numerical questions. NCERT solutions from Vedantu also provides you with extra questions to practice and important questions for examination.