Under this, entries in the books of accounts are made when cash id received or paid and not when the receipt or payment becomes due. 5) It helps a firm in the assessment of its correct tax The meaning of accounting can be made clearer by understanding its process and components. Good returned to supplies should be debited to a) Sales return b) Return outward c) Return inward d) Supplies account 8. The American Accounting Association (AAA) defined accounting as: "the process of identifying, measuring and communicating economic information to permit informed judgment and decision by use… For any business, it is important that the finance it procures is invested in a manner that the returns from the investment are higher than the cost of finance. The financial statements should act as a means of conveying. income statement, shows the net profit of business operations of a firm during a particular accounting period. For example: Land, Building, Machinery etc. particular accounting period. 2) Recording: A transaction will be recorded in the books of accounts only it is considered as an economic event and can be measured in terms of money. Sales are total revenues from goods sold or services provided to customers. An entity has a separate existence from its owner. decisions of users by helping them to form prediction about 4) Comparability: The information should be disclosed in such a manner that it can be compared with previous year’s figures of business itself and other firm’s data. 5) Accounting standards are amendatory in nature. According to this assumption, accounting practices once selected and adopted, should be applied, consistently year after year. According to this principle, apart from legal requirements, all significant and material information, related to the economic affairs of the entity should be completely disclosed in its financial statements, and the accompanying notes to accounts. please add some more mcq’s on Depreciation, BRS and Financial statements. owners, investors, creditors, banks, employees and government authorities etc who analyze Accounting has been defined as, “the art of recording, classifying and summarizing in a significant manner in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results there of. Offered by University of Pennsylvania. 2) Capital Receipts: Capital Receipts are those receipts which are occurred by other than business operations like money received by sale of fixed assets. Cost are equal to a) Cost of good sold + gross profit b) Cost of good sold - gross profit c) Gross profit - cash of good sold d) None of these 5. cash flows and working capital). Offered by University of Pennsylvania. manipulation Bill Receivable is an accounting term of Bill of Exchange. 4) Where the alternative accounting practice is available, an enterprise is free to adopt. The ability of an individual to keep track of the financial transactions of a business, resulting from its operation over a period of time, is known as his financial accounting skills. making economic decisions. Financial accounting is the recording and presentation of information for the benefit of the various stakeholders of an organization. Interest on capital is treated as an expense like any other business expense. ... ALOE is the acronym for the terms … Revenue is the grass inflow of cash, receivables or other considerations arising in the course of ordinary activities of an enterprise from the sale of goods, rendering of services and use of enterprise resources by others yielding interests, royalties and dividends. The process of recording transaction in different journals is a) Posting b) Entry making c) Adjoining d) Journalising 4. This process of reviewing the financial statements allows for better economic decision making. Sales may be cash sales or credit sales. 2) It helps owners to compare one year’s results with those balance sheet which shows assets on one side and Capital “A mode of conduct imposed on an accountant by custom, law and a professional body.” – By Kohler • Concept of Accounting Standards Accounting standards are written statements, issued from time-to-time by institutions of accounting professionals, specifying uniform rules and practices for drawing the financial Statements. before starts learning to account one must read and learn all the terms to understand accounting well. Financial reporting is a vital part of corporate governance. good. Debtors are persons and/or other entities to whom business has sold goods and services on credit and amount has not received yet. business operations of a firm during a particular accounting A company can choose how long it wants its accounting cycle to be. A written acknowledgment of having received, or taken into one's possession, a specified amount of money, goods, etc. manner and in terms of money, transactions and events which are, in part at least, of a financial character, and interpreting the results thereof. There are two bases of ascertaining profit or loss, namely: Under this, entries in the books of accounts are made when cash id received or paid and not when the receipt or payment becomes due. Book keeping is the recording phase while accounting is concerned with the summarizing phase of an, accounting system. in accounts to present a more. 2) To ascertain the profit earned or loss incurred during a particular accounting period which further help in knowing the financial performance of a business. System”. 27. 3) It is analytical in nature and required special skill or knowledge. It increases cash in assets side and capital in liabilities- side by Rs. Liabilities are obligations or debts that an enterprise has to pay after some time in the. Disclosure of all material facts is compulsory but it does not imply, that even those figures which are irrelevant are to be included in the financial statements. The distinction between the two are as under. It involves observing all business activities and selecting those events or transactions which can be considered as financial transactions. According to this principle, the life of an enterprise is divided into smaller periods so that its performance can be measured at regular intervals. (3) Accounting principles are generally accepted. that help the management in. This involves the preparation of financial statements available for public use. Introduction to Financial Management. a) Tangible Assets: Tangible Assets are those assets which have physical existence. If the knowledge about any information is likely to affect the user’s decision, it is termed as material Information. Accounting is the art of recording, classifying and According to this principle, every business transaction has two aspects - a debit and a credit of equal, amount. It is immaterial, whether the cash is received or paid at the time of transaction or on a later date. 5) It is based on various concepts and conventions which may The excess of expenses of a period over its related revenues is termed as loss. Accounting Hall Of Fame: A prominent award in the field of accounting. Double Entry System of Book-keeping refers to a system of accounting under which both the aspects (i.e. Since precision is costly in terms of both time and resources, managerial accounting places less emphasis on precision than does financial accounting. made or received. It means it record the effect of transaction is taken into book in the when they are earned rather than in the period in which cash is actually received or paid by the enterprise. 5) It gives the complete picture of the financial conditions of the business unit. Stephanie Senya Dey Quaye I'D … 2) It helps owners to compare one year’s results with those of other years to locate the, 3) It provides information about the financial position of the business by means of balance. It is concerned with revenues, expenses, assets and liabilities of a business house. side and the right side of an account is called credit side. If the knowledge about any information is likely to affect the user’s decision, it is termed as material, According to this principle, prospective profit should not be recorded but all prospective losses should, immediately be recorded. 1,00,000 = Liabilities + Capital Rs. This discount is not recorded in the accounting books as it is deducted in the invoice/cash memo. Browse more Topics under Introduction To Accounting. the act of. The left side of an account is called debit. (a) Define accounting and trace the origin and growth of accounting. Book keeping is the record-making phase of accounting which is concerned with the recording of financial transactions and events relating to business in a significant and orderly manner. It shows assets on one side and Capital & Liabilities on the other side. Therefore, transactions are recorded and analyzed, and the financial statements are prepared from the point of view of business and not the owner. to. the accounting literature of this somewhat elusive term. Shah Nikhil . 5) Communication: The main purpose of accounting is to 1) Accounting standards are required to bring uniformity in accounting practices and policies by proposing standard treatment in preparation of financial statements. Its function is to provide quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions, in making reasoned choices among alternative courses of action." Book keeping is the recording phase while accounting is concerned with the summarizing phase of an accounting system. sheet and income statement to give details of various items For example: Spending money or incurring a liability for acquiring assets, goods or services is called. such a manner that users can, 4) Comparability: The information should be disclosed in 3. providing depreciation charged on fixed assets and appearance in the Balance Sheet at book value, without having reference to their market value. 6) To prevent frauds by maintaining regular and systematic accounting records. Once the economic events, are identified and measured in economic terms they will be The certificates include Debits and Credits, Adjusting Entries, Financial Statements, Balance Sheet, Income Statement, Cash Flow Statement, Working Capital and Liquidity, Financial Ratios, Bank Reconciliation, and Payroll Accounting. 2) Cash Discount: The objective of providing cash discount is to encourage the debtors to pay the dues promptly. Search for: introduction to financial accounting and its terms. When sold goods are returned from customer due to any reason is known as sales return. Providing. The owner is treated as a creditor (Internal liability) for his investment in the business, i.e. changes in price level. 3) Understandability: The information should be presented in such a manner that users can understand it well. 4) It helps in keeping systematic and complete records of business transactions in the books of accounts according to specified principles and rules, which is accepted by the Courts as evidence. Multiple choice questions (MCQs) quiz. For example, different people have different opinions regarding life of asset for calculating. becomes the basis of all subsequent accounting transactions for the asset. So, an item having an insignificant effect or being, irrelevant to user need not be disclosed separately, it may be merged with other item. Consistency assumption does not mean that particular practices, once adopted, cannot be changed. Dec 14,2020 - Test: Introduction To Accounting - 1 | 20 Questions MCQ Test has questions of Commerce preparation. ledger accounts and the preparation of trial balance with Providing financial information to its users is a regular process. (B) … 26. All accounts are divided into two sides. planning and controlling the operations of a business and in Income is a wider term, which includes profit also. Accounting or accountancy is the measurement, processing, and communication of financial and non financial information about economic entities such as businesses and corporations.Accounting, which has been called the "language of business", measures the results of an organization's economic activities and conveys this information to a variety of users, including … Revenue is the grass inflow of cash, receivables or other considerations arising in the course, of ordinary activities of an enterprise from the sale of goods, rendering of services and use of enterprise, resources by others yielding interests, royalties and dividends. on behalf of third parties such as certain taxes. Return outward appearing in the trial balance is d, MCQs BASED ON JOURNAL ENTRY A journal is called a book of a) Primary Entry b) Secondary Entry c) Final Entry d) None of these 2. Stockholders, suppliers, banks, employees, government agencies, business owners, and other stakeholders are examples of people interested in receiving such information for decision making purposes. It might be of particular interest to small business owners, people who are self employed or those wanting to better manage their own finance. Therefore, transactions are recorded and, analyzed, and the financial statements are prepared from the point of view of business and not, the owner. These principles. Assets = Liabilities + Capital Example: Ram started business with cash Rs. 1,00,000. Any enthusiastic reader with basic Both these types of accounting are examined in the following paragraphs. The Accounting Terms Expenses are outflows or other using up of assets. systematic manner, to ascertain, the profit or loss of the accounting period and to present For example, assets in balance sheet are shown at their cost and not at their market value which could be realised on their sale. This accounting course is for anyone wanting an introduction to bookkeeping and financial accounting. accounts in monetary terms and in chronological order. 2) According to change in business environment accounting standards are being changed or revised from time to time. This. Reply. The award is … Introduction to Accounting It is the system of recording, summarizing, and analyzing an economic entity's financial transactions. 3) To ascertain the financial position of the business by the means of financial statement i.e. This method makes a distinction between capital and revenue items. 1,00,000. a) One b) Two c) Three d) Infinite 5. The excess of revenues over its related expenses during an accounting year is profit. Define accounting. In drawing up accounting statements, whether they are external "financial accounts" or internally-focused "management accounts", a clear objective has to be that the accounts fairly reflect the true "substance" of the business and the results of its operation. The AICPA also provided this definition: "Accounting is a service activity. the act of receiving or the state of being received. This will ensure a meaningful study of the performance of the business for a number of years. December 11, 2020 Liste Liste December 11, 2020 Liste Liste in journal or subsidiary books, all the financial transactions are classified by grouping The objective of this principle is not to overstate the profit of the enterprise in. which is concerned with, ascertainment of total cost and per unit cost of goods or These are liabilities for the business. 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