Introduction to accounting
Q. Define
book keeping. What are its objectives?
Ans: Book keeping is an activity
concerned with the recording of financial data relating to business operation
in a significant and orderly manner.
According
to the R.N carton:- "Book – keeping is the science and arts of correctly
recording in the book of accounts all those business transactions that result
in the transfer of money or moneys worth ".
"North coot” has defined it as
"Book – keeping is the art of recording in the books of accounts the monitory
aspects to commercial or financial transaction ".
Thus we can say that it is an
art of recording business transaction in a systematic manner in the book of
business.
Objectives of Book- keeping: A businessman record the transaction in a set of book in order to
ascertain the following objects:-
i.
To have a permanent records of each transaction of the business.
ii.
To show the financial effect on the entity of each transaction
recorded.
iii.
To know the financial position of the business on a particular
data.
iv.
To disclose factors responsible for earning profit or suffering
loss in a given period.
v.
Determination of the tax liability of the business.
vi.
For prevention of frauds and errors.
vii.
Protection of assets.
Q. Define accounting. What are its objectives?
Ans:
- Accounting is the analysis and interpretation of book-keeping records. It
includes not only maintains of accounting records but also the preparation of
financial and economic information. Which involves the measurement of
transaction and other events pertaining to a business?
"Accounting system is a measure
of collecting summarizing, analyzing and reporting in monetary terms the
information of the business”.
According to the American
institute of certified public accounts” The arts of recordings, classifying and
summarizing in a significant manner and in terms of money transaction and
events which in parts, at least of a financial charter and interpreting the
result there of”.
The mean objectives of accounting are as follow:-
i.
To keep systematic and authentic records: - The accounting
provides as authentic and permanent records of all the financial transaction of
a business.
ii.
To protect business properties:- It keep a full records of all
assets and liabilities and provides information to the proprietor as regards
the utilization and preservation of funds.
iii.
To determine tax liability: - Accounting supplies some important
and relevant information on the basis of which tax liability can be discharged.
iv.
To ascertain the apparitional profit or loss: - Accounting helps
in ascertaining the net profit or loss sufferecl on account of carrying the
business.
v.
To ascertain the financial position of business: - the profit and
loss account gives the amount of profit or loss made by the business during a
particular period.
Q. What are the advantages of Accounting?
Ans:
- The main advantages of accounting are
mentioned below:
i.
Accounting information is used by the management in taking various
menageries at decision.
ii.
It shows the financial position of business on a particular data.
iii.
Accounting data are accepted by the tax authorities as authentic
and reliable. Hence they can be used as the basis for discharging tax
liabilities.
iv.
Accounting supplies financial data which are accepted by the
insurance company as reliable figure for settlement of insurance claim.
Q. what are the limitation of accounting?
Ans:
- Following are the limitations of accounting:
i.
Records transaction measurable in monitory term:- According to records only those transaction
which can be measured in monetary terms. There may be certain important non-monitory
transaction but are not recorded.
ii.
Permits alternative treatment: -
The similar treated with different alternative approach or method and as a
consequent correct result may not be attained.
iii.
Effect of price level changes not considered: -
Accounting transaction is recorded at cash in the book .The effect of price
level changes is not brought into the book .It lead to the difficulties in.
iv.
Personal bias of accountant affect the accounting
statement:-
Accounting statement are influenced by the personal judgment of the accountant.
He may select any methods of depreciation, valuation of stock etc. Such
judgment it based on antiquity and compliancy of the accountant with definitely
affects the preparation of accounting statement.
Q. How book- keeping differ from accounting?
Ans:-The
difference between Book – keeping and accounting summarized below:-
i.
Objective: -
The objectives of book –keeping is too limited up to recording of business
transaction. Where as the object of accounting are not only maintaining
business records but also recpiding income, depiction of financial position and
communication of business result.
ii.
Function: -
The function of book – keeping is to record business transaction. The function
of accounting is the recording, classifying, summarizing, interpreting business
transaction and communicating result.
iii.
Basis: -
Business transaction vouchers and other supporting documents are the basis of
book – keeping for recording. Where as book - keeping serves as the basic for
accounting information.
iv.
Nature: -
Book – keeping is mostly of derical nature. Accounting is comprehensive in
nature and requires specialized knowledge.
v.
Usefulness: -
Book keeping is not of much help to the management for their decision making.
Accounting helps management in forming and executing management policy.
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