Class XI Accountancy

INTRODUCTION TO ACCOUNTING

Definition of Accounting:

Accounting is “the process of identifying, recording, classifying, summarizing, analyzing and interpreting the financial transactions of a business and communicating the result thereof to the interested persons”.

Business Transaction: Business transaction is a dealing between two or more persons in which value is transferred by one to other.

Value means money or money’s worth and money’s worth refers to things, either tangible or intangible, that are worth money.

Tangible things are those having material form, such as goods, furniture, motor vehicles etc.

Intangible things are services rendered, for example, transporting of goods, work performed by employees etc.

Book keeping: Book keeping is the art of identifying and recording the business transactions systematically in the books of accounts.

Users of Accounting information:

1. Owner(s) of the business

2. Managers

3. Suppliers

4. Bank

5. Government

6. Prospective investors

7. Researchers etc.

Basic Terms in Accounting:

1.Assets: Cash or any valuables owned by the business that can be converted in to cash are called assets. Assets can be classified in to two:

(a) Fixed Assets : Assets which are kept and used in the business for a long period of time are called fixed assets.

Example: Land, Buildings, Furniture, Equipment, Machinery etc.

(b) Current Assets: Cash or any assets of the business that are to be converted to cash within a period of one year are called current assets. In other words, assets which are not meant for long use in the business are current assets.

Example: Cash in hand , Cash at bank , Debtors , Stock etc.

Fore More Notes on:

1. Accounting Equation

2. Double Entry Bookkeeping

3. Rules of Debit and Credit

4. Journal, Special Journals and Ledger Accounts

5. Trialbalance

6. Financial Statements of a Soleproprietorship etc.....Click on the below given button