DK Goel Solutions Chapter 1 Meaning and Objectives of Accounting
Read below DK Goel Solutions Chapter 1 Meaning and Objectives of Accounting. These solutions have been prepared based on the latest DK Goel Accountancy book issued for this academic year.
The book is really useful as it explains the fundamental elements of Accountancy and also the actual meaning of the term ‘Accountancy.’, an insight into Balance Sheets, brief on Financial Statements, the basics about Debtors, insight of the Profit & Loss system and meaning of Cash Discount.
These solutions are free and will help you to prepare for Class 11 Accountancy.
Meaning and Objectives of Accounting DK Goel Class 11 Accountancy Solutions
Students can refer below for DK Goel Solutions Chapter 1 solutions for all questions given in your DK Goel Accountancy Textbook for Class 11
Question 1: Define Accounting.
Solution 1: Accounting is a system of figuring out financial transactions, measuring them in money terms, recording them in primary books, classifying, summarizing, reading, deciphering them, and communicating the end result to the customers.
Question 2: Distinguish between debtors and creditors.
|Debtors are persons and entities own to the business an amount for buying goods and services on credit.||Creditors are persons and entities who have to be paid by business an amount for providing the enterprise goods and services on credit.|
Question 3: What is a cash discount?
Solution 3: A deduction is given at the time of payment on the amount payable called cash discount.
Question 4: Distinguish between debtors and creditors.
Solution 4: Debtors are persons and entities own to the business an amount for buying goods and services on credit. Creditors are persons and entities who have to be paid by business an amount for providing the enterprise goods and services on credit.
Question 5: How is profit or loss of a specific term determined?
Solution 5: We can determine Profit or loss of a specific term by profit and loss account and trading account. Gross Profit can be determined by trading and Net Profit can be determining by profit and loss account.
Question 6: How is the final position of a firm established?
Solution 6: The final position of a firm established by the balance sheet.
Question 7: Name the branch of commerce, which keeps a record of monetary transactions in a set of books.
Solution 7: Book keeping is the branch of commerce, which keeps a record of monetary transactions in a set of books.
Question 8: Give one point of distinction between book-keeping and accountancy.
|Bookkeeping is the first stage of accounting. It deals with the recording of monetary events. Bookkeeping is an important part of any business that involves the systematic and orderly recording of events to determine profits and losses of a business.||Accounting is concerned with summarizing the recorded transactions, interpreting them and communicating the results.|
Question 9: What is the end product of financial accounting?
Solution 9: The end product of financial accounting is financial statement. Trading account, Profit & Loss and Balance sheet are the financial statement.
Question 10: Name any two users of accounting information.
Solution 10: Owners and Managers are the main users of accounting information.
Question 11: Who are the internal users of accounting information?
Solution 11: Directors, owners, partners, managers, and employees are the internal users of accounting information.
Question 12: Who are the external users of accounting information?
Solution 12: Investors, government, creditors, employee, lenders, and customers are the external users of accounting information.
Question 13: State the nature of information required by investors.
Solution 13: Investors involve their own money in business for high returns. Investors do not have direct control over business. Thus, they depend only accounting information. The natures of information needed by investors are regarding risks and return on investment.
Question 14: What are the types of information required by long-term investors?
Solution 14: Repaying capacity of the business, Profitability, Liquidity, Operational efficiency and Potential growth of business are the information needed by long-term investors.
Question 15: What are the information needs of management?
Solution 15: Sales, costs, purchases, unused stock etc. the information required by management. From these information’s management can make future plans for business, controlling and decision making.
Question 16: Mention two advantages of accounting.
Solution 16: Below are the two advantages of accounting are:-
1.) It provides information useful for predicting and evaluating the amount, timing and uncertainty of potential cash flow.
2) Financial position of the business also provided by accounting.
Question 17: Write one limitation of accounting.
Solution 17: Accounting information relates to the past transactions and related to quantitative in nature; it does not provide qualitative and non-financial information of the business.
Question 18: Write the name of two qualitative characteristics of accounting information.
Solution 18: The two qualitative characteristics of accounting information are Reliability and comparability.
Question 19: Which qualitative characteristic of accounting information requires the use of common unit and format of reporting?
Solution 19: The qualitative characteristic of accounting that requires the use of common unit and format of reporting is Comparability.
Question 20: ‘Accounting information should be verifiable and free from personal Bias’. Name the qualitative characteristics of accounting information denoted by this statement.
Solution 20: The qualitative characteristic of accounting information denoted by this statement is Reliability.
Question 21: Name the two functions of accounting.
Solution 21: Below are the two functions of accounting are:-
(i) Recognizing of monetary Transactions.
(ii) Recording in Book of Original Entry.
Question 22: What is the traditional function of accounting?
Solution 22: The traditional function of accounting is Recording of Financial transaction.
Question 23: Explain the characteristics of Accounting.
Solution 23: Below are the characteristics of Accounting:-
1) Identifying: The first step in accounting is to determining what transactions to be recorded. Identify those events which are to be recorded. The financial activities to be reported in the account books. It includes all business operations being monitored and those incidents or transactions that can be called financial transactions being chosen.
2) Recording: A transaction can only be reported in the account books if it is treated as an economic occurrence that can be calculated in terms of money.
When economic activities are defined and calculated in economic terms, they will be reported in monetary and chronological terms in the accounting books.
3) Classifying: When journal or subsidiary books are done, then the accounting transactions are classified.
Classification here implies the division of one form of transaction and different accounts in one location. The book in which, according to its purpose, each kind of transaction is documented is known as Ledger.
4) Communication: The Economic events are identified, measured and recorded in order that the pertinent information is generated and communicated in a certain form to management and other internal and external uses.
Higher-Order Thinking Skills (HOTS) Questions for DK Goel Solutions Chapter 1:-
Question 1: What is the traditional function of accounting?
Solution 1: The traditional function of accounting is recording of financial transaction.
Question 2: Is the basic objective of book-keeping to maintain systematic records or to ascertain net results of operations of a financial transaction?
Solution 2: Yes, the basic objective of book-keeping to maintain systematic records or to ascertain net results of operations of a financial transaction.
Question 3: Recording of financial transactions and preparing financial statements are the only objectives of accounting. Do you agree?
Solution 3: No, Recording of financial transactions and preparing financial statements are the not only objectives of accounting.
There are many objectives of accounting besides recording. Examples ascertain the profit or loss during the particular accounting year, ascertain the financial position of the business etc.
Questions 4: What is the first step in the accounting process?
Solution 4: The first step of the accounting process is recording of transactions.
Question 5: What is the last step of the accounting process?
Solution 5: The last step of the accounting process is communicating.
Question 6: On 1st Jan. 2015, Mr Vadera was appointed as marketing manager in a company with Rs. 50,000 per month salary. Explain whether this case will be registered in the book of accounts.
Solution 6: No, above transaction not recorded in the books of accounts, because here we only appointed Mr. Vadera it has not resulted in any change in the financial position of the firm.
Question 7: A company follows a practice of giving the figures for the previous year along with the figures of the current year. Now the accountant of the firm wants to discontinue this practice. Do you justify this decision?
Solution 7: No, comparability of current year figures with previous year is a qualitative characteristic of financial information.
Question 8: Give two examples of transactions that are not recorded in accounting.
Solution 8: Below are the two examples of transactions that are not recorded in accounting are:-
(i) Thinking to purchases fixed assets.
(ii) Order received for sale
Question 9: A firm has received a large order to supply the goods. Will it be recorded in the books?
Solution 9: No, this transaction is not recorded in the books of account because only receiving of an order has not treated as sales.
Accounting can be quoted as a systematic process of analyzing, recording, summarizing data to prepare reports which help the companies to function efficiently. It presents a clear picture of various financial transactions with a firm. Accounting in Class 11 and 12 is just the basic level in which students must strengthen their core for higher studies.
As explained in DK Goel Solutions Chapter 1, some of the essential objectives of Accounting are as follows –
● Accounting is the key to record and manage financial transactions.
● It helps companies to keep track of their profits and losses more efficiently.
● It allows the firms to make financial decisions based on reports.
Management Accounting is a procedure to validate firms’ financial information and accounts to get a crystal-clear picture of the company’s performance. It helps the firms frame better decisions and push them to better financial status.
Accounting is a vast world of calculations, concepts, and theories. The prominent sub-fields of Accounting are as follows – Cost Accounting, Financial Accounting, Management Accounting, Social Responsibility Accounting, and Human Resources Accounting. The students can get notes and in-depth explanations of all types of Accounting in the DK Goel Solutions.
Accounting is the ultimate tool when it comes to organizing the financial data of a firm. It allows the companies to interpret and record their financial data for better performance.
Cost Accounting is one of the types of accounting that allows us to compute the cost of the services or products and the general production charges. It includes the fixed costs, capital costs, selling price, overhead expenses, and much more. In contrast, financial accounting depicts the analysis and recording of financial transactions.