NCERT Solutions for Class 11 Accountancy Financial Accounting
Categories: Freshers NCERT Solutions
NCERT Solutions for Class 11 Accountancy
Financial Accounting
Q1: Define accounting.
Answer: Accounting is a process of identifying the events of financial nature, recording them in Journal, classifying in their respective ledgers, summarising them in Profit and Loss Account and Balance Sheet and communicating the results to the users of such information, viz. owner/s, government, creditors, investors, etc.
According to the American Institute of Certified Accountants, 1941, "Accounting is an art of recording, classifying and summarizing in a significant manner and in terms of money transactions and events that are, in part at least, of a financial character and interpreting the results thereof."
Q2: Enumerate the main objectives of accounting.
Answer: The main objectives of accounting are given below.
1. To keep a systematic record of all business transactions
2. To determine the profit earned or loss incurred during an accounting period by preparing profit and loss account
3. To ascertain the financial position of the business at the end of each accounting period by preparing balance sheet
4. To assist management for decision making, effective control, forecasting, etc.
5. To assess the progress and growth of business from year to year
6. To detect and prevent frauds and errors
7. To communicate information to various users
Q3: List any five users who have indirect interest in accounting.
Answer: The five users who have indirect interest in accounting are given below.
- Trade associations
- Labour unions
- Customers
- Stock exchanges
- Tax authorities
Q4: State the nature of accounting information required by long-term lenders.
Answer: Accounting information required by the long-term lenders are repaying capacity of the business, profitability, liquidity, operational efficiency, potential growth of business, etc.
Q5: Who are the external users of information?
Answer: External users of information are the individual or the organisations that have direct or indirect interest in the business firm; however, are not a part of management. They do not have direct access to the internal data of the firm and uses published data or reports like profit and loss accounts, balance sheets, annual reports, press releases, etc. Some examples of external users are government, tax authorities, labour unions, etc.
Q6: Enumerate informational needs of management.
Answer: The informational needs of management are concerned with the activities given below.
- Assists in decision making and business planning.
- Preparing reports related to funds, costs and profits to ascertain the soundness of the business.
- Comparing current financial statements with its own historical financial statements and of other similar firms to assess the operational efficiency of the business.
Q7: Give any three examples of revenues.
Answer: Three examples of revenue are given below.
- Sales revenue
- Interest received
- Dividends
Q8: 'Accounting information should be comparable'. Do you agree with this statement? Give two reasons.
Answer: Accounting information should be comparable because of the following reasons.
- Comparable accounting information helps in inter-firm comparisons. This helps in assessing viability and advantages of various policies adopted by different firms.
- It also helps in intra-firm comparisons that help in determining the changes and also to ascertain the results of various policies and plans adopted in different time periods. This also helps to figure out the errors, ascertain growth and assist in management planning.
Q9: If the accounting information is not clearly presented, which of the qualitative characteristic of the accounting information is violated?
Answer: If the accounting information is not clearly presented, then the qualitative characteristics like, comparability, reliability and understandability, are violated. This is because if the accounting information is not clearly presented, then meaningful comparison may not be possible, as the data is not trustworthy, which may lead to faulty conclusions.