Class XI NCERT Accountancy Text Book Chapter 1 Introduction to Accounting is given below.
Test Your Understanding – I
Complete the following sentences with appropriate words:
(a) Information in financial reports is based on ………………… transactions.
(b) Internal users are the ………………… of the business entity.
(c) A ………………… would most likely use an entities financial report to
determine whether or not the business entity is eligible for a loan.
(d) The Internet has assisted in decreasing the ………………… in issuing
financial reports to users. (e) ………………… users are groups outside the
business entity, who uses the information to make decisions about the
business entity.
(f) Information is said to be relevent if it is ………………….
(g) The process of accounting starts with ………… and ends with …………
(h) Accounting measures the business transactions in terms of ………… units.
(i) Identified and measured economic events should be recording in ………… order.
The
role of an accountant in generating accounting information is to
observe, screen and recognise events and transactions to measure and
process them, and thereby compile reports comprising accounting
information that are communicated to the users. These are then
interpreted, decoded and used by management and other user groups. It
must be ensured that the information provided is relevant, adequate and
reliable for decision-making. The apparently divergent needs of internal
and external users of accounting information have resulted in the
development of sub-disciplines within the accounting discipline namely,
financial accounting, cost accounting and management accounting (refer
box 3).
Financial accounting assists keeping a systematic record
of financial transactions the preparation and presentation of financial
reports in order to arrive at a measure of organisational success and
financial soundness. It relates to the past period, serves the
stewardship function and is monetary in nature. It is primarily
concerned with the provision of financial information to all
stakeholders.
Cost accounting assists in analysing the expenditure
for ascertaining the cost of various products manufactured or services
provided by the firm and fixation of prices thereof. It also helps in
controlling the costs and providing necessary costing information to
management for decision-making.
Management accounting deals with
the provision of necessary accounting information to people within the
organisation to enable them in decision-making, planning and controlling
business operations. Management accounting draws the relevant
information mainly from financial accounting and cost accounting which
helps the management in budgeting, assessing profitability, taking
pricing decisions, capital expenditure decisions and so on. Besides, it
generates other information (quantitative and qualitative, financial and
non-financial) which relates to the future and is relevant for
decision-making in the organisation. Such information includes: sales
forecast, cash flows, purchase requirement, manpower needs,
environmental data about effects on air, water, land, natural resources,
flora, fauna, human health, social responsibilities, etc.
As a
result, the scope of accounting has become so vast, that new areas like
human resource accounting, social accounting, responsibility accounting
have also gained prominance.
