Test: Meaning And Scope Of Accounting - 3 - SSC CGL MCQ

Explanation:
The field of accounting is divided into various subfields that focus on different aspects of financial information. The options provided include three subfields of accounting and one option that is not a subfield. Let's analyze each option to determine which one is not a subfield of accounting:
A: Management accounting
- Management accounting involves the preparation and analysis of financial information for internal use by management to make informed business decisions.
- It focuses on providing information for planning, controlling, and decision-making within an organization.
B: Cost accounting
- Cost accounting involves the measurement, analysis, and reporting of costs associated with producing goods or providing services.
- It helps in determining the cost of each product or service and provides valuable information for budgeting, cost control, and pricing decisions.
C: Financial accounting
- Financial accounting involves the preparation and reporting of financial statements for external users, such as shareholders, investors, creditors, and regulatory authorities.
- It follows generally accepted accounting principles (GAAP) and provides an overview of a company's financial performance and position.
D: Book-keeping
- Bookkeeping is the recording, organizing, and maintaining of financial transactions.
- It involves tasks such as recording sales and purchases, maintaining ledgers, and preparing financial statements.
- While bookkeeping is an essential part of the accounting process, it is not considered a subfield on its own.
Therefore, the correct answer is D: Book-keeping, as it is not a subfield of accounting but rather a fundamental component of the accounting process.

The purpose of accounting is to accumulate and report on financial information about the performance, financial position, and cash flows of a business. This information is then used to reach decisions about how to manage the business, or invest in it, or lend money to it. This information is accumulated in accounting records with accounting transactions, which are recorded either through such standardized business transactions as customer invoicing or supplier invoices, or through more specialized transactions, known as journal entries.

accounting involves recording, classifying, summarizing, and interpreting financial information.So it does not define which type of business transactions  that the enterprise must engage in.

The correct answer is B.

Judgement is required to prepare accounting information since it is based on various accounting assumptions, policies, principles and standards. Therefore, financial accounting information involves professional judgement which cannot be ignored .

Book-keeping is mainly concerned with:
1. Recording of financial data:
- Book-keeping involves the systematic recording of financial transactions and events in a company's books of accounts.
- It includes the recording of all business transactions, such as sales, purchases, expenses, and receipts, in an organized manner.
2. Designing the systems in recording, classifying, and summarizing the recorded data:
- Book-keeping also involves the design and implementation of systems and procedures for recording, classifying, and summarizing financial data.
- This includes setting up a chart of accounts, establishing rules for categorizing transactions, and creating financial statements.
3. Interpreting the data for internal and external users:
- While book-keeping focuses primarily on recording and organizing financial data, it also plays a role in providing information for decision-making.
- Book-keepers may analyze the recorded data to generate reports and financial statements that can be used by internal management for planning and control purposes.
- The data may also be used by external users, such as investors, creditors, and tax authorities, to assess the financial health and performance of the company.
4. None of the above:
- This option is incorrect as book-keeping does involve the recording, classification, and interpretation of financial data.
In conclusion, book-keeping is mainly concerned with the recording of financial data, as well as designing systems for organizing and summarizing the data. It also plays a role in interpreting the data for internal and external users.

Ledger posting is a 'book-keeping' exercise whereas the others are purely accounting in nature, which are done in accordance with various accounting standards, policies, etc.

Financial statements are part of:

Financial statements are an essential component of accounting and bookkeeping. They provide a summary of a company's financial transactions and help in understanding its financial position, performance, and cash flows. The main financial statements include:

1. Income Statement:

• Also known as the profit and loss statement, it shows the company's revenues, expenses, and net income over a specific period.


• It helps assess the profitability and operating efficiency of the business.

2. Balance Sheet:

• It presents the company's assets, liabilities, and shareholders' equity at a specific point in time.


• It provides a snapshot of the company's financial position and helps in evaluating its solvency and liquidity.

3. Cash Flow Statement:

• It tracks the inflows and outflows of cash and cash equivalents during a specific period.


• It provides insights into the company's ability to generate cash and its cash management practices.

4. Statement of Retained Earnings:

• It shows changes in retained earnings over a specific period, including net income, dividends, and adjustments.


• It helps in understanding how profits are retained or distributed among shareholders.

5. Statement of Changes in Equity:

• It presents changes in equity from transactions other than net income, such as additional investments or revaluation of assets.


• It helps in analyzing the factors affecting equity other than profitability.

Therefore, financial statements are part of both accounting and bookkeeping processes. They are crucial for decision-making, financial analysis, and compliance with accounting standards and regulations.

Financial position of the business is ascertained on the basis of:
1. Records prepared under bookkeeping process:
- Bookkeeping refers to the process of recording financial transactions and maintaining accurate and detailed records of a business's financial activities.
- The records prepared under bookkeeping process serve as the foundation for determining the financial position of the business.
- These records include journals, ledgers, and other financial documents that provide a comprehensive view of the company's financial transactions.
2. Trial balance:
- A trial balance is a statement that lists all the accounts in the general ledger along with their respective debit or credit balances.
- It is used to ensure that the total debits equal the total credits, which helps in detecting any errors or discrepancies in the accounting records.
- The trial balance provides a snapshot of the financial position of the business at a particular point in time.
3. Accounting reports:
- Accounting reports, such as balance sheets, income statements, and cash flow statements, are prepared based on the financial data recorded in the bookkeeping process.
- These reports provide detailed information about the company's assets, liabilities, equity, revenues, and expenses.
- By analyzing these reports, stakeholders can evaluate the financial performance and position of the business.
- The accounting reports help in making informed decisions, analyzing profitability, and assessing the overall financial health of the company.
4. None of the above:
- This option is incorrect as the financial position of the business is indeed ascertained based on the records prepared under the bookkeeping process, trial balance, and accounting reports.
In conclusion, the financial position of a business is determined by examining the records prepared under the bookkeeping process, verifying the trial balance, and analyzing the accounting reports. These sources provide the necessary information to assess the company's assets, liabilities, equity, and overall financial performance.

Users of accounting information include:

Creditors:
- Creditors refer to individuals or organizations that lend money or extend credit to a company.
- They need accounting information to evaluate the creditworthiness and financial health of a company before deciding to lend money or extend credit.

Lenders:
- Lenders are similar to creditors and refer to banks or financial institutions that provide loans to companies.
- They rely on accounting information to assess the financial stability and repayment capacity of the borrowing company.

Customers:
- Customers are individuals or businesses that purchase goods or services from a company.
- They may be interested in the financial position and performance of the company to assess its ability to deliver products or services in a timely manner.

All of the above:
- Accounting information is relevant and useful for all the mentioned users (creditors, lenders, and customers) as it provides insights into the financial health and performance of a company.
- It helps these users in making informed decisions related to lending, credit extension, and purchasing decisions.
In conclusion, all the options mentioned (creditors, lenders, and customers) are users of accounting information. They rely on this information to assess the financial stability, creditworthiness, and performance of a company before engaging in financial transactions or making purchasing decisions.

Financial statements do not consider:

• Assets expressed in non-monetary terms: Financial statements typically only include assets that can be expressed in monetary terms, such as cash, accounts receivable, inventory, and property. Assets that cannot be easily assigned a monetary value, such as employee skills or brand reputation, are not included in financial statements.


• Liabilities expressed in non-monetary terms: Similarly, financial statements only include liabilities that can be expressed in monetary terms, such as accounts payable, loans, and bonds. Liabilities that do not have a specific monetary value, such as warranties or customer relationships, are not considered in financial statements.


• Assets and liabilities expressed in non-monetary terms: Financial statements focus on presenting the financial position and performance of a company in monetary terms. Therefore, any assets or liabilities that cannot be easily quantified in monetary terms are not included in financial statements.

Therefore, the correct answer is option D, which states that financial statements do not consider assets and liabilities expressed in non-monetary terms.

Explanation:
To determine whether the payment of rent by Sohan can be classified as an event or a transaction, we need to understand the definitions of these terms.
An Event:
- An event refers to a happening or occurrence that is significant and noteworthy.
- It does not involve any exchange of goods or services.
- Examples of events include birthdays, holidays, or natural disasters.
A Transaction:
- A transaction refers to an exchange or transfer of goods, services, or money between two or more parties.
- It involves a give-and-take relationship, where one party gives something and the other receives something in return.
- Examples of transactions include buying groceries, selling a car, or paying rent.
Now, let's analyze the scenario of Sohan paying rent:
- Sohan paid rent of Rs. 5,000 on January 1.
- This involves an exchange of money between Sohan (payer) and the landlord (receiver).
- Sohan receives the benefit of using the rented property, while the landlord receives the payment.
- Hence, this payment of rent can be classified as a transaction.
Therefore, the correct answer is B: A transaction.

Unsold items i.e Closing stock is captured in the financial statements as 'Current Assets'.

An event can be internal or external. This is an internal event.

There is no exchange of goods or services or money. Hence, it cannot be termed as a 'transaction'.