Short Answer Questions - Introduction to Accounting - Commerce PDF Download

SHORT ANSWER QUESTIONS

Q1. Explain the meaning of Accounting.

Q2. What is the process of Accounting?

Q3. Define Book Keeping. What is the function of Book Keeping?

Q4. What is the difference between Book Keeping and Accounting?

Q5. Discuss briefly the types of Accounting Information.

Q6. Why the following' parties are interested in Accounting Information;

(a) Investors, (b) Government?

Q7. State what is the end-product of Financial Accounting.

[Hint: Financial Statements, i.e... (i) Income Statement, (ii) Balance Sheet.]

Q8. What are the attributes (features) of Accounting?

Q9. What do you mean by Accounting? What are its main objectives?

Q10. What are the advantages of Amounting?

Q11. Explain the primary objectives of Accounting.

Q12. Explain any four objectives of Accounting.

Q13. Define Accounting. Explain any two limitations of Accounting.

Q14. What is Accounting? Explain four of its functions.

Q15. What do you mean by Accounting? Explain in brief any four advantages of Accounting.

Q16. What do you mean by Financial Accounting? Explain the four main limitations of Financial Accounting.

Q17. What do you mean by Financial Accounting? Explain its one main function.

Q18. Define Accounting.

Q19. What are the attributes (features) of accounting?

Q20. What is Accounting Cycle?

Q21. “Only financial transactions are recorded in Accountancy.” Explain the statement.

Q22. What is the meaning of “recording in terms of money”?

Q23. Explain any four objectives of accounting.

Q24. Give any three points of difference between Book-keeping and Accounting.

Q25. What are types of Accounting?

Q26. Explain briefly any five advantages of accounting.

Q27. State three limitations of accounting.

Q28. Name the qualitative characteristics of accounting information. Explain any two of them.

Q29. “Non-monetary transactions are not recorded in the books of accounts.” Explain.

Q30. “Accounting information should be comparable.” Do you agree with this statement? Give two reasons.

Ans:  Yes, accounting information should be comparable, because

(i) Comparability is needed to make inter-firm comparisons, i.e. to find out how a firm has performed as compared to the other firms, and

(ii) Comparability is needed to make inter-period comparisons, i.e. to find out how it has performed as compared to the previous years.

Q31. Explain ‘Comparability’ as qualitative characteristics of accounting information.

Q32. “The role of accounting has changed over the period of time.” Explain.

Ans: The role of accounting has now shifted from that of mere recording of business transactions to that of providing information to managers and other interested persons in order to help them to make appropriate decisions. It is now regarded as an information system.

Q33. What is the primary reason for business students and others to study accounting discipline?

Ans: Accounting information is presented and communicated in the form of financial statements, reports, graphs and charts to the internal and external users who require it for making important decisions. Primary reason to study accounting discipline is to acquire such knowledge which is helpful in understanding these statements, reports etc.

Q34. Briefly appreciate the exact nature of accounting.

Ans: In order to appreciate the exact nature of accounting, we must understand the following aspects of accounting:

(i) Economic Events: Accounting records only economic events. An economic event is a transaction which can be measured and expressed in terms of money.

(ii) Identification, Measurement, Recording and Communication:

Identification: It means determining what transactions are to be recorded. It involves observing activities and selecting those events that are of financial character and relate to the organization.

Measurement: It means quantification of business transactions into financial terms by using monetary units.

Recording : Accounting is the art of recording business transactions according to some specified rules and in chronological order.

Communication: The recorded events are communicated to management and other internal and external users regularly through accounting reports.

(iii) Organisation : It refers to a business enterprise which can be a sole-proprietory concern, partnership firm, company or any other association of persons.

(iv) Interested Users of Information: They may be internal users and external users. Internal users include Chief Executive, Financial Officer, Vice President, Plant Managers, Stores Managers etc. External users include owners, potential investors, creditors, lenders, labour unions, Tax Authorities, Customers etc.

Q35. State any six users of accounting information Why do they need accounting information?
Ans: (i) The owners/shareholders use them to see if they are getting satisfactory

returns on their investment and also to assess the financial health of their enterprise.

(ii) The managers/directors use them to ascertain the strengths an weaknesses of the enterprise.

(iii) The creditors use them to know whether the firm will be able to pay the interest regularly and will be able to pay their debts as they become due.

(iv) The prospective investors use them to assess whether or not to invest their money in this firm.

(v) Employees: They need accounting information to claim increase in wages, bonus and other benefits.

(vi) The government agencies use them for the payment of various taxes such as Value Added Tax (VAT), Income Tax etc.

Q36. Explain the factors which necessitated systematic accounting.

Ans: Main purpose of accounting is to provide information it a variety of users for taking various decisions. Hence the information should have the quality of reliability, understandability and comparability which is possible only if the accounting is carried out systematically i.e. based on principles and rules of accounting Further, the role of accounting has been changing with the changes in economic development and increasing social demands, which requires analyses of accounting data and preparation of reports. Systematic recording is also needed for assessment of various taxes such as Value Added Tax (VAT), Income Tax, Customs and Excise duties etc.