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Class 11 Accountancy Chapter 1 Notes

Chapter 1 of Class 11 Accountancy introduces accounting as a systematic process for managing financial information to aid decision-making. It outlines the steps in the accounting process, key features, objectives, and the role of accounting in providing valuable data to both internal and external users. Additionally, it defines basic accounting terms essential for understanding financial transactions.

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36 views2 pages

Class 11 Accountancy Chapter 1 Notes

Chapter 1 of Class 11 Accountancy introduces accounting as a systematic process for managing financial information to aid decision-making. It outlines the steps in the accounting process, key features, objectives, and the role of accounting in providing valuable data to both internal and external users. Additionally, it defines basic accounting terms essential for understanding financial transactions.

Uploaded by

kallurikoteswararao544
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Class 11 Accountancy - Chapter 1: Introduction to Accounting

1.1 Meaning of Accounting

Accounting is the systematic process of identifying, recording, classifying, summarizing, interpreting, and

communicating financial information to users to facilitate decision-making.

Steps in Accounting Process:

1. Identifying: Choosing events of financial nature.

2. Recording: In the Journal or books of original entry.

3. Classifying: Posting entries to ledger accounts.

4. Summarizing: Preparing Trial Balance, Trading & Profit and Loss Account, and Balance Sheet.

5. Interpreting: Analyzing profitability, liquidity, solvency.

6. Communicating: Sharing reports with stakeholders.

Features:

- Historical in nature

- Records only monetary terms

- Based on objective evidence

1.2 Accounting as a Source of Information

Accounting provides financial data for:

- Internal users: Owners, managers, employees.

- External users: Investors, creditors, government, banks.

It helps track:

- Profit or loss

- Financial position

- Cash flow

- Compliance and tax reporting

1.3 Objectives of Accounting

1. Maintain systematic records.


Class 11 Accountancy - Chapter 1: Introduction to Accounting

2. Ascertain profit or loss.

3. Determine financial position.

4. Provide information to users.

5. Assist in decision-making.

6. Legal compliance.

1.4 Role of Accounting

1. Record-Keeping

2. Decision-Making Tool

3. Legal Evidence

4. Assisting Taxation

5. Financial Reporting

Accounting is called the "Language of Business" as it communicates financial health.

1.5 Basic Terms in Accounting

Business Transaction - A financial activity measured in money.

Capital - Owner's investment in business.

Drawings - Withdrawals by owner for personal use.

Assets - Properties owned by business.

Liabilities - Amounts owed by business.

Revenue - Income earned from operations.

Expenses - Costs incurred to earn revenue.

Profit/Loss - Excess of income over expenses or vice versa.

Goods - Items bought/sold in business.

Purchases/Sales - Buying/selling of goods.

Debtors/Creditors - People who owe to or are owed by business.

Stock - Unsold goods.

Voucher - Proof of transaction.

Account - Summary of all transactions for a particular item/person.

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