Accounting Unit 1 & 2 Overview

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Questions and Answers

What is the primary objective of accounting as an information system?

  • To track only cash transactions.
  • To meet the diverse needs of users for financial information. (correct)
  • To provide a framework for hiring and training accountants.
  • To certify businesses for taxation compliance.

Which of the following accounting principles supports the assumption that business will continue to operate indefinitely?

  • Going concern principle (correct)
  • Periodicity principle
  • Accruals principle
  • Cost principle

Which of the following is NOT a characteristic that users seek in financial accounting information?

  • Relevance
  • Comparability
  • Simplicity (correct)
  • Reliability

What does AS 9 primarily govern in the context of financial accounting?

<p>Revenue recognition for incomes and expenses. (A)</p> Signup and view all the answers

In accounting for hire-purchase systems, what is the primary benefit for the hire purchaser?

<p>Ability to use the asset while paying over time. (A)</p> Signup and view all the answers

Which of the following is a key difference between a manual and a computerized accounting system?

<p>Computerized systems allow for easier data manipulation and reporting. (D)</p> Signup and view all the answers

What is one of the main challenges of branch accounting?

<p>Determining the performance of individual branches accurately. (A)</p> Signup and view all the answers

Which accounting standard addresses the initial adoption of accounting standards in India?

<p>Ind AS 101 (B)</p> Signup and view all the answers

Flashcards

What is accounting?

Accounting is an information system that records, classifies, summarizes, and interprets financial data to help users make informed decisions.

Qualitative characteristics of accounting

These are the desired qualities of accounting information like relevance, reliability, understandability, comparability, and materiality.

Accrual basis of accounting

This method recognizes revenue when earned and expenses when incurred, regardless of when cash is received or paid.

Matching concept

This principle states that expenses should be matched with the revenue they generate in the same accounting period.

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What are financial statements?

These are formal reports prepared by a business to communicate its financial performance and position to stakeholders like investors, creditors, and managers.

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What is the function of an accounting standard?

Accounting standards provide guidance and rules for accounting practices, ensuring consistency and transparency in financial reporting.

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What is a computerised accounting system?

A system that uses computers to process, store, and retrieve accounting data, automating many tasks and improving efficiency.

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Inventory Valuation

The process of determining the monetary value of a company's inventory for accounting purposes.

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Study Notes

Unit 1: Theoretical Framework

  • Accounting is an information system for financial data, used by various users.
  • Qualitative characteristics of accounting information include usefulness, reliability and comparability.
  • Accounting functions, limitations and advantages differ from cash to accrual basis accounting.
  • Accounting branches cover various business entities.
  • Principles of accounting include entity, money measurement, going concern, cost, realization, accruals, consistency, prudence (conservatism), materiality, and full disclosures .
  • Accounting standards define concepts, needs, and procedures for issuing accounting standards in India.
  • Salient features of IFRS (International Financial Reporting Standards) and standards (Ind AS 1, 2, 16 & AS 9) cover needs and issuance procedure.

Unit 2: Measurement of Business Income

  • Business income measurement uses net income, accounting period, and continuity doctrine.
  • Matching concept determines net income.
  • Capital and revenue expenditures/receipts are distinguished for income measurement.
  • Revenue recognition principles are aligned with AS 9 (Accounting Standard 9).
  • Inventory valuation is crucial for accurate financial reporting.

Unit 3: Final Accounts

  • Financial statements are prepared for non-corporate entities (sole proprietorship and partnerships).

Unit 4: Hire-Purchase, Instalment Systems and Branches

  • Hire-purchase and installment systems have various features, advantages, and disadvantages.
  • Vendor and purchaser rights are addressed in hire-purchase accounts.
  • Branch accounting in independent systems includes treatments for debtors, stocks, and debtors.

Unit 5: Computerised Accounting System

  • Computerized accounting covers systems, components, and advantages.
  • Computerized accounting differs from manual accounting.
  • Various types of accounting packages (like Tally 9) and their features are examined.
  • Simple practical problems are solved to apply learnt concepts.

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