NCERT Solutions for Class 11 Accountancy Chapter 1: The NCERT Accountancy Book Class 11 Solutions Chapter 1 makes it simple to learn and apply concepts, as well as to include them in financial statements. Accounting provides accurate financial accounts, positions, and outcomes to an organization’s management, allowing them to make more informed business decisions. Know more about the NCERT Solutions for Class 11 Accountancy Chapter 1 in this blog.
NCERT Solutions for Class 11 Accountancy Chapter 1
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Accounts Class 11 Chapter 1 Notes- Overview
Introduction to Accounting
- The significance of accounting education There are two sections to the NCERT accountancy curriculum for class 11th. The first section covers the following topics: introduction, accounting theory, transaction recording one and two, bank re-consolation statement, trial balance, and rectification. Errors, depreciation, provision, and bills of exchange are all examples.
- Part two of the NCERT accounting class 11 textbook comprises seven chapters. The first section attempts to familiarise students with the fundamental ideas of accounting, recordkeeping, and identifying and correcting scientific errors.
Part to add a practical accounting understanding by covering her financial statements in a computerised and database manner, on the other hand.
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Financial Accounting Part-1 Chapter 1
Short answers
1. Define accounting.
Accounting is a process of identifying the events of financial nature, recording them in Journal, classifying in their respective ledgers,
summarising them in Profit and Loss Account and Balance Sheet and communicating the results to the users of such information, viz. owner/s, government, creditors, investors etc.
According to the American Institute of Certified Accountants, 1941, “Accounting is an art of recording, classifying and summarising in a significant manner and in terms of money transactions and events that are, in part at least, of a financial character and
interpreting the results thereof.”
2. State what is end product of financial accounting?
1. Income statements (Trading and/or Profit and Loss Account)- An income statement that includes Trading and Profit and Loss Account,
ascertains the financial results of a business in terms of gross (or net) profit or loss.
2. Balance Sheet- It depicts the true financial positions of a business that provides required information like assets and liabilities of a business
firm, to the users of accounting information like owners, creditors, investors, government, etc.
3. Enumerate main objectives of Accounting.
The main objectives of accounting are given below.
1. To keep a systematic record of all business transactions
2. To determine the profit earned or loss incurred during an accounting period by preparing profit and loss account
3. To ascertain the financial position of the business at the end of each accounting period by preparing balance sheet
4. To assist management for decision making, effective control, forecasting, etc.
5. To assess the progress and growth of business from year to year
6. To detect and prevent frauds and errors
7. To communicate information to various users
4. List any five users who have indirect interest in accounting.
The five users who have indirect interest in accounting are given below.
1. Trade associations
2. Labour unions
3. Customers
4. Stock exchanges
5. Tax authorities
5. State the nature of accounting information required by long-term lenders.
Accounting information required by the long term lenders are repaying capacity of the business, profitability, liquidity, operational
efficiency, potential growth of business, etc.
6. Who are the external users of information?
External users of information are the individual or the organisations that have direct or indirect interest in the business firm; however, are not a part of management.
They do not have direct access to the internal data of the firm and uses published data or reportslike profit and loss accounts, balance sheets, annual reports, press releases, etc. Some examples of external users are government, tax authorities, labour unions, etc.
7. Enumerate informational needs of management.
The informational needs of management are concerned with the activities given below.
1. Assists in decision making and business planning
2. Preparing reports related to funds, costs and profits to ascertain the soundness of the business
3. Comparing current financial statements with its own historical financial statements and of other similar firms to assess the operational
efficiency of the business.
8. Give any three examples of revenues.
Three examples of revenue are given below.
1. Sales revenue
2. Interest received
3. Dividends
9. Distinguish between debtors and creditors.
| Basis of difference | Debtors | Creditors |
| MEANING | Persons or organizations that are liable to pay money to a firm are called debtors. |
Persons or organizations to whom the firm is liable to pay money are called creditors. |
| NATURE | They have debit balance to the firm. |
They have credit balance to the firm. |
| PAYMENT | Payments are received from them. |
Payments are made to them. |
| SHOWN | They are shown as assets in the Balance sheet under Current Assets. |
They are shown as liabilities in the Balance Sheet under Current Liabilities. |
10. ‘Accounting information should be comparable’. Do you agree with this statement? Give two reasons.
Accounting information should be comparable because of the following reasons.
1. Comparable accounting information helps in inter-firm comparisons. This helps in assessing viability and advantages of various policies
adopted by different firms.
2. It also helps in intra-firm comparisons that help in determining the changes and also to ascertain the results of various policies and plans
adopted in different time periods. This also helps to figure out the errors, ascertain growth and assist in management planning.
11. If the accounting information is not clearly presented, which of the qualitative characteristic of the accounting information
is violated?
If the accounting information is not clearly presented, then the qualitative characteristics like, comparability, reliability and
understandability, are violated.
This is because if the accounting information is not clearly presented, then meaningful comparisonmay not be possible, as the data is not trustworthy, which may lead to faulty conclusions.
12. The role of accounting has changed over the period of time”- Do you agree? Explain.
The role of accounting is ever changing. While in earlier times, accounting was merely concerned with recording the financial
events, i.e. record-keeping activity; however, now-a-days, accounting is done with the rationale of not only maintaining records, but
also providing an information system that provides important and relevant information to various accounting users.
The need of this change is brought over due to the ever-changing and dynamic business environment, which is more competitive in nature now than
it was in earlier times.
Further, there are various relevant activities like decision making, forecasting, comparison, and evaluation that make these changes in the role of accounting, inevitable.
13. Giving examples, explain each of the following accounting terms:
Fixed assets
Gain
Profit
Revenue
Expenses
Short-term liability
Capital
- Fixed assets– These are held for long term and increase the profit earning capacity of the business, over various accounting periods.
These assets are not meant for sale; for example, land, building, machinery, etc. - Revenue– It refers to the amount received from day to day activities of business, viz. amount received from sales of goods and services to
customers; rent received, commission received, dividend, royalty, interest received, etc. are items of revenue that are added to the capital. - Capital– It refers to the amount invested by the owner of a firm. It may be in form of cash or asset. It is an obligation of the business
towards the owner of the firm, since business is treated separate or distinct from the owner.
Capital = Assets – Liabilities. - Gains– Gains are incidental to the business. They arise from irregular activities or non-recurring transactions; for example, profit on sale of
fixed assets, appreciation in value of asset, profit on sale of investment, etc. - Expenses– Expenses are those costs that are incurred to maintain the profitability of business, like rent, wages, depreciation, interest,
salaries, etc. These help in the production, business operations and generating revenues - Profit– This refers to the excess of revenue over the expense. It is normally categorized into gross profit or net profit. Net profit is added to
the capital of the owner, which increases the owner’s capital. For example, goods sold above its cost - Short term liabilities– Those liabilities that are incurred with an intention to be paid or are payable within a year; for example, bank
overdraft creditors, bills payable, outstanding wages, short-term loans, etc.
14. How will you define revenues and expenses?
- Revenues- Revenues refer to the amount received from day to day activities of the business, likesale proceeds of goods and rendering services to the customers. Rent received, commission received, royalties and interest received are considered as revenue, as they are regular in nature and concerned with day to day activities. It is shown in the credit side of the profit and loss account or trading account.
- Expenses- Expenses refer to those costs that are incurred to earn revenue for the business. It is incurred for maintaining profitability of the business. It indicates the amount spent to meet short-term needs of the business. It is shown in the debit side of the profit and loss account or trading account. For example, wages, rent paid, salaries paid, outstanding wages, etc.
15. What is the primary reason for the business students and others to familiarize themselves with the accounting discipline?
Every monetary transaction must be recorded in such a manner that various accounting users must understand and interpret these results in the same manner without any ambiguity.
The reasons for why business students and others should familiarize themselves
with the accounting discipline are given below.
1. It helps in learning the various aspects of accounting.
2. It helps in learning how to maintain books of accounts.
3. It helps in learning how to summarize accounting information.
4. It helps in learning how to interpret the accounting information with relative accuracy.
Access Other NCERT Solutions For Class 11 Accountancy
Chapter-2 Theory Base Of Accounting
Chapter-3 Recording Of Transactions – I
Chapter-4 Recording Of Transactions – II
Chapter-5 Bank Reconciliation Statement
Chapter-6 Trial Balance And Rectification Of Errors
Chapter-7 Depreciation, Provisions, and Reserves
Chapter-9 Financial Statements – 1
Chapter-10 Financial Statements – 2
Chapter-11 Accounts From Incomplete Records
Chapter-12 Applications of Computers in Accounting
Chapter-13 Computerised Accounting System
Chapter-15 Bank Reconciliation Statement
We have provided all the important NCERT Solutions For Class 11 Accountancy Chapter 1 above in the article regarding the CBSE NCERT Solutions of Class 11 Accountancy Chapter-1. If you have any queries, you can mention them in the comment section.
FAQ On NCERT Solutions for Class 11 Accountancy Chapter 1
Who is accounting’s forefather in NCERT Solutions for Class 11 Accountancy Chapter 1?
Luca Pacioli is known as the “Father of Accountancy.” In 1494, he wrote the first book on double-entry accounting.
What are the five different types of accounts as per the NCERT Solutions for Class 11 Accountancy Chapter 1?
1) Assets 2) Liabilities 3) Equity, 4) Revenue, and 5) Expenses are the five components of a business.
What is accounting and what does it do?
Accounting’s goal is to provide information about a company’s performance and financial situation. This data aids in the making of business decisions.
What are the benefits of accounting?
Accounting is particularly beneficial for recording a company’s financial transactions and alerting shareholders about the company’s financial health.
What are the three accounting golden rules?
Three golden rules of accounting are 1) Debit the Receiver, Credit the Giver
2) Debit What Comes In, Credit What Goes Out. 3)Debit All Expenses and Losses, Credit All Incomes and Gains.