Chapter : 1

Introduction to Accounting

Short Answers 

1. Define accounting. 

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2. State the end product of financial accounting. 

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3. Enumerate main objectives of accounting. 

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4. Who are the users of accounting information. 

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5. State the nature of accounting information required by long-term lenders.

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6. Who are the external users of information? 

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7. Enumerate information needs of management.

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8. Give any three examples of revenues.

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9. Distinguish between debtors and creditors; profit and gain

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10. ‘Accounting information should be comparable’. Do you agree with this statement. Give two reasons.

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11. If the accounting information is not clearly presented, which of the qualitative characteristic of the accounting information is violated? 

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12. “The role of accounting has changed over the period of time”- Do you agree? Explain. 13. Giving examples, explain each of the following accounting terms :

• Fixed assets         • Revenue         • Expenses         • Short-term liability         • Capital

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14. Define revenues and expenses? 

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15. What is the primiary reason for the business students and others to familiarise themselves with the accounting discipline?

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Long Answers 

1. What is accounting? Define its objectives.

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2. Explain the factors which necessitated systematic accounting.

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3. Describe the informational needs of external users.

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4. What do you mean by an asset and what are different types of assets?

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5. Explain the meaning of gain and profit. Distinguish between these two terms.

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6. Explain the qualitative characteristics of accounting information.

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7. Describe the role of accounting in the modern world.

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Checklist to Test Your Understanding 

Test Your Understanding – I 

(a) Economic Transactions 

(b) Management/Employees 

(c) Creditor 

(d) Time-gap 

(e) External 

(f) Free from bias 

(g) Identifying the transactions and communicating information 

(h) Monetary 

(i) Chronological 

Test Your Understanding - II 

1. Reliability, i.e. Verifiability, Faithfulness, Nutrality 

2. Relevance, i.e. Timeliness 

3. Understandability and Comparibility 

Test Your Understanding - III 

(a) Government and other regulators 

(b) Management 

(c) Social responsibility groups 

(d) Lenders

(e) Suppliers and Creditors 

(f) Customers 

Test Your Understanding - IV 

1. (c)         2. (a)         3. (c)         4. (a)         5. (a) 

Test Your Understanding - V 

1. ₹ 5,00,000         2. ₹ 1,00,000,         3.₹ 2,00,000 

4. Mr. Reace, ₹ 1,50,000         5. ₹ 5,000         6. ₹ 5,000         

7. ₹ 30,000         8. Mr. Ravi, ₹ 1,00,000         9. ₹ 35,000 

10. Assets : debtors; Liabilities : creditors; drawings; Revenues : sales expenses, discount, salary.

 Activity 1 : Tick (✔) the appropriate one: