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Meaning and Objectives of Accounting — Account STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceAccountMeaning and Objectives of Accounting6 Marks
Question
What are the attributes (features) of accounting?
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Answer

  1. Recording: Accounting is the art of recording of transactions. Only business relative transactions are recorded in which money is mentioned. All transactions are recorded in detail. Both journal and subsidiary books are used for this.
  2. Classifying: Accounting's main feature is also classifying all business transactions. Accounting makes group of all similar accounting entries in one place. For example all receipt and payment will be shown in cash book. So, all transactions are collected under one common head. This system is also called classification of transaction. This process is completed by opening accounts in books. These books are called ledger.
  3. Summarizing: Summarizing is the art of showing business results in summarize form. After this, it can use for all the interested parties. This feature tells about to financial statement. One is Trading and profit and loss account and other is Balance Sheet.
  4. Interpreting: By interpreting, we can know whether the position of profitability is good or bad. By knowing this, we can estimate business's performance.
  1. Identification of Financial Transactions and Events: Accounting records only those transactions and events which can be measured in terms of money. This involves identifying transactions and events that are part of economic activity, for example purchase of raw material or sale of finished goods by a firm. Such transactions are identified with the help of bills and receipts as evidence of the transactions.
  2. Measuring the Identified Transactions: Accounting measures the transactions and events in terms of a common measurement unit (that is the currency of a country. In other words, financial transactions and events are measured in terms of money.
  3. Analysis and Interpretation: Analysis and interpretation of the financial data are carried out so that the users of financial data can make a meaningful judgement of the profitability and financial position of the business. This helps in planning for the future in a better way.
  4. Communicating: Finally, the accounting function involves communicating the financial data, i.e., financial statements, to its users. The accounting information must be provided in time and presented to the users so that appropriate decisions may be taken at the right time.

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