CBSE Class 11 Accountancy Revision Notes Chapter 1

CBSE Class 11 Accountancy Revision Notes Chapter-1 Introduction To Accounting

Earlier, accounting used to mean the act of financial recordkeeping. It involved keeping a record of all financial transactions of an organisation. Today, accounting means a  lot more.

It refers to an information system that provides useful financial information about an organisation and the decision-makers in the organisation to arrive at informed decisions. Accounting became a crucial tool in helping decision-making by the management as it makes useful financial information available such as sales made in a month, costs, etc.

Extramarks provides CBSE Class 11 Accountancy Chapter 1 Notes to students to help them understand every concept covered in this chapter in a concise manner. Students can use these notes to prepare more effectively and to revise the core concepts of this chapter right before their exams.

Revision Notes for CBSE Class 11 Accountancy Chapter 1 – Download 

Extramarks revision notes for Class 11 Accountancy provide step-by-step explanations of all topics. These notes assist students in quickly reviewing the numerous concepts that are discussed in this chapter. The revision notes can be downloaded for free from the official website of Extramarks.

Access Class 11 Accountancy Part 1 Chapter 1 – Introduction To Accounting

Subject experts with years of expertise thoughtfully curate these CBSE revision notes of Accountancy Class 11 Chapter 1. Extramarks provides students easy access to the updated  Accountancy Chapter 1 notes, allowing them to improve their grasp of the various concepts of the chapter. Some of the important topics covered in Chapter 1 Accountancy are mentioned below:

Accounting

Accounting is the science of efficiently documenting, categorising, and summarising monetary transactions and evaluating the findings efficiently.

Functions of Accounting 

• Identifying: The initial stage in accounting is to identify company transactions from multiple sources. It entails keeping track of all company activities and determining the deemed financial transactions.

• Recording: Only monetary transactions are documented in ledgers. It entails maintaining a precise record of them and recording them in a diary.

• Classifying: The transactions are categorised after being recorded. The term “classification” refers to all similar transactions in one location.

• Summarising: Trial balance is the process of bringing all account balances together in one place.

• Communicating: Accounting also entails communicating financial data such as financial statements to users, such as financial statements, who analyse them according to their needs.

Accounting’s Objectives

• Maintain accurate records of company transactions by established procedures to reduce the risk of omission and fraud.
• Determine the net profit or loss resulting from the company’s transactions during a specific period and the causes for profit or loss.
• Accounting information, such as a balance sheet is used to assess a company’s financial condition.
• Determine business progress from year to year and detect errors and frauds.
• To give accounting information to various interested parties, including owners, creditors, banks, and workers, who conduct in-depth analyses based on the stakeholders’ needs.

Accounting’s Benefits

• Accounting keeps track of all corporate transactions and gives accurate data to stakeholders.
• Accounting shows a company’s profit and loss over a specific period.
• Accounting allows for a comparison of many aspects of a firm, such as profit, sales, and purchases, with past years and assists in making decisions.
• Accounting is used to evaluate and enhance the performance of personnel, divisions, activities, and other entities.
• Accounting records are accepted as evidence in court proceedings.

Accounting’s Limitations

• Accounting has many flaws, one of which is that it primarily considers monetary transactions. Accounting ignores non-monetary factors such as quality, honesty, and abilities.
• It solely evaluates previous transactions. Therefore the figures in the financial statement do not account for changes in price levels.
• Personal judgments impact it, and it is not free of personal prejudice, which lowers its trustworthiness.
• It is influenced by window dressing, which is the manipulation of accounting to make financial statements appear more favourable than they are.
• Because financial statements are merely records of past occurrences, they are inappropriate for predicting.

Accounting’s Bookkeeping Base

The art of documenting transactions in books of accounts is known as bookkeeping. Only transactions with a monetary value are kept track of it. It’s the initial stage in the accounting process. Its primary aim is to preserve records or maintain books of accounts; it is not to be confused with accounting.

Accounting Subfields

• Accounting for Money: The goal of this branch is to keep a systematic record of business activities, determine profit or loss, and portray the financial state using a balance sheet.

• Accounting for Costs: The primary goal of cost accounting is to determine the total and per-unit costs of goods and services produced by a company.

• Accounting for Management: The fundamental goal of this branch is to provide accounting data in such a way that it aids management in planning and directing corporate operations.

• Accounting for Taxes: For tax purposes, this branch is used. This accounting is used to calculate income tax and GST.

Accounting Information Qualitative Characteristics

Accounting data should be produced and presented for a clear picture of a company’s operations.

• Reliability: It means that data must be accurate and observable. And free of mistakes.

• Relevance: Accounting data must be relevant to the business’s objectives. The information must assist accounting information consumers in making decisions to be meaningful.

• Understandability: Accounting data should be presented so that its consumers, such as investors and workers, can understand it.

• Comparability: It’s a helpful feature of accounting data. Previous year data should be included in financial statements to compare performance to prior results.

Accounting Terminology

• Transaction in Business: A business transaction is an economic activity that causes a company’s financial position to change.

• Account: It’s a list of all commercial transactions involving a person or thing. The proforma is T-shaped.

• Capital: It refers to the owner’s amount of money put into a firm. The amount invested might be in cash, products, or other forms.

• Drawing: Drawings are any cash or items taken for personal use from business finances.

• Profit: It’s the difference between a company’s total revenue and total expenses. Revenue-Expenses = Profit

• Loss: Loss is defined as an excess of expenditures over associated revenue. Expenses-Revenue = Loss

• Gain: It is a monetary advantage stemming from business-related events or transactions, such as profit on the sale of fixed assets.

• Stock: It covers things that were unsold on a specific day.

• Purchases: It refers to the number of commodities purchased by a company for resale or manufacturing. It might be in the form of cash or credit.

• Returns on purchases: Purchase returns occur when purchased products are returned to suppliers.

• Sales: In the usual course of business, it refers to the exchange of products or services for money.

• Return of a sale: Sales returns refer to when buyers return the things they purchased.

• Debtors: These refer to those who have been sold products on credit but have yet to be paid.

• Creditors: It refers to those whose company purchases products on credit and has not yet paid for them.

• Voucher: A voucher is a written record of a transaction. A monetary memo, invoice, or receipt might be used. Auditing requires a voucher.

• Income: It’s the distinction between income and expenditure.

• Expense: It’s the money spent on making and selling goods and services.

• Discount: The vendor offers the customer a rebate. There are two kinds of discounts: cash and trade.

• Money Off: Customers are given a discount when they pay on time. It’s always documented in ledgers.

• Wholesale Price: It is a predetermined percentage discount offered by merchants to their clients on the list price of items. It is also not recorded in the accounting books.

• Bad Debts: Amounts that a debtor has not paid despite numerous warnings and has no intention of payment in the future.

Asset

Assets are resources with economic value that a firm, individual, or corporation owns or controls with the expectation of getting future benefits. 

Liabilities

The financial responsibilities of a firm are referred to as liabilities. 

It represents the amount owed to others by a company. Creditors, loans, and the like are examples. There are two kinds of liabilities:

• Non-Current Liabilities: These refer to bills that have a big due date. Long-term loans are one example.

• Current Liabilities: It refers to bills that are due soon. Outstanding costs, Ex-Creditors.

Expenditure

It entails spending money or debt to acquire assets, products, or services. There are three kinds.

• Expenditure on Revenue: It refers to any expenditure from which the benefit is realized in a single accounting period.

• Capital Investment: It refers to an expense from which the benefit is gained over time. 

• Revenue Expenditure Deferred: It refers to revenue-generating expenditures that will presumably reap benefits over many years. Example-Advertisement.

Accountancy Class 11 Chapter 1 Notes Introduction to Accounting – A Quick Glimpse

The first chapter of the class 11 Accounts book covers the theoretical foundation required for an Accountancy practice. It defines the basic accounting terms in detail, which students will frequently encounter during their studies. 

Accounting notes in this chapter make complex issues like recording financial and economic events and analyzing occurrences to establish classification easy for students to understand.

All principles are presented in an easy-to-remember in revision notes.

Accountancy Class 11 Chapter 1 Notes Introduction to Accounting – Revision Notes

Chapter 1 of class 11 Accounts is the entry point to Accountancy, and a thorough knowledge of the necessary concepts is required not only for this chapter but for all forms of accounting practice. Let’s look at a summary of all the subjects and basic accounting definitions covered in the notes.

Class 11 – Accounting (Chapter 1)

The act of keeping records of various financial occurrences is known as accounting. These financial occurrences are converted into economic and monetary terms to create a comprehensive record backed up by data. These transactions occur, giving viewers a clear picture of what happened.

To better understand the subject, students can use the accounting notes provided by Extramarks. Accounting also demands students develop a sense of transaction nature that separates one financial event from another to record more precisely and clearly.

It is critical to have a good foundation in Class 11 Accounting before moving on to other accounting types.

Accountancy – Functions of Accountancy (Class 11th)

Students must complete numerous procedures to construct accounting books – ledger or journal. It’s critical to understand the components of a financial transaction and how to identify them from other business occurrences. Students may learn about these components by going over the Accountancy class 11 chapter 1 notes in detail.

• Identification: It is critical to identify the occurrences that qualify as financial transactions accompanied by a monetary amount when maintaining books. It is the foundation of a student’s understanding of events recorded in the books. 

• Recording: Students will record financial transactions in the books after they have recognized them. For accurate recordkeeping, these economic events must be reported in chronological order. 

• Classification: Students must precisely classify them and create different heads or accounts to record financial occurrences effectively. It’s one of the most crucial accounting duties. 

• Summarise: It is the process of counting and balancing financial occurrences. It determines if such transactions are legitimate.

• Communication: Accounting begins with the dissemination of financial information to interested parties.

Chapter 1 of Accounts in Class 11 – Accounting Objectives

Accounting standards mandate that financial information be handled in a controlled manner to avoid omissions and embezzlement. Our review notes, are supplied with the most needed pointers and therefore rated the ideal guide for a holistic revision.

Accounting is also required to calculate the profit and loss generated by such financial activities. It is critical to any organization since it offers an accurate picture of a company’s success. It also gives quantitative data about a company’s financial position, allowing experts to make informed organizational decisions.

Accountancy Chapter 1 Class 11 – Accounting Benefits

Accountancy is necessary to communicate all financial transactions and related information to various organizations. This form of communication also promotes decision-making in a management body. 

Accounting also aids business owners in evaluating their company’s annual performance. The trial balance and balance sheet also offer a fair depiction of an organization’s financial status. It also aids a company in keeping a systematic record of its financial transactions, which should follow accepted bookkeeping practices.

Chapter 1 of Accounting Class 11 – Accounting Limitations

Accounting diktats solely examine previous company transactions when recording financial events. It’s not for gathering, documenting, and analyzing data on a company’s current financial situation. Accounting also only evaluates data that has monetary implications. Accountancy does not deal with information on variables like management performance or worker efficiency. 

Furthermore, accountants or high-level management might falsify accounting to misrepresent data, a type of fraud. 

Chapter 11 – Bookkeeping in Accountancy

One of the aspects of accounting is bookkeeping. It is concerned with the financial events that occur in a firm. The regular and orderly recording of events to calculate a business’s earnings and losses is known as bookkeeping.

To summarise the difference, accounting is concerned with summarizing all financial transactions, whereas bookkeeping is concerned with documenting such events with appropriate monetary values. To discover more about the distinctions between accounting and bookkeeping for your test preparation, consult our Accountancy Class 11 Chapter 1 notes.

Class 11 – Types of Accounting Data in Account Chapter 1

There are two sorts of accounting data.

• 1st: One type of data concerns financial occurrences used to calculate profit and loss through systematic and accurate recording. This type of data provides a quantitative representation of a company’s financial data. These figures are kept in ledgers, profit and loss accounts. Our Accounting Terms can help students better grasp this type of accounting information. 

• 2nd: The other type of accounting information concerns a company’s financial status. Basic accounting terms such as assets, capital, and liabilities are included. To summarize occurrences, such information is documented in a Balance Sheet.

Students may use our Accountancy class 11 chapter 1 notes to grasp the different sorts of accounting data and prepare for the test.

Chapter 1 – Accounting Branches

There are various forms of accounting, each of which corresponds to a different organizational phase. 

• Accounting for money: This area is focused on the documentation of transactions about a business’s financial aspect.

• Accounting for costs: It is the documentation of financial transactions involving the products or services. Students learn to record manufacturing expenses, unit costs, and so on in this type of accounting.

• Accounting for management: It refers to the presentation of information to management that represents the financial events of a period clearly on which they may make choices. 

Chapter 1 – Qualitative Characteristics of Accounting Data

Accountancy’s goal is to make financial occurrences understandable to those who need to know. The qualitative characteristics are.

• Accounting data is only valuable to those who need to make choices. 
• The data captured and summarized should be accurate and verified against papers that specify individual financial transactions.
• Information should be documented in a clear, intelligible, and consistent manner.
• For interested persons to compare such financial transactions and estimate an organization’s development and profitability, data representation should be consistent with the prior year’s accounting.

Chapter 1 – Assets in Accountancy Class 11

A company’s assets are what it regards to be critical to its operations. Current and non-current assets are the two categories of assets. To frame and document financial events effectively, students need to understand these sorts. 

• Current assets: A company’s short-term resources that it can liquidate regularly.

• Fixed assets or non-current assets: Long-term assets that provide consistent value to a business throughout time. There are two types of tangible assets: tangible and non-tangible.

Chapter 1 – Liabilities in Accountancy Class 11

Liabilities are the many commitments that a company must meet. 

Both assets and liabilities fall within the category of accounting data that pertains to a company’s financial position. Accountancy class 11 chapter 1 notes provide students with a thorough understanding of liabilities. Current and non-current liabilities are the two categories of obligations.

• Current liabilities are a company’s short-term financial commitments, such as debtors.
• Non-current liabilities are any company’s long-term financial commitments, such as a loan.

Class 11 – Receipts in Accounts Chapter 1

A receipt is a document that records the receipt of a product or service against its monetary value. It serves as a confirmation of such receiving and is required for bookkeeping. There are two sorts of receipts:

• Receipts of revenue: This type of receipt is generated by businesses to document their operating actions that produce income.

• Receipt of capital: This type of receipt is only created on rare occasions and only with commercial operations such as the sale of machines.

Chapter 1 of Accountancy Class 11 – Expenses

To generate money, a company must spend many expenses. Expenses are the phrase for these costs. Salaries, interest, and other costs go into this category. With Accountancy class 11 chapter 1 notes, students will effortlessly remember the notion of costs.

Accounts Class 11 – Expenditure (Chapter 1)

The nature of the cost is a crucial distinction between costs and expenditures. Expenditure has defined as the cost of purchasing assets, whether fixed or current. There are three different forms of spending:

• Expenditure of revenue: It is the expense incurred by a firm when purchasing items or services necessary for the course of business.

• Capital investment: Capital expenditures, such as the acquisition of fixed assets, are costs that provide long-term benefits.

• Expenditure on deferred revenue: Deferred revenue expenditures are costs that provide long-term advantages yet are revenue expenditures.

Students may swiftly go through the various forms of spending in our Book Keeping and Accounting section for test preparation.

Chapter 1 of Class 11 Accounts – Business Transactions

Any economic event that impacts a company’s financial condition is referred to as a business transaction.

Class 11 – Accounts Payable and Receivable

An account is all significant financial events and their monetary worth organized under headings. There are two sides to any account: debit and credit. On either of the two sides, all financial events are documented. Students may study more about the notion of account with our Accountancy class 11 chapter 1 notes.

Class 11 of Introduction to Accounting – Capital

Business activities need capital, which the owner or owners provide in cash or another fixed asset. Capital is the most crucial aspect of every company. It guarantees that a company can carry out its activities consistently. 

Chapter 1 – Drawings in Accountancy Class 11

Drawings are defined as any financial occurrence in which an owner or owners remove anything of monetary worth or money itself. In the Balance Sheet, drawings are subtracted from Capital.

Chapter 1 – Profit in 11th Grade Accounts

Profit is the amount of money made in a given year after all expenses have been paid. Gross profit and net profit are two different types of profits.

After accurately documenting all costs against the gross profit and any extra income in a year, net profit is determined in the Profit & Loss A/c. It is then carried forward to the Balance Sheet, either added to the capital or utilized to deduct certain expenses. 

Class 11 Accounting Notes Chapter 1 – Gain

Gain is defined as any profit or income generated by financial events that are not directly related to a company’s activities. A gain is a one-time event that occurs when there is a need.

• Any permanent asset, such as machinery, is sold.
• Appreciation of any asset’s worth, or
• Depreciation of a non-current liability.

Class 11 Notes – Loss, Accounts Chapter 1

A loss is the sum of all costs and overall associated revenue for a single financial event or a series of events. The gross loss is recorded in a Trading A/c, and the net loss is calculated by subtracting the gross loss from any earnings or revenues recorded in the Profit & Loss A/c.

In a Balance Sheet, the net loss is carried forward and removed from the Capital. Our Accountancy class 11 chapter 1 notes, which are produced according to the curriculum, provide students with a thorough understanding of the concept of loss.

Chapter 1 Notes – Goods in Class 11 Accountancy

Goods are the items at the heart of a company’s activities. A good is anything that a company purchases to resell rather than employing in production.

Purchases – Introduction To Accounting Class 11 

A buy is the financial event of items that a firm would resell as part of its activities. A different form of buying is the acquisition of items utilized to make the ultimate product that a company will sell. Both credit and cash can be used to make purchases.

Purchase Returns – Basic Accounting Terms Class 11 Notes 

Purchase returns are described as a financial occurrence in which a previously completed purchase is returned to the seller.

Class 11 Accountancy Notes Chapter 1 – Sales

Sales are the financial event a firm sells its final product(s) to the consumer. It is documented in the books about its monetary worth, referred to as revenue. Cash or credit can be used to complete sales.

Notes for Accounts Class 11 Chapter 1 – Sales Return

In our Business Accounting Notes, financial events that represent the return of sold products from the client are referred to as sales returns.

Accountancy Notes for Class 11 Chapter 1 – Debtors

Both credit and cash can be used to make purchases. Customers or companies that purchase products on credit are referred to as Debtors. In a Balance Sheet, debts are shown under current assets.

Chapter 1 – Creditors – Accounts Note Class 11

When a business acquires products on credit, the entity or seller to whom the firm owes the money is referred to as a creditor. Creditors are a liability for any firm and are noted in the Balance Sheet under current liabilities.

Chapter 1 – Accounts Receivable (Class 11 Accounts Notes)

Bills receivable is an accounting term for bills of exchange. During credit sales, the seller gives the consumer a bill of exchange. The invoice comprises details about the financial transaction and the amount owed by the consumer.

Notes on Bills Payable in Chapter 1 of Class 11 Accounts

A bill payable is the accounting translation of a bill of exchange. The purchaser issues this form of a bill of exchange to document a credit purchase against its monetary worth. It is a short-term obligation reported in the Balance Sheet under Current Liabilities.

Chapter 1 – Discount (Accountancy Class 11 Notes)

The term discount is used when a seller offers to charge a reduced monetary value for a sale made to a consumer. There are two sorts of discounts in financial transactions:

• Discount for trade: A trade offer is granted at a set rate to encourage clients to buy more. The negotiated rate is based on the item’s advertised price. Such discounts are recorded in the sale invoice. It is not documented in any books.

• Discount in cash: This type of discount is not pre-determined, and it is only provided to entice debtors to pay their bills early or on time or prevent bad debts. On the debit side, a cash discount is recorded in accounting books in a Profit & Loss A/c.

Notes on Income in Accountancy Class 11 Chapter 1

Income refers to financial transactions that directly contribute to a company’s capital expansion. Profits and gains are also included.

Chapter 1 – Stock in Accountancy Class 11 

Stock is defined as the monetary worth of all commodities accessible to a firm on a specific day. These items are things that a company can sell as part of its usual activities. It is a short-term asset that appears on a balance sheet.

Chapter 1 of Accountancy in Class 11 – Costs

Cost is the money spent on acquiring raw materials or items utilized to make, manufacture, or process the finished product that a company will sell. Cost is the most crucial aspect of cost accounting.

Voucher – Chapter 1 of Accountancy Class 11

A voucher is a document that painstakingly attests to a financial occurrence against its monetary worth. An invoice for a credit sale or a cash memo for cash transactions might be used.

Class 11 Accounting Features — Double Entry Bookkeeping System

It is a bookkeeping and accounting method in which both debit and credit parts of financial occurrences are documented in the books. Ledgers are drawn according to the number of accounts engaged in an event in this system.

Each record is posted twice in its respective accounts, once for the credit and once for the debit aspects of the transaction. Individual entities participating in a transaction are represented in each profile.

Students may learn more about this bookkeeping by looking through our Double Entry Bookkeeping Class 11 solutions. According to the double entry system rule, the debit and credit amount after summing would be equal.

To account for both elements of a single financial transaction, each posting to an individual account should have a matching entry to another connected account.

Our Accountancy class 11 chapter 1 notes summarise all the ideas and phrases from the first chapter in a concise and easy-to-understand manner for students to review before examinations.