Important Questions for CBSE Class 11 Accounts Chapter 1 – Introduction to Accounting

Accounting today is much more than record-keeping and preparing financial statements by the accountant. Hence, it becomes imperative to strengthen your knowledge base in accountancy. Class 11 Chapter 1 is about Introduction to Accounting. This chapter explains the meaning of accounting and basic terms used in accounting while diving into the internal and external uses of the accounting information and the end objective of why is accounting done. 

Students studying Accountancy should start by going through the Class 11 Accountancy NCERT textbook. Accountancy is a practical subject so along with studying the theory behind it, students can strengthen their understanding by solving various questions from the NCERT textbooks. 

Extramarks is one of the best online learning companions for lakhs of students across the country. Thus, Extramarks provides students with a list of important questions from the CBSE syllabus. Extramarks team refers to NCERT textbooks, other important reference books, CBSE sample papers, CBSE past years’ question papers, etc. for compiling a list of questions.Solving a lot of questions given in our Important Questions Class 11 Accountancy Chapter 1 can make the students feel prepared to face questions in their examinations.

To get the maximum benefit during exam preparations, students can register on Extramarks’ website and get access to Accountancy Class 11 Chapter 1 Important Questions, NCERT solutions, revision notes, and other study materials.

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Accountancy Class 11 Important Questions and Answers

Below are some Important Questions Class 11 Accountancy Chapter 1 with solutions:

Question 1. What is Accounting? Define its objectives?

Answer 1: Accounting is the process that identifies, measures, and records all business transactions communicated to interested users within and outside the organisation. The information is regarding the economic events related to the organisation.

The following are the objectives of accounting:

• Maintenance of records of business transactions:
  Accounting helps systematically record business transactions in the books of accounts. Accounting is beneficial as it is not humanly possible to remember all the business transactions regarding sales, purchases, receipts, and payments. Accounting further serves as an evidence that verifies all those transactions.
• Calculation of profit and loss:
  The accounting of incomes and expenses of the business helps to ascertain the net result at the end of a particular period and understand whether the business operations resulted in a profit or a loss.
• Depiction of Financial Position:
  The preparations of accounts help to understand the financial position, i.e., the statement of assets and liabilities of the business firm. 
• Providing accounting information to its users:
  After the accounting process is complete, the end information is then communicated to the users, which are internal and external, that can use this information to make decisions in various situations.

Question 2. The art of recording all business transactions in a systematic manner in a set of books is called-

(a) Accounting 

(b) Book–keeping

(c) Ledger

(d) None of these.

Answer 2: (b) Book-Keeping

Explanation- Bookkeeping is the process of keeping track of and organising all of a business’s financial transactions.

Question 3. Cash, goods or assets invested by the proprietor in the business for earning profit is called-

(a) Profit

(b) Capital

(c) Fixed assets

(d) None of these

Answer 3: (b) Capital

Explanation: Capital is the ownership of money or other assets by an individual or group that may be used for a variety of activities, including investing or starting a business.

Question 4. Define Debtors and Creditors of the company

Answer 4: 

Debtors- Debtors are those who owe money to the business firm. The money owed by debtors is receivable during the course of business activities.

Creditors- Creditors are those who extend credit to the business; hence the money is to be paid to the creditors during the ordinary course of business.

Question 5. Mention 2 Differences between Accounting and Accountancy.

Answer 5: 

Question 6. Explain the qualitative characteristics of Accounting?

Answer 6: The following are the qualitative characteristics of Accounting:

1. Reliability:
   Reliability implies that one can rely on accounting information. The source documents, such as vouchers, bills, cash memos, and the like, help to verify the information. Hence, the internal and external users of accounting information can rely on them as it is unbiased and free from errors.
2. Relevance:
   The users, i.e., internal and external users, need relevant information to predictand make decisions for the future. Hence, the accounting information should include all the necessary transactions required for them to make these crucial decisions and exclude irrelevant information.
3. Understandability:
   The accounting information should be represented so that the users find it easy to interpret the information in a meaningful manner.
4. Comparability:
   One of the essential characteristics, comparability of data, implies that the current year’s accounting information can be easily compared to the previous year’s accounting information. It also enables the comparison of data between two or more businesses. It helps in understanding the impact of various policies and plans as well as projecting the growth of the business in comparison to similar businesses.

Question 7. Who are the users of accounting information?

Answer 7: Accounting information is used by various parties inside and outside the organisation to make important decisions. Hence, there are two categories that use the accounting information mentioned below:

1. Internal Users:

• Owners
• Employees and Workers
• Management

1. External Users:

External users comprise those who lie outside the organisation and are interested in the financial position and records of the business. External users do not have direct access to the business’s financial records. The External users include the following as below:

• Investors
• Government 
• Consumers 
• General public
• Banks and Financial Institutions
• Tax Authorities
• Creditors

Question 8. Enumerate informational needs of management

Answer 8: The managers need the information about the business for the below-mentioned reasons:

1. Helps in planning business activities and making decisions for the same
2. Preparing financial reports relating to costs, profits, costs, and, to see whether the business enterprise is working well.
3. It compares the current financial performance of the business with its past performances and similar businesses to find out where the business stands in terms of operational efficiency.

Question 9.  Giving examples, explain each of the following accounting terms:

• Fixed assets 

• Revenue 

• Expenses 

• Short-term liability 

• Capital 

Answer 9: 

1. Fixed Assets: Fixed Assets are those that are held on to for long terms and not used for sale. These assets help the business profit and assist in growth over the years.
   Example of Fixed Assets: Land, building, machinery, etc. .
2. Revenue: The inflow of cash resulting from the business’s normal day-to-day activities is known as revenue.
   Examples of Revenue: Sale of goods and services, the commission received, royalties, interest received, etc.
3. Expenses: The costs that are incurred during the process of earning revenue are known as expenses. They help in maintaining the profitability of the business enterprise.
   Examples of Expenses: Rent paid, salaries and wages paid, depreciation, interest on loans, and the likes of it.
4. Short-term Liability: Liabilities that are to be paid by the enterprise within a year are called short-term liabilities.
   Examples of Short-term liability: Creditors, outstanding wages, bank overdrafts, and short-term loans come under short-term liability.
5. Capital: Capital is the sum of the amount the business owner invests in the business. The capital is the business’s liability towards the owner; hence it is shown on the liability side while preparing the balance sheet.
   Example of capital: It may be in the form of cash or assets.

Question 10. What are the 3 advantages of accounting?

Answer 10: The three main advantages of accounting are:

1. Helps in decision-making by the management 
2. Helps in the systematic recording of business transactions
3. Helps in the preparation of financial statements that ascertain profit and loss for the business

Question 11. Define revenues and expenses.

Answer 11:

Revenues– The sale of products and services that result in an inflow of money is considered revenue for businesses. The inflow of money is considered revenue only when the activities resulting from it are day-to-day activities happening in the regular course of the business. 

Examples of revenues include the sale of the goods, sale of services, fees or commission received, and profits from investments are examples of revenue.

Revenues are shown on the credit side of the profit and loss account or trading account.

Expenses: The activities during the business that leads to the outflow of money from the enterprise are termed expenses. The enterprise undertakes these expenses to help it earn revenues.

Examples of expenses include: Salaries and wages paid, rent paid, repair and maintenance, administrative charges, and cost of goods sold are basic examples of expenses.

Expenses are shown on the debit side of the Profit and loss or trading account.

Question 12. Define the branches of accounting.

Answer 12: Below mentioned are the different branches of Accounting:

1. Financial Accounting: Financial accounting is concerned with recording, classification, and summarising the financial activities of the business enterprise. The ultimate focus of financial accounting is to create accurate financial records for a particular period. The financial records are known as financial statements, which include Profit and Loss statements, balance sheets, and Statements of CFOs.
2. Cost Accounting: Cost Accounting is concerned with reporting and computation of costs incurred during producing goods and providing services. Cost accounting involves calculating the fixed and variable costs for the business enterprise.
3. Management Accounting: Management Accounting involves the measurement, evaluation, and interpretation of the financial information, which will be ultimately presented to the management for the realization of organisational goals.

Question 13. Describe the role of accounting in the modern world.

Answer 13: Earlier, the role of accounting was limited to recording business transactions, but in today’s time, its roles have changed significantly. It is not just used as a way of recording financial events. However, it is also used to disseminate information to the internal and the external users, ultimately helping in decision making. 

Apart from this, here are some of the roles of accounting in the modern world:

1. Assisting the management:
   With the creation of budgets and reports, the management can make the right decisions for the long-running of a business enterprise
2. Information to end-user:
   Accounting in today’s times helps to communicate reliable and authentic information to internal and external users. The users depend on this information to make strategic changes in the business operations.
3. Substitute of memory:
   Accounting is the practice that helps in timely and accurate recording of business transactions that also come in handy as evidence for the transactions.
4. Comparative studies:
   Accounting also plays the role of helping organisations in comparing the past and present performance of the business. Businesses can also compare their performance with competitors to understand their position in the market.

Question 14. Differentiate between profit and gain.

Answer 14: The differences between Profits and Gain are mentioned below:

Question 15. Fill in the blanks

• The document certifying the purchase or sale of goods or any monetary transaction is called …………….

• The things or properties which help in the smooth functioning of the business and which are owned by the business are called ……………. of the business.

• The unsold goods left at the end of the year are called ……………..

•  …………… represents the excess of assets over liabilities.

Answer 15: 

1. Voucher
2. Assets
3. Closing stock
4. Capital

Benefits of solving Class 11 Accountancy Chapter 1 Important Questions

Accountancy is an essential foundational subject in Classes 11 and 12 for students who are planning to pursue their careers in Commerce and business-oriented education streams. A lot of practice and effort should go towards understanding the core components of Accountancy. Going through the important questions in Class 11 Accountancy Chapter 1 available on the Extramarks can help students build a strong foundation of the subject which will benefit them greatly while solving practical numerical. 

Here are a few benefits students can achieve while revising the Important Questions Class 11 Accountancy Chapter 1 available at Extramarks. 

• Get a list of all the Class 11 Accountancy questions at one place. The list would include questions from NCERT books, past years’ question papers, and other reference books, providing a holistic revision of the entire chapter.
• The solutions are prepared by Extramarks’ team of subject matter experts who have been teaching Accountancy and Business oriented subjects for many years. So students can rely on the solutions fully. Our team has given step-by-step solutions that help students to revise important theory concepts that are used in solving the specific problems.
• The questions covered in the Class 11 Accountancy Chapter 1 Important Questions list include a comprehensive list of questions from the entire chapter, ensuring that solving them helps with the revision of the entire chapter.

For students in Classes 1 through 12, Extramarks offers high-quality resources such as NCERT revision notes, CBSE sample papers, CBSE past years’ question papers, CBSE extra questions, and CBSE mock tests, etc. In order to access some of these resources, students must click on the website links provided below:

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