Introduction to Accounting

Topics in this chapter

• Accounting Purpose, Scope and Functions
• Bookkeeping and Accounting Process
• Accounting Users and Information Needs
• Branches of Accounting
• Qualitative Characteristics of Information
• Accounting Concepts and Equation
• Limitations and Subjectivity in Accounting

Cheat sheet

Practice questions

1. Question 1Q-D983ED

   Which of the following is considered the primary function of accounting?

   1. A.To maintain ledgers of all personal accounts
   2. B.To record financial transactions and events of a business systematically
   3. C.To compute the exact tax liability for government authorities
   4. D.To audit the financial statements prepared by other firms
   See the answer and solution
2. Question 2Q-F98844

   Which of the following events would be recorded in the books of accounts according to the money measurement concept?

   1. A.Resignation of a very capable and experienced general manager
   2. B.Damage of inventory worth Rs 50,000 due to a sudden fire
   3. C.Signing of a potential joint venture agreement with no immediate monetary exchange
   4. D.A major dispute between the production workers and the plant supervisor
   See the answer and solution
3. Question 3Q-CD1F7D

   What is the final step in the complete accounting process?

   1. A.Posting entries to the ledger
   2. B.Preparing the trial balance
   3. C.Communicating financial information to the users
   4. D.Recording transactions in the journal
   See the answer and solution
4. Question 4Q-1C9749

   Who among the following are classified as external users of accounting information?

   1. A.Board of Directors
   2. B.Managing Director
   3. C.Tax Authorities
   4. D.Full-time departmental managers
   See the answer and solution
5. Question 5Q-598FA6

   Differentiate between bookkeeping and accounting in terms of their scope and responsibility level.

   See the answer and solution