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Students Of CBSE Class 11 Commerce Accountancy Accounting Process Important Notes

Students Of CBSE Class 11 Commerce Accountancy Accounting Process Important Notes

CBSE Class 11 Commerce Accountancy Accounting Process : CBSE  the first education board that was set up in the year 1921 in India for the development of studies was the Uttar Pradesh Board of High School and Intermediate Education. This board was managed and administered by the provinces of Rajputana, Central India and Gwalior.  CBSE affiliates all Kendriya Vidyalayas, all Jawahar Navodaya Vidyalayas, private schools, and most of the schools approved by central government of India.

Students Of CBSE Class 11 Commerce Accountancy Accounting Process Important Notes

CBSE Class 11 Commerce Accountancy Accounting Process : CBSE Class 11 Commerce Accountancy and including it as an information system play and important role in this field of study. The important points and syllabus structure is given here. The whole syllabus is divided into 3 parts, Part A- Financial accounting 1, Part B- Financial accounting 2 and Part C- Project work. Part A has 2 units -Theoretical framework and accounting process. Part B has 3 units- Financial statements of sole proprietorship from complete and incomplete records, Financial statements of not for profit organizations and Computers in accounting. Details of project work is added in this link. Theory contains 90 marks while project work is of 10 marks.

Students Of CBSE Class 11 Commerce Accountancy Accounting Process Important Notes

CBSE Class 11 Commerce Accountancy Accounting Process : Here we provides you CBSE Class 11 Commerce Accountancy Accounting Process notes in PDF format. cakart team members provides solved papers, board question papers, revision notes and NCERT solutions for CBSE Class 11 Commerce Accountancy Accounting Process . The topics included are Accounting equation: analysis of transactions using accounting equation, Rules of debit and credit: for assets, liabilities, capital, revenue and expenses and others. CBSE Class 11 Commerce Accountancy Accounting Process complete details and syllabus information given here:

Download here Complete details of CBSE class 11 Accountancy study material in PDF format

PART A: FINANCIAL ACCOUNTING – I

Unit-2: Accounting Process

Recording of Transactions

  • Accounting equation: analysis of transactions using accounting equation.
  • Rules of debit and credit: for assets, liabilities, capital, revenue and expenses.
  • Origin of transactions- source documents/ supporting vouchers (invoice, cash memo, pay in slip, cheque), debit note, credit note, preparation of accounting vouchers – cash (debit and credit) and non cash (transfer).
  • Books of original entry: format and recording – Journal.
  • Cash book: simple cash book, cash book with discount column and cash book with bank and discount columns, petty cash book.
  • Other books: purchases book, sales book, purchases returns book, sales returns book and journal proper.

Preparation of Bank Reconciliation Statement,

Ledger and Trial Balance

  • Bank reconciliation statement- concept, calculating bank balance at an accounting date: need and preparation. Corrected cash book balance.
  • Ledger – format, posting from journal, cash book and other special purpose books, balancing of accounts.
  • Trial balance: objectives and preparation {Scope: Trial balance with balance method only)

Depreciation, Provisions and Reserves.

  • Depreciation: concept, need and factors affecting depreciation; methods of computation of depreciation: straight line method, written down value method (excluding change in method)
  • Accounting treatment of depreciation: by charging to asset account, by creating provision for depreciation/ accumulated depreciation account, treatment of disposal of asset.
  • Provisions and reserves: concept, objectives and difference between provisions and reserves; types of reserves- revenue reserve, capital reserve, general reserve and specific reserves.

Accounting for Bills of Exchange.

  • Bills of exchange and promissory note: definition, features, parties, specimen and distinction.
  • Important terms : term of bill, due date, days of grace, date of maturity, discounting of bill, endorsement of bill, bill sent for collection, dishonor of bill, noting of bill , retirement and renewal of a bill.
  • Accounting treatment of bill transactions. ‘

Rectification of Errors

  • Errors: types-errors of omission, commission, principles, and compensating; their effect on Trial Balance.
  • Detection and rectification of errors; preparation of suspense account.

Students Of CBSE Class 11 Commerce Accountancy Accounting Process Important Notes

CBSE Class 11 Commerce Accountancy Accounting Process : Accounting or accountancy is an art of recording business transaction. It refers to the process of identifying, measuring and communicating economic information, for judgment and decision making. It also involves knowing about what amount of money there were; were used and also that will be used in transaction.

Accounting began because people needed to record business transactions so as to know if they were financially successful, how much they owned and how much they owed. Accounting main objective is to let people and organization know if they are making profit or a loss and how much cash they have in the business so as to continue for the foreseeable future. There is evidence that accounting was practiced in ancient times in Egypt, China, Greece, and Rome. But today’s accounting differs completely from the one which people in ancient time were using. Today there exist two types of accounting standards; Financial Accounting and Management Account.

THE PROCESS OF ACCOUNTING

Accounting has a primary objective, which is to provide information for decision making. For example a car company, by using accounting he knows about the number of cars sold in a month, he can calculate its depreciation value and therefore he can determine if he can purchase more. In other words if a business record what he sold, to whom, the date it was sold, the price at which it was sold , and the date it received payment from the customers, along with similar data concerning the purchases it made. Certain information could be produced summarizing what had taken place. The profitability of the business and the financial status of the business could also be identified, at any particular point in time.

IDENTIFYING

The first accounting process starts with identifying. Only transaction that belongs to the business is being recorded. Those which concern the business entity are included in the process. For example if the owner withdraws money for his personal use this does not have anything to do with the entity. The transactions identified are then analyzed to determine the accounts affected and the amount to be recorded.

 Business owners use written documents to track specific information relating to financial transactions. These documents classify transactions and usually include specific information regarding economic events. Business owners also use this information to have a historical record of business transactions. Once each transaction is identified and classified, the information is recorded in the company general ledger.

MEASURING

All transactions should have the same common measuring units. It deals with recording transactions using the country currency. Accountants use these measurements to report information to internal and external users. Financial accounting measurement are typically recorded at historical cost or adjusted to current market values through adjusting entries. Management accounting uses measurements to calculate the cost of materials used or the number of labor hours needed to produce goods or services. Accountants use special cost allocation methods when calculating management accounting measurements.

Financial accounting measurements are different than management accounting measurements. Assets, liabilities, debt financing and equity investments are all same accounting items needed for a periodic measurement. External users make investment decisions based on the information included in financial statements; GAAP (generally accepted accounting principles) is used to present financial information in similar methods across business industries. According to the GAAP there are certain principles and laws that companies should adopted.

RECORDING

Recording transactions is the physical process of entering financial data into the company’s general ledger. Small businesses may use manual or automated accounting ledgers in their business operations. Manual accounting requires business owners to maintain several paper ledgers for recording financial transactions. Accounting software provides business owners with an electronic process for recording transactions and maintaining financial information. Recording transactions may require business owners to prepare journal entries based on financial transaction documents.

All transaction is made in a chronological order. Therefore accountants make use of the journal which known as the book of original entry. The journal is a book in which business transactions are being recorded using the double entry bookkeeping system. It contains at least two accounts (one debited and one credited). For example transactions that occur frequently such as sales, purchases and cash receipts.

CLASSIFYING

Classification is the process of identifying accounting transactions and assigning those transactions to an appropriately numbered account. A company’s classification system is recorded on what is known as a statement of financial position. Certain financial information must be reported by law. Classification organizes and facilitates this reporting process. The classification system helps guide bookkeepers as to where various company transactions should go, saving time and improving accuracy in reporting.

All transaction will be posted to the ledger. The ledger is a collection of account that shows the changes made to each account as a result of past transactions, and their current balances. This is the core of classifying phase. For example all journal entries made to cash would be transferred into cash account in the ledger. All increases and decreases in cash will be entered into one ledger account.

SUMMARIZING

Summarizing in accounting means to check the arithmetical accuracy of the ledger and to check before passing all the data in the financial statement. That is firstly we need to prepare a trial balance to check the equality of the debit and credit side. Which means the debit balance should equal to the credit balance. All account balances are extracted from the ledger and arranged in one report. However there are errors which should be corrected. These errors are those which affect the trial balance such as double posting or failure to record a transaction.

At the end of the accounting period, some expenses may have been incurred but not yet recorded n the journals. Some income may have been earned but not entered in the books. Thus adjusting entries and prepared to have the account updated before they are summarizes into the financial statement.

When accounts are already up to date and equality between debits and credits has been tested, the financial statements are the end products of an accounting system. All are summarize in the financial statement. And for a company a financial statement should include the income statement, the statement of changes in equity, the statement of financial position, the statement of cash flows.

ANALYZING

At the end of each transaction all the accounts are closed. Income statement account is closed to prepare it for the next accounting period. This is where accountant make an analysis for decision making whether the business may continue for the foreseeable future (the going concern concept) or no longer continue operation. It is both for internal management and external users such as investors, creditors and analysts make the use of the financial statement to evaluate the company’s profitability, liquidity and solvency.

The most common methods used for analyzing the financial statement are trend analysis, common size statements, and ration analysis. For example liquidity ratio or acid test ratio. These methods include calculations and comparisons of the results to historical company data, competitors, or industry averages to determine the relative strength and performance of the company being analyzed.

INTERPRETING

Accounting interpretation is a statement that clarifies how accounting standards should be applied. Accounting interpretations are issued by accounting standards groups, such as the Financial Accounting Standards Board (FASB), the International Accounting Standards Board (IASB). Interpretations are generally not requirements, but rather outline as best practices and give further explanation. Besides, accountants are required to follow the accounting standards that are in place.

As financial transactions continue to evolve, new situations develop that may not have been foreseen by the existing accounting standards. In this case, accounting boards may choose to issue an interpretation outlining the recommended practices for accounting as questions arise. If new changes are particularly significant, the standards themselves may be adjusted so that compliance is required.

COMMUNICATION

Accounting, the language of business, has its own rules and definitions that seem strange to individuals with no financial background. Accountants need to communicate the meaning behind the numbers in a way that is clear, understandable and that makes sense to non financial individuals.

The most important use of accounting data is to communicate important information, allowing management to make good decisions. To be effective, accounting information must make sense and be understood. Or else, it is just a list of numbers with no real significance. Many businesses use templates for internal reports to communicate information in a matter that is familiar and easy to use by management. For example, departments may get actual budget reports every month, using the same format, facilitating understanding and analysis. That is why accountant are here to help in those decisions.

Download here  CBSE Class 11 Commerce Accountancy Accounting Process Important Notes

Students Of CBSE Class 11 Commerce Accountancy Accounting Process Important Notes

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