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Students Of CBSE Class 11 Commerce Accountancy Part B Financial Accounting Important Notes

Students Of CBSE Class 11 Commerce Accountancy Part B Financial Accounting Important Notes

CBSE Class 11 Commerce Accountancy Part B Financial Accounting  :  CBSE Class 11 Commerce is fundamentals of accounting 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 Part B Financial Accounting Important Notes

CBSE Class 11 Commerce Accountancy Part B Financial Accounting  : Download CBSE class 11 Accountancy study material in PDF format. web site team members provides solved papers, board question papers, revision notes and NCERT solutions for CBSE class 11 Accountancy. The topics included are introduction to accounting, theory base of accounting, recording of transactions, preparation of Journal, ledger account, trial, bank reconciliation statement, depreciation, provisions and reserves, bill of exchange, rectification of error, financial statements of sole proprietorship, financial statements of non profit organisation, accounts from incomplete records, applications of computers in accounting.

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

Part B: Financial Accounting – II (40 Marks)

Unit 3: Financial Statements of Sole Proprietorship: From Complete and Incomplete Records (40 Periods)

  • Financial statements: objective and importance.
  • Trading and profit and loss account: gross profit, operating profit and net profit.
  • Balance sheet: need, grouping, marshalling of assets and liabilities.
  • Adjustments in preparation of financial statements : with respect to closing stock, outstanding expenses, prepaid expenses, accrued income, income received in advance, depreciation, bad debts, provision for doubtful debts, provision for discount on debtors, abnormal loss, goods taken for personal use, goods distributed as free samples and manager’s commission.
  • Preparation of Trading and Profit and Loss account and Balance Sheet of sole proprietorship.
  • Incomplete records: uses and limitations.
  • Ascertainment of profit/loss by statement of affairs method.

Unit 4: Financial Statements of Not-for-Profit Organizations (30 Periods)

  • Not-for-profit organizations: concept.
  • Receipts and Payments Account: features and preparation.
  • Income and Expenditure Account: features, preparation of income and expenditure account and balance sheet from the given receipts and payments account with additional information.

(i) Adjustments in a question should not exceed 3 or 4 in number and restricted to subscriptions, consumption of consumables and sale of assets/ old material.
(ii) Entrance/ admission fees and general donations are to be treated as revenue receipts.
(iii) Trading Account of incidental activities is not to be prepared.

Unit 5: Computers in Accounting

  • Introduction to computer and accounting information system {AIS}: Introduction to computers (elements, capabilities, limitations of computer system),
  • Introduction to operating software, utility software and application software. Introduction to accounting information system (AIS) as a part of MIS
  • Automation of accounting process: meaning
  • Stages in automation: (a) Accounting process in a computerised environment; comparison between manual accounting process and computerised accounting process, (b) Sourcing of accounting software; kinds of software: readymade software; customised software and tailor-made software; generic considerations before sourcing accounting software (c) creation of account groups and hierarchy (d) generation of reports – trial balance, profit and loss account and balance sheet.

(i) The scope of the unit is to understand accounting as an information system for the generation of accounting information and preparation of accounting reports.
(ii) It is presumed that the working knowledge of any appropriate accounting software will be given to the students to help them learn basic accounting operations on computers. For this,the teachers may refer to Chapter 4 of Class XII NCERT textbook on Computerized Accounting System.

Download here  CBSE Class 11 Commerce Accountancy Part B Financial Accounting Important Notes

Students Of CBSE Class 11 Commerce Accountancy Part B Financial Accounting Important Notes

CBSE Class 11 Commerce Accountancy Part B Financial Accounting  : the field of accounting concerned with the summary, analysis and reporting of financial transactions pertaining to a business. This involves the preparation of financial statements available for public consumption. Stockholders, suppliers, banks, employees, government agencies, business owners, and other stakeholders are examples of people interested in receiving such information for decision making purposes.

An account statement is a periodic summary of account activity with a beginning date and an ending date. The most commonly known are checking account statements, usually provided monthly, and brokerage account statements, which are provided monthly or quarterly. Monthly credit card bills are also considered account statements.

Financial accountancy is governed by both local and international accounting standards. Generally Accepted Accounting Principles (GAAP) is the standard framework of guidelines for financial accounting used in any given jurisdiction. It includes the standards, conventions and rules that accountants follow in recording and summarizing and in the preparation of financial statements. On the other hand, International Financial Reporting Standards (IFRS) is a set of passion-able accounting standards stating how particular types of transactions and other events should be reported in financial statements. IFRS are issued by the International Accounting Standards Board (IASB). With IFRS becoming more widespread on the international scene, consistency in financial reporting has become more prevalent between global organizations.

While financial accounting is used to prepare accounting information for people outside the organization or not involved in the day-to-day running of the company, managerial accounting provides accounting information to help managers make decisions to manage the business.

What is ‘Financial Accounting’

Financial accounting is the process of recording, summarizing and reporting the myriad of transactions resulting from business operations over a period of time. These transactions are summarized in the preparation of financial statements, including the balance sheet, income statement and cash flow statement, that encapsulate the company’s operating performance over a specified period.

BREAKING DOWN ‘Financial Accounting’

Financial accounting utilizes a series of established accounting principles. The selection of accounting principles to use during the course of financial accounting depends on the regulatory and reporting requirements the business faces. For public companies in the United States, businesses are required to perform financial accounting in accordance with Generally Accepted Accounting Principles (GAAP). International public companies also frequently report financial statements in accordance to International Financial Reporting Standards. The establishment of these accounting principles is to provide consistent information to investors, creditors, regulators and tax authorities.

Accrual Method Vs. Cash Method

Financial accounting may be performed using either the accrual method, cash method or a combination of the two. Accrual accounting entails recording transactions when the transactions have occurred and the revenue is recognizable. Cash accounting entails recording transactions only upon the exchange of cash. Revenue is only recorded upon the receipt of payment, and expenses are only recorded upon the payment of the obligation.

Financial Accounting Reporting

Financial reporting occurs through the use of financial statements. The financial statements present the five main classifications of financial data: revenues, expenses, assets, liabilities and equity. Revenues and expenses are accounted for and reported on the income statement. Financial accounting results in the determination of net income at the bottom of the income statement. Assets, liabilities and equity accounts are reported on the balance sheet. The balance sheet utilizes financial accounting to report ownership of the future economic benefits of the company.

Financial Accounting Vs. Managerial Accounting

The key difference between financial and managerial accounting is that financial accounting aims at providing information to parties outside the organization, whereas managerial accounting information is aimed at helping managers within the organization make decisions. Financial statement preparation using accounting principles is most relevant to regulatory organizations and financial institutions. Because there are numerous accounting rules that do not translate well into business operation management, different accounting rules and procedures are utilized by internal management for internal business analysis.

Students Of CBSE Class 11 Commerce Accountancy Part B Financial Accounting Important Notes

CBSE Class 11 Commerce Accountancy Part B Financial Accounting  : Financial accounting is the preparation of financial statements that can be consumed by the public and the relevant stakeholders using either Historical Cost Accounting (HCA) or Constant Purchasing Power Accounting (CPPA). When producing financial statements, they must comply to the following:

  • Relevance: Financial accounting which is decision-specific. It must be possible for accounting information to influence decisions. Unless this characteristic is present, there is no point in cluttering statements.
  • Materiality: information is material if its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements.
  • Reliability: accounting must be free from significant error or bias. It should be easily relied upon by managers. Often information that is highly relevant isn’t very reliable, and vice versa.
  • Understandability: accounting reports should be expressed as clearly as possible and should be understood by those to whom the information is relevant.
  • Comparability: financial reports from different periods should be comparable with one another in order to derive meaningful conclusions about the trends in an entity’s financial performance and position over time. Comparability can be ensured by applying the same accounting policies over time..

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