Page 11 - debkxi

CHAPTER Introduction to Accounting
CHAPTER

1 (Meaning and Objectives of Accounting and Accounting Information)

MEANING OF KEY TERMS USED IN THE CHAPTER

1. Accounting Accounting is a systematic process of identifying, measuring, collecting,
recording, classifying, summarising, analysing, interpreting and
communicating financial information to the users.

2. Book Keeping Book Keeping is the process of recording financial transactions in a
systematic manner and classifying them into ledgers. Book Keeping, thus,
involves:
(i) Identifying financial transactions and events,
(ii) Measuring them in terms of money,
(iii) Recording the identified financial transactions and events in the books
of account, and
(iv) Classifying, i.e., posting them into ledger accounts.

3. Accountancy Accountancy is a systematic knowledge of accounting, i.e., it educates how
to maintain the books of account.

4. Trading and Profit Trading and Profit & Loss Account (Statement of Profit & Loss, in
& Loss Account case of companies) (Income Statement) shows the profit earned or
(Income Statement) loss incurred by the enterprise during the accounting year.

5. Balance Sheet Balance Sheet or Position Statement is the statement which shows
(Position Statement) the financial position of the enterprise on a particular date.

6. Accounting Accounting Information is used for forecasting, comparing and
Information evaluating financial performance and position. It also helps in taking
economic decisions.

7. Double Entry System Double Entry System of Accounting means a system of accounting
of Accounting whereby both, debit and credit, aspects of a transaction are recorded.
8. Accounts from Accounts from Incomplete Records or Single Entry System of
Incomplete Records Accounting is a system under which both aspects of the transactions
(Single Entry System are not recorded in all the cases. In some cases both aspects are
of Accounting) recorded, while in others either one aspect is recorded or a transaction is
not recorded at all.