Maharashtra Board Class 11 Book Keeping and Accountancy Chapter 1 Introduction to Book keeping and Accountancy PDF Download

Introduction To Book-keeping And Accountancy

Contents

1.1 Meaning, Definition and Objectives

1.2 Importance of Book-keeping

1.3 Difference between Book-keeping and Accountancy

1.4 Meaning and Definition of Accountancy

1.5 Basis of Accounting System

1.6 Qualitative characteristics of accounting information

1.7 Basic Accounting Terminologies

1.8 Accounting Concepts, Conventions and Principles

1.9 Accounting Standards (AS) and IFRS

Competency Statements

Students understand the meaning, features and the importance of accounting.

Students understand basic accounting concepts and terminologies.

Students can analyse the role and benefits of Book-Keeping.

Students will be able to know the latest accounting standards.

Introduction

Book-keeping is related with recording of business transactions. Business enterprise and other organizations deal in activities which involve exchange of money or money's worth. All these activities are recorded for the purpose of taking important decisions as to whether the activities are feasible, profitable and are to be continued or not. Information about the business and other organizations is required not only by the proprietors and managers of business and other organisations but also to various other stakeholders such as the government, investors, customers, employees and researchers.

Evolution of Accounting

In India, during Chandragupta Maurya's regime, Minister Kautilya wrote a book named 'Arthashastra', where in some references can be traced regarding the way of maintaining accounting records. Afterwards it was called as "Deshi Nama".

In the earlier time of civilisation, accounting was done by agents who managed the properties of wealthy people. They prepared accounts periodically for the owners of property. The records of debit and credit were found in the 12th century itself.

In the year 1494, Luca De Bargo Pacioli, an Italian merchant introduced Double-Entry Book-keeping system. Due to the industrial revolution in the 18th and 19th centuries, large scale operations were carried on and Joint Stock Companies emerged as an important form of organisation which involved separation of ownership from management. Hence, to safeguard the interest of owners and investors, the business establishments required detailed information about business which paved the way for development of comprehensive financial accounting information system.

In the 20th century, the need for analysis of financial information for managerial decision making caused emergence of Management Accounting as a separate branch of Accounting.

Though accounting was individual centric in the initial stage of evolution of accounting, it has gradually developed into Social Responsibility Accounting in the 21st century. This is due to the vast growth in business activities as a result of development in various fields. Thus, accounting has become inevitable in the modern world for business.

1.1 Meaning and Definition

In simple words, the 'Book-keeping' means recording of the business transactions in the books of accounts in a systematic way. All the monetary transactions are recorded datewise for accurate business results from such records at the end of accounting year.

Book-keeping is an art or science of systematic recording, classifying and summarising the financial transactions of business for a particular period, generally one year.

Definition of Book-Keeping

Richard E. Strahelm : "The art of analyzing and recording business transactions, reporting results of business operations through periodic statements and interpreting such results for purposes of effective control of future operations."

J. R. Batliboi : "Book-keeping is an art of recording business dealings in a set of books."

North Cott : "Book-keeping is an art of recording in the books of accounts the monetary aspects of commercial or financial transactions"

R.N. Carter : "Book-keeping is the science and art of correctly recording in the books of accounts, all those business transactions that results in transfer or money or money's worth."

Features of Book-keeping

It is the method of recording day to day business transactions.

Only financial transactions are recorded.

All records are prepared for a specific period which are useful for future references.

Records of transactions are based on rules and regulations.

It is an art of recording business transactions scientifically.

Objectives of Book-keeping

The main objective of book-keeping is to keep a complete and accurate record of all the financial transactions in a systematic, orderly and logical manner.

All the business transactions are to be recorded date wise and account wise.

Book-keeping serves as a permanent record of the monetary transactions of an enterprise business and it can be produced as an evidence, whenever and wherever required.

To know the profit or loss of the business during the financial year.

To know the total assets and liabilities of the enterprise.

To know what the businessman owes to others and what others owe to him.

Businessman comes to know the current year's progress over previous year and compares its financial results with other business enterprise in similar line.

1.2 Importance of Book-keeping

The importance of Book-keeping is as follows:

1) Record : It is not possible for anyone to remember all transactions. But Book-keeping maintains records of all the transactions permanently and systematically in the books of accounts.

2) Financial Information : Book-keeping is useful to get information related to Profit, Loss, Assets, Liabilities, Investments and Stock, etc. at any given time.

3) Decision Making : Book-keeping provides financial information to the businessman for decision making.

4) Controlling : Book-keeping enables the executives of the business to control the activities of the business.

5) Evidence : Businessman needs financial evidence to be produced in the Court of law in case of any disputes.

6) Tax Liability : Book-keeping is useful to find out the tax liabilities e.g. Income Tax, Property Tax, GST, etc.

Utility of Book-keeping

1) Owner : The businessman can find out Profit, Losses, Assets and Liabilities of an enterprise at any time.

2) Management : Management of an enterprise can plan, take decisions and control overall business activities.

3) Investors : Investors can take proper decisions whether to invest or not.

4) Customer : Customer can easily understand financial position of the business. He can be assured about supply of goods.

5) Government : Government can easily find out different types of taxes due from various sources.

6) Lenders : Money Lenders can find financial standing of the enterprise for decision to lend money or not.

7) Development : Business enterprise can achieve the business growth with the help of accounting.

Teacher's Note

Book-keeping helps a shopkeeper track his daily sales and expenses. Just like your parents keep bills for all home expenses, businesses keep records of all money they spend and receive.

Exam Trick

Remember: Book-keeping = Recording. Think of it like your school attendance register where daily attendance is recorded every day in order.

Points to Remember

Book-keeping is the recording of business transactions in a systematic way.

Only financial transactions are recorded in books of accounts.

It gives a permanent record that can be used as evidence in court.

Book-keeping helps owners know profit, loss, assets and liabilities.

Many people use book-keeping information like owners, managers, investors, government and banks.

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