Genral questions

1. CHHATRAPATI SHAHU JI MAHARAJ
UNIVERSITY
NAME – ADITYA TIWARI
CLASS – MBA 1ST YEAR
SUBJECT - FINANCIAL AND
MANAGEMENT ACCOUNTING
ROLL NO. 10
SECTION –A
COURSE CODE- F010702

2. FINANCIAL & MANAGEMENT
ACCOUNTING
NAME-ADITYA TIWARI
COURSE- MBA 1ST YEAR
COLLEGE- SCHOOL OF BUSINESS MANAGEMENT

3. Explain the Purpose, Importance,
Scope And Limitations Of Accounting
Importance of Accounting
 Accounting is important as it keeps a systematic record of the
organization’s financial information
 Up-to-date records help users compare current financial information to
historical data.
 Accounting is especially important for internal users of the organization
 Users may include the people that plan, organize, and run the organization

4.  The management team needs accounting in making important
decisions.Business decisions may range from deciding to pursue
geographical expansion to improving operational efficiency.
 Accounting helps to communicate company results to various users.
PURPOSE OF ACCOUNTING
 The purpose of accounting is to accumulate and report on financial
information about the performance, financial position, and cash flows of a
business. This information is then used to reach decisions about how to
manage the business, or invest in it, or lend money to it. This information is
accumulated in accounting records with accounting transactions, which are
recorded either through such standardized business transactions as
customer invoicing or supplier invoices, or through more specialized
transactions, known as journal entries.

5. SCOPE OF ACCOUNTING
 Its target is to analyse the financial transactions as they take place, to
record them in orderly fashion, to group and arrange the information in
terms of useful and understandable financial report (Balance Sheet,
Income Statement) and to assist in the process of interpretation.
 Identifying
 Measuring
 Recording
 summarising
 Classifying
 Analysing

6. LIMITATIONS OF ACCOUNTING
 Measurability. One of the biggest limitations of accounting is that it cannot
measure things/events that do not have a monetary value. ...
 No Future Assesment. ...
 Historical Costs. ...
 Accounting Policies. ...
 Estimates. ...
 Verifiability. ...
 Errors and Frauds.

7. Explain need and significance of
international financial reporting
standards ?
 IFRS or International Financial Reporting Standards refers to a globally-
accepted set of accounting and financial reporting guidelines for preparing
and presenting financial statements
 It encourages transparency and accountability of financial statements
prepared by companies, small firms, and government agencies.
 The International Financial Reporting Standards are developed to set
uniformity in the presentation and understandability of statements.

8. Explain GAAP generally accepted
accounting principles –concept
information?
 Generally accepted accounting principles, or GAAP, are standards that encompass the details,
complexities, and legalities of business and corporate accounting. The Financial Accounting
Standards Board (FASB) uses GAAP as the foundation for its comprehensive set of approved
accounting methods and practices.
 The four basic constraints associated with GAAP include objectivity, materiality, consistency and
prudence
 GAAP is used primarily by businesses reporting their financial results in the United States.
International Financial Reporting Standards, or IFRS, is the accounting framework used in most
other countrie

10.  They hoped the stock market would create a financial boon. Instead, the
market crashed in 1929, and panic set in. Banks collapsed and people lost
everything. While there were many causes of the 1929 stock market crash
and the Great Depression, there was no question that poor accounting was
the common thread.
 In response to those crippling events, financial regulators came up with
GAAP standards in the early 1930s.

11.  Preparing a trading account is the first stage in of final accounts of a trading concern. It
determines the gross profit or gross loss of the concern for that accounting year. For
determining the true result or the net result of the business, preparing the Trading and
Profit and Loss account is necessary. We prepare these accounts on the last day of the
accounting year. We consider only direct revenue and direct expenses in this account.
 For preparing a Trading and Profit and Loss Account we need complete information
regarding expenses, incomes, assets and liabilities of the concern. In incomplete
records, some details are given and some are missing. Thus, we need to ascertain the
missing details in an indirect manner by using the logic of double-entry.
Prepare format of profit and
balancing account?

12.  In order to calculate the gross profit, it is necessary to know the cost of goods which are sold
and its sales figures.

 Gross Profit = Sales – COGS (Sales + Closing Stock) – (Stock in the beginning + Purchases +
Direct Expenses)

 Items that are included on the debit side and on the credit side give the resultant figure which
is either gross profit or the gross loss.

 Trading and Profit and Loss Account
 A trading account is one that holds both stocks and cash. The main account of a trader is
referred to as a trading account. Because investors’ accounts are subject to particular
regulation because they often purchase and sell assets, their accounts are subject to special
regulation. A trading account’s assets are segregated from those held in a long-term buy-and-
hold strategy.

13. Prepare Accounting cycle
 The accounting cycle is the process of accepting, recording, sorting, and crediting
payments made and received within a business during a particular accounting period.
 Companies generally balance their books each quarter and then again at year-end,
though others may prefer to settle the books every day or every week – that’s a lot of
work, but it can be done if you choose to.
 Based on the transactions recorded as part of the accounting cycle, financial statements
such as cash flow reports, profit and loss statements, and balance sheets can be prepared.
 Once all the business accounts have been balanced, they are closed out for that period
and new ones created for the next accounting period.

14.  The eight steps of the accounting cycle include the following:
 Step 1: Identify Transactions. ...
 Step 2: Record Transactions in a Journal. ...
 Step 3: Posting. ...
 Step 4: Unadjusted Trial Balance. ...
 Step 5: Worksheet. ...
 Step 6: Adjusting Journal Entries. ...
 Step 7: Financial Statements. ...
 Step 8: Closing the Books.