NIOS Class 10 Accountancy Chapter 1 Introduction to Accounting

NIOS Class 10 Accountancy Chapter 1 Introduction to Accounting Solutions to each chapter is provided in the list so that you can easily browse through different chapters NIOS Class 10 Accountancy Chapter 1 Introduction to Accounting and select need one. NIOS Class 10 Accountancy Chapter 1 Introduction to Accounting Question Answers Download PDF. NIOS Study Material of Class 10 Accountancy Notes Paper 224.

NIOS Class 10 Accountancy Chapter 1 Introduction to Accounting

Join Telegram channel

Follow us:

Also, you can read the NIOS book online in these sections Solutions by Expert Teachers as per National Institute of Open Schooling (NIOS) Book guidelines. These solutions are part of NIOS All Subject Solutions. Here we have given NIOS Class 10 Accountancy Chapter 1 Introduction to Accounting, NIOS Secondary Course Accountancy Solutions for All Chapters, You can practice these here.

Introduction to Accounting

Chapter: 1

Intext Questions 1.1

I. Find which of the statements are true and which are false: 

(i) Shifting of goods from one place to another within a shop is a business transaction. 

Ans: False.

(ii) Profit is the reward to the owner for his business activities. 

Ans: True.

(iii) Purchase of vegetables for use at home is not a business transaction. 

Ans: True.

(iv) Purchase of goods on credit for personal use from his friend is a personal transaction. 

Ans: True.

II. Classify the following into business and non-business transactions: 

(i) Rahim starts business with Cash – Rs.1,00,000/- 

Ans: Business.

(ii) He deposits money into the Bank – Rs.50,000/- 

Ans: Business.

(iii) He buys goods for Cash – Rs.10,000/- 

Ans: Business.

(iv) He takes out money from the shop and gives it to his wife for buying a saree – Rs.1,000/- 

Ans: Non – business.

(v) He attends a family function and gets a present worth – Rs. 3,000/- 

Ans: Non – business. 

(vi) He pays salary to his domestic servant – Rs.500/- out of his pocket.

Ans: Non – business.

Intext Questions 1.2

Which of the following statements are True and which are False? 

(i) Book-keeping is concerned with recording of business transactions in a systematic and significant manner. 

Ans: True.

(ii) Book-keeping and accounting are synonymous terms. 

Ans: False.

(iii) Book-keeping is a broader term than accounting. 

Ans: False.

(iv) Book-keeping helps in preparing the budget of the business.

Ans: False.

Intext Questions 1.3

I. Fill in the blanks: 

(i) Accounting is the language of the ____________. 

Ans: Business. 

(ii) Accounting records only transactions which are of a ______ character. 

Ans: Financial.

(iii) Accounting starts where ___________ ends

Ans: Book – keeping.

(iv) _____________ is influenced by personal judgments. 

Ans: Financial accounting. 

(v) _______ is concerned only with the recording of business transactions. 

Ans: Book – keeping.

II. 

(i) Which of the following is an advantage of accounting? 

(a) Personal judgements influence it. 

(b) Helps in keeping systematic records. 

(c) Acts as reliable evidence. 

(d) Shows permanent record of business.

Ans: (c) Acts as reliable evidence.

(ii) Which of the following is not an advantage of Accounting? 

(a) Replaces memory. 

(b) Facilitates a comparative study. 

(c) It permits alternative treatments. 

(d) Helps in knowing the value of business. 

Ans: (c) It permits alternative treatments. 

(iii) Which of the following is a limitation of Accounting? 

(a) Ascertaining value of business. 

(b) It is influenced by personal judgments. 

(c) It helps in ascertaining the right amount of taxes. 

(d) Facilitates a comparative study. 

Ans: (b) It is influenced by personal judgments.

(iv) Which is a correct statement related to book-keeping? 

(a) Book keeping is summarising and analysing business transactions, financial in nature. 

(b) Book keeping is posting transactions in the ledger. 

(c) Book keeping is recording business transactions in an orderly manner. 

(d) None of the above. 

Ans: (c) Book keeping is recording business transactions in an orderly manner.

(v) To ascertain the operational profit or loss is: 

(a) An objective of Accounting. 

(b) An advantage of Accounting. 

(c) A limitation of Accounting. 

(d) Need of Accounting. 

Ans: (a) An objective of Accounting. 

(vi) Book-Keeping is recording: 

(a) All events affecting a business. 

(b) All business transactions. 

(c) Only business transactions with outsiders. 

(d) Only internal business transactions. 

Ans: (b) All business transactions. 

(vii) Which of the following is not a business transaction? 

(a) Purchase of goods for business. 

(b) Sale of goods. 

(c) Payment of sales tax. 

(d) Payment of house tax belonging to the owner.

Ans: (d) Payment of house tax belonging to the owner.

(viii) Which of the following is not an advantage of accounting? 

(a) Facilitates performance comparisons. 

(b) Acts as reliable evidence. 

(c) Influenced by personal judgement. 

(d) Replaces memory.

Ans: (c) Influenced by personal judgement.

1. What is meant by book-keeping? State the need for books – keeping.

Ans: Book-keeping involves the systematic recording of the financial transactions and the maintenance of the correct & up-to-date financial records of the organisation. Accounting is primarily concerned with designing the systems for recording, classifying and summarising the data and interpreting them for internal and external end users. Accountants often direct and review the work of the book-keepers.

The need of book-keeping can be understood with the help of the following points:

(i) Helps in Assessing the Financial Position: Recording the business transactions would be helpful to a businessman for monitoring the financial success or failure of his business. Understanding the existing scenario of financial status of business is of much importance to the business to achieve the objectives and avoid the unexpected losses. 

(ii) Helps in making business decisions: Keeping a record would help to make future business decisions. Business decisions have to be taken by considering the financial consequences that happened earlier and the same can be done only if we maintain the accounting books properly. 

(iii) For Record for Income tax Purposes: Maintaining books of accounts would help businessmen to file the income tax returns accurately. Every business entity has to file income tax returns and pay income tax.

(iv) Preparing Budgets: Keeping the older transactions would help you to plan the budget for the forthcoming year. Preparing a budget would keep you on the safer side and help you to avoid the unwanted expenditure.

(v) Tax Assessment: Keeping good records would help you to prepare payroll, tax returns and sales tax without any delay. If you are doing a partnership business, you can avoid unwanted issues in profit distribution by recording your business transactions accurately.

2. Define accounting. What are its objectives?

Ans: Accounting is the process of recording financial transactions pertaining to a business. The accounting process includes summarising, analysing, and reporting these transactions to oversight agencies, regulators, and tax collection entities. The function of accounting is to provide quantitative information, primarily of financial nature, about economic entities, that is needed to be useful in making economic decisions.

The following are the main objectives of accounting: 

(i) To keep systematic records: Accounting is done to keep a systematic record of financial transactions, like purchase of goods, sale of goods, cash receipts and cash payments. 

(ii) To ascertain the operational profit or loss: Accounting helps in determining the net profit earned or loss suffered on account of running the business. This is done by keeping a proper record of revenues and expenses of a particular period. 

(iii) To ascertain the financial position of the business: The businessman is not only interested in knowing the operating result, but also interested in knowing the financial position of his business i.e., where it stands. In other words, he wants to know what the business owes to others and what others owe to business. 

(iv) To facilitate rational decision making: Apart from the owners, there are various other parties who are interested in knowing about the position of business, such as tax authorities, the management, the bank, the creditors, etc. The required information is furnished to all these parties through the accounting system.

3. How is accounting information useful to Government and Investors? 

Ans: The Government is interested in the financial statements of business enterprises on account of taxation, labour and corporate law. The reason is that the Government activities and welfare schemes are financed through collection of different types of taxes. So they would like to know whether the business is paying appropriate taxes well in time or not.Information about Revenues − One of the most important functions of the Government accounting is to maintain the transactions of generation and collection of revenues during the financial year.

Knowledge of accounting helps investors determine an assets’ value, understand a company’s financing sources, calculate profitability, and estimate risks embedded in a company’s balance sheet. A person who wants to invest in business will like to know about its profitability and financial position. Basically, investors are interested in the amount of dividends they are likely to get from the business. Hence, they would like to know the profitability of the enterprise which they can get from the income statements of the enterprise for a number of years.

4. Distinguish between accounting and book- keeping.

Ans: 

5. Explain the advantages and limitations of accounting.

Ans: Advantages of Accounting are discussed below:  

(i) Replaces memory: Since all the financial events are recorded in the books. The books of accounts will serve as historical records. Any information required at any time can be easily collected from these records. 

(ii) Meets the information requirements: Various interested parties such as owners, lenders, creditors, etc., get the necessary information at frequent intervals which help them in their decision making.

(iii) Assists the management in many other ways: The accounting information provided to the management helps them in taking rational decisions in planning and controlling all business activities. 

(iv) Facilitates a comparative study: With the help of accounting information one can compare the present performance of the enterprise with its past performance and also with that of similar organisations. 

(v) Acts as reliable evidence: Systematic record of business transactions is generally treated by courts as good evidence in case of disputes. 

(vi) Tax matters: The Government levies various taxes such as custom duty, excise duty, sales tax, and income tax. Properly maintained accounting records will help in the settlement of all tax matters with the tax authorities. 

(vii) Ascertaining value of business: In the event of sale of a business firm, the accounting records will help in ascertaining the correct value of business.

Limitations of Accounting are listed below: 

(i) Financial accounting permits alternative treatment: Accounting is based on concepts and it follows “Generally Accepted Principles” but there exists more than one principle for the treatment of any one item. This permits alternative treatments within the framework of Generally Accepted Principles.

(ii) Financial accounting is influenced by personal judgments: Accounting is influenced by personal judgments as one accountant may consider the life of a particular asset say 5 years whereas another accountant may consider the life of that asset say 6 years and the method of charging the depreciation on asset by both the accountants may also be different. 

(iii) Financial accounting ignores non-monetary information: Financial accounting does not consider the transactions of non-monetary nature. For example, the extent of competition faced by the business, technical innovations possessed by the business, loyalty and efficiency of the employees etc.

(iv) Financial accounting does not provide timely information: Financial accounting is designed to supply information in the form of statements for a period normally one year.

6. What is a business transaction? Give five examples of business transactions.

Ans: An exchange of goods, services, or any other activity for money or money’s equivalent. It involves exchange of money also.” In simple words, it includes all events and activities of business which are financial in nature.

The five examples of business transactions are: 

(i) Abhishek starts a small shop with cash `1,00,000/-. In exchange, the owner (Abhishek) gets an ownership right against the business.

(ii) Abhishek withdraws goods costing Rs. 5,000/- from the shop for his own use. It is a business transaction. 

(iii) A retail store sells a laptop computer to a customer for Rs.1,000. This transaction involves the exchange of goods (the laptop) for money (Rs.1,000).

(iv) A small business pays Rs.2,000 in rent for office space. 

(v) A grocery store purchases Rs.5,000 worth of fresh produce from a supplier. 

7. Explain the different branches of Accounting.

Ans: Branches of Accounting: There are three branches of accounting: 

(i) Financial Accounting: Financial Accounting is concerned with recording financial transactions, summarising and interpreting them and communicating the results to users. It shows the profit or loss of a particular period & the position of the business on a particular date. 

(ii) Cost Accounting: It helps in finding out the cost of production of a product manufactured or services rendered and helps the management in decision making. 

(iii) Management Accounting: Management Accounting is concerned with generating accounting information relating to funds, costs, profits etc. as it enables the management in decision making.

8. Explain how accounting is useful to employees.

Ans: Accounting helps employers to keep track of their financial performance, which enables them to make informed decisions. The employees are interested in the financial statements on account of various profit sharing and bonus schemes. Their interest may further increase in case they purchase shares of the companies in which they are employed. They are interested in more wages or salary, bonus, overtime payments, medical facilities and their demands for these matters are based on profitability as provided by income statements.