Introduction to Accounting

financial information. These limitations of accounting must be kept in view while making use of the accounting information. Test Your Understanding - IV Tick the Correct Answer . Which of the following is not a business transaction?

a. Bought furniture of Rs. , for business b. Paid for salaries of employees Rs.

, c. Paid sons fees from her personal bank account Rs. , d. Paid sons fees from the business Rs.

, Deepti wants to buy a building for her business today. Which of the following is the relevant data for his decision? a. Similar business acquired the required building in for Rs.

, , b. Building cost details of c. Building cost details of d. Similar building cost in August, Rs.

, , . Which is the last step of accounting as a process of information? a. Recording of data in the books of accounts b .

Preparation of summaries in the form of financial statements c. Communication of information d. Analysis and interpretation of information . Which qualitative characteristics of accounting information is reflected when accounting information is clearly presented?

a. Understandability b. Relevance c. Comparability d.

Reliability . Use of common unit of measurement and common format of reporting promotes; a. Comparability b. Understandability c.

Relevance d. Reliability Box Different Roles of Accounting ü As a language – it is perceived as the language of business which is used to communicate information on enterprises; ü As a historical record- it is viewed as chronological record of financial transactions of an organisation at actual amounts involved; ü As current economic reality- it is viewed as the means of determining the true income of an entity namely the change of wealth over time; ü As an information system – it is viewed as a process that links an information source (the accountant) to a set of receivers (external users) by means of a channel of communication; ü As a commodity- specialised information is viewed as a service which is in demand in society, with accountants being willing to and capable of providing it.