Class 11 Accountancy - Chapter Introduction to Accounting NCERT Solutions | Describe the informational needs of exte
Describe the informational needs of external users.
There are various external users of accounting who need accounting information for decision making, investment planning and to assess the financial position of the business. The various external users are given below.
1. Banks and other financial institutions− Banks provide finance in form of loans and advances to various businesses. Thus, they need information regarding liquidity, creditworthiness, solvency and profitability to advance loans.
2. Creditors− These are those individuals and organisations to whom a business owes money on account of credit purchases of goods and receiving services; hence, the creditors require information about credit worthiness of the business.
3. Investors and potential investors− They invest or plan to invest in the business. Hence, in order to assess the viability and prospectes of their investment, creditors need information about profitability and solvency of the business.
4. Tax authorities− They need information about sales, revenues, profit and taxable income in order to determine the levy various types of tax on the business.
5. Government− It needs information to determine national income, GDP, industrial growth, etc. The accounting information assist the government in the formulation of various policies measures and to address various economic problems like employment, poverty etc.
6. Researcher− Various research institutes like NGOs and other independent research institutions like CRISIL, stock exchanges, etc. undertake various research projects and the accounting information facilitates their research work.
7. Consumer− Every business tries to build up reputation in the eyes of consumers, which can be created by the supply of better quality products and post-sale services at reasonable and affordable prices. Business that has transparent financial records, assists the customers to know the correct cost of production and accordingly assess the degree of reasonability of the price charged by the business for its products and thus helps in repo building of the business.
8. Public− Public is keenly interested to know the proportion of the profit that the business spends on various public welfare schemes; for example, charitable hospitals, funding schools, etc. This information is also revealed by the profit and loss account and balance sheet of the business.
More Questions From Class 11 Accountancy - Chapter Introduction to Accounting
- Q:-
Mr. Sunrise started a business for buying and selling of stationery with ₹ 5,00,000 as an initial investment. Of which he paid ₹ 1,00,000 for furniture, ₹ 2,00,000 for buying stationery items. He employed a sales person and clerk. At the end of the month he paid ₹ 5,000 as their salaries. Out of the stationery bought he sold some stationery for ₹ 1,50,000 for cash and some other stationery for ₹ 1,00,000 on credit basis to Mr. Ravi. Subsequently, he bought stationery items of ₹ 1,50,000 from Mr. Peace. In the first week of next month there was a fire accident and he lost ₹ 30,000 worth of stationery. A part of the machinery, which cost ₹ 40,000, was sold for ₹ 45,000.
From the above, answer the following :
1. What is the amount of capital with which Mr. Sunrise started business?
2. What are the fixed assets he bought?
3. What is the value of the goods purchased?
4. Who is the creditor and state the amount payable to him?
5. What are the expenses?
6. What is the gain he earned?
7. What is the loss he incurred?
8. Who is the debtor? What is the amount receivable from him?
9. What is the total amount of expenses and losses incurred?
10. Determine if the following are assets, liabilities, revenues, expenses or none of the these: sales, debtors, creditors, salary to manager, discount to debtors, drawings by the owner. - Q:- Explain the qualitative characteristics of accounting information.
- Q:- Describe the role of accounting in the modern world.
- Q:-
Complete the following sentences with appropriate words:
(a) Information in financial reports is based on .....................
(b) Internal users are the ..................... of the business entity.
(c) A ..................... would most likely use an entities financial report to determine whether or not the business entity is eligible for a loan.
(d) The Internet has assisted in decreasing the ..................... in issuing financial reports to users.
(e) ..................... users are groups outside the business entity, who uses the information to make decisions about the business entity.
(f) Information is said to be relevent if it is ......................
(g) The process of accounting starts with ............ and ends with ............
(h) Accounting measures the business transactions in terms of ............ units.
(i) Identified and measured economic events should be recording in ............ order. - Q:- What do you mean by an asset and what are different types of assets?
- Q:-
Define accounting and state its objectives.
- Q:-
Enumerate informational needs of management.
- Q:-
'Accounting information should be comparable'. Do you agree with this statement? Give two reasons.
- Q:-
Giving examples, explain each of the following accounting terms:
* Fixed assets * Revenue * Expenses
* Gain * Profit * Capital
* Short-term liabilities - Q:-
Distinguish between debtors and creditors.
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The primary qualities that make accounting information useful for decision-making are :
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Write the process of preparing ledger from a journal.
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Choose the Correct Answer :
The ledger folio column of journal is used to:
(a) Record the date on which amount posted to a ledger account.
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(d) Record the page number of the ledger account.
1 Comment(s) on this Question
Very good explanation
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