Introduction to Accounting — Important Questions

Cost Accounting

Step 1: Recall the three main branches of accounting. Step 2: Cost Accounting is specifically the process of accounting and controlling the cost of a product or operation. Its main purpose is cost ascertainment and cost control. Step 3: Financial Accounting is concerned with recording transactions and preparing financial statements like Profit & Loss Account and Balance Sheet. Step 4: Management Accounting uses information from financial and cost accounting to help management in planning, controlling, and decision-making. Step 5: Social Accounting is not a listed branch here. Hence, Cost Accou

Internal users

Step 1: Users of accounting information are classified into two groups — Internal Users and External Users. Step 2: Internal users are those who manage and own the business. They include Proprietors/Owners, Management, and Employees. Step 3: Shareholders and owners are the people who have invested capital in the business and are directly involved in it — they are Internal Users. Step 4: External users are outside the business — like creditors, banks, government, and investors who are not owners. Step 5: Government users and Creditor users are categories within External Users, not Internal User

A dedicated and hardworking team of employees

Step 1: Understand a key characteristic of accounting — only financial transactions (those that can be expressed in monetary terms) are recorded. Step 2: Purchase of machinery (₹50,000), sale of goods (₹5,000), and payment of salary (₹10,000) are all financial transactions with a clear monetary value — they WILL be recorded. Step 3: Having a dedicated team of employees is a qualitative fact. It cannot be expressed in terms of money. Step 4: Since accounting records only those events that have a monetary value, the quality of employees is NOT recorded in the books of accounts. This is also one

Ledger

Step 1: Recall the steps in the accounting process. Step 2: The first step is Recording — transactions are first recorded in the Journal (or subsidiary books like Cash Book, Purchases Book, etc.) in chronological (date-wise) order. Step 3: The second step is Classification — after recording, transactions are classified (grouped by nature) into separate accounts. This work is done in the Ledger. Step 4: Trial Balance is prepared after the Ledger is balanced — it is used for Summarising, not Classification. Step 5: Therefore, the Ledger is the correct answer for classification.