Meaning And Scope Of Accounting Short Question Answer Notes

Q.7. How accounting is different from bookkeeping?

Or Differentiate between bookkeeping and accounting.

Ans. Bookkeeping is the part of accountancy. Accounting is concerned with the initial records, ledger accounts, trial balance and also with the preparation of financial statements to ascertain profit and loss of the business.

Bookkeeping is the art of preparing original or initial books of accounts, whereas accounting is concerned with recording, reporting and interpreting the result of the business. In this way bookkeeping is an essential part of accounting. Both bookkeeping and accounting are complementary and supplementary to each other, but even then they are different in the following respects:

Difference between Bookkeeping and Accounting

S.No.	Basis of difference	Bookkeeping	Accounting
	Object	The object of bookkeeping is to prepare original book of accounts. It is restricted to journal, subsidiary book and ledger account only.	The object of accounting is to record, analyse and interpret the business transaction.
	Scope	It has limited scope and is concerned with the recording of business transaction.	It has wider scope as compared to bookkeeping.
	Level of works	It is restricted to low level of work, clerical work is involved in it.	It is concerned with low level, medium level and top level management. Low level clerks prepare the accounts, medium level report it to top level to interpret it.
	Mutual dependence	Bookkeeping is an art of recording transaction, so it has to depend upon accounting which makes it more meaningful and purposeful.	Accounting is based upon bookkeeping which is its initial and vital part. It depends upon the bookkeeping.
	Result of business	It does not show the net result of business.	Accounting shows the net result of the business. It tells us about the profit and loss of the business.
	Special skills	It does not require any special know-ledge and skills.	It requires special knowledge and skills.

Q.8. Describe the scope of accounting.

Or State the functions of accounting.

Ans. Following are the main functions or scope of accounting:

1. To Keep Systematic Record of the Financial Activities: The first important function of accounting is to make a systematic record of the financial activities of the business. In accounting, business transactions are properly recorded, classified and summarised into financial statements like the profit and loss account and the balance sheet.

2. To Secure the Properties of the Business: The second important function of accounting is to protect the properties of the business by maintaining proper records of various properties of the business and providing updated information of the various properties of the business to the management. Accounting enables the management to exercise proper control over the use of the properties of the business.

3. To Analyse the Financial Result: Just as a language is used as a means to communicate, so accounting communicates the financial result (i.e. profit and loss) and other valuable financial information to the various interested groups like the officer and the staff of firm, the owner, the creditor, the employees of the firm, the government, the consumer, etc.

4. To Meet Legal Requirements: The provision of various laws like the Companies Act, 2013, the Income Tax Act 1961, the sales of goods Act 1930 and other statutory laws require a business concern to maintain necessary records and submit certain financial statements or reports. Accounting satisfies the needs of these laws through maintaining proper records.

5. To Prevent and Detect Errors and Frauds: Since, proper record is kept in a systematic manner, so if any error or fraud takes place, it is easily detected.

Q.9. What are the main systems of financial accounting?

Ans. System of Financial Accounting: Several systems of financial accounting are used to record the transactions of the business. Some of the main systems are described in the following paragraphs:

1. Cash System: When the transactions are purely cash in nature and the objective of the business is to serve the society not only to make the profit, then cash system of accounting is used. For example, in clubs, hospital, educational organisation, charitable organisations, library, etc.

2. Single Entry System: In single entry system, some transactions are recorded one sided, some on double sided and some transactions are left. This system is not a perfect system. So, it is also called as imperfect system.

3. Double Entry System: In this system, all the transactions are recorded with double sided effect. This is the best system of accounting out of the various systems.

4. Indian System of Accounting: Under Indian system of accounting, various. accounts are maintained in local language. This system is also based on double entry system.

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