A shopkeeper takes money, pays money, buys stock and sells it all day long. By evening there is one question: how did today go? Accounting is what keeps the answer on paper.
1. What accounting is
Accounting is a process. Through it, the financial activities of a person or an institution can be written down correctly in the books of accounts, and after a certain period the results of those activities can be found out.
The book gives six examples of financial activities: expenses paid, income received, purchase and sale of assets, buying and selling of goods, receiving from accounts receivable, and paying to accounts payable. Tap the six chips and check them off.
spot themthe book's six examples
Which are financial activities?
Paying an expense. A financial activity, and the first example in the book.
Receiving income. A financial activity. Money has come in, so it goes in the books.
Sale of an asset. A financial activity. Buying and selling assets are both the book's examples.
Buying goods. A financial activity. Buying and selling goods are both the book's examples.
Receiving from accounts receivable. A financial activity, the book's own example.
Paying accounts payable. A financial activity, the book's own example.
All six are financial activities, because all six are the book's examples.
2. What accounting does
Accounting discusses the methods of recording, classifying and summarizing the financial transactions of a person or a business.
Record, classify and analyse the financial events properly in the proper books, and the overall result and the financial position of the person or institution can be ascertained.
It also shows how the financial position of a business has changed. This information helps in taking the business's different decisions.
Take one shop's six transactions for a day and do the work yourself. Try pressing the steps out of order, too.
a day at the shoppress the steps
From loose slips to a statement
The amounts are made up, only to show the steps. The six kinds of transaction are the book's.
The knowledge of accounting is used to prepare different statements and reports, and through them the financial position of a firm is known. Now put the work in order.
which firsttap in order
Order of work
What happens to a transaction first? Start there.
Right. What comes after that?
Not yet. The earlier step comes first.
Right order. Nothing can be sorted before it is written down. After writing, like transactions are grouped. No summary exists without grouped data. Statements follow the summary.
3. Why “the language of business”
It is in the statements and reports that a firm's financial position shows itself. That is why accounting is called “the language of business”.
Without a proper technique and its application, the overall result and impact of economic events are hard to know. Accounting uses various tools, methods and techniques to work them out, and it is accounting that discusses these methods.
cut from the notetap to turn over
Language of business
QuestionWhy is accounting called the language of business?
AnswerBecause its statements and reports show the financial position of a firm.
QuestionWithout which two things is it hard to know the overall result and impact of economic events?
AnswerA proper technique and its application.
4. Who wants to know
Events about money happen in a person's life, in an institution, in every sphere of society. Their number is huge and their kinds are many.
By recording and reviewing financial transactions, accounting works out their impact and results. It then reports them to the various parties.
Various parties, both inside and outside the organization, are always keen to know the accounting information.
5. Check yourself
Three questions in the exam's style.
check yourselfpick one answer
Question 1
According to the book, what kind of thing is accounting?
Accounting is not a product; it is a process of recording financial activities and learning their results.
Right. The book calls accounting a process through which financial activities are recorded and their results known.
It is not an object; it is a flow of work, a process, not something you can hold.
A transaction is what accounting records; accounting itself is the process, not a transaction.
Think a little harder about the second.
check yourselfpick one answer
Question 2
According to the book's description, what does the discipline of accounting discuss?
i. Methods of determining the overall impact of financial events ii. Methods of determining financial results iii. Techniques of determining the impact and results
i and ii leave out iii; techniques of determining the impact and results are also discussed.
i and iii leave out ii; methods of determining results are also discussed.
ii and iii leave out i; methods of determining the overall impact are also discussed.
Right. All three are in the book's description: methods of determining impact, methods of determining results and techniques for both.
Check the last one too.
check yourselfpick one answer
Question 3
What are the various internal and external parties of an organization always keen to know?
Family information is not the book's matter.
Right. The book says various internal and external parties are always keen to know accounting information.
Solvency is a result of keeping accounts; the subject of interest is accounting information.
Financing is not mentioned here. The book's answer: Accounting information.
The whole note on a few cards.
cut from the notetap to turn over
Six cards
QuestionWhat kind of thing is accounting, through which financial activities are recorded in the books?
AnswerA process
QuestionWhat can be known through accounting after a certain period?
AnswerThe results of financial activities
QuestionBesides recording and classifying, which other step does the book name for financial transactions?
AnswerSummarizing
QuestionAfter recording, classifying and analysing transactions, which two things can be ascertained?
AnswerThe overall result and the financial position
QuestionWhy is accounting called the 'language of business'?
AnswerBecause its statements and reports reveal the firm's financial position
QuestionWithout which two things is it hard to know the overall result and impact of economic events?
AnswerA proper method and technique
Source: Accounting, Classes 9-10 (NCTB), Chapter 1 “Introduction to Accounting”, the “Concept of Accounting” part.