BBA203 - DRIVE FALL 2015 PROGRAM BBA SEMESTER 2 SUBJECT...

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DRIVE: FALL 2015 PROGRAM: BBA SEMESTER: 2 SUBJECT CODE &NAME: BBA 202, FINANCIAL ACCOUNTING Question 1) Accountancy refers to a systematic knowledge of accounting. It explains ‘why to do’ and ‘how to do’ of various aspects of accounting. Explain the objectives of accounting and explain the categories of users. Answer: Objectives of Accounting: The basic objective of accounting is to provide full, accurate and meaningful financial information about the financial activities of a business to all those who have a right and a need to have such information. The main objectives of accounting include: Systematic recording of all business events or transactions and subsequent posting to ledger, to finally prepare financial statements - profit and loss account and balance sheet. Reporting the results to management, shareholders, creditors, bankers, investors, stock brokers, stock exchanges, employees, government etc. Satisfying the statutory requirements, especially Registrar of Companies (ROC), Securities Exchange Board of India (SEBI), tax authorities (sales tax, excise, customs and income tax) and government in order to protect the interest of general public. Protecting the properties of business by recording them on the date of acquisition and showing their accounts in the balance sheet. Planning, controlling and decision making functions become easy where books of accounts are maintained properly. This helps in internal control by holding concerned persons responsible for any errors, lapses or under performance. Accounting is a tool for effective planning. Current year’s financial performance becomes the basis for future predictions and estimations. Since it is a tool for planning, it also acts as a tool for controlling. Preparation of budgets, cost analysis, tax planning, auditing are some of the functions of accounting. Categories of Users: Different categories of users need different kinds of information for making decisions. These users can be divided into: 1. Internal Users 2. External Users. Internal Users: These are the persons who manage the business, i.e. management at the top, middle, and lower levels. Their requirements of information are different because they make different types of decisions. The top level is more concerned with planning, the middle level is concerned equally with planning and control and the lower level is concerned more with controlling operations. Information is supplied on different aspects, e.g. cash resources, sales estimates, results of operations, financial position, etc.
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External Users: All persons other than internal users come in the group of external users. External users can be divided into two groups: a. Those having direct interest b. Those having indirect interest in a business organization.
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