SOLUTIONS MANUAL FOR INTRODUCTION TO
FINANCIAL ACCOUNTING BY DR. CHANDRA
SHEKHA (AUTHOR) FULL TESTBANK|| LATEST AND
COMPLETE UPDATE 2025 GRADED A+
,1|Page
SOLUTIONS MANUAL FOR INTRODUCTION TO
FINANCIAL ACCOUNTING BY DR. CHANDRA
SHEKHA (AUTHOR) FULL TESTBANK|| LATEST AND
COMPLETE UPDATE 2025 GRADED A+
Subject: Financial Accounting-I
Course Code: BBA-104
Lesson: 1
Author: Dr. Chandra Shekhar
INTRODUCTION TO ACCOUNTING
STRUCTURE
1.0 Objectives
1.1 Introduction
1.2 Development of accounting discipline
1.3 An accountant’s job profile: functions of accounting
1.4 Utility of accounting
1.5 Types of accounting
1.5.1 Financial accounting
1.5.2 Management accounting
1.5.3 Cost accounting
1.5.4 Distinction between financial and management accounting
1.6 Summary
1.7 Keywords
1.8 Self assessment questions
1.9 References/suggested readings
1.0 OBJECTIVES
,2|Page
After going through this lesson, you will be able to-
• Understand the meaning and nature of accounting.
• Differentiate between various types of accounting.
• Know development of accounting principle.
• Explain the importance of accounting.
1.1 INTRODUCTION
Accounting is a system meant for measuring business activities, processing of information into
reports and making the findings available to decision-makers. The documents, which
communicate these findings about the performance of an organisation in monetary terms, are
called financial statements.
Usually, accounting is understood as the Language of Business. However, a business may have a
lot of aspects which may not be of financial nature. As such, a better way to understand
accounting could be to call it The Language of Financial Decisions. The better the understanding
of the language, the better is the management of financial aspects of living. Many aspects of our
lives are based on accounting, personal financial planning, investments, income-tax, loans, etc.
We have different roles to perform in life-the role of a student, of a family head, of a manager, of
an investor, etc. The knowledge of accounting is an added advantage in performing different
roles. However, we shall limit our scope of discussion to a business organisation and the various
financial aspects of such an organisation.
When we focus our thoughts on a business organisation, many questions (is our business
profitable, should a new product line be introduced, are the sales sufficient, etc.) strike our mind.
To answer questions of such nature, we need to have information generated through the
accounting process. The people who take policy decisions and frame business plans use such
information.
All business organisations work in an ever-changing dynamic environment. Any new programme
of the organisation or of its competitor will affect the business. Accounting serves as an effective
tool for measuring the financial pulse rate of the company. It is a continuous
cycle of measurement of results and reporting of results to decision- makers.
Just like arithmetic is a procedural element of mathematics, book keeping is the procedural
element of accounting. Figure 1 shows how an accounting system operates in business and how
the flow of information occurs.
, 3|Page
FIG 1: THE ACCOUNTING SYSTEM
Source: Liorngren, Harrison and Robinson, Financial and
Management Accounting, Prentice Hall, New Jersey, 1994.
1.2 DEVELOPMENT OF ACCOUNTING DISCIPLINE
The history of accounting can be traced back to ancient times. According to some beliefs, the
very art of writing originated in order to record accounting information. Though this may seem
to be an exaggeration, but there is no denying the fact that accounting has a long history.
Accounting records can be traced back to the ancient civilizations of China, Babylonia, Greece
and Egypt. Accounting was used to keep records regarding the cost of labour and materials used
in building great structures like the Pyramids.
During 1400s, accounting grew further because the needs for information of merchants in the
Venis City of Italy increased. The first known description of double entry book keeping was first
published in
1994 by Lucas Pacioli. He was a mathematician and a friend of Leonardo Ileda Vinci.
The onset of the industrial revolution necessitated the development of more sophisticated
accounting system, rather than pricing the goods based on guesses about the costs. The increase
in competition and mass production of goods led to the rise of accounting as a formal branch of
study.
With the passage of time, the corporate world grew. In the nineteenth century, companies came
up in many areas of infrastructure like the railways, steel, communication, etc. It led to a rapid
growth in accounting. As the complexities of business grew, ownership and management of
business was divorced. As such, managers had to come up with well-defined, structured systems
of accounting to report the performance of the business to its owners.
Government also has had a lot to do with more accounting developments. The Income Tax
brought about the concept of ‘income’. Government takes a host of other decisions, relating to
education, health, economic planning, for which it needs accurate and reliable information. As
such, the government demands stringent accountability in the corporate sector, which forces the
accounting process to be as objective and formal as possible.
1.3 AN ACCOUNTANT’S JOB PROFILE: FUNCTIONS OF ACCOUNTING
A man who is involved in the process of book keeping and accounting is called an accountant.
With the coming up accounting as a specialised field of knowledge, an accountant has a special
place in the structure of an organisation, because he performs certain vital functions.
FINANCIAL ACCOUNTING BY DR. CHANDRA
SHEKHA (AUTHOR) FULL TESTBANK|| LATEST AND
COMPLETE UPDATE 2025 GRADED A+
,1|Page
SOLUTIONS MANUAL FOR INTRODUCTION TO
FINANCIAL ACCOUNTING BY DR. CHANDRA
SHEKHA (AUTHOR) FULL TESTBANK|| LATEST AND
COMPLETE UPDATE 2025 GRADED A+
Subject: Financial Accounting-I
Course Code: BBA-104
Lesson: 1
Author: Dr. Chandra Shekhar
INTRODUCTION TO ACCOUNTING
STRUCTURE
1.0 Objectives
1.1 Introduction
1.2 Development of accounting discipline
1.3 An accountant’s job profile: functions of accounting
1.4 Utility of accounting
1.5 Types of accounting
1.5.1 Financial accounting
1.5.2 Management accounting
1.5.3 Cost accounting
1.5.4 Distinction between financial and management accounting
1.6 Summary
1.7 Keywords
1.8 Self assessment questions
1.9 References/suggested readings
1.0 OBJECTIVES
,2|Page
After going through this lesson, you will be able to-
• Understand the meaning and nature of accounting.
• Differentiate between various types of accounting.
• Know development of accounting principle.
• Explain the importance of accounting.
1.1 INTRODUCTION
Accounting is a system meant for measuring business activities, processing of information into
reports and making the findings available to decision-makers. The documents, which
communicate these findings about the performance of an organisation in monetary terms, are
called financial statements.
Usually, accounting is understood as the Language of Business. However, a business may have a
lot of aspects which may not be of financial nature. As such, a better way to understand
accounting could be to call it The Language of Financial Decisions. The better the understanding
of the language, the better is the management of financial aspects of living. Many aspects of our
lives are based on accounting, personal financial planning, investments, income-tax, loans, etc.
We have different roles to perform in life-the role of a student, of a family head, of a manager, of
an investor, etc. The knowledge of accounting is an added advantage in performing different
roles. However, we shall limit our scope of discussion to a business organisation and the various
financial aspects of such an organisation.
When we focus our thoughts on a business organisation, many questions (is our business
profitable, should a new product line be introduced, are the sales sufficient, etc.) strike our mind.
To answer questions of such nature, we need to have information generated through the
accounting process. The people who take policy decisions and frame business plans use such
information.
All business organisations work in an ever-changing dynamic environment. Any new programme
of the organisation or of its competitor will affect the business. Accounting serves as an effective
tool for measuring the financial pulse rate of the company. It is a continuous
cycle of measurement of results and reporting of results to decision- makers.
Just like arithmetic is a procedural element of mathematics, book keeping is the procedural
element of accounting. Figure 1 shows how an accounting system operates in business and how
the flow of information occurs.
, 3|Page
FIG 1: THE ACCOUNTING SYSTEM
Source: Liorngren, Harrison and Robinson, Financial and
Management Accounting, Prentice Hall, New Jersey, 1994.
1.2 DEVELOPMENT OF ACCOUNTING DISCIPLINE
The history of accounting can be traced back to ancient times. According to some beliefs, the
very art of writing originated in order to record accounting information. Though this may seem
to be an exaggeration, but there is no denying the fact that accounting has a long history.
Accounting records can be traced back to the ancient civilizations of China, Babylonia, Greece
and Egypt. Accounting was used to keep records regarding the cost of labour and materials used
in building great structures like the Pyramids.
During 1400s, accounting grew further because the needs for information of merchants in the
Venis City of Italy increased. The first known description of double entry book keeping was first
published in
1994 by Lucas Pacioli. He was a mathematician and a friend of Leonardo Ileda Vinci.
The onset of the industrial revolution necessitated the development of more sophisticated
accounting system, rather than pricing the goods based on guesses about the costs. The increase
in competition and mass production of goods led to the rise of accounting as a formal branch of
study.
With the passage of time, the corporate world grew. In the nineteenth century, companies came
up in many areas of infrastructure like the railways, steel, communication, etc. It led to a rapid
growth in accounting. As the complexities of business grew, ownership and management of
business was divorced. As such, managers had to come up with well-defined, structured systems
of accounting to report the performance of the business to its owners.
Government also has had a lot to do with more accounting developments. The Income Tax
brought about the concept of ‘income’. Government takes a host of other decisions, relating to
education, health, economic planning, for which it needs accurate and reliable information. As
such, the government demands stringent accountability in the corporate sector, which forces the
accounting process to be as objective and formal as possible.
1.3 AN ACCOUNTANT’S JOB PROFILE: FUNCTIONS OF ACCOUNTING
A man who is involved in the process of book keeping and accounting is called an accountant.
With the coming up accounting as a specialised field of knowledge, an accountant has a special
place in the structure of an organisation, because he performs certain vital functions.
