Page 13 - CA_ELG_Volume I_ELG-Sample

Paper 1 Principles and Practices of Accounting Theoretical Framework 1.3

Exercises 1.1

1. On 1 February, Rohan paid rent of 2. On 31 March, 20XX after sale of
₹ 15,000. This can be classified as goods worth ₹ 14,000, he is left with
_________. the closing inventory of ₹ 70,000.
This is _________.
(a) a transaction

(b) an event (a) a transaction
(c) a transaction as well as an event (b) an event
(c) a transaction as well as an event
Answer: (a) a transaction
Answer: (b) an event

1.2 Meaning and Scope of Accounting

The Committee on Terminology which is set up by the American Institute of Certified
Public Accountants has defined “Accounting” as:

“… the art of recording, classifying and summarizing in a significant manner and in
terms of money, transactions and events which are, in part at least, of a financial
character, and interpreting the result thereof.”

American Accounting Association in 1966 treated “Accounting” as:

“The process of identifying, measuring and communicating economic information to
permit informed judgments and decisions by the users of accounts”.

Transactions Interpreting
Accounting
& Events the Results

Recording, In Part
Classifying at Least
& of Financial
Summarising Character

Fig. 1.1 Meaning of Accounting

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