Class 11 Accountancy Terms Part II Chapter 1: Financial Statements I

The sum owing to a debtor is repaid on a regular basis, with or without interest (debt almost always includes interest payments). The world of finance and business is filled with a variety of terms that can often be confusing. If you’ve ever asked yourself, “What is the difference between debtors and creditors?” then you’re in the right place. This distinguish between debtors and creditors class 11 article is dedicated to dissecting the crucial elements that distinguish these two roles, by providing an extremely informative and elaborate understanding of the concept. This article will expound on the 10 key differences between debtors and creditors, who debtors are, who creditors are, and how these roles intertwine in the grand scheme of financial interactions.

It shows the quantity spent to meet the quick-time period wishes of the business. It’s miles shown in the debit aspect of the income and loss account or trading account. As an example, wages, lease paid, salaries paid, amazing wages, and many others. Class 11th Accounts Chapter 1 Question Answer, A Balance Sheet is one of the financial statements that is prepared during the process of maintenance of the accounts of a particular firm or business entity. As accounting is a continuous process, the balance sheet also periodically adds particulars that are related to the firm.

DK Goel Accountancy Class 11 Solutions – Chapter 1

Replacement reminiscence – within the cutting-edge international, each enterprise incurs a massive variety of transactions and it is beyond human capability to memorize each and each transaction. Hence, it’s miles very vital to document transactions within the books of accounts. Skipping the document of any individual of the transactions may additionally cause erroneous and defective effects.

1. Cash – Cash and Cash equivalents are related to the detail on the balance sheet that summarises the value of a business’s assets that are cash or can be transformed into cash instantly.
2. Alongside that, projection is additionally finished by the organisation with respect to its future benefits.
3. A trading account is used to determine a business’s gross profit or loss that results from trading activities.
4. So, there is a fine line of differences between debtors and creditors which we have discussed in the article below, take a read.
5. As an example, wages, lease paid, salaries paid, amazing wages, and many others.

NCERT Solutions for Class 11 Accountancy (Part – I) – Other Chapter-wise Links – FREE PDF

They are – Historical functions and Managerial functions. Historical functions deal with the record of past transactions, whereas managerial functions deal with preparing business operation reports. This can be in the form of trade accounts payable or loans payable. The partners are paid interest on the capital that remains outstanding. The maximum rate of interest that can be paid to the owners is 12% as per the Income Tax Act u/s 40(b).

It is similar to obtaining a loan from any financial institution. With the assistance of gross profit margin, the organisation is equipped for contrasting the current gross benefit and benefits procured previously. Alongside that, projection is additionally finished by the organisation with respect to its future benefits. After the assurance of GP margin, the business can likewise decrease or control different expenses, so the margin might increase in the future.

Glance on NCERT Solutions for Class 11 Accountancy Chapter 1 Introduction To Accounting

This reason is served by way of making ready the balance sheet that helps in ascertaining the true monetary role of the enterprise. The creditor typically requires collateral and/or a personal guarantee from the debtor, as well as loan covenants. This is due to the fact that the quantity of loaned cash might be fairly substantial, putting the creditor at significant risk of loss over a potentially long period of time. A company that lends money is likely to exist purely for the purpose of lending money. Net Loss – A net loss occurs when the net expenses that are depreciation, taxes, interests, and other expenses are more than the revenue earned during an accounting period. A net loss is reported on the income statement as a significant net loss.

Opening Stock – Opening stock is the amount and value of materials that a company has available for sale or use at the beginning of an accounting period. The closing stock can be in various forms such as raw materials, work-in-process goods (WIP), or finished goods. Suppose the users of financial information are looking for information regarding the financial position of the company. In that case, a balance sheet is the most appropriate statement which will present the necessary information. A business will incur many other expenses in addition to direct expenses. These expenses are deducted from the profit or are added to a gross loss and the resulting value thus obtained will be net profit or a net loss.

We at BYJU’S provide DK Goel Solutions to assist students to comprehend all the theories in particular. There are numerous concepts in Accountancy, but the concepts of Trial Balance, Depreciation and Bank Reconciliation Statement (BRS) are required. When it comes to trade credit, covenants are unheard of.

Humans or companies which can be prone to pay money to a company are known as borrowers. Confidence trust that the reported information is a reasonable representation of the actual items and events, that have occurred, depicts which qualitative characteristic of accounting information. Lastly, Tax accounting involves the preparation of tax returns and payment of taxes. Interest on Capital – Every business owner will be looking out for getting a return on the money invested in the business in the form of a fixed rate interest.