Contents
1 Accounting as an Information System
Objective 1: Meaning and Definition of Accounting
Objective 2: Characteristic Features of Accounting
Objective 3: Concept of Accounting as Information System
Objective 4: Characteristic Features of an Accounting System
Objective 5: Users of Financial Accounting Information
5.6 Government and Regulatory Services
5.7 Security Analysts and Advisors
Objective 6: Branches of Accounting
6.5 Social Responsibility Accounting
6.6 Other Branches of Accounting
Objective 7: Distinction Between Financial Accounting and Management Accounting
Objective 8: Objectives of Financial Accounting
Objective 9: General Purpose Statement
Objective 10: Qualitative Characteristics of Accounting Information or Financial Statements
Objective 11: Functions of Accounting
Objective 12: Advantages of Accounting
Objective 13: Limitations of Accounting
Objective 14: Bases of Accounting
Objective 15: Distinction Between Accrual Basis of Accounting and Cash Basis of Accounting
2 Nature of Financial Accounting Principles
Objective 1: Need and Meaning of Accounting Principles
Objective 2: Meaning and Characteristic Features of Generally Accepted Accounting Principles (GAPP)
Objective 3: Basic Accounting Concepts
3.4 Periodicity Concept (Accounting Period Concept)
Objective 4: Basic Accounting Conventions
4.1 Convention of Conservatism (Prudence)
Objective 1: Meaning and Definition of Accounting Standards
1.1 Objectives of Accounting Standards
1.2 Development of Accounting Standards
Objective 2: Constitution of Accounting Standard Board in India
2.1 Formation of the Accounting Standards Board
Objective 3: Scope of Accounting Standards in India
Objective 4: Procedure of Issuing Accounting Standards
Objective 5: Applicability of Accounting Standards
Objective 7: Compliance with Accounting Standards
Objective 8: Implementation of Accounting Standards
Objective 9: Salient Features of “General Purpose Financial Statements”
Objective 10: Benefits of Accounting Standards
Objective 11: AS-1 – Disclosure of Accounting Policies
11.1 Disclosure of Significant Accounting Policies
11.2 Disclosure of Fundamental Accounting Assumptions
11.3 Selection of Accounting Policies
11.4 Disclosure of Changes in Accounting Policies
12.11 Provision for Income Tax
12.13 Research and Development
12.14 Foreign Currency Transaction
12.16 Financial and Management Information System
Objective 13: Accounting Standard-2 (AS–2) Revised and Valuation of Inventories
Objective 14: Accounting Standard-3 (AS–3) and Cash Flow Statements
Objective 15: AS–4: Contingencies and Events Occurring after Balance Sheet Date
4a Accounting Process – Journal
Objective 1: Concept of Accounting Process and Stages
Objective 2: Recording of Business Transactions and its Classification
2.1 Meaning of Business Transaction
2.2 Classification of Business Transactions
2.3 Another Way of Classification of Business Transactions
Objective 3: Meaning of Account and its Classification
3.2 Classification of Accounts
Objective 4: Classification of Accounts
4.3 Nominal Accounts Treated as Personal Accounts
Objective 5: Meaning of Double Entry and Double Entry System
Objective 6: Methods of Recording Business Transactions
6.2 Accounting Equation Approach
Objective 8: Meaning and Format of Journal
Objective 9: Meaning of Journalising
Objective 10: Analysis of Business Transactions
Objective 11: Recording the Results of Analysis
Objective 12: Types of Entries
Objective 13: Source Documents – Formats, Uses and Methods of Recording
Objective 14: Recording of Trade Discount and Cash Discount
Objective 15: Accounting Equation Approach – Meaning and Classification of Accounts
15.1 Meaning of Accounting Equation
15.2 Classifications of Accounts
Objective 16: Rules of Debit and Credit as per Accounting Equation Approach
16.1 Accounting Equation Reaming and Features
Objective 17: Analysis of Business Transactions Applying Accounting Equation Technique
4b Accounting Process – Ledger
Objective 1: Meaning of “Ledger”
Objective 2: Standard Form of Ledger and its Contents
2.1 Explanation of Ledger Account Format
Objective 3: Meaning of Posting
Objective 4: Procedure of Posting
Objective 5: Distinction Between Journal and Ledger
Objective 6: Posting of an Opening Entry
Objective 7: Balancing an Account and Procedure for Balancing
7.1 Balancing of Different Accounts
4c Accounting Process – Subsidiary Books
Objective 1: Meaning of Subsidiary Books
Objective 2: Kinds and Purposes of Subsidiary Books
Objective 3: Advantages of Subsidiary Books (or) Special Journals
Objective 4: Difference Between Subsidiary Books and Ledger
Objective 5: Meaning and Type of Cash Book
Objective 6: Meaning, Format and Recording of Transactions in Single Column Cash Book
6.2 Format of Single Column Cash Book
Objective 7: Meaning and Format of Double Column Cash Book (Cash Book with Discount and Cash Column)
Objective 8: Method of Entering Bank Transactions in Two Columns (Bank and Discount Column)
Objective 10: Meaning, Salient Features and Advantages of Petty Cash Book
Objective 11: Format and Method of Recording Transactions in the Analytical Form of Petty Cash Book
11.1 Format of Analytical Petty Cash Book of…
11.2 Explanations of Column and Procedure for Recording
11.4 Passing of Journal Entries
Objective 13: Meaning, Format and Features of Sales Book
13.2 Explanation and Procedure for Recording Transaction
Objective 14: Meaning and Features of Purchases Returns Book
14.1 Explanation and Procedure for Recording Purchases Returns Transactions
Objective 15: Meaning and Features of Purchases Returns Book
Objective 16: Meaning of Bills of Exchange Specimen and Meaning of Some Important Terms
16.2 Specimen or Format of Bill of Exchange
16.3 Meaning of Important Terms
Objective 17: Procedure of Recording Transactions in B/R and B/P Books
17.1 Bills Receivable and Bills Payable Books
17.4 Posting of Bills Receivable and Bills Payable Books
Objective 18: Journal Proper and Different Kinds of Entries
4d Accounting Process – From Journal to Trial Balance
Objective 1: Meaning of Trial Balance
Objective 2: Objectives and Salient Features of Trial Balance
2.1 Objectives of a Trial Balance
2.2 Salient Features of a Trial Balance
Objective 3: Methods of Preparation of a Trial Balance
3.3 Totals cum Balances Method
Objective 4: Concept of Errors
Objective 6: Classification of Errors (Based on the Impact of Errors on Trial Balance)
Objective 7: Rectification of Errors
7.1 Rectification of Errors which do not Affect the Trial Balance
7.2 Rectification of Errors Affecting Trial Balance
Objective 8: Steps to Locate the Errors in Trial Balance
Objective 9: Meaning of Suspense Account and its Accounting Treatment
Objective 1: Accounting Process – Preparation of Final Accounts from Trial Balance
2.1 Trading Account: A Constituent of Final Accounts
2.2 Preparation of Trading Account
Objective 3: Manufacturing Account
3.1 Meaning of Manufacturing Account
3.2 Pro-forma of a Manufacturing Account
3.3 Differences Between Trading Account and Manufacturing Account
Objective 4: Profit and Loss Account
4.1 Profit and Loss Account: Meaning and Features
4.2 Closing Entries Relating to Profit and Loss Account
4.3 Pro-forma of Profit and Loss Account
4.4 Explanation of Some of the Terms Appearing in Profit and Loss Account
5.1 Meaning and Features of a Balance Sheet
5.2 Contents of the Balance Sheet
5.3 Grouping and Marshalling of Assets and Liabilities: Meaning of Grouping and Marshalling
5.5 In the Order of Performance
Objective 6: Uses of Balance Sheet
Objective 7: Differences Between Trial Balance and Balance Sheet
7.1 Stock at the End or Closing Stock
7.2 Accrued Expenses or Outstanding Expenses
7.5 Income Received in Advance (or) (Unearned Income or Unaccrued Income)
7.6 Description of Fixed Assets
7.8 Provision for Bad and Doubtful Debts
7.9 Provision for Discount on Debtors
7.10 Provision (or) Reserve for Discount on Creditors
7.11 Adjustment of Interest on Capital
7.17 Goods Sent on Approval: Meaning and Accounting Treatment
7.19 Bad Debts Written off Recovered
7.20 Withdrawals, Samples and Free Gifts
7.22 Provident Fund: Employee’s and Employer’s Contribution
5b Capital and Revenue – Expenditures and Receipts
Objective 1: Meaning of Capital Expenditure and Examples
Objective 2: Meaning and Features of Revenue Expenditure
Objective 3: Deferred Revenue Expenditure
Objective 4: Revenue Expenditure: To be Treated as Capital Expenditures
Objective 5: Distinction Between Capital Expenditure and Revenue Expenditure
Objective 6: Capital and Revenue Receipts
6.1 Concepts of Capital and Revenue Receipts
Objective 7: Meaning of Capitalised Expenditure
Objective 8: Capital Profit and Revenue Profit
8.1 Concepts of Capital Profit and Revenue Profit
Objective 9: Capital and Revenue Losses
9.1 Capital and Revenue Payments
6 Accounting for Not-for-profit Organisations
Objective 1: Meaning and Salient Features of NPOs
Objective 2: Meaning and Features of Receipts and Payments Account
2.1 Receipts and Payments Account
2.2 Features of Receipts and Payments Account
Objective 3: Preparation of Receipts and Payments Account
Objective 4: Meaning and Main Features of Income and Expenditure Account
4.2 Main Features of Income and Expenditure Account
Objective 5: Distinction Between Receipts and Payments Account and Income and Expenditure Account
Objective 6: Accounting Treatment of Some Special Items
6.2 Category II: Life Membership
6.3 Treatment of Fund Income (and Fund Expenses)
6.8 Aid from Government and Other Institutions
6.10 Current Years’ Expenditure
Objective 7: Preparation of Income and Expenditure Account from Receipts and Payments Account
Objective 8: Preparation of Opening and Closing Balance Sheets
8.1 Preparation of “Opening Balance Sheet”
8.2 Preparation of “Closing Balance Sheet”
Objective 9: Preparation of Receipts and Payments Account from Income and Expenditure Account
9.1 Preparation of Various Accounts
Objective 10: Preparation of Receipts and Expenditure Account for Professionals
10.2 Steps in the Preparation of Accounts of Professional Firm
7 Financial Statements from Incomplete Records (Single Entry System)
Objective 1: Meaning and Definition of Single Entry System
Objective 2: Salient Features of Incomplete Records System
2.1 Advantages of Incomplete Double Entry System
2.2 Disadvantages of Single Entry System
Objective 4: Preparation of Accounts (or) Ascertainment of Profit or Loss from Incomplete Records
4.1 Statement of Affairs Method (or) Net Worth Method
Objective 5: Distinction Between Statement of Affairs and Balance Sheet
Objective 6: Accounting Treatment
6.1 Model 1: Computation of Capital
6.2 Model 2: Ascertainment of Profit/Loss
6.3 Model 3: Ascertainment of Opening Capital, Closing Capital and Profit/Loss
6.4 Model 4: Computation of Net Profit (After Adjustments)
6.5 Model 5: Cheques Issued but not Presented
6.6 Model 6: Bank Transactions – Adjustments
6.7 Model 7: Net Increase in Assets or Net Decrease in Liabilities
6.8 Incomplete Records and Partnership Firms
6.9 Model 8: Single Entry and Partnership Firm
Objective 7: Method 2: Conversion Method (or) Final Accounts Method
7.2 Conversion Method Features
7.3 Procedure Under Conversion Method
7.4 Model: Calculation of Missing Figure – Opening Stock
7.5 Model: Calculation of Missing Figure – Purchases
7.6 Model: Calculation of Missing Figure – Credit Sales
7.7 Model: Calculation of Missing Figure – Bills Receivable
7.8 Cost of Goods Sold and Memorandum Trading Account
7.11 Model: Computation of Missing Figures (Combination of More Than One Item)
7.12 Model: Preparation of Trading and Profit and Loss Account Together with Balance Sheet
8 Measurement of Business Income
Objective 1: Definition of Income
Objective 2: Revenues and Expenses
Objective 3: Meaning of Measurement of Business Income
Objective 4: Measurement of “Net Income” or “Net Profit”
Objective 5: Measurement of Net Income: Matching of Incomes and Expenses Method
Objective 6: Comparison of “Net Worth Method” and “Matching Costs Against Revenue Method”
Objective 7: Procedure for Measurement of Business Income
Objective 8: Salient Features of Business Income
Objective 9: Meaning of Economic Concept of Income
Objective 10: Salient Features of Economic Concept of Income
Objective 11: Procedure to Measure Economic Income
9 Revenue Recognition and Recognition of Expenses
Objective 1: Definition of Revenue
Objective 2: Factors Derived from the Definition
Objective 3: Timing of Revenue Recognition
Objective 4: Guidelines for Revenue Recognition
Objective 5: Revenue Recognition at the Point of Sale
Objective 6: A Method to Ascertain Recognition of Revenue
6.1 Proportionate or Percentage of Completion Method
6.2 Installment Method of Revenue Recognition
6.3 Recognition at Completion of Production Process
6.4 Revenue Recognition on Holding of Assets
Objective 7: Concept of Recognition of Expenses (Costs)
7.1 Guidelines for Expense Recognition
Objective 8: AS–9 Revenue Recognition
8.1 Introduction: Salient Features of AS–9
8.6 Effect of Uncertainties on Revenue Recognition
Objective 1: Definition of Depreciation
Objective 2: Characteristic Features of “Depreciation”
Objective 3: Accounting Concept of Depreciation
Objective 5: The Causes of Depreciation
Objective 6: Need for Depreciation
Objective 7: Factors Affecting Amount of Depreciation
Objective 8: Depreciation on Assets
Objective 9: Accounting Treatment
9.1 Method 1: By Charging to Asset Account Directly
9.2 Method 2: By Creating Provision for Depreciation
Objective 10: Methods of Providing (Allocating) Depreciation
10.4 Procedure for Change in the Method of Depreciation
10.5 Annuity Method: Meaning and Features
10.6 Sinking Fund Method (or) Depreciation Fund Method: Meaning, Merits, Demerits and Suitability
Objective 11: Choice of Depreciation Method
Objective 12: Is Depreciation a Source of Income or Expense?
Objective 13: Provision: Meaning, Examples, Objectives, Accounting Treatment and Disclosure
14.3 Distinction Between Provision and Reserve
Objective 15: Provision for Repairs and Renewals: Meaning and Accounting Treatment
Objective 16: Accounting Standard (AS)–6
16.1 Salient features of AS–6 (Revised)
Objective 2: Significance of Inventory Valuation
Objective 3: Inventory Record Systems
3.2 Perpetual Inventory System
3.3 Distinction Between Periodic Inventory System and Perpetual Inventory System
Objective 4: Valuation of Inventories
Objective 5: Specific Identification of Costs
Objective 6: First-in-first-out Method
Objective 7: Last-in-first-out Method (LIFO)
Objective 8: Weighted Average Method
8.1 Procedure Under Periodic Inventory System
8.2 Procedure Under Perpetual Inventory System
Objective 9: Choice of Inventory Valuation Methods
Objective 10: Valuation of Inventory as on the Balance Sheet
Objective 11: Accounting Standard-2 (Revised)
12 Accounting for Hire-Purchase and Installment
Objective 1: Definition of Hire-Purchase System
1.1 Explanation of Important Terms
1.2 Contents of Hire-Purchase Agreement
1.3 Salient Features of Hire-Purchase System
Objective 2: Process of Calculation and Allocation of Interest
Objective 3: Accounting Treatment
3.1 Journal Entries in the Books of the Buyer (or) Hire Purchase
3.2 Accounting Treatment in the Books of Hire Vendor
Objective 4: Default and Repossession
Objective 5: Format of Hire-Purchase Sales Register for the Year Ended
Objective 6: Methods of Ascertaining Profit
Objective 7: Installment System
Objective 8: Concepts of Operating and Financial Lease
Objective 9: Salient Features of Lease
Objective 10: Advantages of Learning
Objective 11: Disadvantages of Leasing
Objective 12: Accounting Treatment Relating to Leases as per AS–19
12.1 Finance Lease (or) Full Pay-out Lease
12.2 Operating Lease (or) Non-pay-out Lease
Objective 13: Distinction Between Financial Lease and Operating Lease
13 Accounting for Inland Branches
Objective 1: Meaning of a Branch
1.1 Main Objectives of Opening a Branch
Objective 2: Branch Accounting
Objective 3: Accounting for Inland Dependent Branches
3.1 Salient Features of Dependent Branches
3.2 Accounting Treatment for Dependent Branches
Objective 4: Accounting System
Objective 5: Stock-Debtors System or Stock and Debtors Method
5.1 Meaning of Stock-Debtors System
5.2 Different Accounts and their Purpose
5.9 Item to be Shown in the Branch Account
Objective 6: Independent Branches
6.1 Accounting for Fixed Assets
6.2 Accounting for Goods in Transit
6.3 Accounting for Inter-branch Transactions
Objective 7: Incorporation of Branch Trial Balance
7.1 Detailed Consolidated Method
7.2 Abridged Consolidated Method
7.3 Separate Final Accounts Method
Objective 1: Dissolution of Partnership
1.1 When May a Partnership be Dissolved?
Objective 2: Distinction Between Dissolution of Partnership and Dissolution of Firm
Objective 3: Treatment of Some Accounts at the Time of Dissolution
3.1 Treatment of Loss: Section 48 (a)
3.2 Treatment of Assets: Section 48 (b)
3.3 Treatment of Firm’s Debts and Private Debts
Objective 4: Accounting Treatment
4.1 Preparation of Realisation Account
4.2 Meaning and Features of Realisation Account
4.3 Procedure to Record Entries for Various Items and Preparation of Realisation Account
Objective 5: Accounting Treatment on Dissolution
5.1 Account Treatment on Dissolution of a Firm
5.3 Cash or Bank Account (Ledger)
5.5 Partners Loan Account: (Loan by Partner)
6.2 Unrecorded Assets and Liabilities
Objective 7: Preparation of Balance Sheet as on the Date of Dissolution
7.1 Preparation of Balance Sheet as on the Date of Dissolution
7.3 Assets and Liabilities Taken Over by Partner(s) Accounting Procedure
Objective 8: Return of Premium (Goodwill) (Section 51)
8.1 Gift of Firm – Asset to Partners
Objective 9: Insolvency of Partner(s)
9.3 Students Should Remember these Criteria
9.4 Accounting Procedure when Capitals are Fixed
9.5 Accounting Procedure when Capitals are Fluctuating or Floating
Objective 10: All Partners are Insolvent
10.2 Use of Algebraic Equation
Objective 11: Minor and Partnership Dissolution
11.1 Minor’s Status in Partnership Dissolution
11.3 Garner vs. Murray Rule in Case of Commission to a Partner as Expense of the Business
Objective 12: Sale of Partnership Firm to a Limited Company
12.3 Meaning and Computation of “Purchase Consideration”
Objective 13: Piecemeal Distribution
13.1 Meaning of Piecemeal Distribution
13.2 Proportionate or Surplus Capital Method
13.3 Maximum Possible Loss Method
15 Financial Statement Analysis
Objective 1: Meaning of Financial Statement Analysis
Objective 2: Types or Classification of Financial Statement Analysis
2.1 Type 1 – According to the Material Used
2.2 Type 2 – According to Modus Operandi
2.3 Type 3 – According to the Objective of the Analysis
2.4 Distinction Between Horizontal Analysis and Vertical Analysis
2.5 Distinction Between Inter-firm and Intra-firm Analysis
Objective 3: Process of Financial Statement Analysis
Objective 4: Purposes and Significance of Financial Analysis
Objective 5: Tools or Techniques of Financial Statement Analysis
5.1 Comparative Financial Statements
5.2 Common Size Financial Statements
Objective 6: Comparative Financial Statements
6.1 Objectives of Comparative Financial Statements
6.2 Meaning of Comparative Balance Sheet
Objective 7: Comparative Income Statement – Special Features
7.1 Objectives of Comparative Income Statements
7.2 Preparation of Comparative (P and L A/c) Income Statement
7.3 Percentage of Change is Calculate this Way
7.4 Computation of Percentage Change
Objective 8: Meaning of Common Size Statements
8.1 Preparation of Common Size Balance Sheet
Objective 9: Meaning and Computation of Trend Percentages
9.2 Steps Involved in Computation of Trend Percentages
9.3 Limitations of Trend Ratios (Percentage)
Objective 10: Various Users of Financial Statements
Objective 11: Limitations of Financial Statement Analysis
Objective 12: Financial Statements of a Company – Types and Formats
12.1 Contents of Annual Report
12.2 Report of Board of Directors
1.1 Meaning of Ratio and Ratio Analysis
Objective 2: Advantages and Uses of Ratio Analysis
Objective 3: Limitations of Ratio Analysis
Objective 4: Classification of Ratios or Types of Ratios
5.1 Current Ratio – Relationship of Current Assets to Current Liabilities
5.2 Liquid Ratio or Quick Ratio or Acid Test Ratio
5.3 Absolute Liquid Ratio – Relationship of Absolute Liquid Assets to Liquid Liabilities
Objective 6: Solvency Ratios (Long-term Solvency)
6.2 Total Assets to Debt Ratio
Objective 7: Profitability Ratios
8.2 Debtors Turnover Ratio or Receivables Turnover Ratio
8.3 Working Capital Turnover Ratio
Objective 9: Ratios: Advanced Level
9.2 Cash Cycle – Combined Effect of Turnover Ratios
Objective 1: Meaning of Cash Flow and Cash Flow Statement
Objective 2: Uses of Cash Flow Statement
Objective 3: Limitations of Cash Flow Statement
3.1 Meaning of Cash Flow, Cash and Cash Equivalents
Objective 4: Preparation of Cash Flow Statements
Objective 5: Cash Flow Statement: Preparation
5.1 Direct Method Pro-forma or Format of Cash Flow Statement for the Year Ended
5.2 Indirect Method Pro-forma or Format Cash Flow Statement for the Year Ended
5.3 Calculation of Cash Outflow on Purchases
5.4 Cash Outflow on Expenses Incurred
5.6 Cash Flow from Investing Activities
5.7 Cash Flow from Investing Activities
5.8 Cash Flow from Financing Activities
5.9 Accounting Treatment of Special Items
Objective 6: Important Steps (stages) in the Preparation of Cash Flow Statement
6.1 Stage I: A. Cash Flow from Operating Activities
6.2 Stage II: B. Cash Flow from Investing Activities
6.3 Stage III: C. Cash Flow from Financing Activities
6.4 Stage IV: Net Increase/Decrease in Cash and Cash Equivalents
6.5 Stage V: Cash and Cash Equivalents at the Beginning of the Year to be Added
6.6 Stage VI: Cash and Cash Equivalents at the End of the Year to be Recorded