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Meaning, objective, importance and utility of book-keeping and
accountancy, basic accounting terminologies
Concepts, conventions and principles
Dr BRR
Principles of double entry book keeping and classification of
accounts
Primary books of accounts, meaning, utility, format writing of
primary booksBasis of accounts: Cash &
mercantileDr BRR
Cash book single, double and triple column
Secondary book – ledger posting of transactions in ledger.
Dr BRR
Petty cash book- imprest system, analytical petty cash book
Bank reconciliation statement. Meaning, need importance and
preparation
Dr BRR
Kinds of errors, rectification of errors, suspense account
Preparation of trial balanceFinal accounts. Concepts, meaning
and importance.
Dr BRR
Accounts of NTC
Receipt and payment account and income and expenditure account
Income & Expenditure A/c, Balance Sheet
Dr BRR
Cost accounting conceptRelationship of cost accounting and
financial accountingConcept of cost analysis and its
classification
Dr BRR
Material cost, material records, inventory systems.
Overheads : classificationConcepts of cost units and cost
centres.Allocation and absorption of
overheadsElements of cost sheet
Dr BRR
Recommended Books:1. Financial Accounting-A Managerial
Perspective - Dr. R NarayanaSwamy, PHI
Edition2. Cost Accounting-A Managerial Emphasis Horngren, Datar, Foster, Pearson
EducationJournals:
1. Management Accountant [ICWAI Publication]
2. Chartered Accountant [ICAI Publication]3. Accounting World [ICFAI Publication]
Dr BRR
What is Accounting? Accounting defined: [AICPA] Recording and reporting of
financial transactions, including the origination of the transaction,
its recognition, processing, and summarization in the FINANCIAL
STATEMENTS. Dr BRR
Regulatory Framework
Co ACT, 1956: 658 sections + 14 schedulesIT Act, 1961: 298 sections + 16 schedules RBI, SEBI, IRDA, TRAI, MCA or DCA, CAGGlobal fund raisingHarmonization of financial statements at international levelOwnership & management – separation International organizations-IASB, SEC
What is Book Keeping?It is an art and science of recording
business transactions in a set of books of account
Dr BRR
Interested parties/Stakeholders
PublicCreditors/Lenders
Govt
Investors
Customers
MgtEmployees
Shareholders
BUSINESS FIRM
Dr BRR
Dr. BRR
Objectives Provide financial performance Profitability, Liquidity, Solvency
Bring out sources & applications of funds
Economic resources owned & employed
Dr BRR
What is Accounting Cycle?
Dr. BRR
Documentation Recording
Classifying Summarizing
Bifurcating [income statement & B/S]
Dr BRR
What does an accounting report contain?
Dr. BRR
Income statementBalance sheet
Cash flow statementNotes to Accounts & Accounting
policiesPlus
Auditor’s report, Director’s report, chairman’s statement, management
discussion &analysis, Corporate Governance Report
Dr BRR
Who are stakeholders/users?
Dr. BRR
Investors – present & potential-amateur , analysts
Employees & trade unions Lenders-financial institutions
Suppliers / creditorsConsumers
Government-SEBI, Tax authorities, CAG, Stock exchanges, Dept of company affairsPublic-general, Environmental activists,
consumer forumsManagement
Dr BRR
Accounting assumptions = Concepts + Conventions
Dr. BRR
Accrual ConceptGoing Concern ConceptBusiness Entity Concept
Accounting Period [Periodicity] Concept
Money Measurement ConceptCost Concept
Dual Aspect ConceptConsistencyDisclosure
ConservatismDr BRR
Assets, Expenses Accounts: Debit Credit
Incomes, Liabilities, Equity Accounts: Debit Credit
Debit Expenses or assets
Credit Incomes or Liabilities
Accounting Equation
EQUITY = ASSETS – LIABILITES
Dr BRR
Personal AccountAccounts of persons, firms, institutions
Ram a/c, Bank a/c, O/S expenses, Prepaid a/c
Real AccountAccounts of assets or properties
Cash a/c, Building a/c, Goodwill a/c
Debit The ReceiverCredit The Giver
Nominal AccountAccounts of Expenses, incomes, gains, losses
Salary, Rent, Depreciation, Discount, Commission
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Debit What Comes In Credit What Goes Out
Debit Expenses or Losses Credit Incomes or Gains
Accounting Standards (ASs) AS 1 Disclosure of Accounting Policies AS 2 Valuation of Inventories AS 3 Cash Flow Statements AS 4 Contingencies and Events Occuring after the B/S Date AS 5 Net Profit or Loss for the period,Prior Period Items and
Changes in Accounting Policies AS 6 Depreciation Accounting AS 7 Construction Contracts (revised 2002) AS 7 Accounting for Construction contracts AS 8 Accounting for Research and Development AS 9 Revenue Recognition AS 10 Accounting for Fixed Assets
Dr BRR
AS 11 The Effects of Changes in Foreign Exchange Rates (Revised 2003),
AS 11 Accounting for the Effects of Changes in Foreign Exchange Rates
AS 12 Accounting for Government Grants AS 13 Accounting for Investments AS 14 Accounting for Amalgamations AS 15 Accounting for Retirement Benefits in the Financial
Statement of Employers AS 16 Borrowing Costs AS 17 Segment Reporting AS 18, Related Party Disclosures AS 19 Leases AS 20 Earnings Per Share Dr BRR
AS 21 Consolidated Financial Statements AS 22 Accounting for taxes on income. AS 23 Accounting for Investments in Associates in
Consolidated Financial Statements AS 24 Discontinuing Operations AS 25 Interim Financial ReportingAS 26 Intangible AssetsAS 27 Financial Reporting of Interests in Joint Ventures AS 28 Impairment of AssetsAS 29 Provisions,Contingent Liabilities and Contingent
Assets
Dr BRR
REVENUE RECEIPTS = INCOME
REVENUE EXPENSES = EXPENSES
P & L ACCOUNT[INCOME STATEMENT]
BALANCE SHEETCAPITAL RECEIPTS = LIABILITES
CAPITAL EXPENDITURES = ASSETS
INCOME > EXPENSES → NET PROFITINCOME < EXPENSES → NET LOSS
Dr BRR
ACCOUNTING CYCLE
BUSINESS TRANSACTIONS
JOURNAL / SUBSIDIARY BOOKS
LEDGER
TRIAL BALANCE + EVENTS
P & L ACCOUNT+
BALANCE SHEET+
CASH FLOW
Dr BRR
EXERCISE 1
Classify the following in to
(a) Assets, Liabilities, expenses, equity, income
(b) Real, Nominal & Personal Accounts
Salary, interest received, rent, building, brand, patents, client’s account [Dr.], suppliers account, goodwill, furniture, share capital, retained profits, reserves, term loan from ICICI, out standing salary, prepaid insurance, accrued interest on investment,
debenture, discount, land, cash, stock, debtors, creditors, bills payable, bills receivable
Dr BRR
Journal Book
Date Particulars L.F. Debit Credit
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Rs. Rs.
EXERCISE 2
Prepare Journal book:Started business with Rs. 90,000 capitalOpened bank account Rs. 20,000Purchases Rs. 7,000 [by cash 2,000 & by cheque
rest]Purchases Rs. 16,000 Sales Rs. 33,000, of which Rs. 3,000 was cash salesReceived cheque from debtors Rs. 17,000Salary, rent & lighting paid Rs. 2,000, 4,000 &
1,000 Cash paid in to bank account Rs. 10,000Bank interest credited to bank account Rs. 1,000
Dr BRR
EXERCISE 3
Prepare Journal book [Accounting year FY 08]Started business with Rs. 90,000 cash, Rs. 10,000
furniture, bank Rs. 23,000Drawn from bank for personal use Rs. 2,000Purchases Rs. 17,000 [by cash 2,000]Purchases Rs. 18,000 from Mr. Anand on accountSales Rs. 53,000, of which Rs. 3,000 was cash salesReceived cheque from debtors Rs. 19,000Salary paid: Rs. 2,000 but actual salary bill: Rs2,500Rent paid Rs. 5,000 Insurance on stock paid by cheque for the next one
year:Rs. 10,000 on 1.7.2007Paid Anand 17,800 in full settlement of his account.Dr BRR
Ledger Book
Date Particulars
Cr.Rs. Rs.Date Particular
s JFJFDr.
Dr BRR
EXERCISE 4
Prepare Ledger for the Exercise 2
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Subsidiary BooksPurchases bookPurchases Returns book [Return O/W book]Sales bookSales Returns book [Return I/W book] bookCash bookB/R bookB/P bookJournal Proper
14/11/2005 Exam Q No. 3Dr BRR
Cash BookCash BookTypes:1. Simple Cash Book 2. Three column cash book 3.Petty cash book
Simple Cash Book [Cash column only]
Date Rs.R
eceip
ts N
um
ber
Receipts Date Payments
Vou
ch
er
Nu
mb
er
Rs.
Dr. Cr.
L.F. L.F.
Dr BRR
Three column Cash BookDate
R
eceip
ts N
um
ber
Receip
ts Date
Paym
en
ts
V
ou
ch
er
Nu
mb
er
Dr. Cr.
Cash Bank CashBankD
iscou
nt
Dis
cou
nt
L.F.L.F.
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Petty Cash BookDate
Rs.
Payments
Vou
ch
er
Nu
mb
er
Rs.
TotalReceipts
Rs.
[in Rs.] Analysis of Payments
Printing Wages Adv CartageSundriesPostageL.F.Ledger
Accounts
Dr BRR
BANK RECONCILIATION STATEMENTBANK RECONCILIATION STATEMENTParticulars Rs.
Bank Balance as per Cash Book
ADD: Cheque issued but not presented Cheque issued presented & dishonoured Income credited by banker ECS Credits Under or Over casting of cash book on Debit or Credit side respectively
LESS: Cheque deposited but not credited Bank charges
ECS Debits
Cheque received & entered in CB but not deposited yet Cheque deposited but dishonoured
Bank Balance as per Bank Pass book
Dr BRR