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Financial Accounting

Book Description

Financial Accounting provides a comprehensive, simple, and pragmatic presentation of various concepts in accounting. Rich in pedagogy and extensive in coverage, the book not only meets the requirements of the undergraduate students of different Indian universities but will also be useful for the students of CA, CS, MBA and ICWA.

Table of Contents

  1. Cover
  2. Title page
  3. Brief Contents
  4. Contents
  5. Dedication
  6. Preface
  7. Chapter 1. Accounting as an Information System
    1. Objective 1: Meaning and Definition of Accounting
    2. Objective 2: Characteristic Features of Accounting
    3. Objective 3: Concept of Accounting as Information System
    4. Objective 4: Characteristic Features of an Accounting System
    5. Objective 5: Users of Financial Accounting Information
      1. 5.1 Investors
      2. 5.2 Suppliers and Creditors
      3. 5.3 Lenders
      4. 5.4 Employees
      5. 5.5 Customers
      6. 5.6 Government and Regulatory Services
      7. 5.7 Security Analysts and Advisors
      8. 5.8 Public
      9. 5.9 Management
    6. Objective 6: Branches of Accounting
      1. 6.1 Financial Accounting
      2. 6.2 Cost Accounting
      3. 6.3 Management Accounting
      4. 6.4 Tax Accounting
      5. 6.5 Social Responsibility Accounting
      6. 6.6 Other Branches of Accounting
    7. Objective 7: Distinction Between Financial Accounting and Management Accounting
    8. Objective 8: Objectives of Financial Accounting
    9. Objective 9: General Purpose Statement
    10. Objective 10: Qualitative Characteristics of Accounting Information or Financial Statements
      1. 10.1 Understandability
      2. 10.2 Relevance
      3. 10.3 Reliability
      4. 10.4 Comparability
    11. Objective 11: Functions of Accounting
    12. Objective 12: Advantages of Accounting
    13. Objective 13: Limitations of Accounting
    14. Objective 14: Bases of Accounting
    15. Objective 15: Distinction Between Accrual Basis of Accounting and Cash Basis of Accounting
    16. Summary
    17. Key Terms
    18. Reference
    19. Objective-type Questions
    20. Short Answer-type Questions
    21. Essay-type Questions
  8. Chapter 2. Nature of Financial Accounting Principles
    1. Objective 1: Need and Meaning of Accounting Principles
    2. Objective 2: Meaning and Characteristic Features of Generally Accepted Accounting Principles (GAPP)
      1. 2.1 Meaning of GAPP
      2. 2.2 Salient Features of GAPP
    3. Objective 3: Basic Accounting Concepts
      1. 3.1 Entity Concept
      2. 3.2 Money Measurement Concept
      3. 3.3 Going Concern Concept
      4. 3.4 Periodicity Concept (Accounting Period Concept)
      5. 3.5 Cost Concepts
      6. 3.6 Realisation Concept
      7. 3.7 The Accrual Concept
      8. 3.8 Matching Concepts
    4. Objective 4: Basic Accounting Conventions
      1. 4.1 Convention of Conservatism (Prudence)
      2. 4.2 Convention of Consistency
      3. 4.3 Convention of Materiality
      4. 4.4 Convention of Disclosure
    5. Summary
    6. Key Terms
    7. Reference
    8. Objective-type Questions
    9. Short Answer-type Questions
    10. Essay-type Questions
  9. Chapter 3. Accounting Standards
    1. Objective 1: Meaning and Definition of Accounting Standards
      1. 1.1 Objectives of Accounting Standards
      2. 1.2 Development of Accounting Standards
    2. Objective 2: Constitution of Accounting Standard Board in India
      1. 2.1 Formation of the Accounting Standards Board
      2. 2.2 Objectives and Functions
    3. Objective 3: Scope of Accounting Standards in India
    4. Objective 4: Procedure of Issuing Accounting Standards
    5. Objective 5: Applicability of Accounting Standards
      1. 5.1 Level-I Enterprise
      2. 5.2 Level-II Enterprise
      3. 5.3 Level-III Enterprise
    6. Objective 6: Status of the Accounting Standards Issued by the Institute of Chartered Accountants of India
    7. Objective 7: Compliance with Accounting Standards
    8. Objective 8: Implementation of Accounting Standards
    9. Objective 9: Salient Features of “General Purpose Financial Statements”
    10. Objective 10: Benefits of Accounting Standards
    11. Objective 11: AS-1 – Disclosure of Accounting Policies
      1. 11.1 Disclosure of Significant Accounting Policies
      2. 11.2 Disclosure of Fundamental Accounting Assumptions
      3. 11.3 Selection of Accounting Policies
      4. 11.4 Disclosure of Changes in Accounting Policies
    12. Objective 12: Case Study
      1. 12.1 Convention
      2. 12.2 Basis of Accounting
      3. 12.3 Depreciation
      4. 12.4 Inventories
      5. 12.5 Revaluation of Assets
      6. 12.6 Investments
      7. 12.7 Sale
      8. 12.8 Turnover
      9. 12.9 Investment Income
      10. 12.10 Retirement Benefits
      11. 12.11 Provision for Income Tax
      12. 12.12 Lease Rentals
      13. 12.13 Research and Development
      14. 12.14 Foreign Currency Transaction
      15. 12.15 Claims
      16. 12.16 Financial and Management Information System
    13. Objective 13: Accounting Standard-2 (AS–2) Revised and Valuation of Inventories
      1. 13.1 Valuation of Inventories
    14. Objective 14: Accounting Standard-3 (AS–3) and Cash Flow Statements
    15. Objective 15: AS–4: Contingencies and Events Occurring after Balance Sheet Date
    16. Objective 16: AS–5: Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies
    17. Summary
    18. Key Terms
    19. Reference
    20. Objective-type Questions
    21. Short Answer-type Questions
    22. Essay-type Questions
  10. Chapter 4a. Accounting Process – Journal
    1. Objective 1: Concept of Accounting Process and Stages
    2. Objective 2: Recording of Business Transactions and its Classification
      1. 2.1 Meaning of Business Transaction
      2. 2.2 Classification of Business Transactions
      3. 2.3 Another Way of Classification of Business Transactions
    3. Objective 3: Meaning of Account and its Classification
      1. 3.1 Meaning of Account
      2. 3.2 Classification of Accounts
    4. Objective 4: Classification of Accounts
      1. 4.1 Personal Accounts
      2. 4.2 Impersonal Accounts
      3. 4.3 Nominal Accounts Treated as Personal Accounts
    5. Objective 5: Meaning of Double Entry and Double Entry System
      1. 5.1 Meaning of Double Entry
    6. Objective 6: Methods of Recording Business Transactions
      1. 6.1 Traditional Approach
      2. 6.2 Accounting Equation Approach
    7. Objective 7: Traditional Approach for Recording Business Transactions and Debit–Credit Rules for Three Types of Accounts
    8. Objective 8: Meaning and Format of Journal
      1. 8.1 Meaning of Journal
      2. 8.2 Format of Journal
    9. Objective 9: Meaning of Journalising
      1. 9.1 Meaning
      2. 9.2 Process in Journalising
    10. Objective 10: Analysis of Business Transactions
    11. Objective 11: Recording the Results of Analysis
    12. Objective 12: Types of Entries
      1. 12.1 Simple Entry
      2. 12.2 Compound Entry
      3. 12.3 Opening Entry
    13. Objective 13: Source Documents – Formats, Uses and Methods of Recording
      1. 13.1 Cash Memo
      2. 13.2 Invoice
      3. 13.3 Receipt
      4. 13.4 Debit Note
      5. 13.5 Credit Note
      6. 13.6 Voucher
      7. 13.7 Pay-in-slip
      8. 13.8 Cheque
    14. Objective 14: Recording of Trade Discount and Cash Discount
    15. Objective 15: Accounting Equation Approach – Meaning and Classification of Accounts
      1. 15.1 Meaning of Accounting Equation
      2. 15.2 Classifications of Accounts
    16. Objective 16: Rules of Debit and Credit as per Accounting Equation Approach
      1. 16.1 Accounting Equation Reaming and Features
    17. Objective 17: Analysis of Business Transactions Applying Accounting Equation Technique
    18. Summary
    19. Key Terms
    20. Objective-type Questions
    21. Short Answer-type Questions
    22. Essay-type Questions
    23. Exercises
  11. Chapter 4b. Accounting Process – Ledger
    1. Objective 1: Meaning of “Ledger”
    2. Objective 2: Standard Form of Ledger and its Contents
      1. 2.1 Explanation of Ledger Account Format
    3. Objective 3: Meaning of Posting
    4. Objective 4: Procedure of Posting
    5. Objective 5: Distinction Between Journal and Ledger
    6. Objective 6: Posting of an Opening Entry
    7. Objective 7: Balancing an Account and Procedure for Balancing
      1. 7.1 Balancing of Different Accounts
      2. 7.2 Procedure for Balancing
    8. Summary
    9. Objective-type Questions
    10. Multiple-choice Questions
    11. Short Answer-type Questions
    12. Essay-type Questions
    13. Exercises
  12. Chapter 4c. Accounting Process – Subsidiary Books
    1. Objective 1: Meaning of Subsidiary Books
    2. Objective 2: Kinds and Purposes of Subsidiary Books
    3. Objective 3: Advantages of Subsidiary Books (or) Special Journals
    4. Objective 4: Difference Between Subsidiary Books and Ledger
    5. Objective 5: Meaning and Type of Cash Book
      1. 5.1 Meaning
      2. 5.2 Types of Cash Book
    6. Objective 6: Meaning, Format and Recording of Transactions in Single Column Cash Book
      1. 6.1 Meaning
      2. 6.2 Format of Single Column Cash Book
      3. 6.3 Balancing of Cash Book
    7. Objective 7: Meaning and Format of Double Column Cash Book (Cash Book with Discount and Cash Column)
    8. Objective 8: Method of Entering Bank Transactions in Two Columns (Bank and Discount Column)
    9. Objective 9: Meaning of Triple Column Cash Book with Discount, Cash and Bank Columns and Procedure of Recording Business Transactions in Triple Column Cash Books
    10. Objective 10: Meaning, Salient Features and Advantages of Petty Cash Book
      1. 10.1 Meaning
      2. 10.2 Advantages
      3. 10.3 Salient Features
    11. Objective 11: Format and Method of Recording Transactions in the Analytical Form of Petty Cash Book
      1. 11.1 Format of Analytical Petty Cash Book of…
      2. 11.2 Explanations of Column and Procedure for Recording
      3. 11.3 Balancing Procedure
      4. 11.4 Passing of Journal Entries
      5. 11.5 Posting to Ledger
    12. Objective 12: Purchases Book – Meaning and Format and Methods of Preparing Purchase Book and Ledger Accounts
      1. 12.1 Meaning of Purchase Book
      2. 12.2 Format
    13. Objective 13: Meaning, Format and Features of Sales Book
      1. 13.1 Format of Sales Book
      2. 13.2 Explanation and Procedure for Recording Transaction
    14. Objective 14: Meaning and Features of Purchases Returns Book
      1. 14.1 Explanation and Procedure for Recording Purchases Returns Transactions
      2. 14.2 What is an ‘Allowance’?
    15. Objective 15: Meaning and Features of Purchases Returns Book
      1. 15.1 Format
    16. Objective 16: Meaning of Bills of Exchange Specimen and Meaning of Some Important Terms
      1. 16.1 Bills of Exchange
      2. 16.2 Specimen or Format of Bill of Exchange
      3. 16.3 Meaning of Important Terms
    17. Objective 17: Procedure of Recording Transactions in B/R and B/P Books
      1. 17.1 Bills Receivable and Bills Payable Books
      2. 17.2 Bills Receivable Book
      3. 17.3 Bills Payable Book
      4. 17.4 Posting of Bills Receivable and Bills Payable Books
    18. Objective 18: Journal Proper and Different Kinds of Entries
    19. Summary
    20. Objective-type Questions
    21. Short Answer-type Questions
    22. Essay-type Questions
    23. Exercises
  13. Chapter 4d. Accounting Process – From Journal to Trial Balance
    1. Objective 1: Meaning of Trial Balance
    2. Objective 2: Objectives and Salient Features of Trial Balance
      1. 2.1 Objectives of a Trial Balance
      2. 2.2 Salient Features of a Trial Balance
    3. Objective 3: Methods of Preparation of a Trial Balance
      1. 3.1 Totals Method
      2. 3.2 Balances Method
      3. 3.3 Totals cum Balances Method
    4. Objective 4: Concept of Errors
    5. Objective 5: Kinds of Errors
      1. 5.1 Errors of Principle
      2. 5.2 Clerical Errors
      3. 5.3 Compensating Errors
    6. Objective 6: Classification of Errors (Based on the Impact of Errors on Trial Balance)
    7. Objective 7: Rectification of Errors
      1. 7.1 Rectification of Errors which do not Affect the Trial Balance
      2. 7.2 Rectification of Errors Affecting Trial Balance
    8. Objective 8: Steps to Locate the Errors in Trial Balance
    9. Objective 9: Meaning of Suspense Account and its Accounting Treatment
    10. Summary
    11. Key Terms
    12. References
    13. Objective-type Questions
    14. Short Answer-type Questions
    15. Essay-type Questions
    16. Exercises
  14. Chapter 5a. Accounting Process – From Trial Balance to Final Accounts and Final Accounts of Non-corporate Business Entities
    1. Objective 1: Accounting Process – Preparation of Final Accounts from Trial Balance
    2. Objective 2: Trading Account
      1. 2.1 Trading Account: A Constituent of Final Accounts
      2. 2.2 Preparation of Trading Account
    3. Objective 3: Manufacturing Account
      1. 3.1 Meaning of Manufacturing Account
      2. 3.2 Pro-forma of a Manufacturing Account
      3. 3.3 Differences Between Trading Account and Manufacturing Account
    4. Objective 4: Profit and Loss Account
      1. 4.1 Profit and Loss Account: Meaning and Features
      2. 4.2 Closing Entries Relating to Profit and Loss Account
      3. 4.3 Pro-forma of Profit and Loss Account
      4. 4.4 Explanation of Some of the Terms Appearing in Profit and Loss Account
    5. Objective 5: Balance Sheet
      1. 5.1 Meaning and Features of a Balance Sheet
      2. 5.2 Contents of the Balance Sheet
      3. 5.3 Grouping and Marshalling of Assets and Liabilities: Meaning of Grouping and Marshalling
      4. 5.4 In the Order of Liquidity
      5. 5.5 In the Order of Performance
    6. Objective 6: Uses of Balance Sheet
    7. Objective 7: Differences Between Trial Balance and Balance Sheet
      1. 7.1 Stock at the End or Closing Stock
      2. 7.2 Accrued Expenses or Outstanding Expenses
      3. 7.3 Prepaid Expenses
      4. 7.4 Accrued Income
      5. 7.5 Income Received in Advance (or) (Unearned Income or Unaccrued Income)
      6. 7.6 Description of Fixed Assets
      7. 7.7 Bad Debts
      8. 7.8 Provision for Bad and Doubtful Debts
      9. 7.9 Provision for Discount on Debtors
      10. 7.10 Provision (or) Reserve for Discount on Creditors
      11. 7.11 Adjustment of Interest on Capital
      12. 7.12 Interest on Drawings
      13. 7.13 Abnormal Loss of Stock
      14. 7.14 Insurance Premium
      15. 7.15 Salaries and Wages
      16. 7.16 Commission on Profit
      17. 7.17 Goods Sent on Approval: Meaning and Accounting Treatment
      18. 7.18 Goods-in-Transit
      19. 7.19 Bad Debts Written off Recovered
      20. 7.20 Withdrawals, Samples and Free Gifts
      21. 7.21 Income Tax
      22. 7.22 Provident Fund: Employee’s and Employer’s Contribution
    8. Summary
    9. Key Terms
    10. References
    11. Objective-type Questions
    12. Short Answer-type Questions
    13. Essay-type Questions
    14. Exercises
  15. Chapter 5b. Capital and Revenue – Expenditures and Receipts
    1. Objective 1: Meaning of Capital Expenditure and Examples
      1. 1.1 Examples
    2. Objective 2: Meaning and Features of Revenue Expenditure
      1. 2.1 Examples
    3. Objective 3: Deferred Revenue Expenditure
    4. Objective 4: Revenue Expenditure: To be Treated as Capital Expenditures
    5. Objective 5: Distinction Between Capital Expenditure and Revenue Expenditure
    6. Objective 6: Capital and Revenue Receipts
      1. 6.1 Concepts of Capital and Revenue Receipts
    7. Objective 7: Meaning of Capitalised Expenditure
    8. Objective 8: Capital Profit and Revenue Profit
      1. 8.1 Concepts of Capital Profit and Revenue Profit
    9. Objective 9: Capital and Revenue Losses
      1. 9.1 Capital and Revenue Payments
    10. Summary
    11. Key Terms
    12. References
    13. Objective-type Questions
    14. Short Answer-type Questions
    15. Essay-type Questions
    16. Exercises
  16. Chapter 6. Accounting for Not-for-profit Organisations
    1. Objective 1: Meaning and Salient Features of NPOs
      1. 1.1 Salient Features of NPOs
    2. Objective 2: Meaning and Features of Receipts and Payments Account
      1. 2.1 Receipts and Payments Account
      2. 2.2 Features of Receipts and Payments Account
    3. Objective 3: Preparation of Receipts and Payments Account
    4. Objective 4: Meaning and Main Features of Income and Expenditure Account
      1. 4.1 Meaning
      2. 4.2 Main Features of Income and Expenditure Account
    5. Objective 5: Distinction Between Receipts and Payments Account and Income and Expenditure Account
    6. Objective 6: Accounting Treatment of Some Special Items
      1. 6.1 Subscription
      2. 6.2 Category II: Life Membership
      3. 6.3 Treatment of Fund Income (and Fund Expenses)
      4. 6.4 Legacy
      5. 6.5 Donations
      6. 6.6 Endowment Fund
      7. 6.7 Entrance Fees
      8. 6.8 Aid from Government and Other Institutions
      9. 6.9 Capital Expenditures
      10. 6.10 Current Years’ Expenditure
    7. Objective 7: Preparation of Income and Expenditure Account from Receipts and Payments Account
    8. Objective 8: Preparation of Opening and Closing Balance Sheets
      1. 8.1 Preparation of “Opening Balance Sheet”
      2. 8.2 Preparation of “Closing Balance Sheet”
    9. Objective 9: Preparation of Receipts and Payments Account from Income and Expenditure Account
      1. 9.1 Preparation of Various Accounts
    10. Objective 10: Preparation of Receipts and Expenditure Account for Professionals
      1. 10.1 General Features
      2. 10.2 Steps in the Preparation of Accounts of Professional Firm
    11. Summary
    12. Key Terms
    13. References
    14. Objective-type Questions
    15. Short Answer-type Questions
    16. Essay-type Questions
    17. Exercises
    18. Question Bank – Exercises
  17. Chapter 7. Financial Statements from Incomplete Records (Single Entry System)
    1. Objective 1: Meaning and Definition of Single Entry System
    2. Objective 2: Salient Features of Incomplete Records System
      1. 2.1 Advantages of Incomplete Double Entry System
      2. 2.2 Disadvantages of Single Entry System
    3. Objective 3: Differences Between Single Entry System (Incomplete Records System) and Double Entry System
    4. Objective 4: Preparation of Accounts (or) Ascertainment of Profit or Loss from Incomplete Records
      1. 4.1 Statement of Affairs Method (or) Net Worth Method
    5. Objective 5: Distinction Between Statement of Affairs and Balance Sheet
    6. Objective 6: Accounting Treatment
      1. 6.1 Model 1: Computation of Capital
      2. 6.2 Model 2: Ascertainment of Profit/Loss
      3. 6.3 Model 3: Ascertainment of Opening Capital, Closing Capital and Profit/Loss
      4. 6.4 Model 4: Computation of Net Profit (After Adjustments)
      5. 6.5 Model 5: Cheques Issued but not Presented
      6. 6.6 Model 6: Bank Transactions – Adjustments
      7. 6.7 Model 7: Net Increase in Assets or Net Decrease in Liabilities
      8. 6.8 Incomplete Records and Partnership Firms
      9. 6.9 Model 8: Single Entry and Partnership Firm
    7. Objective 7: Method 2: Conversion Method (or) Final Accounts Method
      1. 7.1 Meaning
      2. 7.2 Conversion Method Features
      3. 7.3 Procedure Under Conversion Method
      4. 7.4 Model: Calculation of Missing Figure – Opening Stock
      5. 7.5 Model: Calculation of Missing Figure – Purchases
      6. 7.6 Model: Calculation of Missing Figure – Credit Sales
      7. 7.7 Model: Calculation of Missing Figure – Bills Receivable
      8. 7.8 Cost of Goods Sold and Memorandum Trading Account
      9. 7.9 Revenue Expenses
      10. 7.10 Revenue Income
      11. 7.11 Model: Computation of Missing Figures (Combination of More Than One Item)
      12. 7.12 Model: Preparation of Trading and Profit and Loss Account Together with Balance Sheet
    8. Summary
    9. Key Terms
    10. References
    11. Objective-type Questions
    12. Short Answer-type Questions
    13. Essay-type Questions
    14. Exercises
  18. Chapter 8. Measurement of Business Income
    1. Objective 1: Definition of Income
    2. Objective 2: Revenues and Expenses
      1. 2.1 Revenues
      2. 2.2 Expenses
    3. Objective 3: Meaning of Measurement of Business Income
      1. 3.1 Net Worth Method
    4. Objective 4: Measurement of “Net Income” or “Net Profit”
    5. Objective 5: Measurement of Net Income: Matching of Incomes and Expenses Method
      1. 5.1 Incomes and Expenses
    6. Objective 6: Comparison of “Net Worth Method” and “Matching Costs Against Revenue Method”
    7. Objective 7: Procedure for Measurement of Business Income
    8. Objective 8: Salient Features of Business Income
    9. Objective 9: Meaning of Economic Concept of Income
    10. Objective 10: Salient Features of Economic Concept of Income
    11. Objective 11: Procedure to Measure Economic Income
    12. Summary
    13. Key Terms
    14. Reference
    15. Objective-type Questions
    16. Short Answer-type Questions
    17. Essay-type Questions
  19. Chapter 9. Revenue Recognition and Recognition of Expenses
    1. Objective 1: Definition of Revenue
      1. 1.1 Meaning
    2. Objective 2: Factors Derived from the Definition
    3. Objective 3: Timing of Revenue Recognition
      1. 3.1 Recognition of Revenue
    4. Objective 4: Guidelines for Revenue Recognition
    5. Objective 5: Revenue Recognition at the Point of Sale
    6. Objective 6: A Method to Ascertain Recognition of Revenue
      1. 6.1 Proportionate or Percentage of Completion Method
      2. 6.2 Installment Method of Revenue Recognition
      3. 6.3 Recognition at Completion of Production Process
      4. 6.4 Revenue Recognition on Holding of Assets
      5. 6.5 On Service Contracts
    7. Objective 7: Concept of Recognition of Expenses (Costs)
      1. 7.1 Guidelines for Expense Recognition
    8. Objective 8: AS–9 Revenue Recognition
      1. 8.1 Introduction: Salient Features of AS–9
      2. 8.2 Definitions
      3. 8.3 Explanation
      4. 8.4 Sale of Goods
      5. 8.5 Rendering of Services
      6. 8.6 Effect of Uncertainties on Revenue Recognition
      7. 8.7 Accounting Standard
    9. Objective 9: Appendix
    10. Summary
    11. Key Terms
    12. Reference
    13. Objective-type Questions
    14. Short Answer-type Questions
    15. Essay-type Questions
  20. Chapter 10. The Nature of Depreciation
    1. Objective 1: Definition of Depreciation
    2. Objective 2: Characteristic Features of “Depreciation”
    3. Objective 3: Accounting Concept of Depreciation
    4. Objective 4: Salient Features
    5. Objective 5: The Causes of Depreciation
      1. 5.1 Physical Features
      2. 5.2 Functional Factors
    6. Objective 6: Need for Depreciation
    7. Objective 7: Factors Affecting Amount of Depreciation
    8. Objective 8: Depreciation on Assets
    9. Objective 9: Accounting Treatment
      1. 9.1 Method 1: By Charging to Asset Account Directly
      2. 9.2 Method 2: By Creating Provision for Depreciation
    10. Objective 10: Methods of Providing (Allocating) Depreciation
      1. 10.1 Straight Line Method: (or) Fixed (or) Equal Installment Method: Meaning, Formula, Merits, Demerits and Suitability
      2. 10.2 Written Down Value Method (or) Diminishing Balance Method (or) Reducing Balance Method: Meaning, Formula, Merit, Demerit and Suitability
      3. 10.3 Provision for Depreciation/Accumulated Depreciation: Passing of Entries and Preparation of Accounts
      4. 10.4 Procedure for Change in the Method of Depreciation
      5. 10.5 Annuity Method: Meaning and Features
      6. 10.6 Sinking Fund Method (or) Depreciation Fund Method: Meaning, Merits, Demerits and Suitability
    11. Objective 11: Choice of Depreciation Method
    12. Objective 12: Is Depreciation a Source of Income or Expense?
    13. Objective 13: Provision: Meaning, Examples, Objectives, Accounting Treatment and Disclosure
      1. 13.1 Meaning
      2. 13.2 Examples of Provisions
      3. 13.3 Objectives
      4. 13.4 Accounting Treatment
      5. 13.5 Disclosure
    14. Objective 14: Reserves
      1. 14.1 Meaning
      2. 14.2 Objectives
      3. 14.3 Distinction Between Provision and Reserve
      4. 14.4 Types of Reserves
    15. Objective 15: Provision for Repairs and Renewals: Meaning and Accounting Treatment
    16. Objective 16: Accounting Standard (AS)–6
      1. 16.1 Salient features of AS–6 (Revised)
    17. Summary
    18. Key Terms
    19. References
    20. Objective-type Questions
    21. Short Answer-type Questions
    22. Essay-type Questions
    23. Exercises
  21. Chapter 11. Inventory – Valuation
    1. Objective 1: Meaning
    2. Objective 2: Significance of Inventory Valuation
    3. Objective 3: Inventory Record Systems
      1. 3.1 Periodic Inventory System
      2. 3.2 Perpetual Inventory System
      3. 3.3 Distinction Between Periodic Inventory System and Perpetual Inventory System
    4. Objective 4: Valuation of Inventories
      1. 4.1 Important Concepts
      2. 4.2 Cost Formulae
    5. Objective 5: Specific Identification of Costs
    6. Objective 6: First-in-first-out Method
      1. 6.1 Merits
      2. 6.2 Demerits
    7. Objective 7: Last-in-first-out Method (LIFO)
      1. 7.1 Merits
      2. 7.2 Demerits
    8. Objective 8: Weighted Average Method
      1. 8.1 Procedure Under Periodic Inventory System
      2. 8.2 Procedure Under Perpetual Inventory System
    9. Objective 9: Choice of Inventory Valuation Methods
    10. Objective 10: Valuation of Inventory as on the Balance Sheet
      1. 10.1 Method I
      2. 10.2 Method II
    11. Objective 11: Accounting Standard-2 (Revised)
    12. Summary
    13. Key Terms
    14. References
    15. Objective-type Questions
    16. Short Answer-type Questions
    17. Essay-type Questions
    18. Exercises
  22. Chapter 12. Accounting for Hire-Purchase and Installment
    1. Objective 1: Definition of Hire-Purchase System
      1. 1.1 Explanation of Important Terms
      2. 1.2 Contents of Hire-Purchase Agreement
      3. 1.3 Salient Features of Hire-Purchase System
    2. Objective 2: Process of Calculation and Allocation of Interest
      1. 2.1 Situation 1
      2. 2.2 Situation 2
      3. 2.3 Situation 3
      4. 2.4 Situation 4
      5. 2.5 Situation 5
      6. 2.6 Situation 6
      7. 2.7 Rule 78
    3. Objective 3: Accounting Treatment
      1. 3.1 Journal Entries in the Books of the Buyer (or) Hire Purchase
      2. 3.2 Accounting Treatment in the Books of Hire Vendor
    4. Objective 4: Default and Repossession
      1. 4.1 Full Repossession
      2. 4.2 Partial Repossession
      3. 4.3 Accounting Treatment
    5. Objective 5: Format of Hire-Purchase Sales Register for the Year Ended
    6. Objective 6: Methods of Ascertaining Profit
      1. 6.1 Debtors Method
      2. 6.2 Stock and Debtors System
    7. Objective 7: Installment System
      1. 7.1 Purchase System
      2. 7.2 Accounting Treatment
    8. Objective 8: Concepts of Operating and Financial Lease
      1. 8.1 Meaning
      2. 8.2 Lessor
      3. 8.3 Lessee
      4. 8.4 Leasing Agreement
      5. 8.5 Suitability
    9. Objective 9: Salient Features of Lease
    10. Objective 10: Advantages of Learning
    11. Objective 11: Disadvantages of Leasing
    12. Objective 12: Accounting Treatment Relating to Leases as per AS–19
      1. 12.1 Finance Lease (or) Full Pay-out Lease
      2. 12.2 Operating Lease (or) Non-pay-out Lease
    13. Objective 13: Distinction Between Financial Lease and Operating Lease
    14. Summary
    15. Key Terms
    16. References
    17. Objective-type Questions
    18. Short Answer-type Questions
    19. Essay-type Questions
    20. Exercises
  23. Chapter 13. Accounting for Inland Branches
    1. Objective 1: Meaning of a Branch
      1. 1.1 Main Objectives of Opening a Branch
    2. Objective 2: Branch Accounting
    3. Objective 3: Accounting for Inland Dependent Branches
      1. 3.1 Salient Features of Dependent Branches
      2. 3.2 Accounting Treatment for Dependent Branches
    4. Objective 4: Accounting System
      1. 4.1 Debtors Method
    5. Objective 5: Stock-Debtors System or Stock and Debtors Method
      1. 5.1 Meaning of Stock-Debtors System
      2. 5.2 Different Accounts and their Purpose
      3. 5.3 Branch Stock Account
      4. 5.4 Branch Adjustment Account
      5. 5.5 Branch Expenses
      6. 5.6 Stock Reserve Account
      7. 5.7 Accounting Treatment
      8. 5.8 Final Account System
      9. 5.9 Item to be Shown in the Branch Account
      10. 5.10 Wholesale Branch Method
    6. Objective 6: Independent Branches
      1. 6.1 Accounting for Fixed Assets
      2. 6.2 Accounting for Goods in Transit
      3. 6.3 Accounting for Inter-branch Transactions
    7. Objective 7: Incorporation of Branch Trial Balance
      1. 7.1 Detailed Consolidated Method
      2. 7.2 Abridged Consolidated Method
      3. 7.3 Separate Final Accounts Method
    8. Summary
    9. Key Terms
    10. References
    11. Objective-type Questions
    12. Short Answer-type Questions
    13. Essay-type Questions
    14. Exercises
  24. Chapter 14. Dissolution of Partnership
    1. Objective 1: Dissolution of Partnership
      1. 1.1 When May a Partnership be Dissolved?
      2. 1.2 Dissolution of a Firm
      3. 1.3 Dissolution by Notice
      4. 1.4 Dissolution by Court
    2. Objective 2: Distinction Between Dissolution of Partnership and Dissolution of Firm
    3. Objective 3: Treatment of Some Accounts at the Time of Dissolution
      1. 3.1 Treatment of Loss: Section 48 (a)
      2. 3.2 Treatment of Assets: Section 48 (b)
      3. 3.3 Treatment of Firm’s Debts and Private Debts
    4. Objective 4: Accounting Treatment
      1. 4.1 Preparation of Realisation Account
      2. 4.2 Meaning and Features of Realisation Account
      3. 4.3 Procedure to Record Entries for Various Items and Preparation of Realisation Account
    5. Objective 5: Accounting Treatment on Dissolution
      1. 5.1 Account Treatment on Dissolution of a Firm
      2. 5.2 Realisation Account
      3. 5.3 Cash or Bank Account (Ledger)
      4. 5.4 Partner’s Capital Account
      5. 5.5 Partners Loan Account: (Loan by Partner)
    6. Objective 6: Goodwill
      1. 6.1 Accounting Treatment
      2. 6.2 Unrecorded Assets and Liabilities
      3. 6.3 Memorandum Balance Sheet
    7. Objective 7: Preparation of Balance Sheet as on the Date of Dissolution
      1. 7.1 Preparation of Balance Sheet as on the Date of Dissolution
      2. 7.2 Accounting Procedure
      3. 7.3 Assets and Liabilities Taken Over by Partner(s) Accounting Procedure
    8. Objective 8: Return of Premium (Goodwill) (Section 51)
      1. 8.1 Gift of Firm – Asset to Partners
      2. 8.2 Gift to a Partner
    9. Objective 9: Insolvency of Partner(s)
      1. 9.1 Meaning of Insolvency
      2. 9.2 Garner vs. Murray Rule
      3. 9.3 Students Should Remember these Criteria
      4. 9.4 Accounting Procedure when Capitals are Fixed
      5. 9.5 Accounting Procedure when Capitals are Fluctuating or Floating
    10. Objective 10: All Partners are Insolvent
      1. 10.1 Acconting Treatment
      2. 10.2 Use of Algebraic Equation
    11. Objective 11: Minor and Partnership Dissolution
      1. 11.1 Minor’s Status in Partnership Dissolution
      2. 11.2 Minor and Insolvency
      3. 11.3 Garner vs. Murray Rule in Case of Commission to a Partner as Expense of the Business
    12. Objective 12: Sale of Partnership Firm to a Limited Company
      1. 12.1 Meaning
      2. 12.2 Salient Features
      3. 12.3 Meaning and Computation of “Purchase Consideration”
      4. 12.4 Procedure
      5. 12.5 Accounting Entries
      6. 12.6 Purchase Consideration
    13. Objective 13: Piecemeal Distribution
      1. 13.1 Meaning of Piecemeal Distribution
      2. 13.2 Proportionate or Surplus Capital Method
      3. 13.3 Maximum Possible Loss Method
    14. Summary
    15. Key Terms
    16. References
    17. Objective-type Questions
    18. Short Answer-type Questions
    19. Exercises
  25. Chapter 15. Financial Statement Analysis
    1. Objective 1: Meaning of Financial Statement Analysis
    2. Objective 2: Types or Classification of Financial Statement Analysis
      1. 2.1 Type 1 – According to the Material Used
      2. 2.2 Type 2 – According to Modus Operandi
      3. 2.3 Type 3 – According to the Objective of the Analysis
      4. 2.4 Distinction Between Horizontal Analysis and Vertical Analysis
      5. 2.5 Distinction Between Inter-firm and Intra-firm Analysis
    3. Objective 3: Process of Financial Statement Analysis
      1. 3.1 Re-arrangement
      2. 3.2 Comparison
      3. 3.3 Analysis
      4. 3.4 Interpretation
    4. Objective 4: Purposes and Significance of Financial Analysis
      1. 4.1 Earning Capacity
      2. 4.2 Managerial Efficiency
      3. 4.3 Solvency
      4. 4.4 Inter-firm Comparison
      5. 4.5 Budgets and Forecasts
    5. Objective 5: Tools or Techniques of Financial Statement Analysis
      1. 5.1 Comparative Financial Statements
      2. 5.2 Common Size Financial Statements
      3. 5.3 Trend Percentages
      4. 5.4 Ratio Analysis
      5. 5.5 Cash Flow Statement
      6. 5.6 Funds Flow Statement
    6. Objective 6: Comparative Financial Statements
      1. 6.1 Objectives of Comparative Financial Statements
      2. 6.2 Meaning of Comparative Balance Sheet
    7. Objective 7: Comparative Income Statement – Special Features
      1. 7.1 Objectives of Comparative Income Statements
      2. 7.2 Preparation of Comparative (P and L A/c) Income Statement
      3. 7.3 Percentage of Change is Calculate this Way
      4. 7.4 Computation of Percentage Change
    8. Objective 8: Meaning of Common Size Statements
      1. 8.1 Preparation of Common Size Balance Sheet
      2. 8.2 Accounting Treatment of Sources and Uses of Funds in the Preparation of Common Size Statements (Balance Sheet)
    9. Objective 9: Meaning and Computation of Trend Percentages
      1. 9.1 Trend Ratios
      2. 9.2 Steps Involved in Computation of Trend Percentages
      3. 9.3 Limitations of Trend Ratios (Percentage)
    10. Objective 10: Various Users of Financial Statements
    11. Objective 11: Limitations of Financial Statement Analysis
    12. Objective 12: Financial Statements of a Company – Types and Formats
      1. 12.1 Contents of Annual Report
      2. 12.2 Report of Board of Directors
      3. 12.3 Auditor’s Report
      4. 12.4 Balance Sheet
      5. 12.5 Profit and Loss Account
      6. 12.6 Notes to Accounts
      7. 12.7 Cash Flow Statement
      8. 12.8 Segment Report
    13. Summary
    14. Key Terms
    15. References
    16. Objective-type Questions
    17. Short Answer-type Questions
    18. Essay-type Questions
    19. Exercises
  26. Chapter 16. Accounting Ratios
    1. Objective 1: Meaning of Ratio Analysis – A Systematic Use of Ratios to Interpret the Performance of Entities
      1. 1.1 Meaning of Ratio and Ratio Analysis
      2. 1.2 Ratio Analysis
    2. Objective 2: Advantages and Uses of Ratio Analysis
    3. Objective 3: Limitations of Ratio Analysis
    4. Objective 4: Classification of Ratios or Types of Ratios
    5. Objective 5: Liquidity Ratios
      1. 5.1 Current Ratio – Relationship of Current Assets to Current Liabilities
      2. 5.2 Liquid Ratio or Quick Ratio or Acid Test Ratio
      3. 5.3 Absolute Liquid Ratio – Relationship of Absolute Liquid Assets to Liquid Liabilities
    6. Objective 6: Solvency Ratios (Long-term Solvency)
      1. 6.1 Debt Equity Ratio
      2. 6.2 Total Assets to Debt Ratio
      3. 6.3 Proprietary Ratio
    7. Objective 7: Profitability Ratios
      1. 7.1 Gross Profit Ratio
      2. 7.2 Net Profit Ratio
      3. 7.3 Operating Profit Ratio
      4. 7.4 Operating Ratio
    8. Objective 8: Activity Ratios
      1. 8.1 Inventory Turnover Ratio
      2. 8.2 Debtors Turnover Ratio or Receivables Turnover Ratio
      3. 8.3 Working Capital Turnover Ratio
    9. Objective 9: Ratios: Advanced Level
      1. 9.1 Turnover Ratio
      2. 9.2 Cash Cycle – Combined Effect of Turnover Ratios
      3. 9.3 Leverage Ratios
      4. 9.4 Profitability Ratios
    10. Summary
    11. Key Terms
    12. References
    13. Objective-type Questions
    14. Multiple-choice Questions
    15. Short Answer-type Questions
    16. Essay-type Questions
    17. Exercises
  27. Chapter 17. Cash Flow Statement
    1. Objective 1: Meaning of Cash Flow and Cash Flow Statement
    2. Objective 2: Uses of Cash Flow Statement
    3. Objective 3: Limitations of Cash Flow Statement
      1. 3.1 Meaning of Cash Flow, Cash and Cash Equivalents
    4. Objective 4: Preparation of Cash Flow Statements
    5. Objective 5: Cash Flow Statement: Preparation
      1. 5.1 Direct Method Pro-forma or Format of Cash Flow Statement for the Year Ended
      2. 5.2 Indirect Method Pro-forma or Format Cash Flow Statement for the Year Ended
      3. 5.3 Calculation of Cash Outflow on Purchases
      4. 5.4 Cash Outflow on Expenses Incurred
      5. 5.5 Adjustments
      6. 5.6 Cash Flow from Investing Activities
      7. 5.7 Cash Flow from Investing Activities
      8. 5.8 Cash Flow from Financing Activities
      9. 5.9 Accounting Treatment of Special Items
    6. Objective 6: Important Steps (stages) in the Preparation of Cash Flow Statement
      1. 6.1 Stage I: A. Cash Flow from Operating Activities
      2. 6.2 Stage II: B. Cash Flow from Investing Activities
      3. 6.3 Stage III: C. Cash Flow from Financing Activities
      4. 6.4 Stage IV: Net Increase/Decrease in Cash and Cash Equivalents
      5. 6.5 Stage V: Cash and Cash Equivalents at the Beginning of the Year to be Added
      6. 6.6 Stage VI: Cash and Cash Equivalents at the End of the Year to be Recorded
    7. Objective 7: Some Important Hints
    8. Summary
    9. Key Terms
    10. References
    11. Objective-type Questions
    12. Short Answer-type Questions
    13. Essay-type Questions
    14. Exercises
  28. Acknowledgements
  29. Copyright