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

Dr BRR

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

Dr BRR

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

Dr BRR

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.

Dr BRR

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