Tag: Auditing

Bills receivable book is a subsidiary book used to record all bills of exchange and promissory notes received by a business from its customers. These financial instruments serve as evidence of a customer’s obligation to pay a specified amount at a future date. The bills receivable book captures essential details, including the date of receipt, customer name, amount, due date, and any discounts applicable. This systematic record helps businesses manage their receivables, monitor cash flow, and track payments effectively, ensuring timely collection of funds and accurate financial reporting.

Features of Bills Receivable Book:

• Detailed Record Keeping

The bills receivable book captures detailed information about each bill received, including the date of receipt, the name of the customer, the amount, the due date, and any applicable discounts. This thorough documentation aids in precise tracking and management of receivables.

• Facilitates Cash Flow Management

By maintaining a bills receivable book, businesses can monitor their expected cash inflows effectively. It provides visibility into when payments are due, allowing companies to plan their cash flow and manage working capital more efficiently. This is crucial for maintaining financial stability and ensuring that the business can meet its obligations.

• Tracking of Due Dates

The bills receivable book enables businesses to track the due dates of various bills. This feature is vital for ensuring timely collection of payments. By being aware of upcoming due dates, businesses can follow up with customers and reduce the risk of late payments, which can impact cash flow.

• Identification of Discounts

The bills receivable book allows businesses to record any discounts that may be applicable to the bills received. This feature helps businesses optimize their cash collections by ensuring they take advantage of any early payment discounts offered by customers, enhancing profitability.

• Management of Customer Relationships

By systematically recording bills receivable, businesses can improve their communication and relationships with customers. The book serves as a reference point for discussions about outstanding payments, fostering transparency and trust between the business and its clients.

• Integration with Accounting Systems

The bills receivable book is often integrated with a company’s accounting software. This integration ensures that all receivables are accurately reflected in the financial statements, allowing for seamless reconciliation of accounts and better financial reporting.

• Facilitates Financial Analysis

The information recorded in the bills receivable book can be used for financial analysis. Businesses can analyze their receivables turnover ratio, assess customer payment behaviors, and make informed decisions regarding credit policies and risk management. This analytical capability supports strategic planning and enhances overall business performance.

Example Entries of Bills Receivable Book

Date	Bill No.	Customer Name	Amount	Due Date	Status
2024-10-01	BR001	John Doe	$1,000	2024-12-01	Unpaid
2024-10-05	BR002	Jane Smith	$500	2024-11-05	Unpaid
2024-10-10	BR003	XYZ Corp.	$2,000	2025-01-10	Paid
2024-10-15	BR004	ABC Ltd.	$750	2024-12-15	Unpaid
2024-10-20	BR005	Global Traders	$1,500	2025-01-20	Paid

Bills Payable Book

Bills Payable Book is a subsidiary book used to record all bills of exchange and promissory notes that a business has issued to its suppliers. These documents represent the business’s obligation to pay a specified amount at a future date. The bills payable book captures crucial details, including the date of issuance, supplier name, amount, due date, and any discounts applicable. This systematic record helps businesses manage their liabilities, track payment schedules, and ensure timely payments to suppliers. By maintaining an accurate bills payable book, businesses can enhance cash flow management and uphold strong supplier relationships.

Features of Bills Payable Book:

• Comprehensive Record Keeping

The bills payable book meticulously documents all details related to bills payable, including the date of issuance, supplier name, amount owed, due date, and any applicable discounts. This thorough documentation facilitates accurate tracking and management of outstanding liabilities, ensuring that the business remains organized and informed about its financial obligations.

• Effective Cash Flow Management

Maintaining a bills payable book aids businesses in managing their cash flow more effectively. By keeping track of upcoming payments, businesses can better plan their cash outflows and allocate funds accordingly. This feature is essential for maintaining liquidity, as it helps ensure that the business can meet its financial obligations on time, thus avoiding late fees or penalties.

• Due Date Tracking

One of the most critical features of the bills payable book is its ability to track due dates for each bill. By having a clear record of when payments are due, businesses can prioritize their payments and ensure timely settlements. This helps to build positive relationships with suppliers and can lead to better credit terms in the future.

• Management of Supplier Relationships

The bills payable book supports the management of supplier relationships by providing a reliable reference for payment schedules. By consistently honoring payment commitments, businesses can foster goodwill with suppliers, which may lead to favorable credit terms or discounts in future transactions. Maintaining healthy supplier relationships is crucial for the ongoing success of any business.

• Integration with Accounting Systems

Typically, the bills payable book is integrated with the business’s accounting software. This integration allows for seamless updates to the general ledger, ensuring that all liabilities are accurately reflected in financial statements. This feature enhances the overall efficiency of financial reporting and facilitates better decision-making.

• Facilitation of Financial Analysis

The information contained within the bills payable book can be invaluable for financial analysis. Businesses can assess their payment patterns, evaluate their liabilities, and analyze the accounts payable turnover ratio. This analysis supports informed decision-making regarding credit policies, supplier negotiations, and cash management strategies.

• Control Over Credit Limits

By maintaining a detailed bills payable book, businesses can monitor their outstanding obligations and ensure they do not exceed their credit limits with suppliers. This feature aids in avoiding over-leveraging and helps maintain financial discipline. By keeping track of all payables, businesses can make informed decisions regarding additional purchases and manage their credit risk effectively.

Example Entries of Bills Payable Book:

Date	Bill No.	Supplier Name	Amount	Due Date	Status
2024-10-01	BP001	ABC Supplies	$1,200	2024-11-01	Unpaid
2024-10-05	BP002	XYZ Wholesalers	$800	2024-10-25	Paid
2024-10-10	BP003	Global Traders	$1,500	2024-11-10	Unpaid
2024-10-12	BP004	Best Goods	$950	2024-12-01	Unpaid
2024-10-15	BP005	Supply Co.	$600	2024-11-15	Paid

Key differences between Bills Receivable Book and Bills Payable Book

Feature	Bills Receivable Book	Bills Payable Book
Nature	Asset	Liability
Purpose	Track incoming payments	Track outgoing payments
Recorded by	Business Receivers	Business Payables
Customer Relationship	Receivable from Customers	Payable to Suppliers
Financial Impact	Increases Cash Flow	Decreases Cash Flow
Status	Unpaid/Paid Receivables	Unpaid/Paid Payables
Documentation	Bills and Promissory Notes	Bills and Promissory Notes
Due Date Monitoring	Collection Dates	Payment Dates
Financial Statements	Accounts Receivable	Accounts Payable
Management Focus	Revenue Collection	Expense Management
Analysis	Receivables Turnover	Payables Turnover
Integration	Revenue Accounts	Expense Accounts

Accounting refers to the systematic process of recording, classifying, summarizing, and interpreting financial transactions of a business or organization. It provides essential information about financial performance and position, aiding in decision-making and compliance with regulations. Key elements include assets, liabilities, equity, revenues, and expenses.

Functions of Accounting

1. Keeping Systematic Records

Accounting is to report the results of most business events. Hence, its main function is to keep a systematic record of these events. This function embraces recording transactions in journal and subsidiary books like cashbook, sales book etc., posting them to ledger accounts and ultimately preparing the financial statements [final accounts].

2. Communicating the Results

The second main function of accounting is to communicate the financial facts of the enterprise to the various interested parties like owners, investors, creditors, employees, government, and research scholars, etc.

The purpose of this function is to enable these parties to have better understanding of the business and take sound and realistic economic decisions.

3. Meeting the Legal Requirements

Accounting aims at fulfilling the legal requirements, especially of the tax authorities and regulators of the business. It discharges this function in accordance with certain fundamental truths and uniform enforcement of generally accepted accounting principles.

4. Protecting the Properties of the Business

Accounting helps protecting the property of the business.

5. Planning and Controlling the Business Activities

Accounting also helps planning future activities of an enterprise and controlling its day-to-day operations. This function is done mainly to promote maximum operational efficiency.

Attributes of Accounting

1. Accounting is both an art and science

Analysis, interpretations and communication of financial results are the art of accounting requiring special knowledge, experience and judgment. As a science, accounting is governed by certain principles, concepts, conventions and policies. But it is not an exact science like other physical sciences; rather it is an exacting science.

2. It involves recording, classifying, and summarizing

Recording means systematically writing down in account books the transactions and events reasonably soon after their occurrence.

Classifying is the process of grouping of transactions or entries of one nature at one place. This is done by opening accounts in a book called ledger. Summarizing involves the preparation of reports and statements from the classified data [i.e., ledger]. This involves the preparation of final accounts.

3. It records transactions in terms of money

This provides a common measure of recording and increases the understanding of the state of affairs of the business.

4. It records only those transactions and events, which are financial in character.

Non-financial events, howsoever important they may be for the business, are not recorded in accounting.

5. It is the art of interpreting the results of operations

It aids to determine the financial position of the enterprise, the progress it has made, and how well it is getting along.

6. It involves communication

The results of analysis and interpretation are communicated to the management and other interested parties.

Reconciliation of Cost and Financial Accounts is process to find all the reasons behind disagreement in profit which is calculated as per cost accounts and as per financial accounts. There are lots of items which are shown in the profit and loss account only when we make it as per financial accounting rules. There are lots of items which are shown in costing profit and loss account only when we calculate profit as per cost accounting.

Suppose, we have taken the profit or loss as per financial accounts, we adjust it as per cost accounts. In the end of adjustments, we see same profit as per cost accounts. If we have taken profit as per cost account, we have to adjust items as per financial accounts. For this purpose, we make reconciliation Statement.

(a) Items included only in financial accounts

There are number of items which appear only in financial accounts, and not in cost accounts, since they neither do nor relate to the manufacturing activities, such as,

(i) Purely financial charges, reducing financial profit

• Losses on capital assets
• Stamp duty and expenses on issue and transfer of stock, shares and bonds
• Loss on investments.
• Discount on debentures, bonds, etc.
• Fines and penalties,
• Interest on bank loans.

(ii) Purely financial income, increasing financial profit

• Rent received
• Profit on sale of assets
• Share transfer fee
• Share premium
• Interest on investment, bank deposits.
• Dividends received.

(iii) Appropriation of profit – donations and charities.

(b) Items included only in the cost accounts

There are very few items which appear in cost accounts, but not in financial accounts. Because, all expenditure incurred, whether for cash or credit, passes though the financial accounts, and only relevant expenses are incorporated in cost accounts. Hence, only item which can appear in cost accounts but not in financial accounts is a notional charge, such as,

• Interest on capital, which is not paid but included in cost accounts to show the notional cost of employing capital, or
• Rent i.e. charging a notional rent of premises owned by the proprietor.

(c) Items accounted for differently in cost accounting and financial accounting

(i) Overhead: In cost accounts, overheads are applied to cost units at predetermined rates based on estimates, and the amount recovered may differ from actual expenses incurred. If such under-or over-recovery of overheads are not charged off to costing profit and loss account, the profits on two sets of books will differ.

(ii) Stock valuation: In financial accounts, stock is valued at lower of cost or market value. In cost accounts, stock is valued at cost adoption one of the methods, such as FIFO, LIFO, average etc., which is suitable to the unit. Thus, there may be difference in stock valuation, which will reflect difference in profit between the two sets of books.

(iii) Depreciation: If different basis is adopted for charging depreciation in cost accounts as compared to financial accounts, the profits will vary.

1. Estimates and Actuals:

The cost can be computed either on actual or estimated basis. Since cost accounts are meant to function as a control device it will be appropriate to adopt estimated costing or preferably standard costing system while preparing cost accounts. Estimates or standards can be nearer to the actuals but in most cases they cannot be the same. This necessarily means that the profit shown by the cost accounts is bound to be different from the profit shown by the financial accounts.

Following are some of the important items the costs of which may be different in financial books and costing books:

(a) Direct Materials:

The estimated or standard cost of the direct materials purchased or consumed in the production process may be different from the actual costs. This difference will be due to change in price or quantity or both.

(b) Direct Labour:

The estimated or standard cost of direct labour may be different from the actual costs because of differences in wage rates or hours of work or both. Sometimes, workers might have to be paid more due to increased dearness allowance, pay revision, bonus etc. This will cause difference between the profits shown by the two sets of books.

(c) Overheads:

In cost accounts the recovery of overheads is generally based on estimates while in financial accounts the actual expenses incurred are recorded. This results in under-or over-recovery of overheads.

The under-recovery or over-recovery of overheads may be carried forward to the next period or may be charged by a supplementary rate (positive or negative) or transferred to costing Profit and Loss Account. In case the under-recovery or over-recovery of overheads has been carried forward to the next period, the profit as shown by the costing books will be different from the profit as shown by the financial books. Such variation may be due to over-or-under charging of factory, office or selling and distribution overheads.

(d) Depreciation:

Different methods of charging depreciation may be adopted in cost and financial books. In financial books depreciation may be charged according to fixed installment method or diminishing balance method etc. while in cost accounts machine hour rate or any other method may be used. This is also an item of overheads and may be one of the reasons of difference between the overheads charged in financial accounts and overheads charged in cost accounts.

2. Valuation of Stocks:

(a) Raw materials: In financial accounts stock of raw materials is valued at cost or market price, whichever is less, while in cost accounts stock can be valued on the basis of FIFO or LIFO or any other method. Thus, the figure of stock may be inflated in cost or financial accounts.

(b) Work-in-progress: Difference may also exist regarding mode of valuation of work-in-progress. It may be valued at prime cost or factory cost or cost of production. The most appropriate mode of valuation is at factory cost in cost accounts. In financial accounts work-in-progress may be valued after considering a part of administrative expenses also.

(c) Finished goods: Under financial accounts, stock of finished goods is valued at cost or market price whichever is lower. In cost accounts, finished stock is generally valued at total cost of production. If the circumstances warrant, prime cost or factory cost may also be taken as the basis for valuing the stock of finished goods.

Thus, mode of valuation of stocks gives rise to different results in the two sets of books. Greater valuation of opening stocks in cost accounts means less profit as per cost accounts and vice versa. Greater valuation of closing stocks in cost accounts means more profit as per cost accounts and vice versa.

3. Items Included in Financial Accounts Only:

There are certain items which are included in the Financial Accounts but not in the Cost Accounts.

These include the following:

(a) Appropriation of profits e.g., provision for taxation, transfer to reserves, goodwill, preliminary expenses written off.

(b) Purely financial charges e.g., losses on sale of investments; penalties and fines, expenses on transfer of company’s office.

(c) Purely financial incomes e.g., interest received on bank deposits, profits made on the sale of investments, fixed assets, transfer fees received etc.

4. Items Included in Cost Accounts Only:

There are certain notional items which are excluded from the financial accounts but are charged in the cost accounts:

(i) Charge in lieu of rent where premises are owned.

(ii) Depreciation on an asset even when the book value of the asset is reduced to a negligible figure.

(iii) Interest on capital employed in production but upon which no interest is actually paid (this will be the case when the firm decides to include interest in the overheads).

The above items will reduce the profits in Cost Accounts as compared to that in Financial Accounts.

5. Abnormal Gains and Losses:

Abnormal gains or losses may completely be excluded from cost accounts or may be taken to costing profit and loss account. In financial accounts such gains and losses are taken to profit and loss account. As such, in the former case costing profit/loss will differ from financial profit/loss and adjustment will be required. In the latter case, there will be no difference on this account between costing profit or loss and financial profit or loss.

Therefore, no adjustment will be required on this account. Examples of such abnormal gains and losses are abnormal wastage of materials e.g., by theft or fire etc., cost of abnormal idle time, cost of abnormal idle facilities, exceptional bad debts, abnormal gain in manufacturing through processes (when actual production exceeds normal production).

The need for reconciliation will not arise in case of a business where Integral or Integrated Accounting System is in use as there will be only one set of books both for financial and costing records. But where there are separate sets of books, reconciliation is imperative.

Preparation of Reconciliation Statement or Memorandum Reconciliation Account:

A Reconciliation Statement or a Memorandum Reconciliation Account should be drawn up for reconciling profits shown by the two sets of books. Results shown by any sets of books may be taken as the base and necessary adjustment should be made to arrive at the results shown by the other set of books.

The technique of preparing a Reconciliation Statement as well as a Memorandum Reconciliation account is discussed below:

The preparation of reconciliation statement involves the following steps:

(1) Profit as per any set of books (cost or financial) may be taken as the base. This is as a matter of fact the starting point for determining the profit as shown by the other set of books after making suitable adjustments taking into consideration the causes of difference.

(2) The effect of the particular cause of difference should be studied on the profits shown by the other set of books.

(3) In case, the cause has resulted in an increase in the profit shown by other set of books, the amount of such increase should be added to the profit as per the former set of books which has been taken as the base.

(4) In case, the cause has resulted in a decrease in the profit shown by other set of books, the amount of such decrease should be subtracted from the profit as per the former set of books which has been taken as the base.

A reconciliation statement can be prepared to reconcile, on the following basis, the profits shown by two sets of books:

1. Profit as per cost accounts may be taken as the base. In other words, the profit as shown by the financial books can be found out if suitable adjustments are made in this figure of profit after taking into account the above causes of difference.
2. Works overheads have been charged more in financial accounts than those in cost accounts. This means profit as shown by the financial accounts is less than the profit as shown by the cost accounts by Rs. 500 (the amount of under-recovery). Since profit as per cost accounts has been taken as the base, the amount of Rs. 500 should be subtracted from this base profit to arrive at the profit as shown by the financial accounts.
3. The inclusion of interest on capital as an expense has resulted in decrease in profits as shown by financial books. In other words, the profit as shown by the cost books is more than the profit as shown by the financial books by Rs. 500 (the amount of interest). The amount should, therefore, be subtracted from the base profit.
4. Dividend received has been credited in financial books. This means the profit as shown by the financial books is more than the profit as shown by the cost books by Rs. 1,000. The amount should, therefore, be added to the profit as shown by the cost books,
5. No charge is made in financial books for rent on owned buildings. The amount has however been charged in the cost books. It means the profit as shown by the financial books is higher than the profit as shown by the cost books by this amount. The amount, therefore, should be added to the profit as shown by the cost books.

Causes of Difference between Profit Shown by Cost Accounts and Financial Accounts:

There are certain items, which appear in financial books only and not recorded in cost accounting books. Similarly, there may be some items, which appear in cost accounts only and do not find place in the financial books.

The following items of expenditures/losses appear only in financial books:

1. Interest on bank loans, mortgage, debentures, etc.
2. Expenses on stamp duty, discount and other expenses relating to issue and transfer of shares and debentures.
3. Fines and penalties.
4. Loss on sale of fixed assets.
5. Loss on sale of investments.

The following items of incomes/gains are recorded in the financial books only:

1. Interest received on bank deposits and other investments.
2. Dividend received on investment in shares.
3. Rental income, etc.
4. Fees received on issue and transfer of shares, etc.
5. Profit on sale of fixed assets
6. Profit on sale of investments.

Besides the above, there are special or abnormal items of expenditure and income, which are not included in the cost of production. If they are included, cost ascertainment will not be correct.

These are:

1. Excessive or avoidable rejections.
2. Defective work and spoilage.
3. Heavy losses of stores.
4. Loss due to theft or pilferage.
5. Loss on account of natural calamities.
6. Abnormal idle time.
7. Unexpected large incomes and other abnormal gains.

Other reasons for the difference between the results of two sets of books are:

1. Wages: Often in cost accounts, direct wages are charged on the basis of predetermined rates whereas in financial accounts actual expenditure on wages is recorded.
2. Overheads: In cost accounts, overheads are generally absorbed on the basis of a predetermined overhead rate whereas in financial accounts actual expenditure on overheads is recorded.
3. Depreciation: Depreciation may be charged on different bases in financial and cost accounts. For example, in financial accounts, it may be charged according to written down value method recognized by the Income Tax Act whereas in cost accounts it may be charged on the basis of the life of the machine in terms of production hours.
4. Valuation of Closing Stock: Different methods of valuation of closing stock adopted in cost and financial accounts also cause difference between the results of two sets of books. In financial accounts, the method generally followed is cost or market price, whichever is less, while in cost accounts only cost is the basis.
5. Notional Charges: Sometimes, notional charges such as interest on capital, rent for own premises, salary of owner-manager, etc. are included in cost accounts. But they do not appear in financial accounts, as there are no actual out go on these items.

Procedure for Reconciliation:

The following procedure may be followed for reconciliation:

1. Ascertain items, which appear in financial accounts but not in cost accounts.
2. Ascertain items that appear in cost accounts only but not in financial accounts.
3. Determine the extent of difference between actual indirect expenses as recorded in financial books and the amount of overheads recovered in cost books.
4. Compare the figures of valuation of stock of raw materials, work-in- progress, stores and finished goods as shown in cost accounts and financial accounts and ascertain the amount of difference.
5. Ascertain other items, which are shown in cost as well as financial accounts but differ in value.
6. Prepare Reconciliation Statement, which is also called Memorandum Reconciliation Statement.
7. Start with the profit as per cost accounts and reach the profit as per financial accounts.
8. Add or deduct, as the case may be, items which differ from financial accounts, and items which are recorded in financial accounts and not in cost accounts. A brief explanation may be given in respect of each addition or deduction.
9. All items of expenditures/losses, which appear in financial accounts but not in cost accounts will be deducted and all items of income/gains appearing in financial accounts but not in cost accounts will be added. Reverse will be the treatment of items appearing in cost accounts but not appearing in financial accounts.

In the same way adjustment will be made for difference between any items appearing in both the accounts. For example, expenses overcharged in cost accounts will be added to and expenses undercharged in cost accounts will be deducted from the profit as per cost accounts to arrive at the profit as per financial accounts.

10. If reconciliation statement is started with profit as per financial accounts and ended with profit as per cost accounts, the above additions and deductions will be reversed.
11. After making necessary additions and deductions, the resultant figure is profit as per financial accounts.
12. The above reconciliation may be carried out by preparing a memorandum reconciliation account
13. In case of a memorandum reconciliation account, profit as per cost accounts will be the first item on the credit side and items that are added in the reconciliation statement will also appear on the credit side. All the items, which are deducted in the reconciliation statement, will be written on the debit side. The balancing figure will be profit as per financial accounts.

There are mainly two system of maintaining cost accounts namely:

(1) Integral System:

Under this system one set of accounts is operated which contains both financial and cost accounts. In such a system there is no need to prepare a separate reconciliation statement to reconcile the cost and financial profits,

(2) Non-Integral System of Accounting:

Under this system, separate cost and financial accounts are maintained. Hence the profit or loss disclosed by the two sets of accounts may differ. In such cases, it becomes necessary that cost and financial accounts are reconciled. If it is not reconciled, the two sets of accounts would provide conflicting information on the basis of which unwise policy decision may be taken.

Need for Reconciliation:

The need for reconciliation of profits as per Financial Accounts and profits as per Cost Accounts arises due to the following reasons:

(1) Numerical Accuracy: Reconciliation of cost and financial accounts help in checking the arithmetic accuracy of two sets of accounts.

(2) Standardisation: In the long ran standardization is achieved in policies relating to valuation of stock, depreciation or appreciation and absorption of overheads.

(3) Knowing the reasons: Reconciliation reveals the reasons for difference in profits or losses between cost and financial accounts.

(4) Effective internal control: It becomes easier for management to take effective decisions after knowing the reasons for the changes in profits/loss by reconciling the cost and financial accounts.

Reasons for Differences in Profit or Loss Shown by Cost Accounts and Profit or Loss Shown by Financial Accounts:

The causes of / reasons for differences between profit shown by financial accounts and cost accounts are:

(a) Pure financial charges included in financial accounts but excluded from cost accounts.

(b) Appropriation of profits included in financial accounts, but not included in cost accounts.

(c) Pure financial incomes and profits included in financial accounts, but not included in cost accounts.

(d) Notional charges included only in cost accounts, but not in financial accounts.

(e) Under or over absorption of overheads.

(f) Abnormal wastage/efficiency in respect of materials and labour.

(g) Difference in the rate of/methods of depreciation adopted in the two sets of accounts.

(h) Difference in the bases of stock valuation etc.

Reconciliation Statement:

Reconciliation means tallying the profits/losses reveled by both set of accounts. Reconciliation Statement is a statement which shows the reasons for the differences between profit and losses as shown by the cost accounts with that of the profits/losses as shown by the financial accounts.

One of the most significant accounting concepts is “Concept of Income”. Similarly, measurement of a business income is also an important function of an accountant.

In General term, payment received in lieu of services or goods are called income, for example, salary received by any employee is his income. There may be different type of incomes like Gross income, Net income, National Income, and Personal income, but we are here more concerned for a business income. Surplus revenue over expenses incurred is called as “Business Income.”

Objectives of Net Income

Following are the important objectives of a net income:

• Historical income figure is the base for future projections.
• Ascertainment of a net income is necessary to give portion of profit to employees.
• To evaluate the activities, which give higher return on scarce resources are preferred. It helps to increase the wealth of a firm.
• Ascertainment of a net income is helpful for paying dividends to the shareholders of any company.
• Return of income on capital employed, gives an idea of overall efficiency of a business.

Definition of Income

The most authentic definition is given by the American Accounting Association as −

“The realized net income of an enterprise measures its effectiveness as an operative unit and is the change in its net assets arising out of a (a) the excess or deficiency of revenue compared with related expired cost, and (b) other gains or losses to the enterprise from sales, exchange or other conversion of assets:”.

According to the American Accounting Association, to be as business income, income should be realized. For example, to be a business income, only appreciation in value of assets of a company is not enough, for this, asset has really been disposed of.

Accounting Period

For the measurement of any income concerns, instead of a point of time, a span of time is required. Creditors, investors, owners, and government, all of them require systematic accounting reports at regular and proper intervals. The maximum interval between reports is one year, as it helps a businessman to take any corrective action.

An accounting period concept is directly related to matching concept and realization concept; in the absence of any of them, we could not measure income of the concerns. On the basis of matching concept, expenses should be determined in a particular accounting period (usually a year) and matched with the revenue (based on realization concept) and the result will be income or loss of the accounting period.

Accounting Concept and Income Measurement

The measurement of accounting income is the subject to several accounting concepts and conventions. Impact of accounting concepts and convention on measurement of the accounting income is given below −

Conservatism

Where an income of one period may be shifted to another period for the measurement of income is called as ‘conservatism approach.’

According to the convention of conservatism, the policy of playing safe is followed while determining a business income and an accountant seeks to ensure that the reported profit is not over stated. Measurement of a stock at cost or market price, whichever is less is one of the important examples as applied to measurement of income. But it must be insured that providing excessive depreciation or excessive provisions for a doubt full debt or excessive reserve should not be there.

Consistency

According to this concept, the principle of consistency should be followed in accounting practice. For example, in the treatment of assets, liabilities, revenues, and expenses to insure the comparison of accounting results of one period with another period.

Therefore, the accounting profession and the corporate laws of most of the counties require that financial statement must be made out on the basis that the figures stated are consistent with those of the preceding year.

Entity Concept

Proprietor and business are the two separate and different entities according to the entity concept. For example, an interest on capital is business expenditure, but for a proprietor, it is an income. Thus, we cannot treat a business income as personal income or vice-versa.

Going Concern Concept

According to this concept, it is assumed that business will continue for a long time. Thus, charging depreciation on a Fixed Asset is based on this concept.

Accrual Concept

According to this concept, an income must be recognized in the period in which it was realized and costs must be matched with the revenue of that period.

Accounting Period

It is desirable to adopt a calendar year or natural business year to know the results of business.

Computation of Business Income

To compute business income, following are the two methods:

Balance Sheet Approach

Comparison of the closing values (Assets minus outsider’s liabilities) of a firm with the values at the beginning of that accounting period is called as Balance Sheet approach. In above value, an addition to capital will be subtracted and addition of drawings will be added while computing the business income of a firm. Since, income is calculated with the help of Balance Sheet hence called as Balance Sheet approach.

Transaction Approach

Transactions are mostly related to production or the purchase of goods and the sale of goods and all these transactions directly or indirectly related to the revenue or to the cost. Therefore, surplus collection of the revenue by selling goods, spent over for production or purchasing the goods is the measure of income. This system is widely followed by the enterprises where double entry system adopted.

Measurement of Business Income

There are following two factors which are helpful in the estimation of an income:

• Revenues: Sale of goods and rendering of services are the way to generate revenue. Therefore, it can be defined as consideration, recovered by the business for rendering services and goods to its customers.
• Expenses: An expense is an expired cost. We can say the cost that have been consumed in a process of producing revenue are the expired cost. Expenses tell us how assets are decreased as a result of the services performed by a business.

Measurement of Revenue

Measurement of the revenue is based on an accrual concept. Accounting period, in which revenue earned, is the period of revenue accrues. Therefore, a receipt of cash and revenue earned are the two different things. We can say that revenue is earned only when it is actually realized and not necessarily, when it is received.

Measurement of Expenses

• In case of delivery of goods to its customers is a direct identification with the revenue.
• Rent and office salaries are an indirect association with the revenue.

There are four types of events (given below) that need proper consideration about as an expense of a given period and expenditure and cash payment made in connection with those items:

• Expenditure, which are expenses of the current year.
• Some expenditure, which are made prior to this period and has become expense of the current year.
• Expenditure, which is made this year, becomes expense in the next accounting periods. For example, purchase of fixed assets and depreciation in next up-coming years.
• Expense of this year, which will be paid in next accounting years. For example, outstanding expenses.

Matching Concept

It is a problem of recognition of revenue during the year and allocation of expired cost to the period.

Recognition of Revenue

Most frequent criteria, which are used in recognition of the revenue are as follows:

• Point of Sale: Transfer of ownership title to a buyer is point of sale, in case of sale of commodity.
• Receipt of Payment: Criteria of cash basis is widely used by the attorneys, physicians, and other professionals in which revenue is considered to be earned at the time of collection of cash.
• Instalment Method: Instalment method is widely used in retail trading specially in consumer durables. In this system, revenue earned is treated in the same manner as is used in any other credit sale.
• Gold Mines: The accounting period in which gold is mined is the period of revenue earned.
• Contracts: Degree of contract completion, especially in long term construction contracts is based on percentage of completion of a contract in a single accounting year. It is based on total estimated life of the contract.

Allocation of Costs

Matching of expired revenue and expired costs on a periodic time basis is the satisfactory basis of allocation of cost as stated earlier.

Measurement of Costs

Measurement of costs can be determined by:

• Historical Costs: To determine periodic net income and financial status, historical cost is important. Historical cost actually means outflow of cash or cash equivalents for goods and services acquired.
• Replacement Costs: Replacing any asset at the current market price is called as replacement cost.

Basis of Measurement of Income

Following are the two significant basis of measurement of income:

• Accrual Basis: In an accrual basis accounting, incomes are recognized in a company’s books at the time when revenue is actually earned (however, not essentially received) and expenses is recorded when liabilities are incurred (however, not essentially paid for). Further, expenses are compared with revenues on the income statement when the expenses expire or title has been transferred to the buyer, and not at the time when the expenses are paid.
• Cash Basis: In a cash basis accounting, revenues and expenses are recognized at the time of physical cash is actually received or paid out.

Change in the Basis of Accounting

We have to pass adjustment entries whenever accounting records change from cash basis to accrual basis or vice versa specially in respect of the prepaid expenses, outstanding expenses, accrued income, income received in advance, bad debts & provisions, depreciation, and stock in trade.

Features of Accounting Income

• Matching revenue with related cost or expenses is a matter of accounting income.
• Accounting income is based on an accounting period concept.
• Expenses are measured in terms of a historical cost and determination of expenses is based on a cost concept.
• It is based on a realization principal.
• Revenue items are considered to ascertain a correct accounting income.

Accounting is a vital function for any business, enabling the systematic recording, analysis, and reporting of financial transactions. It serves various stakeholders, including managers, investors, regulators, and other interested parties. The field of accounting is diverse, comprising several branches, each specializing in different aspects of financial reporting and analysis.

1. Financial Accounting

Financial accounting focuses on the preparation of financial statements that provide an overview of a company’s financial performance and position. This branch adheres to Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS). Financial accountants are responsible for preparing key financial statements, including the balance sheet, income statement, and cash flow statement. These reports are used by external stakeholders, such as investors and creditors, to assess the company’s financial health and make informed decisions.

2. Management Accounting

Management accounting, also known as managerial accounting, focuses on providing internal management with relevant financial information for decision-making, planning, and control. Unlike financial accounting, which is aimed at external users, management accounting involves the analysis of costs, budgets, and performance metrics. Management accountants prepare detailed reports, such as variance analysis, cost-benefit analysis, and forecasting reports, to help managers make strategic business decisions. This branch emphasizes future projections and operational efficiency.

3. Cost Accounting

Cost accounting is a subset of management accounting that specifically deals with the analysis and control of costs associated with production and operations. It involves the collection, analysis, and reporting of cost information to help businesses manage their expenses effectively. Cost accountants work on determining the cost of goods sold (COGS), analyzing production costs, and identifying areas for cost reduction. By providing detailed insights into cost behavior and profitability, cost accounting enables businesses to optimize their pricing strategies and improve overall efficiency.

4. Auditing

Auditing is the branch of accounting that involves the independent examination of financial statements and records to ensure accuracy and compliance with accounting standards and regulations. Auditors may be internal or external; internal auditors focus on evaluating and improving the effectiveness of risk management and internal controls, while external auditors assess the fairness and reliability of financial statements. The audit process provides assurance to stakeholders that the financial information presented is accurate and free from material misstatements.

5. Tax Accounting

Tax accounting focuses on the preparation, analysis, and filing of tax returns and compliance with tax laws and regulations. This branch involves understanding complex tax codes and regulations to optimize tax liabilities for individuals and businesses. Tax accountants work on tax planning, ensuring that clients take advantage of available deductions and credits while complying with legal requirements. They may also represent clients in tax disputes and audits conducted by tax authorities.

6. Forensic Accounting

Forensic accounting combines accounting, auditing, and investigative skills to examine financial information for legal purposes. Forensic accountants are often involved in legal disputes, fraud investigations, and criminal cases. They analyze financial records, transactions, and statements to identify discrepancies, misstatements, or fraudulent activities. Forensic accounting provides valuable insights in legal proceedings, and its findings can be used as evidence in court.

7. Government Accounting

Government accounting is the branch dedicated to the financial management and reporting of government entities and agencies. This branch focuses on ensuring accountability and transparency in the use of public funds. Government accountants prepare budgets, manage public funds, and produce financial statements in accordance with governmental accounting standards. They also work on compliance with regulations and provide reports to oversight bodies, ensuring that public resources are used efficiently and effectively.

8. Nonprofit Accounting

Nonprofit accounting focuses on the financial management of nonprofit organizations. This branch recognizes the unique aspects of nonprofits, including the need to account for donations, grants, and contributions. Nonprofit accountants prepare financial statements that demonstrate accountability to donors and stakeholders. They also manage budgeting, fundraising, and compliance with regulations specific to nonprofit organizations, ensuring that funds are used effectively to further the organization’s mission.

9. International Accounting

International accounting deals with accounting practices and regulations across different countries and cultures. It encompasses the study of international financial reporting standards (IFRS), the impact of globalization on accounting practices, and the challenges faced by multinational corporations in managing financial reporting across various jurisdictions. International accountants must navigate the complexities of currency exchange, taxation, and regulatory compliance in multiple countries, ensuring that companies adhere to local laws while providing consistent financial information.

10. Accounting Information Systems

Accounting Information Systems (AIS) focuses on the technology and systems used to collect, store, and process financial data. This branch involves the design and implementation of accounting software and systems that facilitate the efficient management of financial information. AIS professionals work to ensure the integrity, security, and accessibility of financial data, allowing businesses to leverage technology for better financial decision-making.

Accounting Information Concept refers to the generation, recording, and communication of financial data that assists stakeholders in making informed decisions. This information includes detailed reports like balance sheets, income statements, and cash flow statements. It provides insights into a company’s financial health, performance, and cash position. Accounting information is crucial for internal users, such as management, for planning and control, as well as external users like investors, creditors, and regulatory agencies to assess financial viability and compliance.

Users of Accounting Information:

1. Owners:

The primary objective of accounting is to provide necessary information to the owners relating to their business. For example, the shareholders of a company are interested in the accounting information with a view to ascertaining the profitability and financial strength of the company.

2. Management:

In large business organizations there is a separation of the ownership and management functions. The managements of such concerns are more concerned with the accounting information because of their accountability to the owners for better performance of their concerns.

3. Creditors:

Trade creditors, debenture holders, bankers, and other lending institutions are interested in knowing the short-term as well as long-term position of the company. The financial statements provide the required information for ascertaining such position.

4. Regulatory Agencies:

Various governments and other agencies use accounting reports not only as a basis for tax assessment but also in evaluating how well various business concerns are operating under regulatory framework.

5. Government:

Governments all over the world are using financial statements for compiling statistics concerning business units, which, in turn help in compiling national accounts.

6. Potential Investors:

Investors use the information in accounting reports to a greater extent in order to determine the relative merits of various investment opportunities.

7. Employees:

Employees are interested in the earnings of the enterprise because their pay hike and payment of bonus depend on the size of profits earned.

8. Researchers:

The research scholars in their research in accounting theory as well as business affairs and practices also use accounting data. In addition, those with indirect concern about business enterprise include financial analysts and advisors, financial press and reporting, trade associations, labour unions, consumers, and public at large. Thus, the list of actual and potential users of accounting information is large.

Internal users of Accounting information:

Internal users are that individual who runs, manages and operates the daily activities of the inside area of an organization.

1. Owners and Stockholders.
2. Directors,
3. Managers,
4. Officers
5. Internal Departments.
6. Employees
7. Internal Auditor.

External Users of Accounting information are:

• Creditors
• Invstors
• Government
• Trading partners.
• Regulatory agencies.
• International standardization agencies.

Accounting Cycle Diagram:

Steps in the accounting cycle

• Transactions

Financial transactions start the process. If there were no financial transactions, there would be nothing to keep track of. Transactions may include a debt payoff, any purchases or acquisition of assets, sales revenue, or any expenses incurred.

• Journal Entries

With the transactions set in place, the next step is to record these entries in the company’s journal in chronological order. In debiting one or more accounts and crediting one or more accounts, the debits and credits must always balance.

• Posting to the General Ledger (GL)

 The journal entries are then posted to the general ledger where a summary of all transactions to individual accounts can be seen.

• Trial Balance

At the end of the accounting period (which may be quarterly, monthly, or yearly, depending on the company), a total balance is calculated for the accounts.

• Worksheet

When the debits and credits on the trial balance don’t match, the bookkeeper must look for errors and make corrective adjustments that are tracked on a worksheet.

• Adjusting Entries

At the end of the company’s accounting period, adjusting entries must be posted to accounts for accruals and deferrals.

• Financial Statements

The balance sheet, income statement, and cash flow statement can be prepared using the correct balances.

• Closing

The revenue and expense accounts are closed and zeroed out for the next accounting cycle. This is because revenue and expense accounts are income statement accounts, which show performance for a specific period. Balance sheet accounts are not closed because they show the company’s financial position at a certain point in time.

Accounting Cycle: General Ledger

General ledger serves as the eyes and ears of bookkeepers and accountants and shows all financial transactions within a business. Essentially, it is a huge compilation of all transactions recorded on a specific document or on accounting software, which is the predominant method nowadays. For example, if you want to see the changes in cash levels over the course of the business and all their relevant transactions, you would look at the general ledger, which shows all the debits and credits of cash.

Accounting Cycle Fundamentals

To fully understand the accounting cycle, it’s important to have a solid understanding of the basic accounting principles. You have to know about revenue recognition (when a company can record sales revenue), the matching principle (matching expenses to revenues), and the accrual principle.

Balance Sheet is a financial statement that provides a snapshot of a company’s financial position at a specific point in time. It lists the company’s assets, liabilities, and shareholders’ equity, demonstrating the financial structure and solvency of the business. It follows the accounting equation:

Assets = Liabilities + Shareholders’ Equity

Key Features of a balance sheet:

1. Assets

Assets represent the resources owned by the business that hold economic value and can be converted into cash or used to produce goods and services. Assets are classified into two categories:

• Current Assets: These are short-term assets that can be converted into cash within a year, such as cash, inventory, and accounts receivable.
• Non-Current (Fixed) Assets: Long-term assets that are not expected to be converted into cash within a year, such as property, equipment, and investments.

This classification helps stakeholders assess the liquidity and operational efficiency of the business.

2. Liabilities

Liabilities are the financial obligations or debts that a company owes to external parties. Like assets, liabilities are classified into:

• Current Liabilities: Short-term debts that are due within one year, such as accounts payable, short-term loans, and accrued expenses.
• Non-Current Liabilities: Long-term debts that extend beyond one year, such as long-term loans, bonds payable, and deferred tax liabilities.

3. Shareholders’ Equity

Shareholders’ equity represents the owners’ residual interest in the company after liabilities have been deducted from assets. It consists of:

• Paid-Up Capital: The amount of money invested by shareholders through the purchase of stock.
• Retained Earnings: Profits that have been reinvested in the company rather than distributed as dividends.

4. Double-Entry Principle

Balance sheet follows the double-entry accounting system, where every transaction affects at least two accounts. This ensures that the balance sheet remains balanced, with assets always equaling the sum of liabilities and shareholders’ equity. This principle provides accuracy and transparency, ensuring that financial statements are reliable for stakeholders.

5. Specific Point in Time

Balance sheet reflects a company’s financial position at a particular date. It acts as a “snapshot” of the company’s financial situation on the last day of the reporting period. This feature enables comparison of financial positions at different points in time.

6. Liquidity and Solvency

Balance sheet is crucial for assessing a company’s liquidity and solvency. By analyzing the relationship between current assets and current liabilities, stakeholders can evaluate the company’s ability to meet short-term obligations (liquidity). By examining the ratio of total assets to total liabilities, stakeholders can assess the company’s long-term solvency and financial stability.

7. Hierarchy and Classification

Balance sheet items are presented in a hierarchical and classified manner, starting with the most liquid items. Current assets and liabilities are listed first, followed by non-current assets and liabilities. This structure makes it easier for stakeholders to understand the company’s financial position and prioritize key items, such as cash flow and debt obligations.

8. Financial Ratios and Analysis

Balance sheet is essential for calculating various financial ratios, which provide valuable insights into the company’s performance and financial health. Common ratios are:

• Current Ratio:

Current assets divided by current liabilities, showing the company’s short-term liquidity.

• Debt-to-Equity Ratio:

Total liabilities divided by shareholders’ equity, indicating the company’s financial leverage and risk.

• Return on Assets (ROA):

Net income divided by total assets, measuring the efficiency of asset usage in generating profits.

Example of Balance Sheet:

XYZ Corporation	Balance Sheet	As of December 31, 2024
Assets
Current Assets
Cash and Cash Equivalents	$50,000
Accounts Receivable	$75,000
Inventory	$120,000
Prepaid Expenses	$5,000
Total Current Assets	$250,000
Non-Current Assets
Property, Plant & Equipment (PPE)	$500,000
Accumulated Depreciation	($100,000)
Investments	$30,000
Total Non-Current Assets	$430,000
Total Assets	$680,000
Liabilities and Equity
Current Liabilities
Accounts Payable	$45,000
Short-Term Loans	$35,000
Accrued Expenses	$10,000
Total Current Liabilities	$90,000
Non-Current Liabilities
Long-Term Debt	$200,000
Total Non-Current Liabilities	$200,000
Total Liabilities	$290,000
Shareholders’ Equity
Common Stock	$250,000
Retained Earnings	$140,000
Total Shareholders’ Equity	$390,000
Total Liabilities and Equity	$680,000

Explanation of Key Figures:

• Current Assets: Resources that are expected to be converted to cash or used up within one year, such as cash, accounts receivable, and inventory.
• Non-Current Assets: Long-term assets like property, plant, equipment (PPE), and investments, reduced by accumulated depreciation.
• Current Liabilities: Obligations due within one year, such as accounts payable and short-term loans.
• Non-Current Liabilities: Long-term debts, like loans due after more than one year.
• Shareholders’ Equity: The owners’ claim on the assets after all liabilities have been paid, consisting of common stock and retained earnings.

Profit and Loss account, also known as an income statement, is a financial report that summarizes a company’s revenues, costs, and expenses over a specific period, typically a fiscal quarter or year. It provides insights into the organization’s operational performance by showing how much money was earned and spent, ultimately revealing the net profit or loss for that period. Key components include total revenue, cost of goods sold (COGS), gross profit, operating expenses, and net income. This account is crucial for stakeholders to assess the financial health and profitability of the business.

Features of Profit and Loss Account:

1. Revenue Recognition

One of the primary features of a profit and loss account is its ability to capture revenue generated from sales. Revenue is recognized when earned, following accounting principles such as the accrual basis. This ensures that the income statement reflects the actual performance of the business within the reporting period, regardless of when cash is received.

2. Cost of Goods Sold (COGS)

The profit and loss account includes the cost of goods sold, which represents the direct costs associated with the production of goods or services sold during the period. COGS is deducted from total revenue to determine gross profit. This feature is essential for evaluating the efficiency of production processes and pricing strategies, as it directly impacts profitability.

3. Gross Profit Calculation

Gross profit is a key figure in the profit and loss account, calculated by subtracting COGS from total revenue. This metric indicates how well a company generates profit from its core business activities. A high gross profit margin suggests effective cost management and pricing strategies, while a low margin may indicate inefficiencies or pricing challenges.

4. Operating and Non-Operating Income/Expenses

Profit and loss account categorizes income and expenses into operating and non-operating sections. Operating income derives from primary business activities, while non-operating income includes gains from investments or other ancillary activities. This separation helps stakeholders assess the company’s performance based on its core operations, providing insights into sustainability and operational efficiency.

5. Net Income or Loss

Profit and loss account culminates in net income or loss, calculated by subtracting total expenses from total revenue. This figure represents the company’s overall profitability for the period and is a crucial indicator of financial health. A positive net income indicates profitability, while a negative figure signals a loss, prompting further analysis and potential corrective actions.

6. Time Period Specificity

Profit and loss account covers a specific accounting period, such as a month, quarter, or year. This time-based approach allows for comparative analysis across different periods, enabling stakeholders to assess trends in revenue, expenses, and profitability. This feature aids in forecasting future performance and making informed business decisions.

Components of Profit and Loss Account:

1. Revenue (Sales)

The total amount generated from selling goods or services during the accounting period. This figure may include both cash and credit sales. It represents the company’s primary source of income and sets the foundation for calculating profitability.

2. Cost of Goods Sold (COGS)

The direct costs incurred in producing goods or services sold during the period, including costs of materials, labor, and manufacturing overhead. COGS is subtracted from total revenue to determine gross profit, indicating the efficiency of production and pricing strategies.

3. Gross Profit

Calculated by subtracting COGS from total revenue. Gross profit reflects the profit made from core business operations before considering operating expenses. It provides insight into the company’s operational efficiency and profitability from its primary activities.

4. Operating Expenses

These include all costs necessary to run the business that are not directly tied to the production of goods. This category encompasses selling expenses, administrative expenses, and general expenses. Operating expenses are deducted from gross profit to calculate operating income, helping assess the company’s efficiency in managing overhead.

5. Operating Income

The profit generated from core business operations, calculated by subtracting total operating expenses from gross profit. This metric indicates the profitability of the company’s core activities, excluding non-operating income and expenses.

6. Other Income and Expenses

This section includes income and expenses not directly related to core business operations, such as interest income, gains from asset sales, interest expenses, and losses from investments. These items provide a broader view of overall profitability, reflecting the impact of non-core activities.

7. Income Tax Expense

The estimated taxes owed on the income generated during the period, calculated based on applicable tax rates. Accounting for tax expenses allows stakeholders to see the net income after tax obligations, providing a clearer picture of profitability.

8. Net Income (Net Profit or Loss)

The final figure on the profit and loss account, calculated by subtracting total expenses (including taxes) from total revenue. It represents the overall profitability of the company. Net income is a crucial indicator of a company’s financial health, influencing investor decisions and management strategies.

Example of Profit and Loss Account:

Profit and Loss Account	For the Year Ended December 31, 2024
Revenue
Sales Revenue	$750,000
Total Revenue	$750,000
Cost of Goods Sold (COGS)
Opening Inventory	$80,000
Add: Purchases	$300,000
Less: Closing Inventory	($60,000)
Cost of Goods Sold	$320,000
Gross Profit	$430,000
Operating Expenses
Selling Expenses	$70,000
Administrative Expenses	$50,000
Depreciation Expense	$30,000
Total Operating Expenses	$150,000
Operating Income	$280,000
Other Income and Expenses
Interest Income	$5,000
Interest Expense	($15,000)
Total Other Income/Expenses	($10,000)
Income Before Tax	$270,000
Income Tax Expense	($54,000)
Net Income	$216,000

Explanation of Key Figures:

• Total Revenue: The total sales generated by the company.
• Cost of Goods Sold (COGS): Direct costs associated with the production of goods sold during the period.
• Gross Profit: Revenue minus COGS, indicating profitability from core operations.
• Operating Expenses: Costs incurred in running the business that are not directly tied to production.
• Operating Income: Gross profit minus operating expenses, reflecting profit from core operations.
• Other Income and Expenses: Non-operating items that affect overall profitability.
• Net Income: The final profit after all expenses and taxes, representing the company’s overall profitability.

Unit 1 {Book}
Meaning and Scope of Accounting	VIEW
Need and Development of Accounting	VIEW
Book-Keeping and Accounting	VIEW
Persons interested in Accounting	VIEW
Branches of accounting	VIEW
Objectives of accounting	VIEW
Accounting Standards: Meaning and Scope	VIEW
AS1: Disclosure of Accounting Policies	VIEW
AS6: Depreciation Accounting	VIEW
AS9: Revenue Recognition	VIEW
AS10: Accounting of fixed assets	VIEW
International Financial Reporting Standards (IFRS)	VIEW
IAS1: Presentation of financial Statements	VIEW
IAS2: Inventories	VIEW
Accounting in Computerized Environment: Introduction, features, Applications in various areas of Accounting	VIEW

Unit 2 Accounting Transactions {Book}
Accounting cycle	VIEW
Journal	VIEW
Journal proper	VIEW
Opening and closing entries	VIEW
Relationship between journal and Ledger	VIEW
Rules Regarding posting	VIEW
Trial Balance	VIEW
Subsidiary books	VIEW
Purchase, Purchase returns, Sales, Sale return and cash book- Triple column	VIEW
Bank Reconciliation Statement	VIEW
Expenditure and Classification: Capital, revenue and deferred Revenue expenditure	VIEW
Unusual expenses, Effects of error	VIEW
Receipts: Capital receipts, Revenue receipt	VIEW
Difference between Capital receipts and Revenue receipt	VIEW
Revenue, Capital P/L	VIEW

Unit 3 Depreciation Accounting and Trial Balance {Book}
Depreciation Accounting	VIEW
Straight Line Methods	VIEW
Reducing Balancing Methods	VIEW
Trial Balance	VIEW
Preparation of Trial Balance	VIEW

Unit 4 {Book}
Final accounts of a Sole Proprietor	VIEW
Rectification of errors	VIEW
Manufacturing Account	VIEW
Trading Account	VIEW
Profit and Loss account	VIEW
Balance Sheet	VIEW
Final Accounts in Horizontal format	VIEW
Schedule 6 of Companies Act 1956	VIEW