INTRODUCTION © ee is : Saas has In all activities (whether business activities or non-business activities) Put ee mene Use (whether business organisations like a manufacturing entity or trading CNA reas organisations like schools, colleges, hospitals, libraries, clubs, temples, political Pe Ry Mi MOL MEU MUCUS meee] emcee Cc omcelnls for us resources. In other words, wherever money/economic resource eMC cx ee Coe required to account for it. Accounting is often called the language Peis sauce Cra EMER tee CL on cae Ce Rucci eRe teaser Pee aun 1.0 MEANING OF:-ACCOUNTING aeae 4 buat Bie VPyui Ce) Veta Ue Dee MUR Rees LM ed PES Me and ii eee terms of money, transactions and events which are, Uae interpreting the results thereof.” [American Institute of Certified Public Accountants (AICPA) (1941, MODERN DEFINITION Baler RRL Pee RMU eM UR Ud ee Mr MCO MUL mete. ee tua eRe UR Ue Relate Om eee [American Accounting Association (AAA) (1966) Pee CUE Oakes e ee UUU of communication Itis an information system which communicates the accounting information to the users (whethe PCE Rem Ce) ORC Ur OR LCm Cell a Meee CR UML Te) accounting may be viewed as under: eee pees Classifying Cee CS ny STU) Information to financial terms Analysing * ree ate) Decree te Ree see eden lee Re Eo a lcd ee RoEe ACTIVITIES COVERED UNDER Pere eT enue eld WU PR alle Re ete aie ll Tl alee hel bat een ac oes See eu ce iy ere ether internal or external) is a happening pene tetera aC 4 ] ene Un gu TT. Aula nein aah ecpeemanrint ae (e.g. TATA Steels, Birla Industries Ltq ena . , Ge eRe Mua an kaooue ed a Caan eT Ate ee OP el Pee ANC Mec ie ne economic unit that perfor Reliance Industries Ltd. Int 2. Measuring the Identified T! Pee ae) PR Au eect he PR Ad Ce ec eee ree ee aR eaten transactions to group pene Were eee ue AUC Ra eC lel nets ne eee Age mene Pee aE nt Puta ea Te ae 4. Classifying: It is concerned with Premed aa TR eT CU oc le Re Pe a eM ct Un cca PT en er el clk Ra cece 5. Summarising: It is concerned with the summarization of the Cec Riu alae manner useful to the users. This function involves the preparation of Financial Statements PRO nT ere Mei tl PO eek Rac EA ee Poeedie rene e R Hs Pear MUR reo a of the enterprise. It provides the basis f ee lor 7. Interpreting: It is concerned with explaining the meaning and significance of the relationshi so established by the analysis. Nowadays, the first six functions are performed by electro ad data processing devices and the accountant has to concentrate mainly on the interpret tion Peace eect a a Peers el eMC aU Cut REBUM ‘ on Pree Re Cie Ru nen ual reel oe Cur se een Pentel ken a Ree Aa RC) aris he happened, and (b) what is likely to happen under specified conditions. ue 8. Communicating: It is concerned with the transmission of si r Pr Mey oC uC Mk Le ee OMe od ay asoned Prstsiead Communication is preceded by an accounting cycle through which the identified and measured transactions and events pass. 2.0 MEANING OF ACCOUNTANCY prepesiaiid refers to a systematic knowledge of accounting. It explains ‘why to do’ and ‘how to Tora me eee a are Mele RAUL MeV OM K-11 Re rele oeelt aL Ee f ing i }ow to summarize the accounting information and communicate it to the interested parties.ee Ue ee UC) passant with record keeping or maintenance of Peete eet ti STO a a a on ec all Pre aU Rune ea UEC) Pe RE Cae Cae CU Ce LN eee LUGE ue ae RuC CC Rie aU ul leaded Cee EU ede MCU ue Re ae Pe ae Pe a Ea all Ce E REE aR Ce TM ee UT EE Une mace si Loe [eee eur a FE RR Ree 5.0 DISTINCTION BETWEEN BOOK-KEEPING AND ACCOUNTING ea) Book-keeping differs from accounting in the following respects. Ceo) Peers ee a en ENE oa uaa ata aie i aebiieblee tials D nr: transactions, ee a Nice eaeaiined Dec ano j eta ee ee Met recording the measured | ang communicating the interpreted aS ertukchuctnciscel sucen MUS PEWS ees Peereceiar) Pd Lota iueeeecut ns econ eer eeusacitececcca kan eee en Ron ROCe Sess Rieti) Pee OMe en Me Moher) systematic records of | Performance and _—_ Financial financial transactions. eee CMe rote fae Coan R Ua coc Ceced tan Book-keeping work —_is| Accounting work is performed by eneuuecd ye Cu C us eCcusTTL Los haene SELON ee re i 1 eR ON CMLL da are ae a) aC Ruud ey reac ue o \n era oon ee ieee BN eas not possess ana! Se Come ers Ce ied Pri nature. eed A neers comes Accounting System _| accounts system en an CRC cunaae : Coe eT) Pe el porte Pew ace Phd ‘ACCOUNTING G eras eet Eee Pris Pee Ue Cea Uns with oon pipet res ea en Ee anita ts ee Ret Peet uaa } Pree peal Pea ] Lee i. Re ToD haba | SEQUENTIAL se) INVOLVED IN ry aH JOURNALISING un Journal. Bere ee ; See RU Ru cael ier RR ad Journal), in the ed accounts opened in the fi re aaa ' Pe ER lL POO tn tN a eccle eee eau 2 Prepare a list showing the PUR ue UROL account to verify whether the p k Ss Haha hrnne neti Tee ue ain "Step 5: INCOME STATEMENT ICCA UW Rett aa accel POR e Cl We Ce RO eee ATS) period. Sd POSITION STATEMENT (i.e. Balance Sheet) UMS on Oa od ascertain the financial position. as at the end of accounting oes ¥.0 USERS OF ACCOUNTING INFORMATION AND THEIR NEEDS SOMO me tocol (le Mau on mae lude present and potential i Tor) pa roeer ene Fo ole Ue Meum cle Belt el lemons OCLUTa pet act ile ; 3 a eevee age q ew bavatiaren rhodes TCU COSC Romine: iteRee Ree Ua eRe Ou a Bese eed eu ee materials/Goods, Suppliers of Short-term Loans] Pe ee) mC DC Long-term Loans] Ea ed eC lle} CUBE) tml MU Ug SR PCr Ts alg rece 7. Tax Authorities DE RULE Sener outer Minute Ca RUC iae RMR ACU ue le Ss eae RCCL Peau n Tmo OP UNU Ne C eee me mL information to determine Ra aria are) US Grell will oo paid when due and whether they should extend, maintain orrestrict the flow of credit to an enterprise. etree Ramu tou ned reel Pesce their investment and to determine whether they should Pe Ro ies ca PORE emcee Mi cmurmmCon nee prospects of an enterprise and to determine Pa SS LO ed LAU ES nee SCs Me nC Lg ONS cum uk meek tue ao) PCN Ea ce eld of its Resources), (d) Peel CCUM Ce Cai CO MCS A relation to Investments and to decide upon the course of Pre RON RC USAR Employees and their representative groups are interested MCE eu Ne Um MC IAM ice lellN omU COMM Mee on MUMIA Wot enables them to assess the ability of the enterprise to POMC eMC Cr AM nL SM COMM SCO PPCM LUS Ue) Tees Severe Mei ome OME Ca UO liabilities of an enterprise. 8. Customers (er Clim aCe Pe CuRemeUmea Cy isms ecee lM Ucum at mar oriole k- Meal RCC a LUCK (ooo Ceca 9. Government and their * ery aed Government and their agencies are interested in the Eero eM MC eee ee Ao Ud Pace Mae COM MCN One ammer: Cun regulate the activities of enterprise, determine taxation ree UE CRUE R ULM eee eee Ce BCioecs Pare Cu ee mel eee WEN ea Cu ACU cre uaa eet ssculcl PM ukChucloce et aunauNae erat ie) the number of people, they employ and their patronage Cle Toll Ue CC COU Pia MOUSE ane ona cu caus nteculd developments in the prosperity of the enterprise and the PeeweeAE aaa Aas are ect nary a ee eed Lalas Le 7 Arias ORCA een emu 7 eatin wn Nt cee Re ee ee eee ie = Caldari ea ested a ee SUC e Cone eer cto eed US uC eM iaiee RLC Ren L eneees ead crv ae URUK e NeeeN Cueceg eae tone ate . ene apaond a human memory cannot absorb each and every ne Accounting is done to keep a systematic record of (i) Financial MCS ea Pipa Cero ees aee Zs Pe eee oy RUB ar ley Performan Pilar ase ace ei Eee hase a eee ee ue Ua eal} is fers ot A eile uM Ue eon et eer ae) ae cut piled ek LT Lee nei a eee ee say Cents UU ge ee eC Cnn rey) Rue of an enterprise, the financial position is ascertained eae ica SO Ce reaic hnt eaea eka Eas aM ieee LA Ac Tene Win ere Balin yeas TCU ashe ue TL At Une eee cu ren poail i Rue me Paien ieee ORAS Lette oan ante oP cs Moric Un RR Pete ate) RUT ort eed ie {o intemal users and external users. The internal users ieee Le 7 Participants at all levels of ee me Mattel et eae R LR ORO OE ye een pee gnierprise, they have to rely on financial statements as the source of ec ame eet ala ileal eon ne ay Peerianaa aa 9.0 ADVANTAGES OF ACCOUNTING : "y Bete ele Ce ee) LTR) Ua ancial transactions. Human US CALL ae Aparato aed oaoReltreh ee tee limitation. Pe Too MTs ae) Peter are Pct oe rT eMC Com Sy Ce Pune eu ue ence ae) RCM UCI Miele eld Clee cm ong example, Sec 209 of The Companies Act, 1956, requires a rus RUE Tet} Prd belle Role eco sR rot me eReC Toa P9Y Welt SUR eo mae tae i:\st} concn certain persons to maintain specified books of accounts. CM oe ea te ee tee Accounting facilitates to ascertain Financial Performance by preparing Income Statement. be TE oe meet tC Ere eR elon mec an Ten ny ere olny a kee es Cogs Ter etteta]Pee okaccc a nd Pa ; Crediton eke id aclaates “recounting facilitates the users (.0. Short-term Pte ACU olay era Tr beta a Cat Pernt lent, General Public, Tax Authorities) to take decisions by communicating ae aR : Pei Penne ars Tar Ra ee) : ee p , LY peat elke Pe ee Uta - USEC an g (i Comparison of actual figures of one Pe oa (.e., Intra-firm Comparison); ; Oe Puente ate eae Re eee Ur ea Perret lre) to the same industry (i.e. Inter-firm fee USD cel (iv) Comparison of actual figures of one firm Ree re Rea belongs (i.e., Pattern Comparison) aan 4 SAMI nt: Accounting assists eT rt A a ck ripe ert assisions. For example, Projected Cash Flow Reyne) alee ad activities Phan) e eon Pam ru Laat peer T TC eld Poy rpeneiteres aera alaiad ence mead Pe ee ke atehae Pe ek iat A) Hinman enor DU alls RAN Mac eal ee etal AP Au lle Se aad pear daa Pa eee ete Buca Us SOM Tom Pers ee altel Pe Accounting facilitates the ee oe recs aan ee transfer of business to another entity. SRP od Raising Loans: Accounting facilitates raising loans from Feat ist A eke) Prema ue ceed icy financial statements. 12. Acts as Legal Pte te a) Le eld leo Ee oy systematic manner log Pers du aca eRe oe LEE et Pee eR oe eli Pies) Bee ha ks period for the same 10.0 LIMITATIONS OF ACCOUNTING SPM ee Qualitative Elements: Since the accounting is confined to the monetary PETC AL qualitative Peck Ns of management, quality of labour force, PY iene ated PMS oR Ce Pease eee Reee ME Ce Mol eer aol Retna (ORNL ay eC euler Rol depreciation (e.g., Straight PRPPaP a A Cuns rR do Per rere cin oun A Cee Coy FIFO, LIFO Picea Ue ea PO aan Sone ele ML financial statements are Penn ers Cee ee RR analysis of financial statements also cannot Ree RCN a Re Se Pee Cm od Financial Statements Prepared on Historical Costs: In case of financial statements Pe RM eo Fixed Assets are shown in the Balance Sheet at historical costs less depreciation por not at the oes m em ia cae CUR UMS Am UN FMV M CUCM oR =I le eae BirereUr Roms unio eu a i i PT Mure Tue RCo Meret rou lel e the price-level changes are taken into account. Y i ane bei Position and not Real br Since the financial statements are prepared Pou meeute am eS oe CeCe aa el] or Wom CMR Ct estimated —_tt EMU a re eater I in Lk nner Tt taal : Wy the liquidation of an enterprise. Peer ec) Cee a eae a fs auenner mR SC LY [ith aes er ean eae R a eae Prgeeen) pe reer Statement fails to provide true and fair view of Ine 7 pee ee Pere nner a kal ie jar Accounting is the ieee Pee eal fc aah ie ; = aoe Pl) ad Cee hace) > pene er ek an ae rare CM cccesel Ps) ee = Pele) Tuc Lcale Clg Rs Prue aee) planning pene eR ek casa ing / it is the process of identifying, measuring ang PT arnt Ceo 4 pine sare nA Rec Peeks Fare Leesa it is the process ‘of identifying, measuring ang Leer RT Pe OL LOLs] d decisions by the users of accounting, Fite uuu 12.0 QUALITATIVE Peery Cala ork: q Rk lem LT i Te , Hp cckpeomers Sees heels Pea NAW une eRe ry Pera aCLLi Rae ned Pcs ORC feel RRL ROLL o [eee TR aae ea) Ret eM ULM Mad POMC -mlbg understandable by the users with reasonable knowledge of business Piero oe CO) para ae eVO eMC each fol OOM Pee aR Conus Rc Lele UTR) non-disclosure. No relevant information can be however withheld ere fee Meud complexity. SRT C Cuan casu RURAL Olu ela SLE CL SILAS ACO influence the economic decisions PRU ee said to be relevant. Such information may help eemnetne MeN CCN Ct LCR in confirming or correcting past EYEE ea amt Ue ae} Pre ROMO eUC eRe ek mL materiality. A piece of PT CaP enor eh ok ue CUCM ke USCC ae Uy Frari Wctate Aru Lu eke (cr Lome PM cee aor 4pene SIC kta ao Ea ety cre ced Perri 4 must be free irom material Cotes cos Peak le og ail oy Lideeel fae cain Couns sratene ~~ te — OR ccs Pa Pi ices aro a eae ae © Licsinsee penne tia ©) ‘ Rees PMR Aad are dat Cn Renee Bs : ce SSSR ea ane seer Car ; Poa eee eee MU RUC aS Pho pr eT eae CaS RL ee Palais ac asin eu Peet eno) oie pte sulla Race erp Rone ee Lhe sie he Leet et CS Co aOR io i a eaien ray Ce RAL alice ea omni ST ML oe Pry ae a EPUB CC a A aa Hearne ai si uso Pee Reals erirmerc ra Rum iu kcal ON ere UN loan eters eT Rc iNceaad eee tise ig ees Peed a ad Pe ed a Daas Pee eae UNC Re all Pr RRC Laie eH Coca-Cola Company is producing Coca-Cola. Cadbury is producing Dairy Milk chocolates. Google is providing Pata r leona ene shtese Lele Nieeceumeri coe amr cole i? Rae computer softwares. Peete me Ud ed Petree (Ces CoE) 2.0 WHAT IS MEANT BY AN EVENT? a event is said to have occurred when something happens in relation to an entity got Ue eee ul umm \tem OTR Clallam lr llamo Oa ia=g 3.0 WHAT IS MEANT BY A TRANSACTION ? esa wi Case of Sale of Goods for cash by Mi Is. Mr. Y receives Goods and sacrifices ra 40 Mee Nats TERM ‘ACCOUNT'? An account is a summai ry Sele ea nS i CTO Tae ete tet 01 iS in one P RSAC Let tieta eA ROR Uicotl eta eee TT SES ata eet and directiona Ua Uae LU) CRE a Ohare Clad : Breer Tem eee ee ee ee RR eC) beyond the current accounting period. For Example, Land and Building is an asset that can be Pen eae aed Raker n Sud The assets may broadly be classified as Current Assets and Non-Current Assets. Ne AUD Mell) Let : a a] Pee eee esr eke nar nee UNA ROL a (a) itis held for sale [e.g. Stock of Finished Goods] orits consumption in the production of Goods PaCS Canes niece elk Cems enema R CLS (Mee ee ce R ON Rr U EME eR Te aa Uc) date whichever is later (e.g. Trade Receivables]; or (c) it is Cash or Cash Equivalent [e.g. Cash-in-hand, Bank Balance] PAK Aa ACU eke a he Cle | 1. Cash and Cash Equivalents 2. Inventories ae 4. Current Investments 5. Short-term Loans and Advances PON OMe NE) au a LR Soa ied TSU Se Pe UCcy se uC ANE te Ccd UEC elge Tie ot Wom emo ely eee gen ae BTR ge a te DC ee ce ee Ue eer ee A dividend is a reward for money invested in the shares of a company. a aa een Lie TS Uae orl RO CU nm SUN ou UCU WHAT IS MEANT BY THE TERM ' INVENTORIES'?: DOSES Ca ee (a) held for sale in ordinary business; e.g. Finished Goods, or CRUE cer eMule a em emer cook No ag (©) in the form of materials or supplies to be consumed in the production process or in the Cee MOC Inventory = Finished Goods+ WIP+ Raw MaterialsBasics of Accounting-I_ 1.11 411.0 WHAT IS MEANT BY THE TERM 'GOODS' OR 'MERCHANDISE'? ‘Goods’ or ‘Merchandise’ refer to the items in which the organisation deals in. cud 1. Cars purchased by a Car Dealer, 2. Tables & Chairs purchased by a Furniture Dealer. 3. Computers purchased by a Computers Dealer. Fie dene etc unicc tie Rar On wk PPR eS MATERIALS'?. "Raw Materials’ refer to the items which are used in the production of Goods or roe ens Tee ee no ee eee Cuient cou cUe VEN Cur om Manufacturer, Wood, Ply Board, Adhesive, Nails, Paint, PUR UU ie WORK-IN-PROGRESS(WIP) OR ys aly Goops'? *Work-in-Progress (WIP) or era eee in the production process yet to be Cu ccn These items are neither Raw Material nor RCs ee au kana ee O mae akg Preis Moco cael eee CRU so Rd rt Pe Ogu Reis HR ee Pee eee elo aod Ceinauleucens lane 1T BY THE TERM‘ aN sek held for sale in the normal course of business. Pee Re A el Sieg Pree ee cn Meee cu enue Perm teu Ped ‘Finished Goods’ Peach uot cet Pend pee et Peas peek De a Dea Pa al Pet eee ee ls Bea ce catcaneie PP tes in the normal course of business. The term ‘Trade fore mie Pe ac aaa Se re On ens WORE Cer nS ee PR aul BC Sree eee OUR sed fror nee a aaa RR CCC Pa Rate X is a Trade Debtor of i ; Pa re eR eg Brea the Creditor to the Debtor to pay re uo om a Bee nueaS Malar le UaCoeeLataTe) Coliseo Roa Ue Rem eR meme Cullen ee An order is to pay to or to the order of a specified person or to the bearer. BI e eee coal a alu CM lea e-h-le) Mem Recto] ol 18.0 WHAT IS MEANT BY THE TERM 'CASH'? ve Cash comprises Cash on hand and Demand Deposits with banks. 19.0 WHAT IS MEANT BY THE TERM 'CASH EQUIVALENTS'? eC CUCU Mi sua aurea a Onan take RUE CURA Cn unuP ee kgs Men uma eed Dacca Pe ere iar i Peter Bel eer May 5. Certificate of Deposit PORN NEO AU aoe ai IRS TCH Se Uy esc) SE Ne Re RW eUOu eet ie ese ah aaa URS OneCare use eee eee PONE Ou Sar cco Gell ap cts (OR QUICK ‘ASSETS)'? 4 Pte UU en Heo Res Tea eee rR as Petr ced Dene eos Paes ee 3. Cash and Cash Equivalents, SSC RIES Een el ene Cea oulg irny DO SEU Rat sre stele Ll Stel Ie age ee ees Cele eee MCI eee eee meee ied ae UCC neal eH OMe i eect ear O e ue ea eae i ae Rai goods and to convert the finished goods into debtors. , a Oa eek OR Ma cee ey RR he ea a Cee aa ei eed eee ne Ee Ste RR ee CoM ee CM ROR CCM) Dalia of goods or rendering of services and which are not held for resale in the normal cours Pree wdBasics of Accounting-|_ 1.13 ed 1. Property, Plant & Equipment (old name Fixed Assets) Pa ence Suey SR Gn RUSE. Tee POOR ELE mu aa meme 1U- ee Saou a Smee aa au Se Ra oan] mR UR en Re aS neem 4 POON eS aca dae) ee Dee Ru RU Ree ae Re Cure leh oe a rele Ree acdc ade OR cei cn ieee I POR WSL Masog ia Age Wu eel aie Dee Re ee CRC ane ee OI ae Coed PCT erence ocel N U CR RR (a) are held ORRIN Cy tees a une Aan ee Ro OR Ce CCR aos COC (b) are expected to be used for more than 12 months. Examples: E Se ae uu) cm TU UR eld Pree eA a eal " refer to those fixed assets which do not have a physical existence. Pee Une Pace le Intangible Assets od wea Pee as 4. Copyright Cg Eee eA au eee refers to an intangible property that is the result of Coors Hitec picid Oe Pee em Sh uk RUC me md Pdpaneeg ‘a certain period of time. Intellectual property protection is required to foster eel Loa ; Without protection of OUR Moe ROR RCM Le Ane inventions and would focus less on research and development. >. ee aeBPC MSU M aia luor-WCooel a lre) 28.0 WHAT IS MEANT BY THE TERM 'GOODWILL'? 1. Goodwill is the value of reputation of a firm which enables it to earn profits over and above the DC ee Ut RU eS Ua eas eaten OR URN UO Pam olTe RUN MMC ene MRAM aN oie le CNTR R CM CU ROMA Ms UL eR CUT Ure PR) ed Cae ROC ate Me aN mE Rm tee ek ce RU ee Cou Curiae Uae Lae MUO ML celta RURAL Co ole M IUCN tele Rel (Us EOE aa La Claes fd Trademark is a form of intellectual property consisting of a word, phrase, or symbol or slogans, SR UR eee Cec ar enamine Culiee acted Re Roe Ms erate Re RU Rem im cele Peta dole meer Md Oi Paitin ie nnn ne eae eactcg IereeRmy Tc Te RUE CRUSOE) aici meet ogc tels aes Ce RRC tee cee ue Cee arg eu eeu mee EU OMe eRe Ra Rae ce cA a Ea ae Wee Nelle ed eee ee ee ed eee au UT ate eS a MUR sce een DS e enon eee ee eet et a MU ARC elt eC RR Cie e ae Re ere nse ae nun cect ee eet) Cee ecu The person who grants the franchise is called ‘franchiser’. BU nM ER We Ree UCR Re MCU RCW eee Bee ee RU eA WHAT 1S MEANT BY THE TERM.‘LONG-TERM LOANS AND ADVANCES'? Renee CRUSE UC eae Res we ier Wer Ur oR ke nn ae Ra DP una kc CRU ue ean RN eC CORT Ma LU ma aa en Ole CL Gare Ue Ce ea ee ee i au a Td not yet written off till the date of Balance Sheet. For Exam| 1. Debit Balance of Profit & Loss A/c(Loss) Pa Cun RCC Suu a tayeS comaccuaten an Ed 35.0 HOW WILL YOu DETI prides EO SAT an eA bsg ee ake fot) Aa kes Tu ae een K PaCS p SUE S-la anu te en | sur) a acide ala Bueller lee ee SUT ello Tarer 4 TRUE elt Cee eis aes ea eee aa aaa rey When treated as Current | When treated as Fixed Asset ce er) Inthe hands of Land Developers | in the hands of other persons. Page ences Patria In the hands of Builders & in the hands of other persons. eee Earn) Cc Cm nen ekg aes UE resem LOL} Dealers. Cem lod In the hands of Motor Vehicles | In the hands of other persons. DUET LE oi Kuk UL ea cceedeoe 5. Shares & Debentures | In the hands of Dealer in| Inthe hands of other persons. a ee cs In the hands of Plant &| Inthe hands of other persons. Teemu Co) ee Oi cad 36.0 WHAT IS MEANT BY THE TERM ‘LIABILITIES’? RPP ee acu ee a We meer ey ahi fed as Current Liabilities and Non-Current Liabilties. may be broadly classifi EAN CE Oe ald Bia eee PerN Tm eg Pee CoRR ca a CN SL ata Wee ne ee Ra foie eRe (a) tec uoc nama Sd PS re PE Pee Oa Perea cog : ee ee Ra EY ere ec Lei eeey Months period from the date of th Pe ad Bs Ue Te ec oe ee a SRC ese Re Ceo A ae : he am BC Nana ar dee Pete Re Nod PO a al dia ie ee ar “ t ial I eee ae eh een RUE Ue ee red on ena provided Preece cu ae Sk Rete unit from Mr Y on credit, Mr Y is a Trade Creditor of the business.SPL OCU aac atin) PAR AOR RUUD | eB) The Bill of Exchange is known as Bills Payable for the Trade Debtors. 42.0 WHAT IS MEANT BY THE TERM 'NON-CURRENT LIABILITIES‘? Non-Current Liabilities refer to those liabilities which are expected to be settled after 12 months from the date of Balance Sheet or after Operating Cycle - whichever is later. For Example: Renee Gunes PEON OUR RE ‘LONG-TERM BORROWINGS’? Long-Term Borrowings are those Borrowings(Loans) that are expected to be paid off after 12 ee ue RRR UCB We Bos PMR CRA Umi har EU cd External Liabilities refer to the financial obligations of an enterprise towards outsiders. Le SNe RU ULE hm aa QT ee, Cen oid PEC e i Ce RCR URW nese uu Cu Re Ree PONDS CRU hm aa Umer Van (led Cee RUC Ue EU act ce a Cg ates tae ese eg} or partners (in case of a partnership concern). Capital is increased by the amount of profits earned and amount of additional capital introduced. Ceo AU nC Reta ae etn een the form of cash or kind). De RU ee ee RoR RRC si § Itis also known as Owner's Equity or Net Assets or Net Worth. Se RU Ale es Or Wes eee Lec CeCe Mer Tol| aed CR eee Ca ee ee ota ol ee for) Eee aed ORE Oa aM cia teeing. BRU CRUE Ce eee Cu mems es Ree ae Cece RU Om Une CRE een aucr ic Rem cau Ge eC Rien cured eRe ecureuil aerate hur am eu aod en Te Re CEE eum ‘The term ‘Purchases’ refers to the total amount of goods acquired/obtained by an enterpris® ae ets eee a ae kei tn ne ie Se uae tT Ce SO eck Rete TR cote ET uc tl See —aa Eee nna Pee ee ee Ok eaten t c pahererbachaliaina re Peer ane eer) 49.0 WHAT IS MEANT BY THE TERM ‘PURCHASES RETURNS’? Hy St eee aa Cerca te ; the ua aa i Peet eure an STOR om cee ee ae ea ene e Da See oR oe eae EL eco RU Coe eno EON NEO Mae Vcd ere eo See ORC hE Sem mn eee ee en a Re Ne Ree eM ene ce eee Mero Ree arate Cee TU eR ae ae CREO Rd arene Anan uae ele PRO a SCO ha aU a ae a SE SNS em ROC ur ee a CR enterprise. For Example,in case 50 units (Sold @ € 6 per unit) are retuned by Mr. Y (customer), Pacer eR enue UC Ce 52.0 WHAT IS MEANT BY THE Bescon eae BTA Ree aN ates Nd LCL Cara COMO eet hg te PUT oy (ie. Cash Discount) Y THE TERM ‘TRADE Pelee ad tion granted by a supplier from the list price of goods or services on Ree Re ee ea Een eC Bie ee ae mela Pee neeaseecuk nee payment. eer Ma Ker a Ea ATOR UCN We eRe noo Mairi MN ac Molla given below: ee rete he Mali kes Enea ene nae) Pee a as eRe ee) pel eM Ne ae Panos) Pr ci A ic ella vey a forego eel a Mle granted by a supplier from the invoice price in Pee et nad ynt within a stipulated period. immediate payment or payme! Fc CU uO Pet ete Cu PO CR MMR Ue eu eer Le ea Ree ea ee a EO FOREN a eae Cash Discount @ 2% = % 9,000 OnE RMR het rea = —_ »°SCM Sama uc co Ae} COURTEOUS aU Ay) =) ee q BUTE Wl auc ee ae REM BP Om R ECR ecu ECR uCel Re Mt M Pm C lol Ma CloLDeRel e MUCE Ma Oe Oo -Ter- Tut Mae oa] ee oie i ee eee Roane Mee rN RR VRB oe 56.0 WHAT IS MEANT BY THE TERM“BAD DEBTS RECOVERED'? Cee IC oo aR eu Me Cm Cet tea une Dee CC Re noun aC nie eta cues oi Sec ees ie et 57.0 WHAT IS MEANT BY THE TERM 'DEPRECIATION'? ss q De ee ee ete et eee eee Ce mee un CRORE Me Cuma eR Mele RCT Regen ee eeeeMca wear and tear,passage of time etc.. For Example,On 1.1.2022, a Machine costing & 1,00,000 Re en ee eu pant Carer RC ta ae De aR Cem ELE RL B10 ROO alt ac ae eT RUE hg al TERM ‘CAPITAL EXPENDITURE’? i 4 fer TES tol ere URE URS Ure CRAM tc ye CORE Mg Wie Me ete Wie ag (b) to acquire or bring into existence an advantage or benefit of an Cire ara (0) to increase productivity or earning capacity eee 1. Cost of Land and Building Pee tae EUR Ca Reema O EWR ghd oe eu Oa aE cic a eat Reet en eect eh cucs Accounting Treatment: Capital Expenditure is debited to the et Eos CU Wea) Ne TS oe a a Revenue Expenditure is an expenditure which is incurred: ORC n ut ce meat Re Tea en (Nee Tea acu ee CM ue Ret ced ea Poe SU er a ed 2. Rent of Building Pare Eu y Pn Ree NCR ali oy) ms unt PU CG anon tir heen eeu eu Ru kale Ce Pies m a DUR Ua CeCe ree sce a Cee aaa ” - ae a I De ees Cur iC rucier a Chm ical Sy iucn ico tka beeen F era eC ek eC ei kd ke ial period.a= PATE, Basics of an) 1.19 } LA cere ay Tay bose Rte eT au Ce a? rien d revenue ex; ot Cor the benefit fr ene Lec cey fore UL may Ura te)-tal re al Bari beyond the cleat g en ten BT] aT ike towels Ll ikererrel 'S dealt with in acco Ny CTT LRU ay Sa Rr RWEY TL oltre ett UU CM Reet ee UW Cooe tt CUR? tee DRS eae Re rok Rea Pry pC te nee SER Wary MEANT BY THE aria] ae ea aT ae oot Seiten Ra on ae Erie TT od RUN Se rd Be SET elf Uae Emer te rey URC eesti ed reer CULT net te en eee pu e e ee 3. Additional Capital brought in by a Furniture Dealer NTE t a) Bis ig las BS ce ea eee SET ee eeee Sei RSC on Se ee Bee rete iS L Tea rea nee ke on eke nce ee 3. Sales of Cars by a Car dealer 63.0 WHAT IS MEANT BY EQUITY LL | Leg bee Ud CO Sa cnn aceite) (b) Partners in case of a Partnership firm ORC tie Pe ecu cg Se a we bay jecrease in economic bens during an accountng period in the form of ey ole ee epratephetindidee koko a tee inp ean oer equity (other than due to distribution to Equity Participants), baierare De ceeie a aceLUc Oke tee 2. Purchase of Goods on Credit involves an INCREASE in Trade one eee ese ee oes 4. Interest paid to Lenders involves a DECREASE in Cash or INCREASE in Creditors, SU er et a Delotta1.20 Tulsian's Financial Accounting PRM) a RE ell od eee eR ee eee ee om ae uu mg distribution to equity participants) and events affecting the entity during the accounting period. Reese Seems to acu HEL CR CeUteurie ccc eke ticle) accom Pee ee Resa ese Rewer co oct cte mec CieceCe eunels trite) Ree Raia) miles mere oi ee ees. | Income refers to an increase in economic benefits during an accounting period’ nO aOF Inflow of Assets, or (b) Decrease of Liabilities, which increase internal equity (other than due to TSS acter uS cies SP Clare Ruane Rl ele ecm pe eye aa eR el Ce eR eh oe Bs cot Rc Te BO elo ee ren Cee RU ue eee lu ae investment by equity participants) and events affecting the entity during the accounting Cone a Lee em eee ot Se Sa ae ne eer ea Ca) eet au une en PS Example 1. Profit on the sale of marketable securities is usually considered as operating gain. Example 2. Profit on the sale of a fixed asset is usually considered as non-operating gain. be aa, Cee ay ie due to Profit on nie i pe is not considered as Gain because it is du@ outs ey ee due to increase in Capital is not a Gain because itis due to an oe in Capital. a ta ee CR RU Ue mou Ue eB lM Melee Cite) Relates pannel or CN tn acne tee i hace aCe UR Cate ene ar Pe Cu eee vag ee Net Profit means the excess of Revenue & Gains Over its related Expenses & Losses during 4" ° Cee Eur a aceon = Net Profit = (Revenue & Gain) — (Expenses & Loss) —_eee eee ti ee 72.0 WHAT IS MEANT BY THE TERM a felled Ae Aiea kere lc] i i —— ry evidence lie Ee leita ecu ele ite elke ome C nee CRM eS Tol Rei ao Neer RN ee Ker Re hel Te esr mcr a a ole eR (el ee 73.0 WHAT IS MEANT BY THE IMPORTANCE OF 'VOUCHER'? '. % BUR Neu eee eel ce Bolu aoe Ran a) ns Lee 5 . ! Cen CU Un Cl) PMR We) a Ree The term ‘Cost’ may be defined as a noun or as a verb as follows: (a) As a noun: The amount of expenditure (actual or notional) eta Reo RU oe Ea (OER er mC UC RU coal specified thing or activity. TO cece ua AC alia Otc TLas Seelam Rom ce kas rendering services" Seen eee ie Rt ke aa eR CMM om Ca historical, variable, fixed, ete.) and pee EC ok ctr al ae activity (e.g., a given Oe aCm os produced or services performed). Deere eu Sak eral La Ceska are eee a anu al Pe eicn the period at f os ae ee cal Pec ie ue Rea Cea ctu D im Eee ae ae POR eee Gul hla aaa ‘ Ws eu Cul PRPS Cue Pavel e RUcellies Re rey Le Py ALi ‘INCOME STATEMENT '?- Sa Sf ae ey hilt teaa adi Pec eines cl Oe LS) Pn Pr al aa al Rare ected PSR uu OP ect) Pon . Ei Tye TR Cu the Profit or Loss for a a a Pee eno ualad Peer Tur PC Late Bere ek Cad ame Niall RR ee Piece Pen i Ca cue eu kee foe aa fete eacaee For example,SPANO SUM aar-Wrelt- eNeerolt ni are) TORU ACOR CRN eee 16 his case, Closing Inventory (Stock) of Raw-Materials = 40 units X 200 per unit =%8,000. is Closing Inventory becomes the Opening Inventory at the beginning of the next Accountin riod. .0 WHAT IS MEANT BY THE TERM ‘ CLOSING INVENTORY (STOCK) OF WORK-! PROGRESS'? it SUR uL om Clos Rem Seacrest ect tt) fetoyole ta Mae Rem ‘urrent Accounting Period. PS Cll MOM Regs MET CUE Set purchased @ % 200 per unit. “ull conversion cost @ & 50 per unit was incurred on 50 units. aE Seana ee a aOR etic Rm Ona In this case,Closing Inventory (Stock) of Work-in-Progress = 10 units X % 225 faa eek ea Ree RCO cau Ke lit CU eau cag UR cece) Period. zi eRe LR Me kei Ne Sats le Melos Goops'? Closing Inventory (Stock) of Finished Goods means Current Accounting Period. US RAR Ue Re) eC SCC eee eee a ak anette LMU RNC. 'n this case,Closing Inventory (Stock) of Finished Goods = 20 units X % 250 ae ane BUS RUNG a lee ary Ce Opening Inventory at the eR aU Macrae eet") ARE te ey ROE eta) 4 Ma cue Ca kei | Uta nae Meet) ee te ete ake) SCR Om RR uea ent AR ee Se Salary for the month of March has not yet been paid. Accounting year is the financial year. UT TEST Ue SURO O RCC nt ie] Pe ae or] Outstanding oe Sea Ce i CoRR e Amu re Reed ; iin ~akakl ku tr ka 306.2022. Accounting year is the financial year, insurance Premmsn Corey eh ‘Apa Ue ec har sr Pact aah tne Lee tn eae et De eee earl rere mene Sree | 4]ean i Mt ee Pe LeU ton GT Dea eE tert OU olga UT LOS n een oe ra year. ex} ‘ed for11 months from Apr. to ‘counting year is the financial Interest not received for March = & 1,00,000 x ALES SRO tee Cater eee UES. ha est tty Mee een eee saeco, Period but relates to the next accountin On 1.2.2021, a loan of Z 1,00,000 wa: UL BTR Clea CT on UCase] lg Ee ae Ri OKe oid eo Be ere oe ero rd aU Ounce cme Mint OR UTC ig accounting eR Tiel meg CUT) om Seam AVR MC Mn Tela a arTt CRC Militias) eae CUTS I BTCA iss ates ORAM Ue hn se AS SOR rl RU eee ten] CT a CMa S rs ACCRUAL BASIS OF ACCOUNTING? Giese” A BSS] Liabilit aC Renee aE ene aOR MMT te R] eel lieRUCUCe Collet ACS on Costs, ies are Leese tooo aT '@ accounting period in which LAL ete ding Expenses and Elio MULT] Lalu eT} CCE TCCOmU ars oa its} soe Bourne fae TM costs a MRO eva CuK ay Tan El Noo mem Orta Somer ECC a) 3 A a 7 CCIE Meme oT scree Re uty Pee Taney PCR OT tity See ere Cy ted ln yd ee Dee ae RU ROR erat Cuneta Maku REC ene Ran a beer SCE ea ete fe ac Srey (een eke Cun taal Tey DT Ee rT hy PTET AS Cee eu SCANT CN eT CURE ay nD COIN} ee Cenc fy i 7 err ae EU enn SURAUO nT Tn my HL ee Te nore pocaniuinapaeelit ale tabanl OCU ren Were of accounting, 1. Incom RCA A) ee eee TT cere teten Lear cao eLearn en ORNL Cy eat CeCe CMR Ture) ug penis eerie COON nS UC MRe NTN CEST a reese teen pees SS RoC STi tent cle emer aM cere ; ia ; pee fii) Cea CoP Sa COR TTR UCR Cou RAL OAL Ree URS hers Mar) 1,00,000 | rts Ree cd So %9,00,000 | (out of which & 8,00,000 collected) ro Cach nirchases _ Gr)PCr Werecoot ails) Sree i Renan) Sree eae) Eero) renee yer Creer Nil fed CRN aed eeu Reeth een (ii) Accrual basis, (iii) Hybrid basis. te) RU ile) - COMPUTATION OF INCOME FOR THE YEAR 2021-2022 Se Corr eritg bap ebrobe < ees 7 Crees 1,00,000 od (0) Credit sales eee Pt Etre | Reale) =_ BRK ¢)¢) eens Pt Peete enn PSs os (Okereticicees 80,000 ELK) Mei cur ord (i) Paid CerKerd Ake) 6,00,000 (ii) Outstanding E = 50,000 Ce (i) Paid eke) Ke) (ii) Paid in advance = (38,000) (remeen) = Pree) 7,90,000 CoA ud Ute Veal cee PoE Peace | Seer COR Um Mae Cutt Sete SCR Lh dae awarded without valid reason): eee Cee Ceo on Cone eo Liabilities. ROE ot ood el tee oe PRUE Ce ere Rt cee) guided by generally accepted accounting principles subject Patera Ce et UCN ee Mee eeu toe 6. Equity+LTL-CL=FA+CA eT TeeBasics of Accounting-|_ 1.25 eee CSS ROSS ee eee Sl oe aT CER MT Te Cece t i re , ing Assumptions are Goin, 1 po ner 9 I eee aT ge ety 9. MS Characteristics of Financial Statements are ~ OTIC ae Rae Reliability and Materiality . SUC elmore eth CUR ee on-Ue Reena tol Rete oot Laredo a colt ct ree eee ARP eam aire cael Bem etree oeet t=O cm eres a) mS EEE Ue Ra RYE hm 12. Accounting is the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by the external users of Eros CMW i Renan ICH noe Rr om oP eo ORR ee ee BEA Ce eeu eke Maul Meee Reino SMT een aa ua oad SPA ce nn ence RU ee em co 18. Amount owed to outsiders (other than proprietor) is called capital. ST UN es CCC Re ao ln Pr eee ee a a VERY SHORT ANSWER TYPE QUESTIONS SMES TER RC) ot Hl Mau St | icy) (() Co) @) (e) (f) (g) (h) (i) i} i) 0) (m) (n) (0) ()° )) ree Res ol) eal) fort mele Tee uaa alu) ole neue ae fea ees ee leet at Ae) Capital eS Dero aa Naas Accounting Period ome RUN A Clee Rea aC} Ope een Acro RoR ne ina foe RU uA Coes RUMI C RCletey Peace LL)oP Ure We mame lalla) Pa Cue i ea] ) (b) () (a) iC () cy) (b) (c) () (e) () Ko) (nh) 0) 0 Cs 0) (m) (n) (0) 0) @) 10) 3) ) Pao im ee eomaceo tale R Olu ola) Four Objectives of Accounting Two Advantages of Accounting SRE mom ceo are) Four Branches of Accounting Four Qualitative Characteristics of the Financial Statements 3. State one basic difference between the following : [1 Mark each] Cece euse ct) AoE U SEUSS Current Assets and Non-Current Assets eu C OR US BELTS C sy Neu men aL Se BIC aro Ur REECE le BRU MIL Mero Raw Materials and Work-in-Progress(WIP) Me Sail RU Raa eietot Current Liabilities and Non-Current Liabilities PCB E Se Went Ree BICC one Ue ker Cum co ECD cent ea i) eee cu UCR ut nasa t eT ele u aun oss Stu US een Income and Gain eT Ue ES ue Oe at cuy TCU Ua oat R Co Teer Nate W Ler Cul C eRe Coca]