O'Reilly logo

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

Financial Accounting

Book Description

Texts on Financial Accounting have much in common; but differences run deep. The present text has been class-tested for more than twenty years. Rich in pedagogy and written in an easy-to-understand manner, this book adopts a fresh and novel approach to the study of accounting keeping in view the specific requirements of the students appearing in the B.Com. examination of the Indian universities and other professional examinations.

Table of Contents

  1. Cover
  2. FINANCIAL ACCOUNTING
  3. Preface
  4. CONTENTS
  5. 1. INTRODUCTION TO ACCOUNTING
    1. Introduction
    2. Meaning of Accounting
    3. Accountancy, Accounting and Book-keeping
    4. Relationship Between Accountancy, Accounting and Book-keeping
    5. Distinction Between Book-keeping and Accounting
    6. Meaning of an Accounting Cycle
    7. Users of Accounting Information and Their Needs
    8. Primary Objectives of Accounting
    9. Types of Accounting Information
    10. Advantages of Accounting
    11. Limitations of Accounting
    12. Qualitative Characteristics of Financial Statements
    13. Branches of Accounting
    14. Basic Accounting Terminology
    15. Double Entry System of Book-keeping
    16. Relationship of Accounting with Other Discipline
    17. Role of an Accountant in the Society
    18. Accrual Basis of Accounting and Cash Basis of Accounting
    19. Distinction Between Accrual Basis of Accounting and Cash Basis of Accounting
    20. Concept of Income
    21. Accounting Concept of Income
    22. How to Compute Accounting Income
    23. Economic Concept of Income
    24. How to Compute Economic income
    25. Theoretical Questions
  6. 2. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
    1. Meaning of 'Generally Accepted Accounting Principles' (GAAP)
    2. Basic Assumptions of Accounting
    3. Basic Principles of Accounting
    4. Modifying Principles of Accounting
    5. Theoretical Questions
  7. 3. ACCOUNTING STANDARDS
    1. Introduction
    2. Meaning of Accounting Standards
    3. Objective of Accounting Standards
    4. Significance of Accounting Standards
    5. Advantages of Setting Accounting Standards
    6. Arguments Against Setting Accounting Standards
    7. Development of Accounting Standards
    8. Accounting Standards Board of India
    9. Theoretical Questions
  8. 4. ACCOUNTING POLICIES
    1. Meaning of Accounting Policies
    2. Examples of Accounting Policies
    3. Considerations in the Selection of Accounting Policies
    4. Disclosure of Accounting Policies
    5. Change in Accounting Policy
    6. Theoretical Questions
  9. 5. ACCOUNTING EQUATION
    1. Meaning of Accounting Equation
    2. Procedure for Developing an Accounting Equation
    3. Theoretical Questions
    4. Practical Questions
  10. 6. JOURNALIZING, POSTING AND BALANCING
    1. Meaning of an Account
    2. Traditional Classification of Accounts
    3. Accounting Equation Based Classification of Accounts
    4. Comparison of Traditional Classification and Accounting Equation Based Classification of Accounts
    5. Meaning and Rules of Debit and Credit
    6. Meaning and Format of Journal
    7. Meaning of Journalizing
    8. Distinction Between Journal and Ledger
    9. Invoice
    10. Trade Discount
    11. Cash Discount
    12. Distinction Between Trade Discount and Cash Discount
    13. Ledger
    14. Compound Entry
    15. Meaning, Recording and Posting of Opening Entry
    16. Balancing
    17. Comprehensive Problems
    18. Theoretical Questions
    19. Practical Questions
  11. 7. SUBSIDIARY BOOKS I-CASH BOOK
    1. Need for Sub-division of the Journal
    2. Meaning of Special Journals (or Subsidiary Books)
    3. Advantages of Special Journals (or Subsidiary Books)
    4. Distinction Between Books of Original Entry and Ledger
    5. Meaning and Types of Cash Books'
    6. Single Column Cash Book
    7. Trade Discount
    8. Cash Discount
    9. Distinction Between Trade Discount and Cash Discount
    10. Distinction Between Commission and Discount
    11. Cash Book with Discount Column
    12. Three Column Cash Book
    13. Petty Cash Book
    14. Theoretical Questions
    15. Practical Questions
  12. 8. SUBSIDIARY BOOKS II-OTHER BOOKS
    1. Purchases Book
    2. Sales Book
    3. Purchases Returns Book
    4. Sales Returns Book
    5. Journal Proper
    6. Theoretical Questions
    7. Practical Questions
  13. 9. FINANCIAL STATEMENTS
    1. Meaning of Financial Statements
    2. Usefulness of Financial Statements
    3. Elements of Financial Statements
    4. Recognition of Assets, Liabilities, Income and Expenses
    5. Measurement of the Elements of Financial Statements
    6. Trading Account
    7. Manufacturing Account
    8. Distinction Between Manufacturing Account and Trading Account
    9. Profit and Loss Account
    10. Balance Sheet [or Position Statement]
    11. Distinction Between Tangible Assets and Intangible Assets
    12. Distinction Between Fixed Assets and Current Assets
    13. Grouping and Marshalling of Assets and Liabilities
    14. Distinction Between Trading and Profit and Loss Account and Balance Sheet
    15. Distinction Between a Trial Balance and a Balance Sheet
    16. Methods of Presenting the Final Accounts
    17. Treatment of Some Items which may be Direct Items/indirect Items/Incomes/Expenses
    18. Classification of Capital and Revenue
    19. Rationale of Making Adjustments at the Time of Preparing the Final Accounts
    20. Distinction Between Outstanding Expense and Prepaid Expense
    21. Distinction Between Deferred Revenue Expenses and Prepaid Expenses
    22. Distinction Between Accrued Income and Unaccrued Income
    23. Treatment of Items of Adjustment Appearing Outside the Trial Balance
    24. Treatment of Items of Adjustments Appearing in the Trial Balance
    25. Solved Problems
    26. Solved Problems (Advanced)
    27. Professional Examination Problems
    28. Theoretical Questions
    29. Practical Questions
  14. 10. FINANCIAL STATEMENTS OF NOT -FOR-PROFIT ORGANISATIONS
    1. Meaning of Not-for-Profit Organisations
    2. Distinction Between a Profit Seeking Organisation and a Not-for-Profit Organisation
    3. Fund Based Accounting
    4. Accounting for Not-for-Profit Organisations
    5. Receipts and Payments Account
    6. Income and Expenditure Account
    7. Meaning and Accounting Treatment of some Peculiar Items
    8. Distinction Between Receipts and Payments Account and Income and Expenditure Account
    9. Distinction Between Income and Expenditure Account and Profit and Loss Account
    10. Preparation of an Income and Expenditure Account from a Receipts and Payments Account
    11. Preparation of a Receipts and Payments Account from an Income and Expenditure Account
    12. Preparation of Balance Sheet of a Not-for-Profit Organisation
    13. Accounts of a Professional Firm
    14. Solved Problems
    15. Solved Problems (Advanced)
    16. B. Com. Examination Problems
    17. Professional Examination Problems
    18. Theoretical Questions
  15. 11. DEPRECIATION, PROVISIONS AND RESERVES
    1. Meaning of Depreciation
    2. Meaning of Depreciation Accounting
    3. Causes of Depreciation
    4. Need for Charging Depreciation
    5. Factors Affecting the Amount of Depreciation
    6. Depreciation on Additions to Fixed Assets
    7. Methods of Recording Depreciation
    8. Recording of Depreciation by Charging to Asset Account Method
    9. Methods of Allocating Depreciation
    10. 'Straight Line Method' of Depreciation (SLM)
    11. 'Written Down Value Method' of Depreciation (WDV)
    12. Distinction Between Straight Line Method and Written Down Value Method
    13. Recording of Depreciation by Creating Provision for Depreciation Account
    14. Change in the Method of Depreciation
    15. Sinking Fund Method or Depreciation Fund Method
    16. Meaning and Objectives of Provision
    17. Meaning, Objectives and Types of Reserves
    18. Distinction Between Revenue Reserve and Capital Reserve
    19. Distinction Between 'Provision' and 'Reserve'
    20. Specific Requirements of AS-6 Issued by ICAI
    21. Solved Problems
    22. B.Com. Examination Problems
    23. Professional Examination Problems
    24. Theoretical Questions
    25. Practical Questions
  16. 12. VALUATION OF INVENTORY
    1. Meaning of Inventories
    2. Meaning of Cost for Inventory Valuation
    3. Exclusions from the Cost of Inventories
    4. Inventory Systems
    5. Distinction Between Periodic Inventory System and Perpetual Inventory System
    6. Methods of Valuation of Inventories
    7. Requirements of Accounting Standard 2 as to Method
    8. First in First Out (FIFO) Method
    9. Last in First Out (LIFO) Method
    10. Distinction Between FIFO and LIFO Method of Valuation of Inventory
    11. Weighted Average Price Method
    12. Adjusted Selling Price [or Retail Inventory Method]
    13. Base Stock Method
    14. Specific Identification Method
    15. Standard Cost Method
    16. Valuation of Inventory as on Balance Sheet Date
    17. Stock as per Books and Stock as per Physical Verification
    18. Lower of Cost or Net Realisable Value Rule
    19. Methods of Comparison of Cost or Net Realisable Value
    20. Disclosure Requirements
    21. Specific Requirements of AS-2 Issued by ICAI
    22. Solved Problems
    23. B. Com. Examination Problems
    24. Professional Examination Problems
    25. Theoretical Questions
    26. Practical Questions
  17. 13. ACCOUNTING FOR PARTNERSHIP-DISSOLUTION OF A FIRM
    1. Dissolution of Partnership vs Dissolution of a Firm
    2. Distinction Between Dissolution of Partnership and Dissolution of Firm
    3. Settlement of Accounts [Section 48]
    4. Treatment of Firm's Debts and Private Debts [Section 49]
    5. Distinction Between Firm's Debts and Private Debts
    6. Realisation Account
    7. Accounting Entries
    8. Treatment of Goodwill
    9. Preparation of Balance Sheet as on Date of Dissolution
    10. Preparation of Balance Sheet as on the Date of Dissolution of Firm
    11. Calculation of Remuneration Payable to Incharge of Realisation
    12. Taking Over the Business of a Dissolved Firm by Some of its Partners to Continue the Same Business
    13. Return of Premium (Goodwill) in Case of Dissolution of Firm Before the Expiry of a Fixed Term [Section 51]
    14. Professional Examination Problems
    15. Theoretical Questions
    16. Practical Questions
  18. 14. PARTNERSHIP-INSOLVENCY, PIECEMEAL DISTRIBUTION, SALE OF A FIRM AND AMALGAMATION OF FIRMS
    1. Introduction
    2. Decision in Gamer vs Murray
    3. Applicability of the Decision in Gamer vs Murray in India
    4. Insolvency of a Firm
    5. Piecemeal Distribution
    6. Basis of Distribution of Cash Among Partners Towards their Capitals
    7. Maximum Loss Method
    8. Proportionate Capital Method
    9. Sale of a Firm to a Company
    10. Amalgamation of Firms
    11. B. Com. Examination Problems
    12. Professional Examination Problems
    13. Theoretical Questions
    14. Practical Questions
  19. 15. ACCOUNTS FROM INCOMPLETE RECORDS [OR SINGLE ENTRY SYSTEM]
    1. Meaning of Incomplete Records
    2. Reasons of Incomplete Records
    3. Limitations of Incomplete Records
    4. Distinction Between Double Entry System and Incomplete Records (Popularly known as Single Entry System]
    5. Preparation of Accounts from Incomplete Records
    6. Statement of Affairs Method
    7. Distinction Between Statement of Affairs and Balance Sheet
    8. Final Accounts Method
    9. Hints for Tracing Missing Information
    10. Solved Problems
    11. B. Com. Examination Problems
    12. Theoretical Questions
    13. Practical Questions
  20. 16. ACCOUNTING FOR HIRE PURCHASE
    1. Meaning of Hire Purchase Agreement
    2. Contents of Hire Purchase Agreement
    3. Meaning of Instalment Purchase Agreement
    4. Distinction Between Hire Purchase Agreement and Instalment Purchase Agreement
    5. Calculation of Interest When Both the Cash Price and the Rate of Interest are Given
    6. Calculation of Interest When Cash Price is Given but Rate of Interest is Not Given
    7. Calculation of Interest When Both the Cash Price and the Rate of Interest are Not Given
    8. Calculation of Cash Price
    9. Calculation of Cash Price in Case of Equal Annual Instalments with the Help of Annuity Formula
    10. Accounting for Hire Purchase Transactions
    11. Full Cash Price Method
    12. Journal Entries Under Full Cash Price Method
    13. Disclosure in Balance Sheet Under Full Cash Price Method
    14. Actual Cash Price Paid Method
    15. Journal Entries Under Actual Cash Price Paid Method
    16. Disclosure in Balance Sheet Under Actual Cash Price Paid Method
    17. Default and Repossession
    18. Complete Repossession
    19. Partial Repossession
    20. Accounting for Goods of Small Sales Values
    21. Methods of Ascertaining Profit
    22. Debtors Method
    23. Stock and Debtors Method
    24. Accounting for Instalment Purchase
    25. Journal Entries Under Interest Suspense Method
    26. Disclosure in Balance Sheet Under Interest Suspense Method
    27. Accounting for Guaranteed Service
    28. B. Com. Examination Problems
    29. Professional Examination Problems
    30. Theoretical Questions
    31. Practical Exercises
  21. 17. ACCOUNTING FOR BRANCHES
    1. Meaning of a Branch
    2. Classification of Branches
    3. Accounting for Dependent Branches
    4. Debtors Method
    5. Accounting Treatment of Goods Returned and Cash Remitted by Branch Customers Directly to Head Office
    6. Accounting Treatment of Goods Sent to Another Branch and Goods Received from Another Branch
    7. Accounting Treatment of Normal Loss, Abnormal Loss, Insurance Claim and Agreed Allowance/Trade Discount
    8. Accounting Treatment of Branch Manager's Commission
    9. When Goods are Sent to Branch at Cost plus Profit
    10. Stock and Debtors Method
    11. Final Accounts Method
    12. Whole Sale Branch Method
    13. Accounting for Independent Branches
    14. Incorporation of Branch Results in the Books of Head Office
    15. B. Com. Examination Problems
    16. Theoretical Questions
    17. Practical Questions
  22. 18. USE OF COMPUTERS IN ACCOUNTING
    1. Meaning of a Computer
    2. Capabilities of a Computer
    3. Role ·of Computers in Accounting
    4. Computer Terms
    5. Components of a Computer
    6. Memory of a Computer
    7. Secondary Storage Devices
    8. Hardware and Software
    9. Theoretical Questions
  23. Appendlx-I
    1. True or False Questions
  24. Appendix-II
    1. Important Distinctions
  25. Appendix-III
    1. Important Short Notes
  26. Appendlx-IV
    1. Important Theoretical Question Bank
  27. Appendlx-V
    1. Recognition of Revenue and Expenses
  28. Copyright