Accumulated depreciation account, 57–58
Annual General Meeting (AGM), 16
Arithmetical amount accuracy, 25
Assets
capital commitments, 66–67
contingent liabilities, 66
current assets (See Current assets)
noncurrent assets (See Noncurrent assets)
Balance sheet
assets (See Assets)
constituents of, 62
debit and credit side, 69
definition, 60
equation, 61
equities and liabilities, 70
equity, 67
format, 61–62
liabilities, 67–68
notes to accounts, 71–74
operating cycle, 68
Capital expenditure
definition, 11
vs. revenue expenditure, 13
Capital receipts, 12
Capital work-in-progress, 63
Cash flow statement
activities, 28–29
definition, 28
direct method (See Direct cash flow method)
indirect method (See Indirect cash flow method)
types of, 29
Cheat sheet, 23
Concepts
accural, 3–4
assumptions, 2–3
conservatism, 6–7
consistency, 3
cost, 5–6
debit and credit, 7–8
definition, 2
dual aspect, 6
entity, 4
going concern, 3
matching, 5
materiality, 7
money measurement, 4–5
periodicity, 5
personal transactions, 4
realization, 6
Credit side, 8
Current assets
advance tax payments, 66
cash and cash equivalents, 66
conditions, 64–65
current investments, 65
dividend receivable, 66
interest accrued, 66
inventories, 65
prepaid expenses, 66
short-term loans and advances, 66
trade receivables, 66
Current liabilities, 67–68
Debit side, 8
Depreciation and amortization expenses, 49
Depreciation expense account, 57
Direct cash flow method
calculation, 43
cash account, 44
investing and financing activities, 45
operating activities, 44
Employee benefit expenses, 49
FIFO. See First in last out (FIFO)
Final accounts
Balance Sheet (See Balance Sheet)
and business activities, 28
cash flow statement (See Cash flow statement)
components, 27
definition, 27
financial statements, 27
profit and loss (See Profit and loss accounts)
Financial accounting
concepts (See Concepts)
debit and credit, 7–8
definition, 1
golden rules, 9
process schematics, 1–2
stages of, 1
types of, 8–9
Financial statements, 27
Financing activities, 28–29
First in last out (FIFO)
closing inventory, 86–87
vs. LIFO, 85–86
General journal, 20
Indirect cash flow method
accounts payable, 38
accounts receivable, 37
accrued liabilities, 38
adjustments, 34–35
Balance Sheet, 36–37
bonds, 38
calculation method, 29
cash balance, 37
cash dividend, 38
closing balance, 32
comparative balance sheet, 33
current assets, 36–37
current liabilities, 38
financing activities, 30, 31
income statement, 32, 34
income tax, 35
inflow and outflow, 34
interest expense, 35
interest income, 35
inventory, 36
investing activities, 30, 31
investment (long term), 33, 36
liabilities, 33
net profit, 34
operating activities, 30–31
plant assets, 33, 34, 36
prepaid expenses, 37
reserves and surplus, 37
sale of investments, 34
sale of plant, 35
share capital, 37
statement preparation, 39–43
Intangible assets, 63
Inventory valuation
FIFO (See First in last out (FIFO))
LIFO (See Last in first out (LIFO))
methods, 85–86
types, 85
Investing activities, 28–29
Journal
accounts, type and nature, 15–16
cash account, 17–20
company purchases, 17
company wages, 17
credit sales, 17
credit-debit rule, 15–16
definition, 1, 15
double entry, 15
machinery account, 17–19
narration, 16
prepaid rent account, 18–19
purchase account, 17–19
rent, 17
rent account, 17–19
sales account, 18–19
total credit, 16
total debit, 16
trade discount, 17
transaction analysis, 15–16
types of, 20
Last in first out (LIFO)
closing inventory, 86–87
vs. FIFO, 85–86
Ledgers
balanced account, 21
balancing of, 24
cash account, 22
characteristics, 21
cheat sheet, 23
credit balance, 22
debit balance, 21
definition, 21
example, 22–23
machinery account, 22
personal account, 23
posting, 21
purchase account, 22
rent account, 23
T-shaped account, 22
LIFO. See Last in first out (LIFO)
Manufacturing inventory, 85
Market price, 85
Nominal accounts, 9
Noncurrent assets
deferred tax asset (Net), 64
fixed assets, 62–63
long term loans and advances, 64
noncurrent investments, 63–64
other, 64
Noncurrent liabilities, 67
Notes to accounts
cash and cash equivalents, 82
current liabilities, 81
depreciation and amortization expenses, 83
employee benefit expenses, 83
finance cost, 83
fixed assets, 82
inventory, 83
loan, 81
material consumed cost, 82
prepaid expenses, 82
reserves and surplus, 81
revenue from operations, 82
short term provision, 81
Opening stock, 76
Operating activities, 28–29
Operating cycle, 68
Personal accounts, 9
Posting, 21
Profit and loss accounts
accrued income, 46, 56–57
adjustments, 46, 54
bad/doubtful debts, 58–59
depreciation, 57–58
depreciation and amortization expenses, 49
detailed analysis, 48
employee benefit expenses, 49
fire/theft loss, 59–60
format, 46–47
importance, 45
incomes and expenses side, 50–51
insurance expense, 54–55
materials cost, 48
nominal accounts balance, 45–46
notes to accounts, 52–53
outstanding expense, 46, 55
prepaid expense, 46, 54–55
prepaid income, 46
received income/dividend/interest, 48
report card, 45
revenue from operations, 48
statute, 46
stock-in-trade, 48–49
Trial Balance, 50–51
unearned income, 55–56
Purchase journal, 20
Purchase return journal, 20
Real accounts, 9
Receipts, 12
Revenue expenditure
vs. capital expenditure, 13
characteristics, 11
Revenue receipts, 12
Sales return journal, 20
Shareholders’ funds, 67
Special journal, 20
T-shaped account, 8
Tangible assets, 62–63
Trading inventory, 85
Trial balance, 25
Trial Balance
assets, 80
bad debts, 78
Balance Sheet, 80
capital, 79
credit and debit balances, 75
credit side, 79
debit side, 76
discount, 79
equities and liabilities, 80
furniture and fixtures cost, 77
general expenses, 77–78
land and building cost, 76–77
loan, 79
machinery cost, 77
notes to accounts (See Notes to accounts)
opening stock, 76
operating expenses, 78
purchase returns, 79
purchases, 77
salaries, 77
sales returns, 79
sundry creditors, 79
sundry debtors, 78
wages, 78
Working capital, 68