UNIT

UNIT

Introduction to Accounting

1. Accounting- concept, objectives, advantagesand limitations, types of accountinginformation; users of accounting informationand their needs. Qualitative Characteristics ofAccounting Information. Role of Accounting inBusiness.
2. Basic Accounting Terms- BusinessTransaction, Capital, Drawings. Liabilities(Non Current and Current). Assets (Non Current, Current); Fixed assets (Tangible and Intangible), Expenditure (Capital and Revenue), Expense, Income, Profit, Gain, Loss, Purchase, Sales, Goods, Stock,Debtor, Creditor, Voucher, Discount (Trade discount and Cash Discount)

After going through this Unit, the students will be able to:

1. Describe the meaning, significance,objectives, advantages and limitations ofaccounting in the modem economicenvironment with varied types of businessand non-business economic entities.
2. Identify / recognise the individual(s) andentities that use accounting information forserving their needs of decision making.
3. Explain the various terms used in accountingand differentiate between different relatedterms like current and non-current, capital and revenue.
4. Give examples of terms like businesstransaction, liabilities, assets, expenditure and purchases.

Theory Base of Accounting

1. Fundamental accounting assumptions:GAAP: Concept
2. Business Entity, Money Measurement, GoingConcern, Accounting Period, Cost Concept,Dual Aspect, Revenue Recognition, Matching, Full Disclosure,Consistency,Conservatism,  Materiality and Objectivity
3. System of Accounting. Basis of Accounting:cash basis and accrual basis
4. Accounting Standards: Applicability in IndAS
5. Goods and Services Tax (GST):Characteristics and Objective.

1. Explain that sales/purchases include both cash and credit sales/purchases relating to the accounting year.
2. Differentiate among income, profits and gains.
3. State the meaning of fundamental accounting assumptions and their relevance in accounting.
4. Describe the meaning of accounting assumptions and the situation in which an assumption is applied during the accounting process.
5. Explain the meaning and objectives of accounting standards.
6. Appreciate that various accounting standards developed nationally and globally are in practice for bringing parity in the accounting treatment of different items.
7. Acknowledge the fact that recording of accounting transactions follows double entry system.
8. Explain the bases of recording accounting transaction and to appreciate that accrual basis is a better basis for depicting thecorrect financial position of an enterprise.
9. Understand the need of IFRS
10. Explain the meaning, objective and characteristic of GST.

Recording of Business Transactions

1. Voucher and Transactions: Sourcedocuments and Vouchers, Preparation of Vouchers, Accounting Equation Approach:Meaning and Analysis, Rules of Debit and Credit.
2. Recording of Transactions: Books of Original Entry- Journal
3. Special Purpose books:
4. Cash Book: Simple, cash book with bankcolumn and petty cashbook
5. Purchases book
6. Sales book
7. Purchases return book
8. Sales return book

Note: Including trade discount, freight and cartage expenses for simple GST calculation.

1. Ledger: Format, Posting from journal andsubsidiary books, Balancing of accounts

Bank Reconciliation Statement:

1. Need and preparation, Bank Reconciliation Statement with Adjusted Cash Book

Depreciation, Provisions and Reserves

1. Depreciation: Concept, Features, Causes,factors
2. Other similar terms: Depletion andAmortisation
3. Methods of Depreciation:

i. Straight Line Method (SLM)

ii. Written Down Value Method (WDV)

Note: Excluding change of method

1. Difference between SLM and WDV;Advantages of SLM and WDV
2. Accounting treatment of depreciation

i. Charging to asset account

ii. Creating provision for depreciation/accumulated depreciation account

iii. Treatment for disposal of asset

1. Provisions and Reserves: Difference
2. Types of Reserves:

i. Revenue reserveii.

ii. Capital reserveiii.

iii. General reserveiv.

iv. Specific reserve

V. Secret Reserve

1. Difference between capital and revenuereserve

Accounting for Bills of Exchange

1. Bill of exchange and Promissory Note:Definition, Specimen, Features, Parties.
2. Difference between Bill of Exchange and Promissory Note
3. Terms in Bill of Exchange:

i. Term of Bill

ii. Accommodation bill (concept)iii.

iii. Days of Grace

iv. Date of maturity

v. Discounting of bill

vi. Endorsement of bill

vii. Bill after due date

viii. Negotiation

ix. Bill sent for collection

x. Dishonour of bill

xi. Retirement of bill

xii. Renewal of bill

1. Accounting Treatment

Note: excluding accounting treatment for accommodation bill

Trial balance and Rectification of Errors

1. Trialbalance: objectives and preparation (Scope:Trial balance with balance method only)
2. Errors: types-errors of omission, commission,principles, and compensating; their effect onTrial Balance.
3. Detection and rectification of errors;preparation of suspense account.

After going through this Unit, the students will be able to:

1. Explain the concept of accounting equationand appreciate that every transaction affects either both the sides of the equation or a positive effect on one item and a negative effect on another item on the same side of accounting equation.
2. Explain the effect of a transaction (increase or decrease) on the assets, liabilities, capital, revenue and expenses.
3. Appreciate that on the basis of source documents, accounting vouchers are prepared for recording transaction in the books of accounts.
4. Develop the understanding of recording of transactions in journal and the skill of calculating GST.
5. Explain the purpose of maintaining a Cash Book and develop the skill of preparing the format of different types of cash books and the method of recording cash transactions in Cash book.
6. Describe the method of recordingtransactions other than cash transactions as per their nature in different subsidiary books.
7. Appreciate that at times bank balance as indicated by cash book is different from the bank balance as shown by the pass book /bank statement and to reconcile both the balances, bank reconciliation statement is prepared.
8. Develop understanding of preparing bank reconciliation statement.
9. Appreciate that for ascertaining the position of individual accounts, transactions are posted from subsidiary books and journal proper into the concerned accounts in the ledger and develop the skill of ledger posting.
10. Explain the necessity of providingdepreciation and develop the skill of using different methods for computing depreciation.
11. Understand the accounting treatment of providing depreciation directly to the concerned asset account or by creating provision for depreciation account.
12. Appreciate the method of asset disposal through the concerned asset account or by preparing asset disposal account.
13. Appreciate the need for creating reserves and also making provisions for events which may belong to the current year but may happen in next year.
14. Appreciate the difference between reserve and reserve fund.
15. Acquire the knowledge of using bills of exchange and promissory notes for financing business transactions;
16. Understand the meaning and distinctive features of these instruments and developthe skills of their preparation.
17. State the meaning of different terms used in bills of exchange and their implication in accounting.
18. Explain the method of recording of bill transactions.
19. State the need and objectives of preparing trial balance and develop the skill of preparing trial balance.
20. Appreciate that errors may be committed during the process of accounting.
21. Understand the meaning of different types of errors and their effect on trial balance.
22. Develop the skill of identification and location of errors and their rectification and preparation of suspense account.

Financial Statements

Meaning, objectives and importance; Revenue and Capital Receipts; Revenue and Capital Expenditure;
Deferred Revenue expenditure.

Trading and Profit and Loss Account: Gross Profit,Operating profit and Net profit. Preparation.
Balance Sheet: need, grouping and marshalling of assets and liabilities. Preparation.

Adjustments in preparation of financial statements with respect to closing stock, outstanding expenses, prepaid expenses, accrued income, income received in advance,depreciation, bad debts, provision for doubtful debts,provision for discount on debtors, Abnormal loss, Goods taken for personal use/staff welfare, interest on capital and managers commission.

Preparation of Trading and Profit and Loss account and Balance Sheet of a sole proprietorship with adjustments.

Incomplete Records

Features, reasons and limitations.
Ascertainment of Profit/Loss by Statement of Affairs method.

Difference between accounts from incomplete records and Statement of Affairs. Preparation of Trading , Profit and Loss account and Balance Sheet.

After going through this Unit, the students will be able to:

1. State the meaning of financial statements
2. The purpose of preparing financial statements.
3. State the meaning of gross profit, operatingprofit and net profit and develop the skill of preparing trading and profit and loss account.
4. Explain the need for preparing balance sheet.
5. Understand the technique of grouping andmarshalling of assets and liabilities.
6. Appreciate that there may be certain itemsother than those shown in trial balance whichmay need adjustments while preparing financial statements.
7. Develop the understanding and skill to doadjustments for items and their presentation in financial statements like depreciation,closing stock, provisions, abnormal loss etc.
8. Develop the skill of preparation of trading andprofit and loss account and balance sheet.
9. State the meaning of incomplete records andtheir uses and limitations.
10. Develop the understanding and skill ofcomputation of profit / lossusing the statement of affairs method.

1. Introduction to computer and accounting information system {AIS}: Introduction to computers (elements, capabilities, limitations of computer system)
2. Introduction to operating software, utility software and application software.
3. Introduction to accounting information system (AIS) as a part of Management Information System.
4. Automation of accounting process: meaning
5. Stages in automation: (a) Accounting process in a computerised environment; comparison between manual accounting process and computerised accounting process, (b)Sourcing of accounting software; kinds of software: readymade software; customised software and tailor-made software; generic considerations before sourcing accounting software (c) creation of account groups and hierarchy (d) generation of reports - trial balance, profit and loss account and balance sheet

Scope:

(i) The scope of the unit is to understand accounting as an information system for the generation of accounting information and preparation of accounting reports.

(ii) It is presumed that the working knowledge of any appropriate accounting software will be given to the students to help them learn basic accounting operations on computers.

After going through this Unit, the students will be able to:

1. State the meaning of a computer, describe itscomponents, capabilities and limitations.
2. State the meaning of accounting informationsystem.
3. Appreciate the need for use of computers in accounting for preparing accounting reports.
4. Develop the understanding of comparing the manual and computerized accounting process and appreciate the advantages and limitations of automation.
5. Understand the different kinds of accounting software.

1. Collection of source documents, preparation of vouchers, recording of transactions with the help of vouchers.

2. Preparation of Bank Reconciliation Statement with the given cash book and the pass book with twenty to twenty-five transactions. 

3. Comprehensive project of any sole proprietorship business. This may state with journal entries and their ledgering, preparation of Trial balance. Trading and Profit and Loss Account and Balance Sheet. Expenses, incomes and profit (loss), assets and liabilities are to be depicted using pie chart / bar diagram.