Accountancy · 11th TN - English Medium
30 chapters · 377 topics
Chapter 1: ACCOUNTANCY
Chapter 1: Introduction to Accounting
- ver the centuries, accounting has remained
- of users whose decisions and actions are related to
- Interested Users of Information
- Business organisations involves economic events. An economic event is known
- Identification : It means determining what transactions to record, i.e., to identity
- terms, these are recorded in books of account in monetary terms and in a
- profit motive. Depending upon the size of activities and level of business
- that is helped by the availability of accounting information. You will study
- Accounting as a Source of Information
- or estimation; and
- communicated to the users. These are then interpreted, decoded and used
- planning and controlling business operations. Management accounting draws
- tend to enhance its understandability and usefulness. In order to assess
- verifiable by independent parties use the same method of measuring, and be
- To be relevant, information must be available in time, must help in prediction
- with other entities. To be comparable, accounting reports must belong to a
- cannot accurately remember the numerous amount of varied transactions
- period. A proper record of resources owned by business organisation (Assets)
- Unions and employee groups-information on the stability, profitability
- competition and for comparative and benchmarking purposes. Whereas
- financial information. These limitations of accounting must be kept in view
- Entity means a reality that has a definite individual existence. Business entity
- Liabilities are obligations or debts that an enterprise has to pay at some time in
- brought in the form of cash or assets by the owner for the business entity
- expense (also called revenue expenditure). On the other hand, the benefit of
- certain deduction in amount due in case if they pay the amount within the
- cash, for use or sale. In a trading concern, purchases are made of merchandise
- amount standing to the favour of such persons and/or entities on the closing
Chapter 2: THE BOOK
Chapter 2: Theory Base of Accounting
Chapter 3: EDUCATIONAL OPPORTUNITIES
Chapter 3: Recording of Transactions-I
- L EARNING O BJECTIVES
- n chapter and , while explaining the
- example of a transaction , which involves reciprocal
- . . Preparation of Accounting Vouchers
- Compound voucher may be: (a) Debit Voucher or (b) Credit Voucher ; the specimen
- fonts of printing are used. Some of the specimen of the accounting vouchers
- At any point of time resources of the business entity must be equal to the
- the picture would emerge somewhat as follows
- (assets) by Rs. , , , decreases cash by Rs. , and increases
- equal to the total amount credited. In accounting, the terms — debit and credit
- The summary of effects of transactions on accounting equation is in the following analysis table
- “Increase in asset is debited, and decrease in asset is credited.”
- illustrate different kinds of events, three more transactions have been added
- In the preceding pages, you learnt about debits and credits and observed how
- the journal is subdivided into a number of books of original entry as follows
- column, which indicates the end of recording the specific journal entry. The
- follows
- listed are recorded in the journal
- The ledger is the principal book of accounting system. It contains different accounts
- sheet. In the beginning, an index is also provided. For easy identification, in
- Amount : This column records the amount in numerical figure, corresponding
- The Journal and the Ledger are the most important books of the double entry
- of the accounting period by transferring them to the trading and profit and
- ‘Furniture’ will be entered signifying that cash is received from the sale of
- We will now see how the transactions listed in example on page - are
Chapter 4: SCOPE OF ACCOUNTANCY EDUCATION
Chapter 4: Recording of Transactions-II
- business transactions are first recorded in the
- illustrated by an example. Consider the following transactions of M/s Roopa
- are credited in the respective ledger accounts because cash has been received
- transactions in our example are posted to the related ledger accounts
- money. (refer figure . ) The depositor writes the name of the party to whom
- Though this is rarely done, a cheque can be transferred by the payee (the
- on the right side in the cash column. The reverse entries are recorded when cash
- If a cheque received from a customer is dishonoured, the bank will return
- The following transactions related to M/s Tools India
- how the transactions recorded in double column cash book are posted to the
- sum, say Rs. , is given to the petty cashier at the beginning of a certain
- date, voucher number and particulars are common for both receipts and
- of petty expenses are listed here under
- writing sundries as per petty cash book. The petty cash account is balanced. It
- On the left side, all cash transactions relating to cash receipts (debits) and on
- has been made, all these documents, popularly known as vouchers, are given
- All credit purchases of goods are recorded in the purchases journal whereas
- Consider the following details obtained from M/s Kanika Traders and observe
- Posting from the purchases journal is done daily to their respective accounts
- serially numbered and dated. The format of the purchases return journal is
- Refer to the purchases (journal) book of Kanika Traders you will notice that
- of the invoice are recorded in the sales journal. Other details about the sales
- The above stated transactions will be entered in a sales journal as follows
- the buyer. Like the debit note, the credit note is also prepared in duplicate
- credited with the amount of returns and the sales return account be debited
- A book maintained to record transactions, which do not find place in special
- Other entries : In addition to the above mentioned entries in the points
- (vii)
- Accounts in the ledger are periodically balanced, generally at the end of the
- complete process of recording the transactions, posting to ledger and balancing
Chapter 5: Bank Reconciliation Statement
- the business organisations keep a record of their
- if withdrawals exceed deposits it will show a debit
- that the bank reconciliation statement may be prepared. Its format shown in
- (+ column) and another showing deductions (-column). For convenience, we
- Reconciliation of the cash book and the bank passbook balances amounts
- immediately recorded in the debit side of the cash book. This increases
- it receives the bank statement. In this case, the bank records the receipts in the
- the business firm is discounted with the bank is dishonoured on the date of
- and wrong totalling, etc. committed by the bank while posting entries in the
- . Preparation of Bank Reconciliation Statement
- We may have four different situations while preparing the bank reconciliation
- on standing instructions and debited by the bank in the passbook but
- The following solved illustrations will help you understand dealing with
- So far we have dealt with bank reconciliation statement where bank balances
- The following solved illustration will help you understand the preparation of
- . . Preparation of Bank Reconciliation Statement with
- but not yet collected, and (iii) due to an error in the passbook. The step wise
- maintainance of the firm’s. The firm’s cash book for July which Kamlesh
Chapter 5: SCOPE ABROAD
Chapter 6: INTRODUCTION TO ACCOUNTING
Chapter 6: Trial Balance and Rectification of Errors
- n the earlier chapters, you have learnt about the
- If they do not tally, it indicate that there are some errors. So one must check
- To help in the preparation of the financial statements. (Profit & Loss account
- ensures that all debits and the corresponding credits have been properly recorded
- that all entries in the books of original record (journal, cash book, etc.) have
- this method is not widely used in practice, as it does not help in assuming accuracy
- Mr. Rawat’s ledger shows the following accounts for his business. Help him
- . . Significance of Agreement of Trial Balance
- account to be debited is credited and amount to be credited is debited, or an
- to Mohan Rs. , , not entered in the sales book. When the recording of
- . . Compensating Errors
- Compare the trial balance of current year with that of the previous year to
- to transposition of figures. For example, if a debit amount of Rs. is posted
- as two sided errors. They can be rectified by recording a journal entry giving the
- following examples
- . . Rectification of Errors Affecting Trial Balance
- A better way therefore is by noting the correction on the appropriate side for
- If sales to Diwakar and sons were not posted to his account, ledger will show
- are identified, the amounts are transferred from suspense account to the
- an error of partial omission comitted while posting entries of the sales
- . . Rectification of Errors in the Next Accounting Year
- period. You will learn about this aspect at an advanced stage of your studies
Chapter 7: INTRODUCTION TO ACCOUNTANCY
Chapter 7: Depreciation, Provisions and Reserves
- atching principle requires that the revenue of
- which are used in business for more than one
- As an accounting term, depreciation is that part of the cost of a fixed asset
- Depreciation may be described as a permanent, continuing and gradual
- during the expected useful life of the asset. Depreciation includes amortisation
- Depreciation has a significant effect in determining and presenting the
- Above mentioned discussion on depreciation highlights the following features
- There are some terms like ‘depletion’ and ‘amortisation’, which are also used in
- period of time. The procedure for amortisation or periodic write-off of a portion
- Examples of such assets are patents, copyrights, leases, etc. whose utility to
- repaired after an accident will not fetch the same price in the market even if it
- before arriving at net profit according to ‘Generally Accepted Accounting
- compel some business organisations like corporate enterprises to provide
- condition. Besides the purchase price, it includes freight and transportation
- expenses related to its disposal are estimated at Rs. , . Then its net residual
- example, a machine is purchased and it is estimated that it can be used in
- . Methods of Calculating Depreciation Amount
- depreciation and corresponding time period is plotted on a graph, it will result
- The useful life of the asset is years and net residual value is estimated to
- . . . Limitations of Straight Line Method
- will be computed as follows
- For example, the original cost of a truck is Rs. , , and its net salvage
- Although this method is based upon a more realistic assumption it suffers from
- depreciation is calculated on original cost while under written down value
- changes and require more repair expenses with passage of time such as plant
- In the books of account, there are two types of arrangements for recording
- follows
- The following journal entries are recorded under this method
- . Disposal of Asset
- Consider the following entries in the book of account of R.S. Limited
- the transactions involved in the sale of an asset under one account head. The
- disposal account is as follows
- Rs. , . The Asset Disposal account will be prepared in the following manner
- . Effect of any Addition or Extension to the Existing Asset
- of being used after the existing asset is disposed off, depreciation, should
- for expected repair and renewal of the fixed assets. Examples of provisions
- As already stated that when business transaction takes place on credit
- For creating a provision for doubtful debts the following journal entry
- entries will be recorded
- . . Difference between Reserve and Provision
- true and fair profit or loss in compliance with ‘Prudence’ or ‘Conservatism’
- . Use for the payment of dividend : Provision cannot be used for distribution
- A reserve is created by retention of profit of the business can be for either a
- Revenue reserves : Revenue reserves are created from revenue profits which
- otherwise available for dividend distribution. On the other hand capital
- purposes as provided in the law in force, e.g. to write off capital losses or
- itself from the consequences of unknown expenses and losses, it may be
- Creation of secret reserves within reasonable limits is justifiable on grounds of
Chapter 8: Bill of Exchange
- oods can be sold or bought for cash or on
- The hundies are written in Indian languages and
- the order of a certain person or to the bearer of the instrument. The following
- There are three parties to a bill of exchange
- the bill is retained by Mamta for three months and the amount of
- the drawee. Since Jyoti has accepted the bill, she is the acceptor. Suppose in
- According to the Negotiable Instruments Act , a promissory note is defined
- A promissory note does not require any acceptance because the maker of the
- become the payee. Similarly, if Harish Chander gets this promissory note
- Framework for relationships : A bill of exchange represents a device, which
- Easy transferability : A debt can be settled by transferring a bill of
- the maturity date. But when an emergent holiday is declared under the
- bill along with the name of the party to whom it is being transferred. The act
- However, when the bill of exchange is retained by the receiver with him
- promisesor under all the four alternatives. It makes no difference whether the
- The journal entries to be recoded in the books of the drawer and the acceptor
- A bill is said to have been dishonoured when the drawee fails to make the
- books of Anju (receiver)
- A bill of exchange should be duly presented for payment on the date of its
- the drawer’s books. This is because he is responsible for the dishonour of the
- In the books of Azad, entries will be recorded as
- Sometimes, the acceptor of the bill foresees that it may be difficult to meet the
- The journal entries recorded in case of renewal for the cancellation of the
- bill. The new bill was met on maturity by Mohan. In this case, the following
- happens when the drawee of the bill has funds at his disposal and makes a
- returned it to Amit. On March , Babli retired her acceptance under
- separately in special subsidiary books, the bills receivables in the Bills
- This total is debited to the “Bills Receivable Account” whereas the account of
- are recorded in bill receivable and bills payable book along with postings in
- Posting of recorded entries are as follow
- Normally, bills of exchange or promissory notes are drawn to finance the actual
- The journal entries in the books of Raj and Pal will be recorded as follows
- accommodation bill helps both the parties to the instrument to temporarily
- ( a) Drawer
Chapter 9: LEDGER
Chapter 9: Financial Statements - I
- that the objective of business is to communicate
- and external users specifying their objectives and consequent information
- . Distinction between Capital and Revenue
- benefit of expenditure extends more than one accounting period, it is termed
- Sometimes, it becomes difficult to classify the expenditure into revenue or
- The similar treatment is given to the receipts of the business. If the receipts
- loss will be incorrect. For example, the revenues earned during an accounting
- It has been emphasised that various users have diverse informational
- and capital. These are prepared on the basis of trial balance and additional
- Trading and Profit and Loss account is prepared to determine the profit earned
- from the previous year and remains unchanged during the year and
- used in the product are direct expenses as it refers to small containers
- machinery, furniture, fixtures, fittings, etc. for keeping them in working
- inwards account and direct expenses account are closed by transferring
- The posting done in ledger will appear as follows
- the later stage and there you will notice how this format undergoes a change
- business organisation. Besides purchases, the remaining expenses are divided
- viz. profit and loss account. All revenue/gains other than sales are transferred
- profit and net profit of Ankit for the year ended March , . The redrafted
- Rs. , + Rs. , ) on expenses/losses including salaries, rent and bad
- . . Cost of Goods Sold and Closing Stock–Trading Account Revisited
- of closing stock in business from Rs. , (as computed in figure . ) to
- Cost of Goods Sold = Opening Stock+Purchases Direct Expenses–Closing Stock
- It is the profit earned through the normal operations and activities of the
- (Rs. , × / ), which has been shown on the debit side of the trading
- = Rs. ,
- The balance sheet is a statement prepared for showing the financial position
- Refer to our example - you will observe that the trial balance of Ankit
- trial balance (example - ) to show how the accounts of assets and liabilities of
- ( ) Fixed Assets: Fixed assets are those assets, which are held on a long-term
- as increased by profits and interest on capital and decreased by losses
- permanent of all the assets. Out of debtors, bank and cash, debtors will take
- balances of all fixed assets and long-term investment under the heading of
- The balances of various accounts in balance sheet are carried forward from
- To Creditors A/c
Chapter 10: TRIAL BALANCE
Chapter 10: Financial Statements - II
- n chapter , you learnt about the preparation of
- accounts will not reflect the true and fair view of the
- Let us take another example. The salaries for the month of March,
- in figure .
- and loss account of Ankit for the year ended March , and his balance
- opening and closing stocks are adjusted through purchases, the trial
- of profit or loss. The entry to bring such expenses into account is
- preparation of the trading and profit and loss account as follows
- The necessary adjustment in respect of prepaid expenses is made by recording
- loss account as follows
- The amount of accrued income will be added to the related income in the
- profit by Rs. , making it as Rs. , . Further, it will be shown in the
- However, this income does not pertain to current year and hence will not be
- depreciation. For example, the trial balance in our example shows that Ankit
- sheet as follows
- The existence of bad debts in the trial balance signifies that Ankit has incurred
- sheet is shown below
- accurately know the amount of such bad debts. Hence, we make a reasonable
- of doubtful debts. In the balance sheet, it will be shown as a deduction from
- meeting the loss due to bad debts incurred during the next year. The provision
- In this case, the following journal entries will be recorded
- entry is recorded to create provision for discount on debtors
- deduction from the debtors account to portray correctly the expected realiable
- for discount on debtors account. The account will be treated in the same
- = Rs.
- amount of net profit before charging such commission
- Sometimes, the proprietor may like to know the profit made by the business
- a Trading and Profit and Loss Account and a Balance Sheet
- . The following balances were extracted from the books of Avika Enterprises
- . The following balances were extracted from the books of Anushka Enterprises
- Redraft the Trial Balance (Correct total of Trial Balance Rs. , , )
- Anika Enterprises?
Chapter 11: BANK RECONCILIATION STATEMENT
Chapter 11: Accounts from Incomplete Records
- e have so far studied accounting records of
- and revenues is partially recorded. Hence, these are
- and needs, and their accounts are not comparable due to lack of
- limitations. This is due to the basic nature of this mechanism. Broadly
- Therefore, the problem faced in this situation is how to use the available
- outstanding expenses, bank balances, etc. are ascertained from the relevant
- owner or any fresh capital introduced by him during the accounting period in
- Profit or Loss = Capital at end – Capital at beginning + Drawings during the year
- . . Difference between Statement of Affairs and Balance Sheet
- shown in a tabular form as under
- cash purchases, debtors, cash sales, other cash payments and such receipts
- which is given in figure . , credit purchases or any other missing figure related
- the total debtors account is prepared as shown in figure . , credit sales or any
- the balancing figures. The proforma of total bills receivable account and total
- . . Ascertainment of Missing Information through Summary of Cash
- summarised below
Chapter 12: DEPRECIATION ACCOUNTING
Chapter 12: Applications of Computers in Accounting
Chapter 13: FINAL ACCOUNTS OF SOLE PROPRIETORS - I
Chapter 13: Computerised Accounting System
Chapter 14: Structuring Database for Accounting
- L EARNING O BJECTIVES
- n the earlier chapters, you have already learnt
- as follows
- tables that are structured in a manner that ensures data consistency and
- (ii) Input of Data : The accounting data contained in vouchers is to be entered
- Alternatively, the transformed data can be directly presented in the form
- Relational Data Model : It is representational data model through which ER
- discussed in the context of an accounting reality given below
- Anything in the real world with independent existence is called entity such as
- (ii) Single-valued vs. Multi-valued Attributes : An attribute with a single value
- specific to each entity types have been stated below as
- Vouchers is an entity that expresses various transactions vouchers. It is
- of attributes. The collection of entities of a particular entity type is grouped
- type students has unique values through which a student instance can be
- debit account(s) and vouchers contain credit account(s). In ER Model, these
- (relationship) and EMPLOYEES (entity) together signify a binary
- N: implying thereby that a set of vouchers can be created by a
- entity type to the relationship, whereas partial participation is
- a good partial key. Otherwise a composite attribute of all the weak entity’s
- . . ER Presentation of Accounting Reality
- organisation operates within an environment. While operating, the
- In a transaction, the names of accounts (or their accounting codes), date of
- characteristics): one it is integrated and second it is shared . Integrated
- However, information may be viewed as data at one level. But when it is
- following transactions
- several representational models, Relational Data Model (RDM) is the most popular
- the table as such is called a relation . The data type describing the types of
- ACCOUNTS ( Code , Name, Type) ← Relation with attributes
- components. The multi-valued attributes are represented by separate
- (c) The Integrity constraints, specified on database schema, must hold in
- is that of a key which has not redundancy. This can be shown
- that we cannot identify such tuples or identify these as alike. A failure to
- Code . The values of debit and credit cannot be null because of total
- example, an attempt to add another record of an account with data values
- to provide a step-by-step procedure that transforms ER design into Relational
- has an owner entity and an identifying relationship through which such
- relationship on n-side while Employees entity participates in same
- names as attributes in Vouchers relation as foreign keys to reference
- In above relation credit Code is included as foreign key to represent primary
- Where in another attribute vType has been introduced to indicate whether
- Model-II : The set relations given below are based on modified example reality
- One of the major reasons for the success of commercial databases is the SQL
- In this sense, it can be used as a sub-language in a database-programming
- II. Query to retrieve selected columns of data records from a table, subject
- applying any condition. This in turn means that all tuples of a relation
- IV. Ambiguous Attribute Names and Renaming ( Aliasing ) : SQL allows the
- relation. Whenever vouchers and details relations are used in a query, the
- V. Sub-string Comparisons and Arithmetic Operators and Ordering and use
- using * and range specification within rectangular brackets. For Example
- statement. Consider the following query
- on the specific RDBMS. Consider the following example
- value is to be compared with an attribute, the value set can be given in
- the basis of creating collection of data items on which these functions are