Professional Documents
Culture Documents
Introduction
Accounting is aptly called the language of business. This designation is applied to accounting because
it is the method of communicating business information. The basic function of any language is to
serve as a means of communication. Accounting duly serves this function. The task of learning
accounting is essentially the same as the task of learning a new language. But the acceleration of
change in business organization has contributed to increase the complexities in this language. Like
other languages, it is undergoing continuous change in an attempt to discover better means of
communications. To enable the accounting language to convey the same meaning to all stakeholders, it
should be made standard. To make it a standard language certain accounting principles, concepts and
standards have been developed over a period of time. This lesson dwells upon the different dimensions
of accounting, accounting concepts, accounting principles and the accounting standards.
Definition of Accounting
The American institute of certified and public accountants committee on terminology defined
accounting as, accounting is the art of recording, classifying and summarizing, in a significant
manner and in terms of money, transactions and events which are, in part at least, of a financial
character and interpreting the results thereof.
(i) Recording: It is concerned with the recording of financial transactions in an orderly manner,
soon after their occurrence In the proper books of accounts.
(ii) Classifying: It is concerned with the systematic analysis of the recorded data so as to
accumulate the transactions of similar type at one place. This function is performed by
maintaining the ledger in which different accounts are opened to which related transactions
are posted.
(iii) Summarizing: It is concerned with the preparation and presentation of the classified data in a
manner useful to the users. This function involves the preparation of financial statements such
as Income Statement, Balance Sheet, and Statement of Changes in Financial Position,
Statement of Cash Flow, and Statement of Value Added.
(iv) Interpreting: Nowadays, the aforesaid three functions are performed by electronic data
processing devices and the accountant has to concentrate mainly on the interpretation aspects
of accounting. The accountants should interpret the statements in a manner useful to action.
The accountant should explain not only what has happened but also (a) why it happened, and
(b) what is likely to happen under specified conditions.
NATURE OF ACCOUNTING
i) Accounting as a service activity: Accounting is a service activity. Its function is to provide
quantitative information, primarily financial in nature, about economic entities that is intended
to be useful in making economic Decisions, in making reasoned choices among alternative
courses of action.
(i) (ii)Accounting as a profession: Accounting is very much a profession. A profession is a career
that involves the acquiring of a specialized formal education before rendering any service.
Accounting is a systematized body of knowledge developed with the development of trade and
business over the past century.
(ii) (iii)Accounting as a social force: In early days, accounting was only to serve the interest of
the owners. Under the changing business environment the discipline of accounting and the
accountant both have to watch and protect the interests of other people who are directly or
indirectly linked with the operation of modern business.
(iii) Accounting as a language: Accounting is rightly referred the "language of business".
It is one means of reporting and communicating information about a business. As one has to
learn a new language to converse and communicate, so also accounting is to be learned and
practiced to communicate business events.
(iv)Accounting as science or art: Accounting has its own principles e.g. the double entry system,
which explains that every transaction has two fold aspects i.e. debit and credit. It also lays
down rules of journalizing. So we can say that accounting is a science. Accounting is an art as
it also requires knowledge, interest and experience to maintain the books of accounts in a
systematic manner.
(v) Accounting as an information system: Accounting discipline will be the most useful one in
the acquisition of all the business knowledge in the near future. You will realize that people
will be constantly exposed to accounting information in their everyday life. Accounting
information serves both profit-seeking business and non-profit organizations.
BRANCHES IN ACCOUNTING:
To meet the ever increasing demands made on accounting by different interested parties such as
owners, management, creditors, taxation authorities etc., the various branches have come into
existence. There are as follows:
I. Financial Accounting: The object of financial accounting is to ascertain the results (profit or loss)
of business operations during the particular period and to state the financial position (balance sheet) as
on a date at the end of the period.
Benefits or Advantages of Financial Accounting
1. Financial information about business: Accounting makes available financial information ie
the profit earned or loss suffered and also what are teh assets and liabilities of the enterprise.
To provide information useful for the making economic decision .
2. To serve primarily those users who have limited authority ability or resource to obtain
information and who rely on financial statement as their principal source of information about
the economic activities of an enterprises.
3. Facilitates comparative study :To provide information useful to investors and creditors for
predicting comparing and evaluating cash flow in terms of amount timing and related
uncertainty.
4. To provide users with information for predicting comparing and evaluating the earning power
of the enterprise.
5. Assistance to Manager : The management responsible for the function of the business and has
to therefore plan make decisions and exercise effective control on the affairs of the business.
The management performs these function on the basis of accounting information. To supply
useful information in judgment the managements ability to utilize enterprise resources
effectively for achieving the primary enterprise goals.
6. To provide factual and interpretive information about the transaction that are useful for
predicting comparing and evaluating the earning power of an enterprise.
7. Replace memory: No business man can remember everything about his business since human
memory has limitation .It is necessary to record transaction in the book of accounts promptly.
There is no necessity of remembering various transaction since on need the records will furnish
the necessary information.
8. Facilitates loan: Loan is granted by the bank and financial institution on the basis of growth
potential which is supported by the performance .Accounting makes available the information
with respect to performance.
Disadvantages of Financial Accounting
1. Accounting is not fully exact: Accounting is influenced by personal judgment in respect of
various terms. People are bound to have different ideas and the estimates will naturally differ
from person to person. Thus this will lead to different amount of profit shown by different
person. Thus the profit cannot be treated as exact.
2. Accounting does not indicate the releasable value: The balance sheet does not show the
amount of cash which the firm may realize by the sale of all assets.
3. Accounting ignores qualitative elements: Since accounting is confined to monetary matters
only qualitative elements like quality of management and labor force industrial relations and
public relations are ignored.
4. Accounting ignores the effect of price level change: Accounting statement are prepared at
historical cost .Money as measurement unit change in value. It does not remain stable
.Financial statement do not show the effect of change in price level .The assets remain
undervalue in many case particular land and building So while preparing financial statement
accounting information will not show the true result.
5. Accounting may lead to window dressing: The term window dressing means manipulation of
accounts in a way so as to conceal vital facts and present the financial statement in a way to
show better position than what it is actually .In this solution income statement fails to provide a
true and fair view of the result of operation and the balance sheet fails to provide a true and fair
view of the financial position of the enterprise.
II. Cost Accounting: The object of cost accounting is to find out the cost of Goods produced or
services rendered by a business. It also helps the business in controlling the costs by indicating
avoidable losses and wastes.
The importance and advantages of cost accounting are presented below:
1. Helps in controlling cost: cost accounting helps in controlling cost by applying some
techniques such as standard costing and budgetary control.
2. Provides necessary cost information: it provides necessary cost information to the
management for planning, implements and controlling.
3. Ascertains the total per unit cost of production: it ascertains the total and per unit cost of
production of goods and services that helps to fix the selling prices as well.
4. Introduces cost reduction programs: it helps to introduce and implement different cost
reduction programs.
5. Discloses the profitable and non-profitable activities: it discloses the profitable and non-
profitable activities that enable management to decide to eliminate or control unprofitable
activities and expand or develop the profitable activities.
6. Provides information for the comparison of cost: it provides reliable data and information
which enable the comparison of cost between periods, volume of output, determent and
processes.
7. Checks the accuracy of financial accounts: it helps checking the accuracy of financial
accounts. This is done by preparing cost reconciliation statement.
8. Helps invest and financial institutions: it is also advantageous to investment and financial
institutions since it discloses the profitability and financial position in which they intend to
invest.
9. Beneficial to workers: it is beneficial to workers as well since it emphasizes the efficient
utilization of labor and scientific systems of wages payment.
Accounting Concepts
Accounting Concept defines the assumptions on the basis of which Financial Statements of a business
entity are prepared. Certain concepts are received assumed and accepted in accounting to provide a
unifying structure and internal logic to accounting process. The word concept means idea or nation,
which has universal application. Financial transactions are interpreted in the light of the concepts,
which govern accounting methods. Concepts are those basis assumption and conditions, which form
the basis upon which the accountancy has been laid. Unlike physical science, Accounting concepts are
only results of broad consensus. These accounting concepts lay the foundation on the basis of which
the accounting principles are formulated.
Now we shall study in detail the various concept on which accounting is based. The following are the
widely accepted accounting concepts.
Business Entity Concept: Entity Concept says that business enterprises is a separate identity
apart from its owner. Business transactions are recorded in the business books of accounts and
owners transactions in this personal back of accounts. The concept of accounting entity for
every business or what is to be excluded from the business books. Therefore, whenever business
received cash from the proprietor, cash a/c is debited as business received cash and capital/c is
credited. So the concept of separate entity is applicable to all forms of business organization.
Money Measurement Concept: As per this concept, only those transactions, which can be
measured in terms of money are recorded. Since money in the medium of exchange and the
standard of economic value, this concept requires that these transactions alone that are capable of
being measured in terms of money be only to be recorded in the books of accounts. For example,
health condition of the chairman of the company, working conditions of the workers, sale policy
etc. Do not find place in accounting because it is not measured in terms of money.
Cost Concept: By this concept, the value of assets is to be determined on the basic of historical
cost. Transaction is entered in the books of accounts at the amount actually involved. For
example a machine purchased for Rs. 80000 and may consider it worth Rs. 100000, But the
entry in the books of account will be made with Rs. 80000 or the amount actually paid. The cost
concept does not mean that the assets will always be shown at cost. The assets may be recorded
at the time of purchase but it may be reduced its value be charging depreciation.
Going Concern Concept: According to this concept the financial statements are normally
prepared on the assumption that an enterprise is a going concern and will continue in operation
for the foreseeable future. Transaction are therefore recorded in such a manner that the benefits
likely to accrue in future from money spent. It is because of this concept that fixed assets are
recorded at their original cost and depreciation in a systematic manner without reference to their
current realizable value.
Dual aspect Concept: This concept is the care of double entry book-keeping. Every transaction
or event has two aspects. If any event occurs, it is bound to have two effects. For Rs.50000, on
the other hand stock will increase by Rs.50000 and other liability will increase by Rs.50000.
similarly is X starts a business with a capital of Rs. 50000, while on the other hand the business
has to pay Rs. 50000 to the proprietor which is taken as proprietors Capital.
Realization Concept: It closely follows the cost concept any change in value of assets is to be
recorded only when the business realize it. i.e. either cash has been received or a legal obligation
to pay has been assumed by the customer. No Sale can be said to have taken place and no profit
can be said to have arisen. It prevents business firm from inflating their profit by recording sale
and income that are likely to accrue, i.e. expected income or gain are not recorded.
Accrual Concept: Under accrual concept the effect of transaction and other events are
recognized on mercantile basic. When they accrue and not as cash or a cash equivalent is
received or paid and they are recorded in the accounting record and reported in the financial
statements of the periods to which they relate financial statement prepared on the accrual basic
inform users not only of past events involving the payment and receipt of cash but also of
obligation to pay cash in the future and of resources that represent cash to be received in the
future. For Example: Mr. Raj buy clothing of Rs. 50000,a paying cash Rs. 20000 and sells at Rs.
60000 of which customer paid only Rs. 40000. So his revenue is Rs. 60000, not Rs. 40000 cash
received. Exp. Or Cash is Rs. 50000, not Rs. 20000 cash paid. So the accrual concept based
profit is Rs. 10000 (Revenue- Exp.)
Accounting Period Concept: This is also called the concept of definite periodicity concept as
per going concept on indefinite life of the entity is assumed for a business entity it causes
inconvenience to measure performance achieved by the entity in the ordinary causes of business.
Therefore, a small but workable fraction of time is chosen out of infinite life cycle of the
business entity for measure the performance and loading at the financial position 12 months
period is normally adopted for this purpose accounting to this concept accounts should be
prepared after every period & not t the end of the life of the entity. Usually this period is one
calendar year. In India we follow from 1 st April of a year to 31st March of the immediately
following years. Now a day because of the need of management, final accounts are prepared at
shorter intervals of quarter year or in some cases a month such accounts are know a interim
account.
Matching Concept: In this concept, all exp. Matched with the revenue of that period should
only be taken into consideration. In the financial statements of the organization. If any revenue is
recognized that exp. Related to earn that revenue should also be recognized. This concept as it
considers the occurrence of exp. And income and do not concentrate on actual inflow or outflow
of cash. This leads to adjustment of certain items like prepaid and outstanding expenses,
unearned or accrued income.
Objective Concept: As per this concept, all accounting must be based on objective evidence. In
other words, the transactions recorded should be supported by verifiable documents. Only than
auditors can verify information record as true or otherwise. The evidence should not be biased. It
is for this reasons that assets are recorded at historical cost and shown thereafter at historical lass
depreciation. If the assets are shown on replacement cost basis, the objectivity is lost and it
becomes difficult for auditors to verify such value, however, in resent year replacement cost are
used for specific purpose as only they represent relevant costs. For example, to find out intrinsic
value of share, we need replacement cost of assets and not the historical cost of the assets.
Accounting Conventions
The term Accounting Conventions refers to the customs or traditions which are used as a guide in
the preparation of accounting reports and statements. The conventions are derived by usage and
practice. The accountancy bodies of the world may charge any of the convention to improve the
quality of accounting information accounting conventions need not have universal application.
Following are important accounting conventions in use:
1.) Convention of consistency:- According to this convention the accounting practices should remain
unchanged from one period to another. It requires that working rules once chosen should not be
changed arbitrarily and without notice of the effect of change to those who use the accounts. For
example, stock should be valued in the same manner every year. Similarly depreciation is charged on
fixed assets on the same method year after year. If this assumption is not followed, the fact should be
disclosed together with reasons.
The principle of consistency plays its role particularly when alternative accounting methods is equally
acceptable. Any change from one method to another method would result in inconsistency; they may
seem to be inconsistent apparently. In case of valuation of stocks if the company applies the principle
at cost or market price whichever is less and if this principle accordingly result in the valuation of
stock in one year at cost and the market price in the other year, there is no inconsistency here. It is only
an application of the principle.
2) Convention of Conservatism:- This is the policy of playing sale game. It takes into consideration
all prospective losses but leaves all prospective profits financial statements are usually drawn up on a
conservative basis anticipated profit are ignored but anticipated losses are taken into account while
drawing the statements following are the examples of the application of the convention of
conservatism.
Making the provision for doubtful debts and discount on debtors.
Valuation of the stock at cost price or market price whichever is less.
Charging of small capital items, like crockery to revenue.
Showing joint life policy at surrender value as against the actual amount paid.
Not providing for discount on creditors.
3) Convention of Disclosure:- Apart from statutory requirement, good accounting practice also
demands that significant information should be disclosed in financial statements. Such disclosures can
also be made through footnotes. The purpose of this convention is to communicate all material and
relevant facts concerning financial position and results of operations to the users. The contents of
balance sheet and profit and loss account are prescribed by law. These are designed to make
disclosures of all materials facts compulsory. The practice of appending notes relative to various facts
and items which do not find place in accounting statements is in pursuance to the convention of full
disclosure of material facts. For example;
(a) Contingent liability appearing as a note.
(b) Market value of investments appearing as a note.
The convention of disclosure also applies to events occurring after the balance sheet date and the date
on which the financial statement are authorized for issue. Such events include bad debts, destruction of
plant and equipment due to natural calamities, major acquisition of another enterprises, etc. such
events are likely to have a substantial influence on the earnings and financial position of the
enterprises. Their not-disclosure would affect the ability of the users for evaluations and decisions.
ACCOUNTING PROCESS
The accounting process consists of three major parts:
The recording of business transactions during that period;
The summarizing of information at the end of the period and
The reporting and interpreting of the summary information.
Meaning of Journal
Accounting process starts with the identification of financial transactions of a business. Such
financial transactions are recorded permanently in the books of accounts systematically in different
specialized books. These books of accounts are called journal. The journal is an important book under
the double-entry system. Journal is the first book of systematic record of the financial transactions of
the business. Journal is called the book of original or prime entry, because its financial transactions are
first of all recorded in this book as and when they take place. Journal is also called a subsidiary book
as it is maintained to help prepare the main book called the ledger. The journal is prepared with the
help of memorandum or waste book, which is a rough and temporary record of the financial
transactions of the business.
Journalizing: In simple words, journalizing is an act of recording financial transactions in the journal
book. It is a process of systematic recording of financial transactions in the book of prime or original
entry. The following steps are taken while journalizing the transactions in the journal book.
To identify the two aspects of the transaction.
To identify the appropriate accounts for the two aspects of the transactions.
To debit and credit the accounts relevant to the transaction by using the rules of debit and
credit.
To write the entry in the journal in chronological order. Such an entry is called journal entry.
The format of the journal is represented below
Each and every financial transaction affects the three basic elements. However, the total of all
assets is always equal to the total of capital and liabilities at any point in time. The rules of debiting
and crediting an account based on the accounting equation can be summarized in the following way:
Ledger
Ledger is a principal book of accounts of the enterprise. It is rightly called as the 'King of Books'.
Ledger is a set of accounts. Ledger contains the various personal, real and nominal accounts in which
all business transactions of the entity are recorded. The main function of the ledger is to classify and
summarize all the items appearing in Journal and other books of original entryunder appropriate
head/set of accounts so that at the end of the accounting period, each account contains the complete
information of all transaction relating to it.
Uses of ledger:
(a) It provides complete information about all accounts in one book.
(b) It enables the ascertainment of the main items of revenues and expenses
(c) It enables the ascertainment of the value of assets and liabilities.
(d) It facilitates the preparation of Final Accounts
Trial Balance
At the end of the financial year or at any other time, the balances of all the ledger accounts are
extracted and are recorded in a statement known as Trial Balance and finally totalled up to see whether
the total of debit balances is equal to the total of credit balances. A Trial Balance may thus be defined
as a statement of debit and credit totals or balances extracted from the various accounts in the
ledger books with a view to test the arithmetical accuracy of the books
Objectives of Preparing Trial Balance
1. To check the arithmetic accuracy of books of accounts: According to the principle of double
entry system of book-keeping, every business transaction has two aspects, debit and credit. So,
the agreement of the trial balance is a proof of the arithmetical accuracy of the books of
accounts.
2. Helpful in preparing final accounts: The trial balance records the Balances of all the ledger
accounts at one place which helps in the preparation of final accounts, i.e. Trading and Profit
and Loss Account and Balance Sheet. But, unless the trial balance agrees, the final accounts
cannot be prepared.
3. To serve as an aid to the management: By comparing the trial balances of different years
changes in figures of certain important items such as purchases, sales, debtors etc. are
ascertained and their analysis is made for taking managerial decisions. So, it serves as an aid to
the management.
Advantages
It helps to ascertain the arithmetical accuracy of the book-keeping work done during the
period.
It supplies in one place ready reference of all the balances of the ledger accounts.
If any error is found out by preparing a trial balance, the same can be rectified before preparing
final accounts.
It is the basis on which final accounts are prepared.
For the above said purposes, the businessman prepares financial statements for his business i.e. he
prepares the Trading and Profit and Loss Account and Balance Sheet at the end of the accounting
period. These financial statements are popularly known as final accounts. The preparation of financial
statements depends upon whether the business concern is a trading concern or manufacturing concern.
If the business concern is a trading concern, it has to prepare the following accounts along with the
Balance Sheet:
(i) Trading Account; and
(ii) Profit and Loss Account.
But, if the business concern is a manufacturing concern, it has to prepare the following accounts along
with the Balance Sheet:
(i) Manufacturing Account;
(ii) Trading Account; and
(iii) Profit and Loss Account.
Trading Account: Trading Account is one of the financial statements which shows the result of
buying and selling of goods and/or services during an accounting period. The main objective of
preparing the Trading Account is to ascertain gross profit or gross loss during the accounting period.
Gross Profit is said to have been made when the sale proceeds exceed the cost of goods sold.
Conversely, when sale proceeds are less than the cost of goods sold, gross loss is incurred
Profit and Loss Account: Trading Account results in the gross profit / loss made by a businessman on
purchasing and selling of goods. It does not take into consideration the other operating expenses
incurred by him during the course of running the business. Besides this, a businessman may have other
sources of income. In order to ascertain the true profit or loss which the business has made during a
particular period, it is necessary that all such expenses and incomes should be considered. Profit and
Loss Account considers all such expenses and incomes and gives the net profit made or net loss
suffered by a business during a particular period. All the indirect revenue expenses and losses are
shown on the debit side of the Profit and Loss Account, whereas all indirect revenue incomes are
shown on the credit side of the Profit and Loss Account.
Classification of Assets:
Real Assets:
Assets which have some market value are called real assets, e.g. building, machinery, stock, debtors,
cash, goodwill, etc. Real assets are further divided into two types according to their permanence:
Fixed Assets: Assets which have long life and which are bought for use for a long period of time
are called "fixed assets". These are not bought for selling purposes, e.g. land, building, plant,
machinery, furniture etc. Fixed assets are again sub-divided into two:
1. Tangible Assets: Assets which have physical existence and which can be seen, touched and
felt are called "tangible assets", e.g. building, plant, machinery, furniture etc.
2. Intangible Assets: Assets which have no physical existence and which cannot be seen,
touched or felt are called "intangible assets", e.g. goodwill, patent right, trade mark etc.
Current Assets: Assets which are short-lived and which can be converted into cash quickly to
meet short term liabilities are called "current assets", e.g. stock debtors, cash etc. Such assets
change their form repeatedly and so, they are also known as circulating or floating assets. For
example, on purchase of goods cash is converted into stock and on sale of goods, stock is
converted into debtors, on collection from debtors, debtors take the form of cash etc. Out of
current assets those which can be converted into cash very quickly or which are already in the
form of cash are called liquid or quick assets e.g. debtors, cash in hand, cash at bank etc.
Fictitious Assets: Assets which have no market value are called fictitious assets. Examples of
fictitious assets include preliminary expenses, loss on issue of shares etc. They are also known as
nominal assets.
Besides these, there is another type of assets whose value gradually reduce on account of use and
finally exhaust completely. This type of assets is called wasting assets e.g. mine, forest etc.
Classification of Liabilities:
Internal Liabilities:
The total amount of debts payable by a business to its owner is called internal liability e.g.
Owner's equity (capital), reserve etc. From practical view point internal liabilities should not be
regarded as liabilities, since there is no question of meeting such liabilities al long as the
business continues.
External Liabilities:
All debts payable by a business to the outsiders (other than the owner) are called external
liabilities e.g. creditors, debentures, bills payable, bank overdraft, etc. External liabilities are
further divided into two.
o Fixed or Long Term Liabilities: The liabilities which are payable after a long period
of time are called fixed or long term liabilities e.g. debentures, loan on mortgage etc.
o Current or Short Term Liabilities: The debts which are repayable within a short
period of time are called current or short-term liabilities e.g. creditors, bills payable,
bank overdraft etc. Current liabilities may again be divided into two:
1. Deferred Liabilities: Debts which are repayable in the course of less than one year
but more than one month are called deferred liabilities e.g. Short term loan etc.
2. Liquid or Quick Liabilities: Debts are repayable in the course of a month are called
liquid or quick liabilities e.g. bank overdraft, outstanding expenses, creditors etc.
Besides the above, there is another type of liability which is known as contingent liability. It is one
which is not a liability at present, but which may or may not become a liability in in future. It depends
upon certain future event. For example, suppose, the buyer of goods filed a suit in the court against the
seller claiming damage of Rs.10,000 for breach of contract. This will be regarded as a contingent
liability to the seller until the receipt of the court's order. To the buyer, this is a contingent asset. Both
contingent liability and contingent asset are not recorded in the balance sheet. They are generally
mentioned in the balance sheet as a note.
Basis for
Balance Sheet Profit and Loss Account
Comparison
Account that shows the company's
A statement that shows company's assets,
Meaning revenue and expenses over a period
liabilities and equity at a specific date.
of time.
What is it? Statement Account
Financial position of the business on a Profit earned or loss suffered by
Represents
particular date. business for the accounting period
Basis for
Balance Sheet Profit and Loss Account
Comparison
Preparation Prepared on the last day of financial year. Prepared for the financial year.
Information Assets, liabilities, and capital of
Income, expenses, gains and losses.
Disclosed shareholders.
Accounts shown in the Balance Sheet do
Accounts transferred to Profit and
not lose their identity; rather their balance
Accounts Loss account are closed and cease to
is carry forward to next year as opening
exist.
balance.
It is prepared after the preparation of It is prepared before the preparation
Sequence
Profit & Loss Account. of Balance Sheet
It is prepared to verify the arithmetical It is prepared to disclose the true financial position
1 1
accuracy of books of accounts of the business
It is prepared with balances of all the ledger It is prepared with the balances of assets and
2 2
accounts liabilities accounts.
3 It is not a part of final accounts 3 It is an important part of final accounts.
It is prepared before the preparation of final It is prepared after the preparation of trading and
4 4
accounts profit and loss account.
It may be prepared a number of time in an It is generally prepared once at the end of
5 5
accounting year. accounting year.
Generally, it includes opening stock but not It always includes closing stock but not opening
6 6
closing stock. stock.
There is no rule for arranging the ledger Assets and liabilities must be shown in it according
7 7
balances in it. to the rule of marshaling.
It must be filed with the registrar of companies if
8 It is not required to be filed to anybody. 8
the business is a company.
9 Auditor need not to sign it. 9 Auditor must sign it.
Part B
1. Explain the tools and techniques used in management accounting.
2. Differentiate between financial and management accounting.
3. What is the nature of accounting? In what ways accounting information is useful to creditors,
investors and employees of business organization.
4. Explain the importance of various accounting concepts and conventions.
5. State the functions of accounting.
6. What are the advantages of HRA?
7. Define HRA. What are the objectives of HRA? How is it important to the business?
8. What do you mean by accounting concepts and conventions? Explain important conventions.
9. Explain the different branches of accounting.
10. Evaluate GAAP.
11. Explain the tools and techniques used in management accountings.