Professional Documents
Culture Documents
Mr. M.
VijayaRagunathan
Meaning
Definition
Concepts
Conventions
Functions
Limitations
Kinds
Golden Rules
1.
2.
7. Matching Concept:
At the end of the period total expenses
matched with total revenue to find the profit or
loss.
8. Material Concept:
Only the material based will be taking place
in the accounting books whereas others will be
ignored.
1.Conventions of Disclosure:
Material based information (Profit and Loss
A/c, Balance Sheet) disclosed to owners,
investors and government bodies.
2. Conventions of Consistency:
Accounting principles and practices should
not be changed year to year. It may continue
for long period of time.
3. Conventions of Conservatism:
Its all about adopting policy Playing Safe. Loss
can be taken into consideration. Profit will be
ignored.
4. Conventions of Materiality:
1.PERSONAL ACCOUNT
Natural (Human beings)
Artificial (Banks, Company and Firms)
Debit the Receiver
Credit the Giver
( Examples)
a) Cash in hand
b)Cash at bank
c)Closing stock
d)Machinery
e)Bills Receivable
f)Short-term Investment
g)Prepaid Expenses
e)Sundry Debtors etc
2. Fixed assets
a) Land
b) Building
c) Plant and
d) Motor car
e) Premises etc
3.NOMINAL ACCOUNT:
A)Expense :
a) Salaries Paid
b) Rent Paid
received
c) Commission
received etc.,
d) Interest Paid
e) Advertisement
f) Fright charges etc.,
Income:
a) Rent received
b) Commission
c) Interest
Proforma ofL/Journal
Debit
Dat
e
Particulars
Jan
1
Cash A/c.Dr
To Capital A/c
(Being Capital introduced)
(Dr)
(Rs)
Credit
(Cr)
(Rs)
10,000
10,000
To Bal c/d
J Am Amt
/ t
F
Dat
e
10,00 Jan
0
1
Particula J A
Amt
rs
/ mt
F
By Cash
10,00
0
10,00
0
10,00
0
By Bal b/d
Feb
Subsidiary books
All sub divided books called subsidiary books.
Bhagawathi
Types of Errors
1. Error of Principle
2. Error of Omission
3. Error of Commission
4. Error of Compensation
1. Error of principle
When some fundamental principle of accountancy
is violated while recording the transaction.
Example
Capital expenditure treated as revenue expenses
2. Error of omission
A transaction completely omitted in the books of
accounts.
3. Error of commission
These are the errors which caused due to
wrong posting, wrong totaling, wrong casting
of the subsidiary books, wrong balancing.
4. Error of compensation
If the effect of one error is neutralized by the
effect of some other error, such errors are
called compensating errors.
Meaning:
balance/overdraft
Pass book shows credit balances = favourable balance
balance/overdraft
Expenditure
2. Capital Receipts and Revenue
Receipts
and
Raman
2. Financial Accounting- S.C. Shukla
Profit and Loss account: To know the net profit or net loss of the
Particulars
To Opening stock
To Purchase less
purchase return
To Production
wages
To Manufacturing
expenses
To Factory related
expenses
To Gross Profit c/d
By Sales less
sales return
By Closing stock
Total
Total
Amount Amoun
t
Particulars
Gross loss b/d
Salary
Rent
Commission
Office expenses
Lighting charge
Discount
allowed
Advertisement
Warehouse
charges
Travelling
expenses
Carriage
outwards
Interest on
capital
Depreciation
Net Profit
Amt
Amt
Particulars
Gross Profit b/d
Interest
received
Commission
received
Discount
received
Total
Amt
Amt
Liabilities
Current Liability
Sundry Creditors
Bills Payable
Bank Overdraft
Outstanding
Expenses
Long term Liabilities
Share capital
Reserves and
Surplus
Debentures
Long term loans
Amt Amt
Assets
Amt
Current assets
Cash in hand
Cash at bank
Closing stock
Bills
Receivable
Short-term
Investment
Sundry Debtors
Fixed Assets
Plant and machinery
Land and Building
Amt
Narang
2. Financial Accounting- Arulanandham
and Raman
Meaning:
3. Annuity Method
It is assumed that the amount spend in the
purchase of assets is an investment which
should interest.
5. Revaluation Method
Compare the value of assets at the end of the
year with the value in the beginning of the year.
6. Depletion Method
Depletion means exhausting of natural resources,
1.
Meaning
Consignment is an arrangement under which the
manufacturer or wholesaler sends his goods at his
own risk to his agent in a different place for the
purpose of sales on commission basis. The person
who sends the goods is known as consignor. The
ownership of the goods remains with the consignor.
The person to whom the goods are sends for sales is
known as the consignee or the agent.
1. Proforma Invoice
When the consignor sends the goods to the
consignee, he forwards a statement showing
the particulars of the goods such as quality,
quantity, price etc
2. Commission
Consignor pays commission to consignee for
selling his goods. Commission is generally
calculated at fixed percentage of total sales as
per terms laid by the con
3. Recurring Expenses
These expenses are incurred after the goods
have been received at consignees go down.
Consignor
Consignee
Bank charges
Expenses on Damaged
goods
Godown rent
Insurance
Brokerage
Advertising
Salary to salesman
Expenses on goods
return
Expenses on goods
damaged
Commission on goods
damaged
Establishment expenses
Consignor
Consignee
Packaging
Transport or carriage
Forwarding
Dock dues
Landing charges
Freight
Insurance
Unloading charges
Railway dues
Dock dues
Import or customs Duty
Octroil
Carriage to godown/shop
Meaning:
Joint venture is a business venture where two or more
person agrees to undertake jointly a particular venture.
Joint venture is a particular partnership. It is defined as
the kind of business proposition where two or more
persons jointly venture to complete a specific business
undertaking on agreed conditions to share the profit or
loss arising there from, on a temporary partnership
basis until its completion.
1.
2.
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5.
and Bhagawathi
2. Financial Accounting- S.C. Shukla