Please, follow the links below for details: Revised course based on Common core Curriculum. Book 1 (Eng. Medium) ( MB) PDF File Opens in a new. NIOS. Accountancy (). English Medium. Accountancy Book ( MB) PDF File Opens in a new window. Information About. Admission; On Demand. Nios Accountancy Full Book - Ebook download as PDF File .pdf), Text File .txt) Amount withdrawn by him for personal use 30, Interest on capital.
|Language:||English, Japanese, Hindi|
|Genre:||Politics & Laws|
|ePub File Size:||29.48 MB|
|PDF File Size:||12.44 MB|
|Distribution:||Free* [*Register to download]|
Module V Accounting for Share and Debentures. EL6 · EL22 download NIOS Class 12 Accountancy Guide Books and Help Books. Leave a Reply Cancel. Download NIOS Class 12th Accountancy Book (Old) Module IV Partnership Accounts. EL2 · EL18 Module V Accounting for Share and Debentures. Course Accountancy 12th class NIOS Board Jhansi by SS Coaching and get all syllabus details of accountancy for 12th class in NIOS board or syllabus of accountancy of 12th class in NIOS board by SS coaching. 8. Special Purpose Books.
For this purpose only, educationists from all over the country come together at regular intervals to deliberate on the issues of changes needed and required. Keeping this framework and other national and societal concerns in mind, we have introduced few new subjects at the secondary level, making them current and need based.
We have also taken special care to make the learning material user friendly, interesting and attractive for you. I would like to thank all the eminent persons involved in making this material interesting and relevant to your needs. I hope you find it appealing and absorbing. Dear Learner, The Academic Department at the National Institute of Open Schooling tries to bring you new programmes every now and then in accordance with your needs and requirements.
Recently, we undertook the responsibility of revising curriculum in all the subjects at the secondary level as well as to introduce new subjects as per need of learners. After making a comprehensive comparative study, we found that our curriculum was functional, related to life situations and simple. The task now was to make it more effective and useful for you.
We invited leading educationists of the country and under their guidance, have been able to revise and update the curriculum. At the same time, we have covered all relevant things and have tried to make the learning material attractive and appealing for you.
NIOS Class 12 Accountancy (Hindi) (320) Neeraj
I hope you will find this material interesting and exciting. Any suggestions for further improvement are welcome. Dear Learner, I am happy that you have chosen Accountancy as one of the subjects at Secondary level. Welcome to the course in Accountancy. You know that all of us have some direct and indirect link with various accounting activities.
The environment around us has influenced our lives in many ways. In this context, it is our attempt to develop awareness among the learners about business and accounting, its wide network and also about its ever-changing nature.
It would also give you some idea about how Accountancy provides career opportunities. Each lesson of this subject has been designed keeping in view the requirements of the Self Learners like you through Open and Distance Mode. All these will include Intext Questions which will appear after every section of the lesson. They will normally be very short answer type questions consisting objective type, true and false, match the colomn, fill in the blanks and Multiple Choice Questions will help you to understand the extent to which you have learnt the section.
You will find the key to these questions at the end of the lesson. If you are able to answer the questions, then you can proceed further otherwise you should learn the section again. I hope you will find the lessons interesting and would be able to apply your knowledge in the real life situations. So, read, all these lessons carefully and prepare well for examinations. The examination in Accountancy will consist of one paper which carries marks.
For your practice a sample question paper has been given at the end of the book. This is followed by detailed marking scheme, which will tell you how your answers will be evaluated. Try to answer all the questions and compare those with the answer given in the marking scheme. Do not hesitate to write to me, in case you have any difficulty in your studies.
Happy Studies Wishing you success. You have accepted the challenge to be a self-learner. NIOS is with you at every step and has developed the material in Accountancy with the help of a team of experts, keeping you in mind.
A format supporting independent learning has been followed. You can take the best out of this material if you follow the instructions given. The relevant icons used in the material will guide you. Total content has been divided into sections and subsections. Section leads you from one content element to another and subsections help in comprehension of the concepts in the content elements.
Each page carries empty space in the side margins, for you to write important points or make notes. These are statements of outcomes of learning expected from you after studying the lesson.
You are expected to achieve them, do read them and check if you have achieved. Intext Questions: Very short answer self check questions are asked after every section, the answers to which are given at the end of the lesson. These will help you to check your progress. Do solve them. Succesful completion will allow you to decide whether to proceed further or go back and learn again.
What You Have Learnt: This is the summary of the main points of the lesson. It will help in recapitulation and revision.
You are welcome to add your own points to it also. Terminal Questions: These are long and short questions that provide an opportunity to practice for a clear understanding of the whole topic. Key to Intext Questions: These will help you to know how correctly you have answered the intext questions. Contents Module 1: Introduction and Basic Concepts Lesson 1. Introduction to Accounting Accounting Concepts and Conventions Accounting Terms Journal and Other Subsidiary Books Lesson 4.
Accounting Equation Double Entry System Cash Book Bank Reconciliation Statement downloads and Sales Book Ledger and Trial Balance Lesson Trial Balance and Accounting Errors Depreciation, Provisions and Reserves Lesson Provisions and Reserves Preparation of Financial Statements Lesson Financial Statements Without Adjustments Financial Statements With Adjustments Computer in Accounting Lesson Computers in Accounting Introduction to Tally The award was given by Sh.
NIOS has been selected for its remarkable work done for the learners with disabilities through ICT by making its web portal www. Introduction and Basic Concepts Accounting is indispensable in the modern society. This module will help the students to understand the meaning of various terms used in accounting, meaning, objectives, advantages and limitations of book keeping and accountancy and the difference between the two.
The module will also give an insight to the learners about the various concepts and conventions applied in the field of accounting and develop accounting equation on the basis of the knowledge so obtained. Lesson 1: Introduction to Accounting Lesson 2: Accounting Concepts and Conventions Lesson 3: NIOS feels honoured to accept the award.
The award was conferred on 28th January at a function in presence of President of India and high level dignitaries. The website is bilingual in Hindi and English. It also has provisions of Screen Reader, increasing text size, colour contrast scheme etc. You must have seen a shopkeeper selling goods to earn profit. These are all business transactions involving money. A large number of such transactions take place daily. A businessman cannot remember all these transactions, he therefore, keeps a record of all these transactions in writing, so that he can make use of this recorded information later on.
The trader would like to know at the end of a period which is generally one year , what he has earned during this period from his business.
He would also like to know the amount he has to pay to his suppliers and the amount his customers have to pay to him. He can get various other information of this kind only if he maintains proper record of business transactions, which have taken place during the year. This is called Book Keeping. This information needs, to be recorded, classified and summarized in a systematic manner.
It is called Accounting. In this lesson you will learn the meaning, objectives and uses of Book-keeping and Accounting. Just as many transactions take place in a house, many more transactions take place in a business. Notes Let us observe the activities of a nearby stationery shop. A customer comes, he downloads register and pays money for it. Then, another customer comes, he downloads a text-book and pays for it. After sometime, a third customer comes to the shop, he downloads different stationery items like writing pads, pencils, pens, etc.
Then, a supplier comes, he supplies various stationery items to the shopkeeper and submits a bill. The shopkeeper keeps the bill and promises to pay after one month. These are some of the important business transactions. There can be many more such activities. You have noticed that these business transactions involve exchange of goods for money or promise for payment in future.
These transactions have some important features which are as follows: Business transactions are business activities. These involve exchange of goods or services like transportation, storage, packaging, etc for money or moneys worth. These are monetary in nature. In cash business transactions, goods or services are exchanged for money. In credit business transactions, goods or services are exchanged but money is received or paid at a future date.
All business transactions are recorded in the books of accounts. In exchange, the owner Abhishek gets an ownership right against business. It is a business transaction. Thus you may say that business transactions pertain to the outsiders or to the owner. Now, business transaction may be defined as: It involves exchange of money also. In simple words, it includes all events and activities of business which are financial in nature. You know that a businessman enters into several transactions in a day.
Some of these may be meant for his personal purposes. For example, Abhishek goes to a movie with his friends. This is his personal transaction and not the business transaction. Since a business transaction has an effect on business, therefore, it is recorded in the. Owners personal transactions where the money of the business Basic Concepts is not affected, are not recorded anywhere in the books of the business. This separation of business transactions and personal transactions is very helpful in recording business transactions.
Find which of the statements are true and which are false: Shifting of goods from one place to another within a shop is business transaction.
Profit is the reward to the owner for his business activities. download of vegetables for use at home is not business transaction. download of goods on credit for personal use from his friend is personal transaction.
Classify the following into business and non-business transactions: Book-keeping is mainly concerned with recording of financial data relating to the business operations in a significant and orderly manner. Accounting is primarily concerned with designing the systems for recording, classifying and summarizing the data and interpreting them for internal and external end users. Accountants often direct and review the work of the book-keepers. Need of Book-keeping It is significant for a business to have transparent record keeping systems which would make the transaction clear.
The need of book-keeping can be under stood with the help of the following points: Recording the business. You probably dont know where you are going if you do not realize where you have been. Hence, understanding the existing scenario of financial status of business is of much importance to the business to achieve the objectives and avoid the unexpected losses. Notes ii Helps in making business decisions: Keeping a record would help to make future business decision. Business decisions have to be taken by considering the financial consequences that happened earlier and the same can be done only if we maintain the accounting books properly.
Without the precise data and financial information, it is extremely difficult to predict the impact of any given action. Maintaining books of accounts would help businessmen to file the income tax returns accurately. Every business entity has to file income tax returns and pay income tax. With proper records, it is very easy to prepare the tax returns and filing can also be done on time without any delay.
Keeping the older transactions would help you to plan the budget for forthcoming year. Preparing budget would keep you on the safer side and help you to avoid the unwanted expenditure. Keeping good records would help you to prepare payroll, tax returns and sales tax without any delay. If you are doing a partnership business, you can avoid unwanted issues in profit distribution by recording your business transactions accurately.
Moreover, effective book-keeping would help you to identify the activities, which are not profitable, and the unwanted operating expenses. Businessman can avoid such expenditures and prepare an effective budget to optimize business financially. Hence, book-keeping plays an essential role in every business. Objectives of Book-keeping After understanding the need of book-keeping let us now discuss the objectives of book-keeping which are as follows: Book keeping is to record business transactions in proper books of accounts which can be kept safe for years together.
Various statements are prepared from the information contained in books of accounts called final accounts. One of such statements is called Income Statement or Profit and Loss Account which helps in ascertaining business profit. Book keeping helps in preparing balance sheet and ascertaining the net capital employed. Basic Concepts Businessman is interested in knowing the total sales and total downloads of business which help him in taking decisions regarding sales strategies.
Businessman would like to know how much and to whom he owes and Notes how much and who owe to him. Book-keeping records will help in it. Quantity and value of stock is required to manage stock levels. This can be ascertained by maintaining proper books of accounts.
Book-keeping is concerned with recording of business transactions in a systematic and significant manner. Book-keeping and accounting are synonymous terms. Book-keeping is a broader term than accounting. Book-keeping helps in preparing budget of the business. The basic function of a language is to serve as a means of communication.
Accounting communicates the result of business operations to various parties who have some stake in the business. With the help of accounting records the business is able to ascertain the profit or loss and the financial position of the business at the end of a given period and communicate such information to all interested parties.
The function of accounting is to provide quantitative information, primarily of financial nature, about economic entities, that is needed to be useful in making economic decisions. 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 financial character and interpreting the results thereof: Accounting is the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information.
There are three branches of accounting: Financial Accounting is concerned with recording financial transactions, summarising and interpreting them and communicating the results to users.
Notes ii Cost Accounting: It helps in finding out the cost of production of a product manufactured or services rendered and helps the management in decision making. Management Accounting is concerned with generating accounting information relating to funds, costs, profits etc. You will study only Financial Accounting in this course.
Objectives of Accounting The following are the main objectives of accounting: Accounting is done to keep a systematic record of financial transactions, like download of goods, sale of goods, cash receipts and cash payments. Accounting helps in determining the net profit earned or loss suffered on account of running the business. This is done by keeping a proper record of revenues and expenses of a particular period. The businessman is not only interested in knowing the operating result, but also interested in knowing the financial position of his business i.
In other words, he wants to know what the business owes to others and what others owe to business. Apart from the owners, there are various other parties who are interested in knowing about the position of business, such as tax authorities, the management, the bank, the creditors, etc.
The required information is furnished to all these parties through accounting system. Advantages of Accounting i Replaces memory: Since all the financial events are recorded in the books. The books of accounts will serve as historical records. Any information required at any time can be easily collected from these records. Various interested parties such as owners, lenders, creditors, etc.
The accounting Basic Concepts information provided to the management helps them in taking rational decisions in planning and controlling all business activites. With the help of accounting information one can compare the present performance of the enterprise with its past performance and also with that of similar organisations.
This enables the Notes management to draw useful conclusion about the business and make efforts to improve the performance. Systematic record of business transactions is generally treated by courts as good evidence in case of disputes.
The Government levies various taxes such as custom duty, excise duty, sales tax, and income tax. Properly maintained accounting records will help in the settlement of all tax matters with the tax authorities. In the event of sale of a business firm, the accounting records will help in ascertaining the correct value of business. Limitations of Accounting i Financial accounting permits alternative treatment: Accounting is based on concepts and it follows Generally Accepted Principles but there exist more than one principle for the treatment of any one item.
This permits alternative treatments within the framework of Generally Accepted Principles. For example, the closing stock of a business may be valued by any one of the following methods: Accounting is influenced by personal judgments as one accountant may consider the life of a particular asset say 5 years whereas another accountant may consider the life of that asset say 6 years and the method of charging the depreciation on asset by both the accountants may also be different.
Financial accounting does not consider the transactions of non-monetary nature. For example, extent of competition faced by the business, technical innovations possessed by the business, loyalty and efficiency of the employees etc. Financial accounting is designed to supply information in the form of statements Balance Sheet and Profit and Loss Account for a period normally one.
The business requires timely information at frequent intervals to enable the management to plan and take correct action wherever the performance is not as per plans. Basis of distinction Book-Keeping Accounting i Objective The objective of Book- Accounting aims at keeping is to maintain maintaining business records, records of business calculation of business income, transactions.
It is the final stage. There are many more parties who use the accounting information. These parties are as follows:. A person who wants to invest in Basic Concepts business will like to know about its profitability and financial position. Basically, investors are interested in the amount of dividends they are likely to get from the business. Hence, they would like to know the profitability of the enterprise which they can get from the income statements of the enterprise for a number of years.
Notes ii Creditors: Creditors are the persons who have extended credit to the business. They would like to know whether the enterprise will be in a position to meet its commitments well in time towards them both regarding payment of interest and principal.
Their main interest lies in liquidity and profitability of business enterprise. The proprietor is the owner of business who starts the business with an objective to make profit. He is interested in knowing the position of his business as if he is earning profits or incurring loss.
The profitability and financial soundness are, therefore, matters of prime importance to the proprietors who have invested their money in the business. The employees are interested in the financial statements on account of various profit sharing and bonus schemes.
Their interest may further increase in case they download shares of the companies in which they are employed. They are interested in more wages or salary, bonus, overtime payments, medical facilities and their demands for these matters are based on profitability as provided by income statement.
They are interested in knowing whether a company will continue to honour product warranties and continue to provide its products in future, and how much profit is made by a company by providing goods and services to them.
The Government is interested in the financial statements of business enterprise on account of taxation, labour and corporate law. The reason is that the Government activities and welfare schemes are financed through collection of different types of taxes. So they would like to know, whether the business is paying appropriate taxes well in time or not.
Fill in the blanks: Multiple Choice Questions i. Which of the following is an advantage of accounting? Notes b Helps in keeping systematic records. Which of the following is not an advantage of Accounting? Which of the following is a limitation of Accounting? Which is a correct statement related to book-keeping? To ascertain the operational profit or loss is: Book-Keeping is recording: Which of the following is not a business transaction? Which of the following is not an advantage of accounting?
Basic Concepts a Facilitates performance comparisons. It is not possible to remember all the transactions which have taken place over a period of time, and calculate the net effect of all such transactions. Hence, the need for accounting arises.
Information about the business enterprise is required for both internal and external use. To get the required information, a systematic record is necessary. Accounting is the process of identifying, measuring, recording, classifying, summarising, analysing, interpreting and communicating the results of financial transactions and events.
The objectives of accounting are: Book-keeping is a part of accounting. It is the record keeping function of accounting and is limited upto the classifying stage. Bookkeeping is largely a mechanical process and does not involve any analysis of the financial transactions whereas, accounting includes the preparation of statements concerning assets, liabilities and the operating results of a business.
Many groups of people like owners, management, lenders, creditors, investors, tax authorities, employees, etc. There are many advantages of properly maintained accounting system such as it acts as reliable evidence, helps in determining tax liability.
NIOS Class 12th sample papers
It may also lead to many limitations such as influenced by personal judgements, ignores important non-monetary informations etc. What is meant by book-keeping? State the need of book keeping. Define accounting. What are its objectives? How is accounting information useful to Government and Investors? Distinguish between accounting and book- keeping. Explain the advantages and limitations of accounting. What is a business transaction? Give five examples of business transactions.
Explain the different branches of Accounting. Explain how accounting is useful to employees. In the previous lesson, you studied the meaning and objectives of Financial Accounting. There are some concepts and conventions which are followed in accounting for a long time. These concepts constitute the very basis of accounting.
All the concepts have been developed over the years from experience and thus, are universally accepted rules and are termed as Generally Accepted Accounting Principle or GAAP. In accounting, there are many conventions or practices which are used while recording the transactions in the books of accounts. In this lesson you will learn accounting concepts and conventions. Business Entity, Money Measurement, Going Concern and Dual Aspect; understand the meaning of the term accounting conventions and explain the meaning and significance of accounting conventions of Materiality, Conservatism and Consistency.
Main Accounting Concepts are: Thus, the business and personal transactions of its. Thus, the accounting records are made in the books of accounts from the point of view of the business unit and not from the point of view of the owner. Notes Let us take an example, Ms. These are the assets of the business and not of the owner. These are termed as Drawings. Since business and its owners according to this concept are treated as separate entities therefore, the transactions between these two are recorded in the books of accounts.
Significance The following points highlight the significance of business entity concept: This concept helps in ascertaining the profit of the business as only the business expenses and revenues are recorded and all the private and personal expenses are ignored.
It also facilitates the recording and reporting of business transactions from the business point of view It is the very basis of accounting concepts, conventions and principles. Thus, as per the money measurement concept, transactions which can be expressed in terms of money are recorded in the books of accounts.
But the transactions which cannot be expressed in monetary terms are not recorded in the books of accounts. For example, sincerity, loyalty and honesty of employees are not recorded in books of accounts because these cannot be measured in terms of money although they do affect the profits and losses of the business concern. Another aspect of this concept is that the records of the transactions are to be kept not in the physical units but in the monetary unit. For example, at the end of the year , an organisation may have a factory on a piece of land measuring 5 acres, office building containing 10 rooms, 20 personal computers, 30 office chairs and tables, 50 kg of raw materials etc.
These are expressed in different units, but for accounting purposes these are to be recorded in money terms i. Therefore, the transactions which can be expressed in terms of money are recorded in the books of accounts and not in terms of the quantity. Significance The following points highlight the significance of money measurement concept: This concept guides accountants what to record and what not to record.
It helps in recording business transactions uniformly. If all the business transactions are expressed in monetary terms, it will be easy to understand the accounts prepared by the business enterprise.
It facilitates comparison of business performance of two different periods of the same firm or of the two different firms for the same period. Health of a Managing Director. Delay in supply of raw materials. Simply stated, it means that every business entity has continuity of life.
Thus, it will not be dissolved in the near future. According to this concept every year some amount will be shown as expense and the balance amount as an asset. Thus, if an amount is spent on an item which will be used in business for many years, it is not correct to charge the amount from the revenues of the year in which the item is acquired. Only a part of the value is shown as expense in the year of download and the remaining balance is shown as an asset.
Significance The following points highlight the significance of going concern concept: This concept facilitates preparation of financial statements. On the basis of this concept, depreciation is charged on the fixed assets.
It is of great help to the investors, because, it assures them that they will continue to get income on their investments. In the absence of this concept, the cost of a fixed asset will be treated as an expense in the year of its download. Because of this concept business can be judged for its capacity to earn profits in future.
Basic Concepts Going concern, Business entity 2. It provides the very basis of recording business transactions in the books of accounts. This concept Notes assumes that every transaction has a dual effect, i. Therefore, the transaction should be recorded at two places. It means, both the aspects of the transaction must be recorded in the books of accounts.
For example, goods downloadd for cash has two aspects which are: These two aspects are to be recorded. Thus, the duality concept is commonly expressed in terms of fundamental accounting equation: Owners claim is also termed as capital or owners equity and that of outsiders, as liabilities or creditors equity. The knowledge of dual aspect helps in identifying the two aspects of a transaction, which help in applying the rules of recording the transactions in books of accounts.
The implication of dual aspect concept is that every transaction has an equal impact on assets and liabilities in such a way that total assets are always equal to total liabilities. Let us analyse some more business transactions in terms of their dual aspect: First aspect Receipt of cash, Second aspect Increase in Capital owners equity.
First aspect Receipt of cash, Second aspect, delivery of goods to the customer. First aspect Rent Expenses incurred , Second aspect payment of cash.
Once the two aspects of a transaction are known, it becomes easy to apply the rules of accounting and maintain the records in the books of accounts properly. The interpretation of the Dual Aspect Concept is that every transaction has an equal effect on assets and liabilities in such a way that total assets are always equal to total liabilities of the business.
It encourages the accountant to post each entry in opposite sides of two affected accounts. Transaction Ist aspect IInd aspect i. Owner brings cash in business ii. Goods downloadd for cash iii. Goods sold for cash iv. Furniture downloadd for cash v. Received cash from Sharma vi. downloadd machine from Rama on credit vii. Paid to Ram viii. Salaries paid ix. Rent paid x. Commission received. These are followed like customs, traditions etc. Accounting conventions are evolved through the regular and consistent practice over the years to facilitate uniform recording in the books of accounts.
Accounting conventions help in comparing accounting data of different business units or of the same unit for different periods. These have been developed over the years. The most important conventions which have been used for a long time are: Convention of Consistency. Convention of Materiality. Convention of Conservatism. A meaningful conclusion can be drawn Basic Concepts from financial statements of the same enterprise when there is a comparison between them over a period of time.
But this can be possible only when accounting policies and practices followed by the enterprise are uniform and consistent over a period of time. If different accounting procedures and practices are used for preparing financial statements of different years, then the result will not be comparable. Generally a Notes businessman follows the same general practices or methods year after year, for preparing the books of accounts.
While charging depreciation on fixed assets or valuing unsold stock, once a particular method is used, it should be followed year after year. So that the financial statements can be analysed and compared provided that, the depreciation on fixed assets is charged or unsold stock is valued by using same method year after year.
This can be further clarified in case of charging depreciation on fixed assets, accountant can decide to adopt any one method of depreciation such as diminishing value method or straight line method.
Similarly, in case of valuation of closing stock it can be valued at actual cost price or market price, whichever is less. However, precious metals like gold, diamond, minerals are generally valued at market price only. Therefore, as per this convention the same accounting methods should be adopted every year in preparing financial statements. But it does not mean that a particular method of accounting once adopted can never be changed.
Whenever a change in method is necessary, it should be disclosed by way of footnotes in the financial statements of that year. Significance The following points highlight the significance of Convention of Consistency It facilitates comparative analysis of the financial statements. It ensures uniformity in charging depreciation on fixed assets and valuation of closing stock. Precious metals, like gold, silver etc.
The question that arises here is what is a material fact? The materiality of a fact depends on its nature and the amount involved. Material fact refers to the information that will influence the decision of its user. For example, a businessman is dealing in electronic goods.
He downloads T. In downloading these items he uses larger part of his capital. These items are significant items; thus should be recorded in books of accounts in detail. At the same time to maintain day to day office work he downloads pen, pencil, match box, scented stick, etc. For this he will use very small amount of his capital. But to maintain the details of every pen, pencil, match box or other small items is not considered of much significance. These items are insignificant items and hence they should be recorded separately.
Thus, the items that are significantly important in recording the details are termed as material facts or significant items. The items that are of less significance are immaterial facts or insignificant items. Thus, according to this convention important and significant items should be recorded in their respective heads and all immaterial or insignificant transactions should be clubbed under a different accounting head.
Significance The following points highlight the significance of Convention of Materality It helps in minimising errors in calculation. It helps in making Financial Statements more meaningful.
It saves time and resources. It provides guidance for recording transactions in the books of accounts. It is based on the policy of playing safe in regard to showing profit. The main objective of this convention is to show minimum profit. Profit should not be overstated. If more profit is shown than the actual, it may lead to distribution of dividend out of capital.
This is not a fair policy and it will lead to the reduction in the capital of the enterprise. Thus, this convention clearly states that profit should not be recorded until it is earned. But if the business anticipates any loss in the near future, provision should be made in the books of accounts for the same. For example, valuing closing stock at cost or market price whichever is lower, creating provision for doubtful debts, discount on debtors, writing off intangible assets like goodwill, patent, etc.
The convention of conservatism is a very useful tool in situation of uncertainty and doubts.
The following point highlight the significance of convention of conservatism It helps in ascertaining actual profit. It is useful in the situation of uncertainties and doubts. It helps in maintaining the capital at its real value. Give your decision in the following situations: At which price the unsold stock should be recorded? Will he record this transaction in books of account?
According to going concern concept, a business is viewed as having: Valuation of stock at lower of cost or net realizable value is an example of a Consistency convention b Conservation convention c Materiality convention d None of the above iii. According to which of the following concepts the two aspects of a transaction are recorded.
According to which of the following accounting concepts, even the owner of a business is considered as creditor to the extent of his capital.
The important accounting concepts are business entity, money measurement, going concern, dual aspect concept.
Money measurement concept assumes that all business transactions must be recorded in the books of accounts in terms of money. Going concern concept states that a business firm will continue to carry on its activities for an indefinite period of time. Notes Dual aspect concept states that every transaction has a dual effect. Accounting conventions are common practices which are followed in recording and presenting accounting information of business. Convention of consistency states that the same accounting methods should be adopted every year in preparing financial statements.
Convention of materiality states that, to make financial statements more meaningful only significant information should be shown in the financial statements. Convention of conservatism states that, profit should not be recorded until it is earned. But if business anticipates any loss in near future, provision for it should be made in the books of accounts. Explain the meaning and significance of going concern concept. What is meant by business entity concept?
State the meaning and significance of money measurement concept. What do you mean by accounting concept? Explain any four accounting concepts. Explain the convention of consistency with the help of an example.
Explain the accounting convention of conservatism with example.
Sanctioned Staff strength : 251
Explain the convention of materiality. State the meaning and significance of dual aspect concept. Every subject has certain important basic terms, and Accountancy is no exception. These terms facilitate the understanding of the subject.
Hence, this lesson has been designed to acquaint you with the knowledge of some important basic accounting terms. The entire structure of Accounting rests upon these terms. The terms, that we frequently use, are Assets, Liabilities, Revenue and Expenses. This is the amount invested by the owners in the business. It is also called as owner's equity. Owners equity is the owners stake in the business.
It shows how much is his investment in the assets of the business. It is the amount of cash or goods drawn by the proprietor from the business for his personal or domestic use. Any thing that is owned by an individual or business and which can be valued in terms of money is called an asset.
In other words, any thing which will enable the firm to get cash or a benefit in future is an asset. For example land, building, machinery, furniture, stock, debtors, bank balance and cash etc.
Classification of Assets i Fixed Assets: The assets which are acquired not for resale but with the. For example - land, building, machinery, computer, furniture, vehicles, live stock etc. Current Assets are those assets which are retained in the business with the purpose to convert them into cash within a short period of Notes time say one year.
For example - cash in hand, bills receivables, debtors, stock goods etc. The assets which can be seen and touched or have physical existence. For example - building, machinery, furniture, computer etc. The assets which cannot be seen and touched or which do not have physical existence. For example - goodwill, trade mark, patents etc.
Wasting assets are those assets which are natural resources extracted and consumed as a raw material or otherwise. For example - mines, quarries, oil wells etc. The assets of a business concern are financed by the funds supplied by the proprietors and outsiders. Money is invested by the proprietor to start his business. Money is also borrowed from others and invested in business. With this money assets are downloadd.
So the proprietor and outsiders have a claim against the assets of the business. This claim of the proprietor and outsiders is termed as Liabilities. In other words, any amount which the firm owes to the proprietors and outsiders is liability for the business unit.
Hence, liabilities are the obligations or debts payable by the business unit in future. Liabilities have been classified as: For example: Creditors for goods: Sundry creditors, bills payable Creditors for expenses: Expenses yet to be paid like outstanding salaries, wages outstanding, rent due but not yet paid. Creditors for loans: Bank loan, Bank overdraft, partners loan, loans taken from other outsiders.
It is the proprietors claim against the assets of the business. Any amount contributed by the owner towards the business concern is a liability for the business concern. This liability is also termed as Capital.
Hence, the owners claim against the assets of the business unit is called as capital. In case of one man business or sole proprietorship the capital is contributed by the Notes proprietor himself. In case of partnership business firm, capital is contributed by the partners, and in case of companies, capital is contributed by the shareholders. Owners of the business are those who contribute capital. They get profit of the business, for the risk taken by them.
So, the owners have a claim against the firm which is a liability for the firm. Owners claim can be expressed as: Hence, capital is also a liability for the business unit.
Fill in the blanks with suitable words: Classify the following items into external and internal liabilities: Bank loan ii. Interest on capital unpaid iii. Capital iv. Sundry Creditors v. Outstanding rent vi. Undistributed Profits vii. Bills Payable viii. Bank Overdraft ix.
Salaries due but not paid x. Revenue refers to the inflow of money or other assets that results from the sale of goods or services or from the use of money. It is the amount realized or receivable from the sale of goods. Amount received from sale of assets or borrowing loan is not revenue. In broader sense, revenue is also used to mean receipt of rent, commission, discount, etc.
Such inflows should be regular in nature and should be Notes concerned with the day-to-day affairs of the business. It should be calculated in the period in which it is earned or realized. For example, sale of goods, rent received, interest on investment received, etc.
Revenue should not be confused with income. Income is the difference between revenue and expense. Let us consider an example before we understand meaning of expense. Rakesh has a textile mill. He downloads raw cotton and converts it into cloth.
For this purpose, he has engaged employees to whom he pays daily wages. He also has a showroom where he sells the cloth that he produces. He has three salesman to whom he pays salaries.
In order to sell his product he has given advertisements in the newspapers and television. He has done all this to earn profits. For Rakesh, cost of raw cotton, wages, salaries and advertisement cost are all expenses which he has incurred in order to earn revenue. All costs incurred in earning revenue is called as expense. It refers to the cost which is incurred in acquiring an asset or service, e. It is the amount spent in order to produce and sell the goods and services to earn the revenue, for example, cost of raw material, carriage, wages, insurance premium, rent paid for office, etc.
Expense may be different from expenditure. Module 1. Introduction to Financial Accounting 6 Marks Approach This module has been designed to introduce Accounting to learners. This module will familiarise the learners with Basic Assumptions, Concepts and Conventions of Accounting. Prerequisite Knowledge General idea of profit or loss, transactions. Content Units : --Business transactions, Book-keeping, Accounting and its branches. Unit 2. Unit 3. Unit 4. Module 2: Accounting Terms, Accounting Equation and Journal: 6 Marks Approach This module had been designed to familiarise the students with different accounting terms, accounting equation and journal approach to accounting.
This will enable them, i to prepare Accounting equation. Pre-Requisite Knowledge Familiarity with items of merchandise and Mathematical equation. Journal --Meaning, classification of journal into General journal and special journals with examples. Incorporation of journal entries involving different accounts. Module 3 Voucher Approach in Accounting 12 Marks Approach This module has been designed to familiarise the learners with different types of accounting vouchers usually prepared by business concerns.
This will enable the learners to prepare accounts. Module 4: Bank Reconciliation Statement 6 Marks Approach This module has been designed to explain the reasons responsible for the differences between the balance shown by Cash Book and Pass Book.Very short answer self check questions are asked after every section, the answers to which are given at the end of the lesson.
Interest on Capital 3, ix. Vouchers may be divided into two categories a Supporting vouchers and b Accounting vouchers. For example land, building, machinery, furniture, stock, debtors, bank balance and cash etc. It is an addition to the owners equity. If you are able to answer the questions, then you can proceed further otherwise you should learn the section again.
Unit 3: This module will familiarise the learners with Basic Assumptions, Concepts and Conventions of Accounting.