CBSE Class 11 Accountancy

1. Theoretical Framework

Introduction to accounting · Basic accounting terms · Theory base of accounting · Bases of accounting and standards

• Introduction to Accounting – Accounting is the language of business. It identifies money events, records them, classifies and summarises them, and then gives the results to the people who need them — owners, managers, banks, investors and the government.
• Basic Accounting Terms – Accounting has its own words. Capital is what the owner puts in; drawings are what the owner takes out. Assets are owned, liabilities are owed. Expenses used up this year are revenue expenditure; long-life purchases are capital expenditure. Trade discount is never recorded; cash discount is.
• Theory Base of Accounting – Accounting follows common rules called GAAP so that every firm's accounts mean the same thing. Three basic assumptions — going concern, consistency and accrual — stand first. Other principles like business entity, money measurement, historical cost, dual aspect, matching and conservatism decide what to record, when and at what value.
• Bases of Accounting, Accounting Standards and GST – A business can record items when cash moves (cash basis) or when they are earned or incurred (accrual basis). Accounting Standards (AS) and Ind AS are written rules that make accounts uniform; Ind AS match world standards and apply to listed and large companies. GST is one tax on supply of goods and services, with credit for tax already paid.

2. Accounting Process

Vouchers and accounting equation · Journal and special purpose books · Ledger · Bank reconciliation statement · Depreciation, provisions and reserves · Trial balance and rectification of errors

• Vouchers, Accounting Equation and Rules of Debit and Credit – Every transaction starts with a source document (bill, receipt, cash memo). From it a voucher is prepared, showing which account to debit and which to credit. Every transaction affects at least two accounts so that Assets = Liabilities + Capital always holds. Assets and expenses increase on the debit side; liabilities, capital and revenues increase on the credit side.
• Journal and Special Purpose Books – The journal is the book of first entry: each transaction is written in date order with the account debited, the account credited and a narration. Busy firms split it into special purpose books — cash book, petty cash book, purchases, sales and return books — and keep a journal proper for everything else.
• Ledger: Format, Posting and Balancing – The ledger is the main book of accounts where all entries about one item (cash, a customer, rent) are collected in one account. Posting means copying each journal or subsidiary-book entry into the right accounts. Balancing finds the difference between the two sides at the end of a period.
• Bank Reconciliation Statement – The bank column of the cash book (kept by the firm) and the pass book (kept by the bank) should show the same balance, but they often differ because of timing, items known first to the bank, and errors. A bank reconciliation statement (BRS) starts with one balance and adds or subtracts each cause to reach the other.
• Depreciation, Provisions and Reserves – Depreciation is the fall in value of a fixed asset because of use, time and new technology; its cost is spread over its useful life by the straight line method (same amount yearly) or the written down value method (same rate on the reducing balance). A provision is a charge against profit for a known loss or liability; a reserve is a part of profit kept back to strengthen the business.
• Trial Balance and Rectification of Errors – A trial balance lists all ledger balances in debit and credit columns to test whether total debits equal total credits. Agreement proves arithmetical accuracy only: errors of omission, commission, principle and compensating errors can still hide. One-sided errors make it disagree; the difference is parked in a suspense account until each error is rectified.

3. Financial Statements of Sole Proprietorship

Financial statements · Adjustments in financial statements · Incomplete records

• Financial Statements of a Sole Proprietor – At the end of the year, the trial balance is turned into two statements. The trading and profit and loss account uses revenue items to find gross profit, operating profit and net profit. The balance sheet uses capital items to show assets, liabilities and capital on the last day, grouped and arranged in order. Its closing balances open next year's books through the opening entry.
• Adjustments in Financial Statements – Adjustments are items found after the trial balance that must be brought into the final accounts so that profit is true (accrual and matching). The golden rule: every adjustment appears in two places — once in the trading or profit and loss account and once in the balance sheet (or twice within them).
• Accounts from Incomplete Records – Many small businesses do not follow full double entry: they keep a cash book and personal accounts only. Such incomplete records cannot give a trial balance or a true profit and loss account, so profit is estimated by comparing capital at the start and end of the year using statements of affairs, adjusted for drawings and fresh capital.

4. Project Work

Project (any one)

Coming soon