Accountancy lessons

57 lessons

• Accountancy Project Work (Class 11): Pick Any One – The Class 11 accountancy project carries 20 marks. You choose any one of three: (A) record source documents and vouchers, (B) a bank reconciliation with 20 to 25 transactions, or (C) the full accounts of a sole trader with charts and simple GST. This lesson shows the steps, the format of the file and a worked reconciliation, so you can plan and finish it neatly with your own numbers.
• Accounting for a Merchandising Business – A merchandising business buys finished goods and sells them again for more. Its special accounts are Inventory, Purchases, Sales, Sales Returns, Discounts, Freight-in and Cost of Goods Sold (COGS). Stock is tracked with a perpetual system (updated at every sale) or a periodic system (counted at year end). COGS = opening inventory + net purchases − closing inventory. Net sales − COGS = gross profit; gross profit − operating expenses = net income.
• Accounting for Debentures – A debenture is a written loan to a company. The company pays fixed interest and returns the money later (redemption). Debentures can be issued at par, premium or discount, redeemed at par or premium, issued to a vendor for assets, or kept with a lender as collateral security. Interest is a charge, and any discount or loss on issue is written off from securities premium and then from profits.
• Accounting for Sales Tax – Sales tax is money a business collects from customers for the government. It is not income: it goes into a liability account, Sales Tax Payable. With a value-added tax (GST, VAT, HST) the business also gets back the tax it paid on its own purchases (input tax credit), so it remits only the difference. With a single-stage retail sales tax (like a provincial or state sales tax) it simply passes on all the tax it collected.
• Accounting for Share Capital – A company raises money by selling shares. Money usually comes in parts: application, allotment and calls. Journal entries record each part, including premium, extra applications, unpaid calls, advance payments, shares given for assets, and shares taken back (forfeited) and sold again (reissued). Share capital is shown in the balance sheet under Shareholders' Funds.
• Accounting Practice: Keep the Books of a Small Shop – Accounting practice means keeping the books of a small business from the first transaction to the final report. Everything rests on the accounting equation: assets = liabilities + owner's capital. Every transaction is written in two places (double entry), so the equation stays balanced. The steps are: record each transaction in the journal, sort them into ledger accounts, check the totals with a trial balance, then prepare two reports. The profit and loss statement shows sales minus costs and expenses, which gives profit. The balance sheet shows what the business owns and owes. In our project, Ravi starts a shop with 1000 cash, buys goods for 400, sells goods that cost 100 for 160, and pays rent 50. His profit is 160 − 100 − 50 = 10, his capital is 1010 and his assets are 1010. The scale stays level at every step.
• Accounting Procedures – The balance sheet always balances: assets = liabilities + net assets. Revenue raises net assets, expenses lower them, and the difference is profit. Fixed assets lose value through depreciation, securities are valued at market, loans split into current and long-term, and tax-effect accounting matches the tax expense to accounting profit.
• Accounting Ratios: Liquidity, Solvency, Activity and Profitability – A ratio compares two related numbers from the financial statements. Liquidity ratios check if short-term debts can be paid; solvency ratios check long-term safety; activity (turnover) ratios check how fast assets are used; profitability ratios check how much profit each rupee earns.
• 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.
• Accounts Receivable and Accounts Payable – When a business sells on credit, the customer owes it money: an account receivable (a current asset). When it buys on credit, it owes the supplier: an account payable (a current liability). Credit terms such as 2/10, n/30 offer a discount for paying early. Each customer and supplier has a page in a subledger that must agree with the control account. Because some customers never pay, businesses estimate bad debts with an allowance. A written promise to pay with interest is a note receivable.
• 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).
• Admission of a New Partner – When a new partner joins, the old partners give up part of their share. We find the new ratio and the sacrificing ratio, the new partner pays a premium for goodwill (shared by sacrificers as per AS 26), assets and liabilities are revalued, old reserves go to old partners, capitals may be adjusted, and a new balance sheet is drawn.
• Auditing and Professional Accountants – Owners give money to managers, so managers must be accountable: they must explain how the money was used through financial statements. Because managers write those statements about themselves, an independent auditor checks them using evidence and gives an opinion: unqualified, qualified, adverse or a disclaimer. Professional accountants, such as certified public accountants and tax accountants, audit, prepare tax returns and advise, and must be honest, independent, careful and confidential.
• 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.
• 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.
• 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.
• Bookkeeping for Shops: Billing, Books and Profit – Bookkeeping is the daily, careful recording of every money deal of a business. It starts with billing: each sale gets a bill (invoice or cash memo) showing seller, bill number, date, buyer, items, quantity, rate, amount, tax and total. Under double entry, every deal affects two accounts: one is debited and one is credited by the same amount, so Assets = Liabilities + Capital always holds. Deals are first written in the journal by date, then posted to ledger accounts. Busy shops use subsidiary books: cash book, purchases book, sales book, purchase returns, sales returns, petty cash book and journal proper. At year end the trading account finds gross profit (sales − cost of goods sold), and the profit and loss account finds net profit (gross profit − expenses + other income).
• Budgeting and Budgetary Control – A budget is a plan in numbers for a set period. Firms start with the sales budget, then make production, cost and cash budgets, and join them into a master budget. Budgetary control compares actual results with the budget, finds the variances (favourable or unfavourable), asks why, and takes action. Flexible budgets change with activity; zero-based budgets start from nothing each time.
• Careers in Accounting – Accounting offers jobs at every level, from bookkeeper to chief financial officer, in firms, industry, government and not-for-profits. Professional accountants study for a degree, pass a professional body's exams and complete supervised experience to earn a designation such as CPA, CA, ACCA or CMA. Professional bodies set exams, enforce a code of ethics and require lifelong learning.
• Cash Flow Statement (AS 3): Where Did the Cash Come From and Go? – A cash flow statement shows how cash came into a company and went out during a year. Every cash movement is put in one of three groups: operating, investing or financing. Under the indirect method we start from profit before tax, add back items that used no cash, adjust for changes in current assets and liabilities, and subtract tax paid.
• Change in Profit-Sharing Ratio Among Existing Partners – When partners agree on a new profit-sharing ratio, some partners give up part of their share (sacrifice) and others get more (gain). The gainer pays the sacrificer for goodwill. Assets and liabilities are revalued, and old reserves and profits are shared in the old ratio, because they were earned under it.
• Computerised Accounting System (CAS): Features, Parts and Software Types – A computerised accounting system (CAS) records business deals on a computer. You enter a voucher once and the software posts it, totals it and prints ledgers and statements. A CAS has six parts: hardware, software, people, procedure, data and connectivity. Accounting software may be ready-made, customised or tailored.
• Cost Management – Cost management means planning and controlling what things cost. Standard costing sets the cost one item should have and measures variances (actual minus standard). Direct standard costing counts only variable costs in product cost. Target costing starts from the market price: target cost = price - desired profit. Activity-based costing shares overhead by the activities that cause it. Quality costing adds up prevention, checking and failure costs.
• Costing by Cost Element: Material, Labour and Expense Calculation – The first step of cost calculation is to find how much material, labour and expense a factory used. Material used is priced by a rule such as FIFO or average cost. Labour is paid by time rate or piece rate, and may be direct or indirect. Expenses are of three kinds: paid for the month (rent), measured by use (power meter) and shared over years (depreciation). The result splits into direct costs for a job and indirect costs that go into overhead.
• Costs and Cost Accounting: Concept, Features and Structure – Cost is the value of the things a business uses up to make and sell a product: materials, labour and other expenses. Cost accounting records and sorts these costs so we know what each product really costs. It follows three steps: costs by element, then by department, then by product. Costs build up like layers: prime cost, manufacturing cost, total cost, then profit is added to get the selling price.
• Departmental and Product Costing: Job-Order and Process Costing – Step two and three of cost calculation: share factory overhead between departments, then find the cost of each product. Job-order costing gives each customer order its own cost: direct material + direct labour + overhead by rate. Departmental costing uses a separate overhead rate for each department, which is fairer. Process costing is for goods made all day in the same way: total cost of a department ÷ equivalent units gives cost per unit.
• 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.
• Direct Costing (Variable Costing) – In direct costing only variable costs are counted as product cost. Fixed costs are charged in full to the period in which they happen. Profit = sales - variable costs - fixed costs. Absorption costing spreads fixed cost over every unit made, so unsold stock carries some fixed cost forward. When stock grows, absorption shows more profit than direct costing.
• Dissolution of a Partnership Firm – On dissolution, the firm stops business. All assets (except cash) are sold, all outside liabilities are paid, the profit or loss on this is found in a Realisation Account and shared by partners, and finally partners are paid their capital balances so that every account closes to zero.
• Efficient Bookkeeping: Vouchers and Accounting Software – Writing every transaction in one big book is slow. A voucher system uses one slip per transaction: receipt slips for money in, payment slips for money out and transfer slips when no cash moves. Slips can be written by many people, checked, sorted and posted as daily totals. Accounting software goes further: one entry updates the ledger, trial balance and statements automatically.
• Ethics in Accounting – Banks, investors, workers and governments make decisions using accounting numbers, so the numbers must be honest. Accountants face pressure to bend them. A code of ethics guides them with five principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. Strict standards and new issues such as AI, cyber security and climate reporting keep changing the accountant's role.
• Financial Statements of a Company (Schedule III) – A company prepares two main statements: the Balance Sheet (what it owns and owes on a date) and the Statement of Profit and Loss (income and expenses for a year). Schedule III of the Companies Act 2013 gives a fixed vertical format with main heads and sub-heads, so every company's statements look alike and can be compared.
• 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.
• Goodwill: What It Is and How to Value It – Goodwill is the value of a firm's good name: the reason it earns more than a normal business of the same size. It is an intangible asset. It is valued by the average profit, super profit or capitalisation method, and partners adjust it through their capital or current accounts.
• Group (Consolidated) Accounting – Companies join in different ways: in a merger two become one; in an acquisition a parent buys control of a subsidiary and both stay separate companies. After a merger one set of statements is made and any price above net assets is goodwill. For a group, consolidated statements add the parent and subsidiary, remove the investment against the subsidiary's equity and remove internal sales and unrealised profit, and show outside owners as non-controlling interest. Removing unrealised profit creates a deferred tax asset in the group accounts.
• Head Office and Branch Accounting – A business with branches keeps books at the head office and at each branch. Whatever head office gives a branch is a debit in the Branch account at head office and a credit in the Head Office account at the branch. Branch-to-branch deals are routed through head office. Differences such as goods in transit are reconciled. At year end the statements of all offices are combined and the two mirror accounts cancel out.
• Internal Accounting: Completing Products, Factory Ledger and Closing the Books – In a factory, costs first collect in Work in process. When products are finished, their cost moves to Finished goods. When they are sold, cost moves to Cost of goods sold and the sale is recorded. Some firms keep a separate factory ledger that is linked to the head office ledger by mirror accounts. At year end a manufacturer prepares a manufacturing account (cost of goods manufactured) and then an income statement to find profit.
• Internal Control in Accounting – Internal control is the set of rules and checks a business uses to protect its assets, keep records accurate and make people follow policy. Key elements: separate duties, approve transactions, lock up assets, use numbered documents, check records against reality (cash counts, bank reconciliations), and use budgets and independent audits.
• 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.
• Inventory Accounting: Systems, Costing Methods and Controls – Inventory is the stock of goods a business holds to sell. Inventory accounting decides how much the goods sold cost (cost of goods sold) and how much the goods left are worth (closing inventory). When prices change, the answer depends on the costing method: FIFO or weighted average (specific identification for unique items). Businesses track stock with a perpetual or periodic system, count it physically, protect it with internal controls, and watch how fast it sells with inventory turnover.
• 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.
• Management Accounting and Business Administration – Management accounting gives managers inside a firm the numbers they need to plan, control and decide. Cost accounting works out what products and services cost, and is the main data source. Financial accounting reports past results to outsiders by fixed rules. Management accounting looks forward, has no fixed format, and uses cost data plus forecasts.
• Partnership Fundamentals: Deed, Capital and Sharing Profit – A partnership is two or more people who share the profit of a business they run together. Their agreement (deed) says how profit is shared. If there is no deed, the Partnership Act 1932 gives the rules. Profit is first used for partners' interest, salary and commission in a P&L Appropriation Account, and the rest is shared in the profit-sharing ratio.
• Payroll Accounting: From Gross Pay to Net Pay – Payroll is the process of paying employees and recording it. Employees can earn a salary, hourly wages with overtime, commission, piece rate or bonuses. Their total earnings are gross pay. Some amounts are taken off (deductions): income tax, pension or social security, insurance and voluntary items like union dues. What is left is net pay. The employer records gross pay as an expense, owes the deductions to the government and others, adds its own contributions as payroll tax expense, and sends the money on time.
• Performance Measurement – A large firm is split into units, and each boss is judged by what the boss controls. A cost centre is judged on cost against budget. A profit centre is judged on profit. An investment centre is judged on profit compared with the money invested: ROI = profit ÷ investment × 100. Residual income = profit - a charge for the capital used. A balanced scorecard adds non-money views such as customers, processes and learning.
• Retirement and Death of a Partner – When a partner leaves (retires) or dies, the remaining partners take over his share. We find the gaining ratio, the gainers pay him for goodwill, assets are revalued and reserves shared in the old ratio, and the amount due is settled in cash or moved to his loan account. For a deceased partner, his share of profit up to death is added, and the amount is paid to his executors.
• Spreadsheets in Accounting: Formulas, BRS, Schedules, Ratios and Charts – A spreadsheet is a grid of rows and columns where each cell can hold a number, a word or a formula. When one number changes, every formula that uses it updates by itself. Accountants use spreadsheets for bank reconciliation, depreciation and loan schedules, payroll, ratio analysis and charts.
• Standard Costing: Purpose, Procedure and Cost Variance Analysis – Standard costing sets what a product should cost (the standard), records what it actually cost, and studies the difference, called a variance. A variance is favourable if actual cost is below standard and unfavourable if above. Splitting the variance by cause shows where money was lost: material price and usage, labour rate and efficiency. Managers use this to find problems early, control cost and plan better.
• The Accounting Cycle for a Service Business – The accounting cycle is the set of steps a business repeats every period to turn its daily transactions into financial statements. Analyse each transaction, record it in the journal, post it to the ledger, prepare a trial balance, make adjusting entries, prepare the statements, close the temporary accounts, and check with a post-closing trial balance. Then the cycle starts again.
• The Accounting Equation – Everything a business owns (assets) always equals what it owes to outsiders (liabilities) plus what it owes to its owner (capital): Assets = Liabilities + Capital.
• 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.
• Tools of Financial Statement Analysis – Analysis means studying financial statements to judge a company's profit, safety and growth. Its main tools are comparative statements (compare two years side by side: change in rupees and %) and common-size statements (show every item as a % of a common base: revenue or total). Analysis has limits: it uses past data, ignores non-money facts and depends on accounting choices.
• 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.
• Using a Computerised Accounting System: From Installation to Statements – To use accounting software you install it, create the company, set up groups and account codes, enter vouchers, and let the software check them. At the year end you pass adjusting and closing entries, print the statements and carry balances forward as opening entries. Passwords, user rights, audit trail and backups keep the data safe.
• Value Added, Profit Allocation and the Accounting Information System – Value added = sales minus goods and services bought from other firms. It is shared between staff (wages), the state (taxes), lenders (interest) and owners (profit). Profit is then split into reserves, dividends and retained earnings. An accounting information system (often an ERP) records every deal once, from source document to ledger to statements, and keeps the data safe.
• 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.