CONTENT : Preface to the Second Edition v Acknowledgements ix Preface to the First Edition x Teaching Plan xii 1. Conceptual Basis of Accounting 2 1.1 Introduction 2 1.2 Evolution of Financial Accounting 3 1.3 Foundations of Accounting4 1.4Development of Accounting6 1.5 Accounting as a Measurement and Valuation System6 1.6 Sole Proprietorship, Partnership and Company9 1.7 Basic Framework of Accounting11 1.8 Conceptual Basis of Accounting12 1.9Accounting Policies18 1.10 Objectives i>f Accounting 19 1.11 Purposes of Accounting Information19 1.12 Accounting and Management Control21 1.13 Users of Accounting Information 22 1.14 Branches of Accounting24 Summary26 Key Wordx .aid Definition1;27 Web Resources 28 Multiple Choice Questions29 Self-Assessment Questions29 Exercise30 Cases32 Further Readings33 Annexure 1.1Three Ways of Capital Maintenance34 Annexurel.2 Limited Liability Partnership35 2. Balance Sheet 37 2.1Introduction 37 2.2Conceptual Basis of a Balance Sheet 38 2.3Balance Sheet Equation 39 2.4Balance Sheet Changes 40 2.5Revenue and Expenses43 2.6Classification of Items on a Balance Sheet 44 2.1Current Assets46 2.8Fixed Assets57 2.9Intangible and Other Assets53 2.10Current Liabilities55 2.11Long-Term Liabilities57 2.12Owner(s) Equity 58 2.13 Other Formats of a Balance Sheet62 Summary65 Key Words and Definitions65 Solved Problems66 Web Resources75 Multiple Choice Questions75 Self-Assessment Questions76 Exercise 76 Review Questions79 Cases86 3. Profit and Loss Account 97 3.1 Introduction97 3.2Why Profit and Loss Account 97 3.3 Measurement of Income98 3.4 Realisation Principle100 3.5 Accrual Principle101 3.6 Accounting Period102 3.7 Matching Revenue and Expenses 103 3.8 Revenue103 3.9 Expense104 3.10 Assets that Become Expenses106 3.11 Preparation of Profit & Loss Account107 3.12 Possible Future Expenses109 3.13 Fixed Assets and Depreciation111 3.14 Methods of Depreciation112 3.15 Form and Contents of Profit and Loss Account119 3.16 Dividends and Retained Earnings132 3.17 Solved Illustrations133 Summary139 Key Words and Definitions139 Web Resources140 Self-Assessment Questions141 Exercise141 Review Questions143 Cases148 4. Funds and Cash Flow Statement 157 4.1 Flow of Funds157 4.2 Working Capital158 4.3 Need for Working Capital158 4.4 Reconciling Increase in Working Capital162 4.5 Determining the Existing Capital Requirement164 4.6 Future Capital Requirements165 4.7 Possible Sources of Working Capital167 4.8 Factors Affecting Fund Requirements168 4.9 Analysing Changes in Working Capital174 4.10 Statement of Cash Flow157 4.11 Preparing a Cash Flow Statement: An Introduction183 4.12 Solved Illustrations187 Summary 197 Key Words and Definitions197 Web Resources198 Self-Assessment Questions198 Exercise198 Review Questions 201 Cases 207 5. Accounting Records 22} 5.1Introducer, 223 5.2 Balance Sheet Equation and Accounts 224 5.3 Account 225 5.4Recording of Transactions 228 5.5 Classification of Accounts228 5.6Rules for Debit and Credit 230 5.7 The Journal 232 5.8 Subsidiary Books-Divisions of the Journal 233 5.9Ledger Accounts 234 5.10 Posting of Transactions234 5.11 Adjustments 240 5.12 Trial Balance and Work Sheet 241 5.13 Cash Book: A Subsidiary Book as well as a Principal Book 277 5.14 Difference in Trial Balance 273 5.15 Errors that cannot be Located by a Trial Balance 274 5.16 Steps for Locating the Errors in a Trial Balance 275 5.17 Rectification of Errors 275 5.18 Collection Losses 275 5.19 Solved Illustrations 280 Summary 286 Key Words and Definitions 287 Web Resources 287 Multiple Choice Questions 288 Self-Assessment Questions292 Exercise 292 Review Questions 294 6. Accounts for Joint Stock Companies 303 6.1 Introduction303 6.2 Characteristics of Companies304 6.3 Shares and Share Capital 305 6.4 Debentures and Bonds 308 6.5 Issue of Securities 310 6.6 Par Value and No Par Value Shares 312 6.7 Forfeiture of Shares 314 6.8 Issue of Shares-Accounting Records314 6.9 Legal Requirements as to Company Accounts 319 6.10 Form and Contents of Balance Sheet and Profit and Loss Account320 6.11 Distribution of Profits in Case of Companies 321 6.12 Depreciation Related Issues 322 6.13 Company Law Requirements 326 6.14 SEBI Guidelines for Issue of Share Capital330 6.15 Classification of Equity Reserves 331 Solved Illustrations332 Summary336 Key Words and Definitions 337 Web Resources337 Multiple Choice Questions 337 Self-Assessment Questions 341 Exercise341 Cases342 Annexure 6.1Public Vs Private Company-A Sneak Preview of Indian Scenario 359 Annexure 6.2Indian Companies Act 1956 on Board Meetings 360 7. Financial Statement Analysis 362 7.1 Financial Statements-Basic Relationships 362 7.2Relation and Comparison of Accounting Data 363 7.3 Common Size Financial Statements364 7.4Financial Statement Analysis Using Common Ratios367 7.5 Profitability Ratios368 7.6 Solvency Ratios 375 1.1Using Financial Statement Information 382 Solved Illustrations384 Summary 401 Key Words and Definitions402 Web Resources 402 Multiple Choice Questions 403 Self-Assessment Questions 405 Exercise406 Cases409 8. Common Issues in Accounting Records 427 8.1 Depreciation Accounting 427 8.2Accounting of Inventories 436 8.3 Accounting for Debentures442 8.4Accounting for Investments 449 8.5 Accounting for Negotiable Instruments 454 8.6Bank Reconciliation Statement 458 Summary 463 Web Resources463 Multiple Choice Questions 464 Self-Assessment Questions467 Exercise 468 Cases472 9. Accounting Standards 491 9.1 Introduction491 9.2Accounting Standards in India 492 9.3 Importance of the Accounting Standards494 9.4Disclosure of Accounting Policies496 9.5 Regulations for Valuation of Inventories499 9.6 Rules for Cash Flow Statement502 9.7Norms for Events after Balance Sheet Date508 9.8Rules for Provisions and Contingencies570 9.9Norms for Net Income and Changes in Accounting Policies575 9.10 Regulations for Depreciation Accounting577 9.11 Norms for Revenue Recognition579 9.12 Accounting for Fixed Assets527 9.13 Accounting for Taxes on Income523 9.14 Accounting for Intangible Assets528 9.15 Norms for Consolidated Financial Statements537 9.16 Need for Notes to Accounts533 9.17 Other Accounting Standards538 9.18 Computerisation of Accounts547 9.19 Indian Companies Providing their Accounts as per US GAAP and IFRS 550 Summary551 Web Resources551 Exercise557 Review Questions 553 Cases553 Annexure 9.1Significance of Chart of Accounts in AIS 565 Annexure 9.2 Web Resources on Computerisation of Financial Accounting566 Appendix ASample Annual Report 567 Appendix BInternational Financial Reporting Standards 588 Appendix CComprehensive Assignment 602 Appendix DComprehensive Test: VIP Chaddi Pe Gaddi Offer .. 614 List of References 619 Index 621