SYLLABUS

Unit I Contact Hours:10

Financial Accounting: Introduction, Importance, Scope, and Limitations, Users of Accounting
Information, Branches of Accounting, Basic Terms, Generally Accepted Accounting Principles,
Accounting Equation. Introduction to International Financial Reporting Standards (IFRS).
Understanding Accounting Standards issued by the ICAI related to Disclosure of Accounting
Policies, Depreciation Accounting, and Revenue Recognition. Accounting Process, Nature of
Accounts and Rules of Debit and Credit, Recording Transactions in General Journal.
Unit II Contact Hours:12
Preparation of Ledger Accounts. An overview of Subsidiary books: Purchase Book, Purchase
Returns Book, Sales Book and Sales Returns Book. Recording Transactions in two column and
three column Cash Book. Preparation of Trial Balance, Bank Reconciliation Statement. Opening and
Closing Entries.
Unit III Contact Hours:12
Understanding Accounting Standards issued by the ICAI related to Disclosure of Accounting
Policies, Depreciation Accounting, and Revenue Recognition. Methods of charging Depreciation:
Straight-line Method, and Written-Down-Value Method. Change in Method as per AS-6, Adjustment
Entries. Post- adjusted Trial Balance. Preparation of Financial Statements: Preparing Trading
Account, Profit & Loss Account and Balance Sheet for a Sole Proprietor.
Unit IV Contact Hours:14

Understanding Contents of Financial Statements of a Joint Stock Company as per

Companies Act 2013. Understanding the Contents of a Corporate Annual Report. Preparation
of Cash Flow Statement as per AS-3 (Revised).

Unit V Contact Hours:12

Analyzing Financial Statements: Objectives of Financial Statement Analysis, Sources of

Information, Standards of Comparison, Techniques of Financial Statement Analysis:
Horizontal Analysis, Vertical Analysis, and Ratio Analysis. Meaning and Usefulness of
Financial Ratios, Analysis of Financial Ratios from the perspective of different Stakeholders
like Investors, Lenders, and Short-term Creditors. Profitability Ratios, Solvency Ratios,
Liquidity Ratios and Turnover Ratios, Limitations of Ratio Analysis.
SUBJECT – BUSINESS ACCOUNTING
SESSION NO. –1
TOPIC –
NAME OF THE FACULTY- NAMRATA KEDIA

ITM GROUP OF INSTITUTIONS

4
 LEDGER POSTING
 Transfer of individual entries to ledger accounts is ledger posting.
 A ledger is basically a record in which we record transactions of a
specific nature.
 The most important function of ledgers is to sort individual
transactions into separate individual accounts.
 They make it easy for us to group all transactions of similar
nature and same subject matter into individual groups.
 This, in turn, enables us to carry forward the process of
accounting smoothly and effectively.
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Features of Ledgers:
 Every ledger contains two sides: the left side shows debit entries
while the right one depicts credit entries. Abbreviations of “Dr.”
and “Cr.” on the top of the left and right sides respectively.

 Secondly, every ledger relates to a particular person, asset, income

or expense. Therefore, every transaction affects some ledger
regardless of whether it is a real, personal or nominal transaction.

 Thirdly, we can identify each ledger from the name of the

concerned account. In order to do this, we have to write the name
of each account in the middle.
Each side of a ledger contains the following columns:

 Date: This column basically depicts the date on which that

transaction took place.

 Particulars: This shows the name of the relevant account which the
transaction effects.

 JF (Journal Folio): This column denotes the page number on which

the journal entry was passed.

 Amount: This column basically shows the amount associated with

every entry.
Format of Ledger Account:
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Procedure of Ledger Posting

Ledger posting means nothing but transferring debit

and credit items from journal entries into their
respective accounts.

The account which has been debited in the journal

entry has to be debited in the ledger as well. However,
we have to mention the name of the other account.
Similarly, the account which is credited in the
journal entry is recorded on the credit side of the
ledger but the reference is given to the other account
in the entry.

It is customary to mention the words “To” and “By”

as a prefix before debited and credited accounts
respectively.
Balancing Ledgers:

Just like every other accounting record, the grand total

of debit and credit sides of ledgers must always be
equal.

However, sometimes the debit side may exceed the

credit side and vice versa.

In such cases, we have to balance the ledgers by

recording the difference in the deficient side to make
it equal.
Whenever the debit side exceeds the credit
side, we have to record the balance on the
credit side. This ledger is now said to have
a debit balance.

Similarly, if the credit side is greater, we

record the balance on the debit side. The
account now has a credit balance.
Example of Balancing Ledgers:
The ledger below is said to have a debit balance because the
total of debits is more than the total of Credits. That is,
36,900 > 4,460. The difference 32,440 is carried down to next
year as a debit balance

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SUBSIDIARY BOOKS
Subsidiary Books are books of Original Entry.
They are also known as Day Book or special journals.
We record transactions of similar nature are in Subsidiary
Books.
They are helpful in overcoming the limitations of journal
book or journal entries. The journal becomes bulky and
voluminous
Need Of Subsidiary Books:
• Cash transactions can be grouped in one category.
• Credit transactions can be grouped in another category.
• The main journal is sub-divided in a way that a separate book
is used for each category of transactions which are repetitive
and sufficiently large in number.
• Each one of the subsidiary books is a special journal and a
book of original or prime entry.
• The double entry principles of accounting are strictly followed.
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Types of Subsidiary Books:
 Cash book
 Purchases book
 Sales book
 Purchases return or return outwards book
 Sales return or return inwards book
 Bills receivable book
 Bills payable book
 Journal proper
Purchases book:
1. A firm records all its credit purchases of goods
in Purchase Book or Purchase Day Book.
2. While it records all the cash purchases of goods
in the Cash Book.
3. We do not record Purchases of assets in
Purchase Book. Thus, they are recorded in the
Journal Proper.
Format of Purchase Book:
Sales Book:
1. A firm records all credit sales of goods in the Sales Book or
Sales Day Book.
2. It records cash sales of goods in the Cash Book.
3. We do not record the sale of assets in the Sales Book. Thus, we
shall record them in the Journal Proper.
4. In this case, also we record entries from the source documents.
5. Also, we record entries with the net amount of the invoice
Format of Sales Book:
Purchase Return or Return Outward Book
1. We record the return of goods purchased in the Purchase
Return Book.
2. A Debit Note is prepared for every return of goods in
duplicate.
3. It contains the name of the supplier, details of goods
returned and reason thereof.
4. It needs to be dated and serially numbered.
Format of Purchase Return Book:
Sales Return or Return Inwards Book:
1. We record the return of goods sold in the Sales
Return Book.
2. A Credit Note is prepared for every return of goods
in duplicate.
3. The Credit Note contains the name of the customer,
details of goods returned and reason thereof.
4. It also needs to be dated and serially numbered.
Format of Sales Return Book:
30
 CASH BOOK :
 The book in which all cash transactions either cash is
received or paid are primarily recorded according to dates,
is called Cash Book.
 In cash book all cash receipts and cash payments are
recorded.
 We can also record bank deposits, bank withdrawals,
receipts and payments through cheques in cash book.
 Some organizations also record cash discount allowed to
customers and cash discount received from suppliers.
Features of Cash Book:
 It has two identical sides-left hand side, the debit side and right
hand side, the credit side.
 All the items of cash receipts are recorded on the left hand side.
 All items of cash payments on the right hand side in order of
date.
 The difference between the total of two sides shows cash in hand
on the end of the period.
 Its balance is verified by counting actual cash in the cash box.
 It always shows debit balance. It can never show credit balance.
Importance of Cash Book:
1. Helpful in ascertaining the true cash position
2. Helpful in preventing embezzlement
3. Serves as a documentary evidence for cash balance
4. Ascertainment of daily cash transactions
5. Ascertainment of cash balance
6. Guard against defalcation
7. Helping in ascertaining bank balance
The Columns of the Cash Book are explained below:
1. Date: The date of transaction is written in this column
in two lines—in the first line, the year and in the
second line, the name of the month followed by the
actual date.
2. Particulars: In this column the name of the opposite
account is written (the second aspect of cash
transaction). Below this is written the narration of the
transaction within brackets.
3. L.F. (Ledger Folio): The page number of the Ledger
where the concerned (opposite) account has been opened
is written in this column. This will help to locate the
account from the Ledger.
4. Amount: The amount of the transaction is recorded in
this column. The amount of cash received is recorded on
the debit side in amount column and the amount of cash
paid is recorded on the credit side in amount column.
5. V. NO. (Voucher Number): The voucher number of
each item of receipt and payment is also written. A
voucher is necessary for each item of receipt and
payment. Generally, a voucher has a serial number and
this number-is written in this column (V. No). A document
evidencing cash receipts and payments and forming the
basis for making entries in the Cash Book is called Cash
Voucher.
 Kinds of Cash
Book

Single Double Triple

Petty Cash
Column Column Column
Book
Cash Book Cash Book Cash Book

With Cash & With Cash & With Bank &

With Cash,
Bank Discount Discount
Bank &
Columns Columns Columns
Discount
Columns
Format of Double Column Cash Book
(With Cash & Bank Column)
Format of Double Column Cash Book
(With Cash & Discount Column)
Format of Double Column Cash Book
(With Bank & Discount Column)
Format of Triple Column Cash Book
(With Cash, Bank & Discount Column)
TRIAL BALANCE
 Trial balance is a statement in which debit and credit
balances of all the accounts of ledger including cash
and bank balances are shown to test the arithmetical
accuracy of the books of accounts.
 As every debit has a corresponding credit, hence total
of debit balances of trial balance is always equal to
total of its credit balances.
OBJECTS OF PREPARING A TRIAL BALANCE:
1. Financial Statements are prepared on the basis of trial
balance.
2. To check the arithmetical accuracy of books of
accounts.
3. The balance of any account of ledger can be easily and
conveniently known by it.
4. If trial balance does not tally, it means that their are
some errors in recording, posting or balancing of
accounts.
5. A test of account books is necessary before preparation
of final accounts, which is done through trial balance.
METHODS OF PREPARATION OF TRIAL BALANCE

1. Total Method : Under this method debit total and

credit total of each account of ledger are recorded in
trial balance.

2. Balance Method : Under this method, only balance of

each account of ledger is recorded in trial balance.
Some accounts may have debit balance and the other
may have credit balance.
3. Total and Balance Method : This is the combination
of above two methods, i.e., under this method both
debit and credit total of each account and also
balances of each account are recorded.

4. Elimination of Equal Totals Method : Those accounts

whose debit totals are equal to credit totals i.e. , the
accounts which have no balances are eliminated.
Such accounts are not recorded in trial balance.
Format for preparing Trial Balance
Under Total Method:
Format for preparing Trial Balance
Under Balance Method:
Format for preparing Trial Balance
Under Total and Balance Method :
 Format for preparing Trial Balance
Under Elimination of Equal Totals Method:
 REASONS FOR PREPARING BRS:
 Cheques Issued but not cleared in the bank.
 Difference in cheque deposited and cheque credited date.
 Date of cheque issued and date on which it is debited differ.
 Cheque issued/received is not presented to the bank for clearing.
 Bank interests, charges etc. are not accounted for. Reason being
it is not known till you reconcile.
 Banks can do mistake in debiting or crediting the transactions
54
55
Opening entries:
The opening balance is that balance which is brought
forward at the beginning of an accounting year from the
end of a previous accounting year, i.e., the closing
balance becomes the opening balance
It is the very first entry in the books of accounts.
The opening balance will be appearing on the credit or
debit side of the ledger, depending on nature of account.
Closing Entries:
A closing entry is a journal entry that is passed at the
end of the accounting year to transfer balances from a
temporary account to a permanent account.
All the expenses and gains or income related nominal
accounts must be closed at the end of the year. On the
basis of trial balance we transfer them to either
Trading A/c or Profit and Loss A/c.
SUBJECT – BUSINESS ACCOUNTING
SESSION NO. –1
TOPIC –
NAME OF THE FACULTY- NAMRATA KEDIA

ITM GROUP OF INSTITUTIONS

SUBJECT – BUSINESS ACCOUNTING
SESSION NO. –1
TOPIC –
NAME OF THE FACULTY- NAMRATA KEDIA

ITM GROUP OF INSTITUTIONS

SUBJECT – BUSINESS ACCOUNTING
SESSION NO. –1
TOPIC –
NAME OF THE FACULTY- NAMRATA KEDIA

ITM GROUP OF INSTITUTIONS

SUBJECT – BUSINESS ACCOUNTING
SESSION NO. –1
TOPIC –
NAME OF THE FACULTY- NAMRATA KEDIA

ITM GROUP OF INSTITUTIONS

SUBJECT – BUSINESS ACCOUNTING
SESSION NO. –1
TOPIC –
NAME OF THE FACULTY- NAMRATA KEDIA

ITM GROUP OF INSTITUTIONS

SUBJECT – BUSINESS ACCOUNTING
SESSION NO. –1
TOPIC –
NAME OF THE FACULTY- NAMRATA KEDIA

ITM GROUP OF INSTITUTIONS

SUBJECT – BUSINESS ACCOUNTING
SESSION NO. –1
TOPIC –
NAME OF THE FACULTY- NAMRATA KEDIA

ITM GROUP OF INSTITUTIONS

SUBJECT – BUSINESS ACCOUNTING
SESSION NO. –1
TOPIC –
NAME OF THE FACULTY- NAMRATA KEDIA

ITM GROUP OF INSTITUTIONS

SUBJECT – BUSINESS ACCOUNTING
SESSION NO. –1
TOPIC –
NAME OF THE FACULTY- NAMRATA KEDIA

ITM GROUP OF INSTITUTIONS