|Recording of Transactions
- Accounting equation: analysis of transactions using accounting equation.
- Rules of debit and credit: for assets, liabilities, capital, revenue and expenses
- Origin of transactions- source documents (invoice, cash memo, pay in slip, cheque), preparation of vouchers – cash (debit and credit) and non cash (transfer).
- Books of original entry: format and recording – Journal.
- Cash Book: Simple Cash Book, Cash Book with Discount Column and Cash Book with Bank and Discount Columns, Petty Cash Book.
- Other books: purchases book, sales book, purchases returns book, sales returns book and journal proper.
Preparation of Bank Reconciliation Statement, Ledger and Trial Balance.
- Bank reconciliation statement- calculating bank balance at accounting date: need and preparation. Corrected cash book balance.
- Ledger – format, posting from journal, cash book and other special purpose books, balancing of accounts.
- Trial balance: objectives and preparation
(Scope: Trial Balance with balance method only)
Depreciation, Provisions and Reserves
- Depreciation: concept need and factors affecting depreciation; methods of computation of depreciation: straight line method, written down value method (excluding change in method)
- Accounting treatment of depreciation: by charging to asset account, by creating provision for depreciation/ accumulated depreciation account, treatment of disposal of asset.
- Provisions and reserves: concept, objectives and difference between provisions and reserves; types of reserves- revenue reserve, capital reserve, general reserve and specific reserves.
Accounting for Bills of Exchange
- Bills of exchange and promissory note: definition, features, parties, specimen and distinction.
- Important terms : term of bill, due date, days of grace, date of maturity, discounting of bill, endorsement of bill, bill sent for collection, dishonour of bill, noting of bill, retirement and renewal of a bill.
- Accounting treatment of bill transactions.
Rectification of Errors
- Errors: types-errors of omission, commission, principles, and compensating; their effect on Trial Balance.
- Detection and rectification of errors; preparation of suspense account.
|After going through this Unit, the students will be able to:
- explain the concept of accounting equation and appreciate that every transaction affects either both the sides of the equation or a positive effect on one item and a negative effect on another item on the same side of accounting equation.
- explain the effect of a transaction (increase or decrease) on the concerned assets, liabilities, capital, revenue and expenses.
- appreciate that on the basis of source documents, accounting vouchers are prepared for recording transaction in the books of accounts.
- develop the understanding of recording of transactions in journal.
- explain the purpose of maintaining a Cash Book and develop the skill of preparing the format of different types of cash books and the method of recording cash transactions in Cash book.
- describe the method of recording transactions other than cash transactions as per their nature in different subsidiary books .
- appreciate that at times bank balance as indicated by cash book is different from the bank balance as shown by the pass book / bank statement and to reconcile both the balances, bank reconciliation statement is prepared.
develop understanding of preparing bank reconciliation statement.
- appreciate that for ascertaining the position of individual accounts, transactions are posted from subsidiary books and journal proper into the concerned accounts in the ledger and develop the skill of ledger posting.
- state the need and objectives of preparing trial balance and develop the skill of preparing trial balance.
- explain the necessity of providing depreciation and develop the skill of using different methods for computing depreciation.
- understand the accounting treatment of providing depreciation directly to the concerned asset account or by creating provision for depreciation account.
- appreciate the method of asset disposal through the concerned asset account or by preparing asset disposal account.
- appreciate the need for creating reserves and also making provisions for events which may belong to the current year but may happen in next year.
- appreciate the difference between reserve and reserve fund.
- acquire the knowledge of using bills of exchange and promissory notes for financing business transactions;
- understand the meaning and distinctive features of these instruments and develop the skills of their preparation.
- state the meaning of different terms used in bills of exchange and their implication in accounting.
- explain the method of recording of bill transactions.
- appreciate that errors may be committed during the process of accounting.
- understand the meaning of different types of errors and their effect on trial balance.
- develop the skill of identification and location of errors and their rectification and preparation of suspense account.