Financial Accounting 2e

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Author(s): K. Murugadoss, M. Jaya, V. Charulatha, D. Baskar

Published by Vijay Nicole Imprints Private Limited

Publication Date: Sat Sep 01 00:00:00 UTC 2007 Available in all formats

ISBN: 9789395245333

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This book Financial Accounting, 2e is suitable for Under Graduate students of all universities. This book gives a clear and crisp explanation on the Principles and Practices of Financial Accounting.

Salient Features

• Adequate theory on each concept.

• Extensive coverage of Journal and Ledger, Trail Balance, Final Accounts, Single Entry System, Bills of Exchange, Average Due Date and Account Current.

• In-depth coverage of Non-Trading Organisations, Branch Accounting, Departmental Accounting, Bank Reconciliation Statement, Fire Insurance Claims and Partnership Accounts.

• Includes Basics of Tally for practical accounting knowledge.

Cover
Halftitle Page
Title Page
Copyright Page
Table of Contents
Preface
Chapter 1 Introduction
- Accounting
  - Definition of Accountancy
  - Attributes in Accounting
  - Advantages of Accounting
  - Limitations of Accounting
- Stakeholders Interested in Accounting Information
- Book Keeping
  - Objectives of Book Keeping
  - Book Keeping vs Accounting
- Branches of Accounting
  - Financial Accounting
  - Cost Accounting
  - Management Accounting
- Methods of Accounting
  - Single Entry System
  - Double Entry System
- Classification of Accounts
- Rules for Double Entry
  - Bases of Accounting
- Accounting Equation
- Accounting Concepts and Conventions
  - Accounting Concepts
  - Accounting Conventions
- Review Questions
Chapter 2 Journal and Ledger
- Journal
  - Meaning of Journal
  - Advantages of Journal Entries
  - Points to be Observed while Passing Journal Entries
- Ledger
  - Characteristics of Ledger
  - Proforma of a Ledger
  - Posting
  - Model Journal Entry for Posting from Journal to Ledger
  - Steps for Balancing of Ledger Accounts
- Illustrations
- Review Questions
- Exercises
Chapter 3 Trial Balance
- Introduction
- Main Characteristics and Uses of a Trial Balance
- Objectives of Preparing a Trial Balance
- Methods of Preparation of Trial Balance
  - Total Method
  - Balance Method
- Schedule of Debtors and Creditors
- Advantages of a Trial Balance
- Illustrations
- Review Questions
- Exercises
Chapter 4 Rectification of Errors
- Introduction
- Based on Nature
  - Errors of Omission
  - Errors of Commission
  - Errors of Principle
  - Compensating Errors
- Based on the Impact on Trial Balance
  - Errors Not Disclosed by Trial Balance
  - Errors Disclosed by Trial Balance
- Based on Accounts Criterion
  - Single Sided Errors
  - Double Sided Errors
- Suspense Account
- Basic Principles for Rectification of Errors
- Illustrations
- Review Questions
- Exercises
Chapter 5 Subsidiary Book
- Introduction
- Advantages of Subsidiary Book
- Basic Documents for Subsidiary Books
- Kinds of Subsidiary Books
  - Purchases Book
  - Sales Book
  - Purchases Returns Book
  - Sales Returns Book
  - Bills Receivable Book
  - Bills Payable Book
  - Journal Proper
  - Cash Book
- Illustrations
- Review Questions
- Exercises
Chapter 6 Cash Book
- Introduction
- Characteristics of a Cash Book
- Advantages
- Types of Cash Book
  - Single Column Cash Book or Simple Cash Book
  - Double Column Cash Book or Two Column Cash Book
  - Triple Column Cash Book or Three Column Cash Book
  - Analytical Petty Cash Book
- Imprest System
  - Benefits of Petty Cash Book
  - Posting of Entries from Petty Cash Book
- Illustrations
- Review Questions
- Exercises
Chapter 7 Final Accounts
- Introduction
- Objectives in the Preparation of Final Accounts
- Stages in Preparation of Final Accounts
  - Manufacturing Account
  - Trading Account
  - Profit and Loss Account
  - Balance Sheet
- Grouping and Marshalling of Assets and Liabilities
- Final Accounts with Adjustment
  - Closing Stock
  - Expenses Outstanding
  - Prepaid Expenses
  - Accrued Incomes
  - Income Received in Advance
  - Depreciation on Fixed Assets
  - Bad Debts
  - Provision for Bad and Doubtful Debts
  - Provision for Discount on Debtors
  - Provision for Discount on Creditors
  - Interest on Capital
  - Interest on Drawings
  - Other Adjustments
- Illustrations
- Review Questions
- Exercises
Chapter 8 Bills of Exchange
- Introduction
- Promissory Note
  - Features of a Promissory Note
  - Parties to a Promissory Note
- Bill of Exchange
  - Parties to a Bill of Exchange
- Distinction between Bills of Exchange and Promissory Note
- Specimen of Bills of Exchange
- Advantages of Bill of Exchange
- Important Terms
- Accounting Treatment of Bill Transactions
  - Bills Receivable
  - Bills Payable
- Illustrations
- Review Questions
- Exercises
Chapter 9 Average Due Date
- Why Average Due Date is Calculated or Significance of Average Due Date
- Uses of Average Due Date
- How to Calculate Due Date of a Transaction?
- Types of Problems
- Illustrations
- Review Questions
- Exercises
Chapter 10 Account Current
- Definition
- Calculation of Interest
  - Forward Method
  - Product Method
  - Backward or Epoque Method
  - Red-ink Interest
  - Daily Balance or Periodic Balance Method or Account Current by Means of Product of Balances
- Method of Preparation
  - How to Calculate Days between Transactions
- Distinction between Account Current and Current Account
  - Account Current
  - Current Account
- Illustrations
- Review Questions
- Exercises
Chapter 11 Depreciation Accounting
- Introduction
- Characteristics of Depreciation
- Factors/Causes of Depreciation
  - Wear and Tear
  - Effluxion of Time
  - Obsolescence
  - Disuse
  - Technical Growth
  - Depletion
- Factors Affecting the Calculation of Depreciation
- Need for Providing Depreciation
- Methods of Depreciation
  - Straight Line Method or Fixed Installment Method or Original Cost Method
  - Diminishing Balance Method or Reducing Installment Method or Written Down Value Method
  - Annuity Method
  - Depreciation Fund or Sinking Fund Method
  - Insurance Policy Method
  - Sum of Years Digit Method
  - Revaluation Method
  - Depletion Method
  - Machine Hour Rate Method
- Illustrations
- Review Questions
- Exercises
Chapter 12 Non-Trading Organisations
- Introduction
- Final Accounts of Non-profit Organisations
- Preparation of Financial Statements
  - Receipts & Payment Account
  - Income & Expenditure Account
- Treatment of Special Items of a Non-profit Organisation
  - Entrance / Admission Fee
  - Donations
  - Life Membership Fee
  - Subscriptions
  - Special Receipts
  - Legacy
  - Sale of Assets
  - Sale of Newspapers, Magazines and Sports Materials
  - Honorarium
  - Other Funds
- Treatment of Revenue Items in Income & Expenditure Account
- Illustrations
- Review Questions
- Exercises
Chapter 13 Bank Reconciliation Statement
- Introduction
- Meaning
- Definition
- Need for Bank Reconciliation Statement
- Reasons for Disagreement
- Steps for Preparation of Bank Reconciliation Statement
- Proforma of Bank Reconciliation Statement
- Analysis of Bank Reconciliation Statement
- Illustrations
- Review Questions
- Exercises
Chapter 14 Fire Insurance Claims
- Introduction
- Fire Insurance Claims
- Types of Fire Insurance Claims
  - Loss of Stocks and Assets
  - Loss of Profit
- Distinct Terms in Fire Insurance Claims
- Illustrations
- Review Questions
- Exercises
Chapter 15 Single Entry System or Accounts from Incomplete Records
- Meaning
- Definition
- Features
- Advantages
- Limitations
- Differences between Double Entry System and Single Entry System
- Process of Ascertainment of Profit
- Distinction between Statement of Affairs and Balance Sheet
- Steps Involved in Preparation of Final Accounts under Conversion Method from Incomplete Records
- Illustrations
- Review Questions
- Exercises
Chapter 16 Branch Accounting
- Introduction
- Objectives of Branch Accounts
- Categories of Branches
  - Inland or Domestic Branches
- Incorporation of Branch Trial Balance in Head Office Books
- Foreign Branches
- Illustrations
- Review Questions
- Exercises
Chapter 17 Departmental Accounting
- Introduction
- Departmental Accounting
  - Objectives of the Departmental Accounting
  - Advantages of Departmental Accounts
- Differences between Branch Accounting and Departmental Accounting
- Methods and Techniques
  - Interdepartmental Transactions
  - Journal Entry
  - Disclosure in Balance Sheet
- Illustrations
- Review Questions
- Exercises
Chapter 18 Hire Purchase System
- Introduction
- Hire Purchase
  - Special Features of this Hire Purchase Contract
  - Important Definitions of the Act
  - Differences between Sale and Hire Purchase
- Instalment Method
  - Features of Instalment Payment System
- Differences between Hire Purchase System and Instalment Purchase System
- Accounting for Hire Purchase
  - Calculation of Interest & Cash Price
- Termination of Hire Purchase Agreement before the Agreed Period of Instalments
  - Default and Repossession
  - Sale of Small Values of Goods and its Accounting Treatment
- Instalment System
  - Accounting of Instalment Purchase
- Illustrations
- Review Questions
- Exercises
Chapter 19 Partnership
- Introduction
- Partnership Deed
  - Meaning
  - Contents
  - Rules Applicable in the Absence of Partnership Deed
- Accounts of Partnership Firms
  - Adjustments to be Made to the Accounts
  - Partners Capital Accounts
- Other Points Relating to Partnership
  - Capital Ratio
  - Adjustment of Capital Accounts after Closing Accounts of the Firm
  - Cancellation of Excess Interest
  - Guarantee
- Illustrations
- Review Questions
- Exercises
Chapter 19A Reconstitution of Partnership by Admission of a Partner
- Introduction
- Admission of a New Partner
  - New Profit Sharing Ratio of the New Firm
  - Accounting Goodwill of the Existing Firm
  - Revaluation of Assets and Liabilities of the Firm
  - Capitalisation of Accumulated Profits and Losses
  - Adjustment of Partners’ Capitals of All Partners
- Illustrations
- Review Questions
- Exercises
Chapter 19B Reconstitution of Partnership by Retirement of a Partner
- Introduction
- Sections Relating to Retirement
  - Sec. 32 (2)
  - Sec. 32 (3)
  - Sec. 32 (4)
- Accounting Adjustments
  - Calculation of New Profit Sharing Ratio and Gaining Ratio of Continuing Partners
  - Adjustment Regarding Goodwill
  - Revaluation of Assets and Liabilities
  - Adjustment Regarding Undistributed Profits and Losses
  - Settlement of Retiring Partner’s Claim
- Adjustment of Remaining Partners Capital Account after Retirement
- Retirement Cum Admission
- Joint Life Policy (JLP)
- Illustrations
- Review Questions
- Exercises
Chapter 19C Reconstitution of Partnership by Death of a Partner
- Introduction
- Death of a Partner
- Mode of Payment
- Other Factors to be Considered in Case of Death of a Partner
- Illustrations
- Review Questions
- Exercises
Chapter 19D Dissolution of Partnership Firm
- Introduction
- Meaning of Dissolution
  - Dissolution of Partnership
  - Dissolution of a Firm
  - Reasons of Dissolution of Partnership Firm
  - Settlement of Accounts
- Accounts for Dissolution
  - Proforma of Realisation Account
- Methods of Problems
  - Preparation of Memorandum of Balance Sheet
  - Voluntary Dissolution and All Partners are Solvent
  - Insolvency of a Partner
  - Piecemeal Distribution of Cash
- Illustrations
- Review Questions
- Exercises
Chapter 20 Tally
- Introduction to Computers
  - What is a Computer?
- History of Computers
- Generation of Computers
  - First Generation
  - Second Generation
  - Third Generation
  - Fourth Generation
  - Fifth Generation
- Advantages of Computers
- Disadvantages of Computers
- Characteristics of Computers
- Areas of Application
- IPO Cycle
- Components of Computer
  - Input Unit
  - Output Unit
  - Central Processing Unit (CPU)
- Hardware and Software
  - Hardware
  - Software
- Operating System
  - Functions of Operating System
  - Classification of Operating System
- Tally – Introduction
  - Fundamentals of Computerized Accounting
- Principles of Accounting
  - Journal
  - Types of Accounts
  - Accounting Rules
  - Ledger
  - Trial Balance
  - Final Accounts
- Computerized Accounting Versus Manual Accounting
- Architecture and Customization of Tally
- Features of Tally
- Starting Tally
  - Configuration of Tally
  - Tally Screens and Menus
  - Gateway of Tally
  - Account Information
  - Company Information
  - Groups
  - Ledgers
  - Display
  - Creation of Company
  - To Delete a Company
  - To Alter a Company
  - Creation of Groups
  - Editing and Deleting Groups
  - Deleting Groups
  - Creation of Ledgers
  - Editing and Deleting of Ledgers
- Introduction to Vouchers
  - Voucher Entry
  - Types of Vouchers
  - Editing and Deleting Vouchers
- Tally – Advanced
  - Introduction to Inventory
- Creation of Stock Group
- Creation of Stock Categories
- Creation of Stock Item
  - To Create Units of Measure
  - To Create Stock Item
- Editing and Deleting Stock
  - To Edit Stock Group
  - To Delete Stock Group
- Configuration and Features of Stock Item
- Usage of Stocks in Voucher Entry
  - To Enter Sales Voucher with Inventory Allocation
  - To Enter Purchase Voucher with Inventory Allocation
- Purchase Orders-Stock Vouchers
  - To Enter Purchase Order
- Sales Order-Stock Voucher
  - To Enter Sales Order
- Introduction to Cost
- Creation of Cost Category
- Creation of Cost Center
- Editing and Deleting Cost Category
  - Editing Cost Category
  - Deleting Cost Category
- Editing and Deleting Cost Center
  - For the Modification of Cost Center
  - For Deletion of Cost Center
- Usage of Cost Category and Cost Center in Voucher Entry
- Budgetary Controls
- Creation of Budgets
  - To Set Budget for Groups
- Editing and Deleting Budgets
  - Editing of Budgets
  - Deletion of Budgets
- Generating and Printing Reports in Detailed and Condensed Format
  - Day Book
  - Balance Sheet
  - Trial Balance
  - Profit and Loss
  - Ratio Analysis
  - Cash/ Fund Flow
  - Cost Center Report
  - Inventory Report
  - Bank Reconciliation Statement
- Introduction to ERP 9
  - What is Tally?
  - Features of Tally
  - Advantages of Tally
- Create Company in Tally
  - How to Create a Company in Tally
- What are Groups in Tally ERP 9?
  - Primary Groups
  - Sub Groups
- How to Create Group in Tally ERP 9
  - How to Create Groups in Tally
- How to Display Group in Tally
- How to Alter Group in Tally ERP 9
- Create Single Ledger in Tally ERP 9
  - How to Create Ledger Account in Tally
- How to Display Single Ledger in Tally
- How to Alter Single ledger in Tally
- Create Multiple Ledgers in Tally
- How to Display Multiple Ledgers in Tally
  - How to Alter Multi Ledgers in Tally
- How to Create Cost Centre in Tally ERP 9
  - Enable Cost Centre in Tally
  - How to Create Cost Centre
- How to Display Single Cost Centre
  - How to Alter Single Cost Centre
- Challenges Associated with Accounting on Computers and Solutions there On
- Software Training to Enhance Employability
  - Tally ERP 9 + GST 2020 Course
  - Training on Tally ERP 9 and latest TallyPrime
- Growth of Tally
  - Tally in Cloud Computing
  - Tally Market Share and Product Suite
  - Tally Global Presence
- Conclusion
- Review Questions
Index

Dr. K. Murugadoss is Head, PG & Research Department of Commerce, Periyar Government Arts College, Cuddalore, Tamil Nadu.

Dr. M. Jaya is Associate Professor and Head, Department of Commerce, Asan Memorial College, Chennai.

Dr. V. Charulatha is Associate Professor and Head, Department of Commerce (Corporate Secretaryship), Asan Memorial College, Chennai.

Dr. D. Baskar, Associate Professor and Head, Department of Commerce (Computer Applications), Asan Memorial College, Chennai.

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