Basic financial accounting for management/ Paresh Shah.

Part I
Fundamentals of Accounting

1. Basic Understanding of Accounting 3
Introduction 3
Bookkeeping 5
Functions of Accounting 6
Objectives of Accounting 6
Users of Accounting Information 7
Limitations of Accounting 8
Kind of Accounting Activities 9
The Cyclical Nature of Business 10
The Accounting Equation 11
Accounting Events and Transactions 12
Accounting Methods 13
Relationship of Accounting with Other Disciplines 13
The Role and Activities of an Accountant 15
Accounting Personnel 16
The Nature of the Accounting Function 20
The Organizational Structure of Accounting and Finance Department 21


2. Balance Sheet 25
Accounting Concepts 25
Balance Sheet 28


3. Income Statement 37
Introduction 37
Accounting Concepts 38
Contents of Income Statement 40
Presentation of Income Statements 42
Relationship between Balance Sheet and Income Statement 43


Part II
Recognition and Types of Transactions

4. Objectively Verifiable Evidence 59
Introduction 59
Receipt 59
Payment Vouchers 63
Custody of Receipt Books 67
Journal Voucher 67


5. Revenue and Expense Recognition 74
Introduction 74
Revenues 74
Expenses 79
Expense Measurement 81
Revenue Expense as Capital Expense 82
Assets as Expenses 82


6. Accounting for Business Transactions 95
Introduction 95
Mechanics of Accounting 96
Voucher System 97
Journal Proper or Books of Original Entry 97
Ledger 102
Relationship Between Books of Original Entry and Ledger 103
The Account 704
Types of Accounts 113
Posting 116
Balancing an Account 117
Trial Balance 117
Errors in Accounting 126
Suspense Account 127
Distinction Between Subsidiary and Principal Books 128


7. Fixed Assets and Depreciation 149
Introduction 149
Acquisition Cost of Fixed Assets 149
Revaluation of Assets 150
Depletion Cost 151
Amortization Cost 152
Depreciation Expenses 152
Depreciation Methods 155
Selection of Depreciation Method 171
Recording Depreciation 171
Depreciation Impact on Profit Measurement 174


8. Inventory Valuation 198
Introduction 198
Objectives of Inventory Measurement 199
Controlling Inventories 199
Costing Inventories or Inventories Pricing 201
Departures From the Cost Concept 206
Valuation of Stock and final Accounts 207
Accounting for Changing Prices 209


9. Average Due Date, Account Current, and Negotiable Instruments 226
Average Due Date 226
Account Current 234
Negotiable Instruments 236

Part III
Preparation of Financial Statements

10. Bank Reconciliation Statement 263
Introduction 263
Meaning and Objective of a Bank Reconciliation Statement 264
Need for the Bank Reconciliation Statement 265
Causes of Difference 265
Preparing a Bank Reconciliation Statement 266


11. Preparation of Financial Statements 285
Introduction 285
Types of Adjusting Entries 285
Closing Entries 291
WorkSheet 293
Cost of Goods Sold 293
Trading Account 296
Profit and Loss Account 298
Balance Sheet 300
Profit and Loss Account and Balance Sheet: The Linkage 304


12. Accounting from Incomplete Records 349
Introduction 349
Difference Between Double-Entry System And Single-Entry System 350
Advantages of Single-entry System 357
Disadvantages of Single-entry System 352
Computation of Profit or Loss 352


Part IV
Analytical Accounting

13. Analysis and Interpretation of Financial Statements 381
Introduction 381
Types of Financial Statements 382
Analysis and Interpretation of Financial Statements 383
Comparative Financial Statements 393
Common Size Statements 399
Trend Analysis 404
Ratio Analysis 408


14. Cash Flow Statement 441
Introduction 441
Cash Flows 441
Format of Cash Flow Statement 443

Part V
Special Topics
15. Legal and Regulatory Framework of Accounting and Auditing 457
Introduction 457
Accounting Standards 457
Limited Liability Companies 458
Corporate Governance 468
Audit 471

16. Company Accounts 485
Introduction 485
Nature of Company 485
Characteristics of a Company 486
Types of Companies 487
Share Capital of a Company 489
Shares of a Company 491
Issue of Shares 493
Employee Stock Option Plan 505
Private Placement of Shares 508
Buyback of Shares 509
Disclosure of Share Capital in Corporate Balance Sheet 510
Debentures 512
Final Accounts 529
Company's Balance Sheet and a Firm's Balance Sheet 529
Form of Profit and Loss Account 530
Form of Preparing a Balance Sheet 530


17. Foreign Exchange Accounting 542
Introduction 542
Exchange Rates And Currency Transactions 543
Translation 545
Accounting Standard 546
Relevant Terms 546
Exchange Gain/Loss 548
Provision For Changes In Exchange Rates 550
Forward Exchange Rate 556
Hedging Transactions 560
Depreciation 562
Translations of Foreign Currency 563
Net Investment in Foreign Equity 564
Foreign Branch Accounts 565