Maharaja Surajmal Institute Affiliated to GGSIPU Delhi On Course Bachelor of Business Administration Subject Module Financial Accounting Analysis BBA 105 BBA B I 103 Semester I Credit 4 Module Contributor s Dr Shavita Deshwal Dr Seema Shokeen Dr Sumita Kukreja Dr Heramb Nayak Ms Monika Notes for Educational Purposes Only July 2021 1 SYLLABUS BBA G 105 Financial Accounting Analysis BBA B I 103 Financial Accounting Analysis Unit I 14 Hours Meaning and Scope of Accounting Objectives and nature of Accounting Definition and Functions of Accounting Book Keeping and Accounting Interrelationship of Accounting with other Disciplines Branches of Accounting Limitation of Accounting Accounting Principles and Standards Accounting Principles Accounting Concepts and Conventions Meaning and relevance of GAAP Introduction to Accounting Standards Issued by ICAI Unit II Balance Journalizing Transactions Journal entries compound entries Openi ng Ent ry Ledger Posting and Trial Balance Preparation of Ledger Posting Cash Book Sales and Purchase Book and Trial 14 Hours Company Final Accounts Preparation of Final Accounts with adjustments Profit Loss Account Balance Sheet as per Schedule III of new Companies Act 2013 Unit III 14 Hours Depreciation Provisions and Reserves Concept of Deprecation Causes of Depreciation Basic Features of Depreciation Meaning of Depreciation Accounting Objectives of Providing Depreciation Fixation of Depreciation Amount Method of Recording Depreciation Methods of Providing Depreciation Depreciation Policy AS 6 Revised Provisions and Reserves Change of method of Depreciation by both current and retrospective effect Contemporary Issues Challenges in Accounting Human Resource Accounting Green Auditing Inflation Accounting Price Level Accounting Social Responsibility Accounting Unit IV 14 Hours Shares and Share Capital Introduction to Joint Stock Company Shares Share Capital Accounting Entries Under Subscription Oversubscription Calls in Advance Calls in Arrears Issue of Shares at Premium Issue of Shares at Discount Forfeiture of Shares Surrender of Shares Right Shares Issue of Debentures Method of Redemption Redemption Of Debentures Overview Stock Exchange of India and role of SEBI 2 CONTENTS Unit Name Unit No I Meaning and Scope of Accounting Principles Standards Lesson1 Objectives Nature Functions of Accounting Lesson2 Book Keeping Interrelationship Branches of Accounting Lesson 3 Accounting Principles Lesson 4 Concepts and Conventions Lesson 5 Relevance of GAAP Lesson 6 Introduction to Accounting Standards Issued by ICAI II III IV Journalizing Transactions Company Final Account Lesson 1 Journal Entries Lesson 2 Ledger Posting Lesson 3 Trial Balance Lesson 4 Cash Book Sales Book Lesson 5 Sales Book Purchase Book Lesson 6 Final Accounts Depreciation Provisions and Reserves Contemporary Issues Challenges Lesson1 Causes Features Objectives Lesson 2 Method of Recording Depreciation Lesson 3 Provisions and Reserves Lesson 4 Change in method of Depreciation Lesson 5 Human Resource Accounting Green Auditing Inflation Accounting Lesson 6 Price Level Accounting Social Responsibility Accounting Share And Share Capital Lesson1 Accounting Entries Lesson 2 Under Subscription Over Subscription Lesson 3 Call in Advance Calls in Arrears Lesson 4 Issue at Par Premium Discount Lesson 5 Forfeiture Surrender Right Shares Lesson 6 Issue of Debenture Lesson 7 Redemtion of Debenture SEBI Key Words Further Readings Progress Check Multiple Choice Questions Long Answer Questions Page No 4 12 13 40 41 89 90 100 100 100 101 124 3 MEANING AND SCOPE OF ACCOUNTING UNIT I INTRODUCTION Accounting has rightly been termed as the language of the business This unit gives students the necessary background to understand the concept about bookkeeping and accounting It explores the difference between financial accounting and other branches of accounting It explains the general purposes functions and limitations of accounting The second part focuses on generally accepted accounting practices GAAP to acquire conceptual knowledge GAAP aims to make information in financial statements relevant reliable and comparable FINANCIAL ACCOUNTING Financial accountancy or financial accounting is the field of accountancy concerned with the preparation of financial statements for decision makers such as stockholders suppliers banks employees government agencies owners and other stakeholders Financial capital maintenance can be measured in either nominal monetary units or units of constant purchasing power The central need for financial accounting is to reduce the various principal agent problems by measuring and monitoring the agents performance and thereafter reporting the results to interested users FUNCTIONS OF ACCOUNTING 1 Record Keeping 2 Protecting of properties 3 Communication of results 4 Meeting legal requirements NEED FOR ACCOUNTING BRANCHES OF ACCOUNTING 1 Financial accounting 1 Maintain complete and orderly prepared records of economic events 2 net results in terms of profit or loss 3 information to the investors It is the original form of accounting It is mainly confined to the preparation of financial statements for the use of outsiders like creditors banks and financial institutions etc The chief purpose of financial accounting is to calculate profit or loss made by the business 4 during the year and exhibit financial position of the business on a particular date 2 Cost accounting 3 Management accounting Function of cost accounting is to ascertain the cost of the product and to help the management in the control of cost It is accounting for management i e accounting which provides necessary information to the management for discharging its functions It is the reproduction of financial accounts in such a way as will enable the management to take decisions and to control various business activities BOOK KEEPING AND ACCOUNTING In general bookkeeping is the recording of business data in the prescribed manner this is the first phase Much of the work of bookkeeper is of the clerical in nature The sphere of accounting starts where the sphere of bookkeeping ends Accounting is primarily concerned with the design of the system of records the preparation of reports and the interpretation of reports Accountants often direct and review the work of bookkeepers END USER OF ACCOUNTING INFORMATION 1 Owners 2 Management 3 Creditors 4 Employees 5 Government OBJECTIVES OF ACCOUNTING i To keep systematic records Its main objective is
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