Every rule and format in one place

📒 Ch 1: Introduction to Accounting

• Accounting = identifying, measuring, recording and communicating economic information to interested usersOrder: I → M → R → C. Book-keeping = only the recording part; accounting goes on to summarise, analyse and communicate.
• Users: internal (owners, management, employees) · external (investors, lenders/banks, creditors, government & tax authorities, customers, public)
• Qualitative characteristics: Reliability · Relevance · Understandability · ComparabilityReliable = verifiable, free from bias; Relevant = timely and useful for the decision
• Capital = amount invested by the owner · Drawings = money/goods taken by the owner for personal use
• Assets: non-current (land, building, machinery, furniture; long-term use) and current (cash, bank, stock, debtors, bills receivable; within a year)
• Liabilities: non-current (long-term loan) and current (creditors, bills payable, outstanding expenses)
• Capital expenditure (benefit over many years, e.g. buying machinery) vs revenue expenditure (benefit within the year, e.g. rent, wages)
• Revenue = income from normal business (sales, commission, interest) · Expense = cost of earning revenue · Gain = profit from non-regular activity · Loss = expense with no benefit
• Debtor owes money to the business · Creditor is owed money by the businessPurchases/Sales = goods bought/sold for resale only; Stock (inventory) = unsold goods, valued at cost

🏛️ Ch 2: Theory Base of Accounting

• GAAP = generally accepted rules and guidelines for recording and reporting, so accounts are uniform and comparable
• Business entity: owner and business are separate · Money measurement: record only what can be expressed in money
• Going concern: business will continue for a long time (so assets at cost less depreciation) · Accounting period: accounts for fixed periods, normally 1 April – 31 March
• Cost: assets recorded at purchase price (acquisition cost incl. freight, installation) · Dual aspect: every transaction has two effects → A = L + C
• Revenue recognition: revenue is recorded when earned (goods sold/service given), not when cash is received · Matching: set expenses of a period against revenues of the same period
• Full disclosure: reveal all material facts · Consistency: same methods year after year · Materiality: focus on items that affect decisions
• Conservatism (Prudence): provide for all possible losses, do not anticipate profits (stock at cost or market price, whichever is lower) · Objectivity: based on verifiable evidence (vouchers)
• Systems: double entry (both aspects, complete, reliable) vs single entry (incomplete)Cash basis: record only when cash is received/paid · Accrual basis: record when earned/incurred (NCERT method)
• Accounting Standards (AS) by ICAI · Ind AS = IFRS-converged standards for specified companies
• GST: intra-state → CGST + SGST (half each) · inter-state → IGST (full rate) · UTGST in union territories

⚖️ Ch 3: Recording of Transactions – I

• Assets = Liabilities + Capital

  Capital = Assets − Liabilities · Revenue/profit increases capital · Expenses, losses and drawings decrease capital
• Source documents: cash memo, invoice/bill, receipt, pay-in-slip, cheque, debit note, credit note · Vouchers: cash (debit/credit) vouchers, non-cash (transfer) vouchers, compound vouchers

• Posting: in the debited account write "To + the other account" on the Dr side; in the credited account write "By + the other account" on the Cr side
• Balancing: difference written on the smaller side as Balance c/d; next period brought down on the opposite side as Balance b/dReal & personal accounts are balanced and carried forward; nominal accounts are closed to Profit & Loss A/c
• Goods withdrawn by owner / given as charity / lost by fire: credit Purchases A/c (at cost)
• GST set-off: Input IGST → IGST, then CGST, then SGST · Input CGST → CGST, then IGST · Input SGST → SGST, then IGSTCGST credit is never used against SGST, nor SGST against CGST. Net payable = Output − Input

💵 Ch 4: Recording of Transactions – II

• Cash book = book of original entry + ledger (works as Cash A/c and Bank A/c); balance: cash never Cr, bank Cr balance = overdraft

• Contra entry: cash deposited into bank / cash withdrawn from bank; both sides of the cash book, mark C in L.F., not posted to the ledger
• Cheque received → Dr bank column (or cash column if not deposited the same day) · Cheque dishonoured → Cr bank column in the customer's name · Bank charges → Cr bank column
• Petty cash (imprest system): fixed amount given at the start; amount reimbursed = amount spent; balance restored to the imprestAnalytical petty cash book: separate columns for postage, stationery, cartage, conveyance, sundries
• Special books: Purchases book (credit purchases of goods only) · Purchases return book (debit notes) · Sales book (credit sales of goods only) · Sales return book (credit notes)Cash purchases/sales go to the cash book; credit purchase of assets goes to the journal proper
• Debit note is sent by the buyer when returning goods · Credit note is sent by the seller when accepting returned goods
• Journal proper: opening entries, closing entries, adjusting entries, rectifying entries, transfer entries, credit purchase/sale of assets, goods withdrawn by owner, loss by fire/theft, discount allowed/received on settlement

🏦 Ch 5: Bank Reconciliation Statement

• BRS = statement that explains the difference between the bank column of the cash book and the passbook/bank statement on a date
• Cash book Dr balance = favourable = passbook Cr balance · Cash book Cr balance = overdraft = passbook Dr balance
• Causes: timing differences (cheques issued not presented, cheques deposited not collected, bank charges, direct deposits, interest/dividend collected, standing-instruction payments, dishonoured cheques) and errors by the firm or the bank

• Logic: ask "because of this item, is the other balance more or less?" More → add; less → subtract
• Overdraft as starting point: write the overdraft as a minus figure and use the same table (easiest). If you keep the overdraft as a plus figure instead, every sign in the table is reversed.
• Adjusted (amended) cash book: first correct items not yet in the cash book (bank charges, direct deposits, interest, dishonour, cash-book errors); then BRS shows only items not yet in the passbook

🔍 Ch 6: Trial Balance and Rectification of Errors

• Trial balance = list of all ledger balances on a date; Dr total = Cr totalObjectives: check arithmetical accuracy, help locate errors, help prepare financial statements. Methods: totals, balances (most common), totals-cum-balances
• Debit balances: assets, expenses, losses, drawings, purchases, sales return · Credit balances: liabilities, capital, revenues, gains, sales, purchases return
• Tallying ≠ error-free: errors of principle, complete omission, compensating errors and wrong-account postings on the correct side do not disturb totals

• Rectification idea: (entry that should have been) − (entry that was made) = rectifying entry; cancel the wrong, put the right
• One-sided error (affects only one account) → rectified with Suspense A/c · Two-sided error → rectified by a normal journal entry between the two accounts
• Suspense A/c: TB Dr side short → Suspense shown on Dr side; Cr side short → on Cr sideAfter all one-sided errors are rectified, Suspense A/c closes automatically (zero balance)
• Next-year rectification: nominal accounts wrongly affected last year → use Profit & Loss Adjustment A/c

📉 Ch 7: Depreciation, Provisions and Reserves

• Depreciation = systematic allocation of the depreciable amount of a fixed asset over its useful life; a non-cash charge against profitDepletion = natural resources (mines, oil wells) · Amortisation = intangible assets (patents, copyright, goodwill)
• Causes: wear and tear · expiry of legal rights · obsolescence · abnormal factors (accident, fire) · Factors: cost, estimated net residual value, depreciable cost, useful life
• SLM: Depreciation = Cost of asset − Net residual valueUseful lifeSame amount every year. Rate = Annual depreciationAcquisition cost × 100. Cost ₹2,00,000, scrap ₹20,000, life 6 yrs → ₹30,000 a year, rate 15%
• WDV: Depreciation = Opening book value × rate; rate R = [1 − ⁿ√sc] × 100 (s = scrap value, c = cost, n = life)Falling amount each year; value never reaches zero. ₹1,00,000 @ 20%: 20,000 → 16,000 → 12,800
• Asset bought during the year: depreciation only for the months used (months12)
• Method 1 (charge to asset A/c): Depreciation A/c Dr. / To Asset A/c · Method 2: Depreciation A/c Dr. / To Provision for Depreciation A/c (asset stays at cost)
• Sale of asset: Profit/Loss = Sale value − Book value on date of sale · Asset Disposal A/c collects cost, accumulated depreciation and sale proceeds; balance = profit or loss

• Reserves: general (free) vs specific (dividend equalisation, workmen compensation fund, investment fluctuation fund, debenture redemption reserve) · revenue vs capital reserve (from capital profits, e.g. premium on shares, profit on sale of fixed assets)
• Secret reserve: hidden reserve created by understating assets or overstating liabilities (e.g. excess depreciation)