Ind AS is "converged" with IFRS, meaning it is largely based on IFRS but contains certain "Carve-outs" (deviations) to suit Indian economic and legal conditions.

The Going Concern assumption is fundamental to accounting. It implies the entity has neither the intention nor the need to liquidate or curtail materially the scale of its operations. This justifies charging depreciation over useful life rather than liquidation value.

Journal Proper is used for transactions that do not fit into special subsidiary books (like Cash Book, Purchase Book, Sales Book). Credit purchase of fixed assets (Furniture) goes to Journal Proper, whereas credit purchase of Goods goes to Purchase Book.

When you issue a cheque, you deduct it from the Cash Book immediately. However, the Passbook balance remains higher until the cheque is presented. To reconcile (match Passbook), you must add the amount back to the Cash Book balance.

In WDV method, depreciation is calculated on the reducing balance of the asset. Since the book value decreases each year, the depreciation amount also decreases, which matches the higher repair costs in later years.

Any cost incurred to bring a fixed asset to its working condition (like freight, installation, trial run) is capitalized (added to the cost of the asset) and treated as Capital Expenditure.

If the Credit side of Trial Balance is heavier, it means there is a shortage on the Debit side. The Suspense Account will have a Debit balance to balance it. Debit balances (if not expenses) are shown on the Asset side.

The Dual Aspect Concept states that every transaction has two effects: a debit and a credit of equal amount. This forms the basis of Double Entry Bookkeeping and the Accounting Equation.

When a bill is dishonoured, the holder gets it "Noted" by a Notary Public to establish legal proof of presentation and dishonour. This is the first step before "Protesting".

AS 11 prescribes how to account for foreign currency transactions and foreign operations. AS 10 is Property, Plant & Equipment; AS 3 is Cash Flow; AS 9 is Revenue Recognition.

Transactions are first recorded in the Journal (Original Entry), posted to the Ledger (Classification), summarized in the Trial Balance, and finally analyzed in Final Accounts.

A Contra Entry is recorded when cash is deposited into the bank or withdrawn from the bank for office use. It affects both Cash and Bank columns simultaneously on opposite sides.

Start: OD as per Passbook. Cheque deposited means Cash Book balance increased (OD decreased). Passbook hasn't changed yet (High OD). To match Cash Book (target), we must reduce the OD. But wait, logic check: Passbook OD is HIGH. Cashbook OD is LOW (because we assumed deposit). To go from Passbook to Cashbook, we must reduce the OD. "Less" in favorable balance logic means "Add" in Overdraft logic? Let's simplify. PB is -100. CB is -95 (cheque added). Start -100. Target -95. You must Add 5. Correct.

Depreciation does NOT cease when the asset becomes idle. It stops only when the asset's residual value equals its carrying amount, or it is derecognized.

It is revenue in nature (advertising) but the benefit is expected to last for more than one year (new product launch). Hence, it is deferred and written off over 3-5 years. Note: Modern standards (AS 26) are stricter, often forcing this to be expensed immediately, but traditionally in exams, it is Deferred Revenue.

Treating a Capital Expenditure (Machinery) as a Revenue Expenditure (Purchase A/c) violates accounting principles. Hence, Error of Principle.

IFRS are issued by the London-based International Accounting Standards Board (IASB) to provide a common global language for business affairs.

Accrual basis records transactions when they occur (mercantile system), not when cash changes hands. This gives a truer picture of profit/loss.

In the Imprest system, the petty cashier is given a fixed float (Imprest amount) at the beginning. At the end of the period, they are reimbursed the exact amount spent to restore the float to the original level.

As per the Negotiable Instruments Act, 3 days of grace are allowed for bills payable "after date" or "after sight". They are not allowed for "On Demand" bills.

Accounting Equation: Assets = Liabilities + Capital. Therefore, Liabilities = Assets - Capital. 5,00,000 - 3,00,000 = 2,00,000.

Depreciation is for tangible assets. Amortization is for intangible assets. Depletion is for wasting assets (natural resources).

If a transaction is completely omitted (neither debited nor credited), the total debits and credits will still match, so the Trial Balance will tally despite the error.

Consistency ensures that financial statements are comparable over different periods. Frequent changes in methods (e.g., depreciation from SLM to WDV) distort comparison.

This is based on the principle of conservatism (Prudence). You anticipate losses (if NRV < Cost) but do not anticipate gains.

Trade discount is given at the time of sale to encourage bulk buying. Only the net amount (List Price - Trade Discount) is entered in the books. Cash discount, however, is recorded.

For the bank, customer deposits are liabilities (Credit balance). Therefore, a Debit balance in the Passbook means the customer owes money to the bank (Overdraft).

Maintenance is a recurring expense required to keep the asset in working condition. It does not increase the capacity or life of the asset, so it is Revenue Expenditure.

Accounting only records transactions that can be expressed in monetary terms. Crucial qualitative factors that affect business success are often not reflected in the books.

Accommodation bills are not backed by the sale of goods. They are drawn for mutual financial accommodation (to discount and raise money).

Depreciation spreads the "depreciable amount" over the useful life. Depreciable amount is Cost minus Scrap (Salvage) Value.

This is a one-sided error (casting error). The trial balance won't tally, and a Suspense Account is needed to balance it until the error is fixed. The others are two-sided errors.

Under Phase II of Ind AS implementation, unlisted companies with a net worth of ?250 crore or more are required to comply with Ind AS.

Journalizing is recording; Posting is the act of transferring the debit and credit aspects to the respective accounts in the Ledger.

Accounting should focus on information that is "material" (significant) to the user. For example, a calculator bought for office use is expensed immediately rather than depreciated over 5 years because the amount is immaterial.

Errors (Wrong total, Omission, Double entry) are mistakes. "Cheques issued but not presented" is a timing difference because the transaction is correct but recorded at different times by the firm and the bank.

Legal expenses incurred to acquire or defend the title of a fixed asset are capitalized as part of the asset's cost. Legal fees for debt recovery would be Revenue Expenditure.

Endorsement is the act of signing the instrument (usually on the back) for the purpose of negotiation (transferring title).

Book Value = Cost - Accumulated Depreciation = 1,00,000 - 40,000 = ?60,000. Sale Price = ?70,000. Profit = Sale Price - Book Value = 70,000 - 60,000 = ?10,000.

The Accounting Standards Board (ASB) constituted by ICAI formulates Accounting Standards. Ind AS are notified by the Ministry of Corporate Affairs (MCA) based on ICAI recommendations.

Real Accounts relate to assets and properties (Tangible or Intangible). Cash is a tangible asset. Salary is Nominal (Expense). Ram is Personal. Overdraft is Personal (Liability).

Compensating errors occur when one error's effect is nullified by another error (e.g., Overcasting Purchase book by 100 and Sales book by 100). The Trial Balance still tallies.

Cash column represents physical cash in hand. Since you cannot pay out more cash than you have, the cash balance can never be negative (Credit). It is always Debit or Nil.

Direct deposit increases the Passbook balance. The Cash Book balance is lower because the accountant doesn't know yet. To match the Cash Book with the Passbook (Target), we must ADD the amount.

Repairs on a second-hand machine *before* it is put to use are capitalized because they are necessary to bring the asset into working condition.

The Drawer makes the bill; the Drawee (debtor) is the one directed to pay; the Payee receives the money.

Conservatism states: "Anticipate no profit, but provide for all possible losses." Creating a provision for bad debts anticipates a future loss.

Depreciation allocation is based on Cost, Useful Life, and Scrap Value. It is a systematic allocation of cost, not a valuation process based on daily market price changes.

To avoid distorting the current year's profit with last year's errors, nominal account corrections are routed through the P&L Adjustment Account.

Profit belongs to the owner. Therefore, Net Profit is added to the Capital at the end of the year, increasing the owner's equity.

AS 1 requires enterprises to disclose the significant accounting policies followed in preparing and presenting financial statements.

Transactions are recorded chronologically in the Journal first, hence it is the Book of Original Entry. The Ledger is the Book of Final Entry.

Sales Book records only CREDIT sales of GOODS (inventory). Cash sales go to Cash Book. Asset sales go to Journal Proper.

When deposited, Cash Book was increased. Dishonour means Passbook did not increase (or increased and decreased). Since Cash Book is still high, we must Subtract the amount to match Passbook.

SYD = n(n+1)/2. For 3 years, 1+2+3 = 6. Depreciation fractions will be 3/6, 2/6, 1/6.

Installation wages are a Capital Expenditure as they are necessary to bring the asset to use. Hence, they are added to the cost of the Machine.

Noting Charges are paid by the holder initially but are ultimately recoverable from the drawee (who dishonoured the bill).

Revenue is considered realized when the title of goods passes to the buyer, creating a legal obligation to pay. Cash receipt is not necessary.

The Journal Proper is the residual book of original entry used for Opening, Closing, Transfer, and Rectification entries.

Recording in Journal/Subsidiary book but failing to post to Ledger is Partial Omission. It affects the Trial Balance agreement.

According to Accounting Standards (AS 26 / Ind AS 38), research costs are expensed (Revenue) as incurred. Development costs can be capitalized (Capital) only if technical and commercial feasibility is demonstrated.

Under revised standards (Ind AS 8 / AS 10 Revised), a change in depreciation method is considered a "Change in Accounting Estimate" and is applied prospectively (for future periods), not retrospectively.

A wrong credit by the bank increases the Passbook balance. To reconcile the Cash Book with the Passbook (target), we must ADD the amount to the Cash Book balance, even though it is an error.

Monetary items (money held and assets/liabilities to be received/paid in fixed money amounts) must be translated at the Closing Rate. Exchange differences are recognized in P&L.

Retiring a bill under rebate means paying early. The rebate received is a Gain for the drawee (payer), so it is Credited. (For the holder/receiver, it is an Expense/Debit).

Unlike traditional Indian GAAP, Ind AS requires a separate statement detailing the movement in Equity (Share Capital + Other Equity like Reserves) during the year.

Treating a Revenue expense (Repair) as a Capital asset (Machinery) violates accounting principles. Others are Errors of Commission or Omission.

LFAR is a detailed questionnaire-based report covering various aspects of branch operations (Cash, Credit, Forex, Housekeeping). It is a critical tool for the Management and RBI to assess the bank's health.

This concept is the foundation of the Double Entry System. Accounting Equation (Assets = Liabilities + Equity) is derived from this.

Real accounts represent assets. An asset cannot have a negative value. Hence, the Debit side (inflow/value) is always greater than or equal to the Credit side (outflow/sale), resulting in a Debit Balance.

In this method, the Cash Book balance is first updated for items like Bank Charges, Interest, etc., which the bank has already passed. The BRS is then prepared only for timing differences (Cheques issued/deposited).

In this method, the depreciation amount is invested in outside securities. The interest earned and the annual provisions accumulate to provide enough cash to replace the asset when it is scrapped.

This is a tricky one. Legal costs to acquire an asset are Capital. Legal costs to maintain/defend the title of an existing asset are Revenue Expenditure, as they are for maintenance of the asset's status, not improvement.

Insolvency implies inability to pay. When the drawee is declared insolvent, the bill is automatically treated as dishonoured, and the holder can claim the amount (dividend) from the drawee's estate.

Ind AS 16 prescribes the accounting treatment for Property, Plant and Equipment (Fixed Assets), including recognition, measurement, and depreciation.

Since the business and owner are separate entities, the money given by the owner to the business is a claim the owner has on the business, hence a Liability (Internal Liability).

This is a double whammy. Sales Return should decrease Sales (reducing profit). Purchase (Debit) increases Cost (reducing profit). You wrongly increased Cost instead of reducing Sales. Both actions reduce profit. Wait. Sales Return (Debit). Purchase (Debit). You Debited Purchase instead of Sales Return. Debit side of Trading A/c increased by 500 (Purchase) instead of Debit side increasing by 500 (Sales Return). The effect on Gross Profit is... the same? Let's re-evaluate. Correct entry: Debit Sales Return. Wrong entry: Debit Purchase. Both reduce GP by 500. So GP is correct? No, Sales Return reduces Sales. Purchase increases Cost. Both reduce GP. If I debit Purchase for 500, GP reduces by 500. If I debit Sales Return, Sales reduces, GP reduces by 500. So the error has NO effect on GP. Wait, "Posted to debit of Purchase". Sales Return is also a debit. You put a debit in the wrong debit account. Nominal accounts affect profit. Since both accounts reduce profit, the profit remains Understated by 500 (the intended amount). But if you omitted Sales Return AND added Purchase, it's double. Here, you just swapped. So GP is correct. Let's assume the question implies "Sales Return treated as Purchase". Correct effect: -Sales. Wrong effect: +Purchase. Profit = Sales - Purchase. If Sales down 500, Profit down 500. If Purchase up 500, Profit down 500. So the effect is identical. Answer: No effect/Correct? Ah, usually these questions imply "Sales Return Omitted AND Purchase Recorded". If just misposted between two expense/revenue reduction accounts, impact is nil. Let's assume the option "Understated by 1000" is the trap and "No change" isn't there. Let's look closer. Sales Return reduces Sales. Purchase increases Purchases. Both reduce Gross Profit. So if you debit Purchase INSTEAD of Sales Return, you are still reducing GP by 500. So GP is stated correctly (relative to the error). However, if the question means "Sales Return was ignored and Purchase was recorded", then GP is understated by 500 (for the purchase) and overstated by 500 (for missing sales return)? No. Missing sales return means Sales is high -> Profit High. Recording Purchase means Cost High -> Profit Low. Net effect zero. Okay, let's change the question to something clearer. "Sales of 500 recorded as Purchase". Sales (Credit) omitted, Purchase (Debit) recorded. Profit reduces by 500 (Purchase) and reduces by 500 (Missing Sales). Total Understated by 1000. Yes, let's go with "Sales recorded as Purchase".

While PAN is mandatory for many financial transactions (Income Tax purpose), it is technically NOT in the list of 6 OVDs for "Proof of Address" in KYC norms because it does not contain an address.

As per IRAC norms, an asset becomes Non-Performing if it remains overdue for a period of more than 90 days.

For NIFO, assets and liabilities (both monetary and non-monetary) are translated at the Closing Rate because the investment is treated as a net investment. For Integral Operations, non-monetary items use Historical Rate.

Cash basis records transactions only when cash flows. Expenses incurred but not paid (outstanding) are ignored until paid. Accrual basis records them.

Abnormal losses like fire or theft are adjusting entries that don't fit in special journals. Entry: Loss by Fire A/c Dr to Purchase A/c. This goes to Journal Proper.

Bank has reduced the balance (Passbook down). Cash Book is higher. To match Passbook, Subtract from Cash Book.

Useful life is an economic estimate, not necessarily physical life. A computer may work for 10 years (physical) but be useful to a tech company for only 3 years (economic).

If an expenditure increases the future economic benefits (efficiency, capacity, life) beyond the previously assessed standard of performance, it is Capital.

The holder pays the notary initially, but since the dishonour was the drawee's fault, the expense is recoverable from the Drawee.

GAAP refers to a common set of accounting principles, standards, and procedures that companies must follow when compiling their financial statements.

Though the pen is an asset, its cost is immaterial. Tracking its depreciation is not worth the effort. Hence, Materiality allows it to be expensed.

Debit is short. To balance the TB, we need an item on the Debit side. So, Suspense A/c is debited with ?500.

Concurrent audit is a continuous audit aimed at detecting anomalies and irregularities in transactions as they happen (or very soon after), ensuring compliance.

Realization usually occurs when goods are transferred to the buyer, transferring risks and rewards. This creates the legal right to receive payment.

Obsolescence is a functional loss of value. Even if a machine is physically perfect, it may become obsolete if a newer, more efficient machine enters the market.

Debit in Cash Book = Asset (Money we have). Credit in Pass Book = Liability for Bank (Bank owes us money). They are opposite.

As per AS 11, forward contracts should be recorded at inception. The premium/discount is amortized over the life of the contract.

Parts are sent via different routes/mails. As soon as one part is accepted/paid, the others become void. This ensures safety in international trade.

Ind AS 109 covers Financial Instruments: Recognition, Measurement, Impairment (ECL model), and Hedge Accounting.

The shortage of Debit (4500 in Ram) is exactly compensated by the shortage of Credit (4500 in Shyam). The Trial Balance will still agree.

Since calculations are automated, the audit focus shifts to testing the IT controls, parameter settings, and exception reports generated by the system.

Assets are recorded at the price paid to acquire them, not at their changing market values. This ensures objectivity.

Nominal accounts are temporary. They are summarized in the P&L account to determine profit/loss, which is then added to Capital. Real/Personal accounts go to Balance Sheet.

Interest charged increases the Overdraft (making the balance more negative/lower). Cash Book hasn't recorded it, so it shows a better position (higher/less negative).

Profit on sale is an operating gain (or non-operating depending on view, but revenue nature) and is credited to the P&L Account.

These are costs to bring the entity into existence. They are usually capitalized or treated as deferred revenue expenditure and written off over a period.

Blank endorsement converts the bill into a bearer instrument, transferable by delivery alone.

Interest paid is a cost of obtaining finance. Hence, for non-financial firms, it is a Financing Activity. (For banks, it is Operating).

To provide timely information, the indefinite life of a business is cut into smaller periods (typically 12 months) for reporting.

Since P&L for the previous year is closed, any nominal account correction now must go through P&L Adjustment to keep current year P&L pure.

Sometimes entry date and value date differ. For interest calculation, the Value Date is what matters.

RBIA shifts focus from transaction testing to risk process testing. It prioritizes areas with inherent high risk.

If branch A debits Branch B, and Branch B doesn't credit, the money might be siphoned off. Long outstanding entries suggest control failure.

Cash (Asset) comes in (+10,000), and Bank Loan (Liability) is created (+10,000). Equation balances.

Returns Inward (Sales Return) of goods sold on credit are entered here.

Start: Passbook (Lower because payment made). Target: Cash Book (Higher because payment not recorded). To reach Target from Start, we must ADD.

For small items like tools where individual tracking is hard, they are revalued at year-end, and the difference is treated as depreciation.

Expenses to put an old asset into usable condition (First repairs/whitewash) are capitalized. Subsequent whitewashing is Revenue.

Since both benefit from the funds, the cost of funds (discount) is shared in the same proportion as the proceeds.

MCA mandated Ind AS for NBFCs in phases based on net worth, similar to corporates.

Example: In a Finance Lease, the lessee records the asset even though legal title is with the lessor, because in substance/reality, the lessee uses it.

Suspense represents errors. Until found, it remains as a real balance in the Balance Sheet.

Given banks' reliance on CBS, System Audit checks security, data integrity, and IT governance.