CA fast track notes for Accountancy

Term Explanation
Expenses Accrual Appropriate Exp. A/c Dr.
To Exp. Accrued A/c
Income Accrual Income Accrued A/c Dr.
To Appropriate Income A/c
Advance Income Appropriate Income A/c Dr.
To Advance Income A/c
Advance
Expenses
Prepaid Exp. A/c Dr.
To Appropriate Exp. A/c
Stock in hand Stock of Material A/c Dr.
To Appropriate Exp. A/c
Provision for Bad
Debts
Profit & Loss A/c Dr.
To Provision for bad & doubtful debts A/c
Provision for
Discount
To Provision for discount A/c
Depreciation Depreciation Exp. A/c Dr.
To Fixed Asset A/c
Abnormal Loss Loss by fire A/c Dr.
To Purchase A/c
Goods Sent on
Approval
Sales A/c Dr.
To Sundry Debtors A/c
Stock with customers A/c Dr.
To Trading A/c
Goods used Donation/Drawings/Samples Dr.
To Purchase A/c
Sales Tax Cash/Debtors A/c Dr.
To Sales A/c
To Sales Tax Payable A/c
Sales Tax Payable A/c Dr.
To Bank A/c
Term Explanation
Opening Stock The balance of stock carried forward from last period.
Closing Stock The balance of stock remaining at the end of current period.
Carriage Inwards Incurred to bring the materials to the firm’s godown and make
them available for use.
Drawings The amount withdrawn by the owner out of the business.
Bad Debts Amount due from customer not recoverable.
Balance Sheet A statement which sets out the assets and liabilities of a firm or
an institution as at certain date.
Chartered Accountancy Session 1, Section A
CPT Course Fundamentals of Accounting
Lecture 11 – Final Accounts Part 2 Quick Revision Notes
Important Terns & Concepts
2
Adjustments3Points to be kept in mind
 Personal Expenses & Income should be separated from business Income &
Expenditure.
 Distinction between Capital & Revenue Expenditure and Receipts.
 Manufacturing Account shows the total cost of manufacturing the finished products and
sets out in detail the constituent elements of such cost.
 Trading Account is debited with all expenses incurred in bringing the goods ready for
sale.
 Profit & Loss Account starts with Gross Profit/Loss.
 Profit & Loss Account has on the debit side all the expenses & losses which have not
been entered in the Trading Account.
 Profit & Loss Account has on the credit side all the incomes and gains other than sales
 Balance Sheet is prepared at a particular date, rather the close of a day and not for a
period.
 Balance Sheet is prepared after preparation of Profit & Loss Account.
© ICAI
1

Transaction Accounting Entry
Goods sent on consignment Consignment to ___ A/c Dr.
To Goods sent on consignment A/c
Exp. Incurred by Consignor Consignment to ___ A/c Dr.
To Cash/Bank A/c
Exp. Incurred by Consignee Consignment to ___ A/c Dr.
To Consignee
For Sale done by Consignee Consignee Dr.
To Consignment to ___ A/c
Commission due to
Consignee
Consignment to ___ A/c Dr.
To Consignee
Amount received from
Consignee
Cash/Bank A/c Dr.
To Consignee
For unsold goods on
consignment
Stock on Consignment A/c Dr.
To Consignment to ___ A/c
Transferring profit on
consignment
Consignment to ___ A/c Dr.
To P. & L. A/c
Transferring goods sent on
consignment to Trading A/c
Goods sent on consignment A/c Dr.
To Trading Account
Lecture 12 – Consignment Accounting Quick Revision Notes
Important Terns & Concepts2
Important Concept
1. Valuation of Stock: Stock should be valued at cost or net realizable value whichever is
lower. In case of consignment, cost means:
Cost of Goods to Consignor
+ Exp. incurred till the goods reach the premises of the consignee
2. Goods invoiced above cost: If goods are booked at higher than cost, the effect of
loading must be removed by additional entries.
Additional Entries:
1. Goods sent on Consignment A/c Dr.
To Consignment to ____ A/c
(reversing loading in goods sent on consignment)
2. Consignment to _____ A/c Dr.
To Stock Reserve A/c
(reversing loading in value of closing stock)
3. Abnormal Loss: 1. Find out the cost of the goods lost
2. Pass the entry: P. & L. A/c Dr.
To Consignment to ______ A/c
4. Normal Loss: Spread over the entire consignment
Cost per unit = Total Cost + Expenses incurred / Qty available after normal loss
5. Return of Goods from the consignee: Goods valued at the price at which it was
consigned to consignee
Exp. incurred by the consignee to send those goods back to consignor are not taken into
consideration.
3Points to be kept in mind
 Consignor remains the owner of goods even after sending to consignee.
 Consignor does not send any Invoice rather a Performa invoice.
 The Amount of Sales belongs to Consignor.
 All the exp. are to be borne by Consignor. If borne by consignee, recoverable
from consignor.
 Consignee entitled to Commission.
 Consignee entitled to de-credere commission if he is responsible for bad debts.
 Consignee sends a statement called Account Sales, periodically.
1
Accounting Entries – In the books of consignee
Ignore: 1. Entries for Goods sent on Consignment; 2. Exp. incurred
by Consignor.
Record: 1. Entries for advance sent by consignee to consignor; 2.
Entries for making sales; 3. Exp. incurred by Consignee; 4. Earning
Commission.
4
© ICAI

For Supply of Goods to Joint
Venture out of business
Joint Venture A/c Dr.
To Purchase A/c
For meeting Joint Venture
Exp.
To Bank A/c
Other co-venturer supplies
goods or meets exp.
To Co-venturer A/c
Joint venture sale made by
self
Bank A/c Dr.
To Joint Venture A/c
other co-venturer
Co-venturer Dr.
For Joint –venture profit Joint Venture A/c Dr.
To Profit & Loss A/c (own share)
To Co-venturer A/c (co-venturers’ share)
For Joint –venture loss Profit & Loss A/c Dr. (own share)
Co-venturer A/c Dr. (co-venturers’ share)
Settlement of dues Co-venturer A/c
To Bank A/c
Initial Contribution by Co-
venturer
Joint Bank A/c Dr.
To Co-venturers’ A/c
Exp. Out of Joint Bank
Account
To Joint Bank A/c
Direct Exp. By Co-venturer
for Joint Venture
Sale or Payment received Joint Bank A/c Dr.
Sale or Payment received by
Co-venturer directly
Co-venturers’ A/c Dr.
Profit on Joint Venture Joint Venture A/c Dr.
Loss on Joint Venture Co-venturers’ A/c Dr.
Closing Joint Bank Account Co-venturers’ A/c Dr.
To Joint Bank A/c
For Supply of Goods to Joint
Venture out of business
To Purchase A/c
For meeting Joint Venture
Exp.
To Bank A/c
Other co-venturer supplies
goods or meets exp.
No Entry - Only entered in Memorandum
Joint Venture Account
self
Bank A/c Dr.
other co-venturer
No Entry - Only entered in Memorandum
Joint Venture Account
For Joint –venture profit Joint Venture A/c Dr.
To Profit & Loss A/c
For Joint –venture loss Profit & Loss A/c Dr.
Settlement of dues Joint Venture A/c Dr.
To Bank A/c
Lecture 13 – Joint Venture Accounting Quick Revision Notes
©ICAI
Accounting Entries – where separate set of books are maintained
1 Accounting Entries – Each Co-venturer keeps record of all
transactions
2
Accoun
ting
Entries
– Each
Co-
venturer
keeps
record of
own
transactio
ns only
3

Accounting Entries
On Receipt of Acceptance of
Bill of Exchange/ Promissory
Note
Bills Receivable A/c Dr.
To Party
On Payment on Due Date Cash A/c Dr.
To Bills Receivable A/c
On Dishonor on Due Date Party Dr.
Discounting Bill of
Exchange/Promissory Note
with Bank
Bank A/c Dr.
Discount A/c Dr.
On Dishonor of Discounted
bill
Party A/c Dr.
To Bank A/c
Dishonor of Bill of
Exchange/Promissory Note
and payment of noting
charges
Party Dr.
To Bank A/c (noting charges)
Lecture 14 – Bills of Exchange Quick Revision Notes
Bills of Exchange
1. A Bill of Exchange must be in writing.
2. It must be dated.
3. It must contain an order to pay a certain sum of money.
4. The money must be payable to a definite person or to his order to the bearer.
5. The draft must be accepted for payment by the party whom the order is made.
1 2
Promissory Note
1. A Promissory Note must be in writing.
2. It must contain a clear promise to pay. Mere acknowledgement of a debt is not
a promissory note.
3. The promise to pay must be unconditional.
4. The promiser or maker must sign the promissory note.
5. The maker must be a certain person.
6. The payee (the person to whom the payment is promised) must also be certain.
7. The sum payable must be certain.
8. Payment must be in legal currency of the country.
9. It should not be made payable to the bearer.
10.It should be properly stamped.
Accommodation Bills
Bills of Exchange used as financing arrangement
One party accepts and sends to other party
Get Bill discounted from Bank
Proceeds divided between the parties according to mutual agreement
Insolvency
Inability of maker to pay his liabilities
Record amount of loss as Bad Debts
3
© ICAI

Lecture 15 – Sale of Goods on
Approval or Return Basis Quick Revision Notes
Accounting Treatment
Sale of Goods on Approval or Return Basis
Casually
Treat as Ordinary
Sale
Frequently
Prepare Sales or
Return Journal
Numerously
Sales or Return Day
Book
Sales or Return
Ledger
1
Goods Causally Sent On Sales or Return
1. At the time of Sending the goods:
Debtor’s A/c Dr. [Invoice price]
To Sales A/c
2. At year end if goods still lying with customer and
time limit not passed:
a) Reverse the original entry
b) Take the stock into account
Stock with Customers on Sale or Return A/c Dr.
To Trading A/c
[Cost or Market Value whichever is less]
2
© ICAI
Goods Frequently Sent On Sales or Return
Prepare ‘Sale or Return Journal/Day Book’
Goods sent on Approval Goods Returned Goods Approved Bal.
1 2 3 4 5 6 7 8 9 10 11 12 13
Date Particulars fl Amt. Date Particulars fl Amt. Date Particulars fl Amt. Amt.
3
Goods Numerously Sent On Sales or Return
Prepare Memorandum Books
Sale or Return Day Book Sale or Return Ledger
4
Journal Entries
1. Goods sent to customers on a sale or return basis
In Memorandum Books:
Customer’s A/c Dr.
To Sale or Return A/c
In General Ledger
----- No Entry -----
2. Goods returned by customers
Sale or Return A/c Dr.
To Customer’s A/c
In General Ledger
----- No Entry -----
3. Goods approved by customers
Sale or Return A/c Dr.
To Customer’s A/c
In General Ledger
Customer’s A/c Dr.
To Sale or Return A/c
4. At year end
----- No Entry -----
In General Ledger
Stock with Customers on Sale or Return A/c Dr.
To Trading A/c [Cost or Net Realizable Value, whichever is less]
5

Lecture 16 – Partnership Accounting Part 1 Quick Revision Notes
Fixed and Fluctuating Capital
Frequent Transactions to Partners’
Capital:
1. Drawings
2. Partners’ Salary
3. Intt. On Capital
4. Intt. On Drawings
5. Share in Profits
1
Fixed Capital
When these transactions are adjusted to Partners’
Current Account and Capital Remains Fixed.
Fluctuating Capital
When these transactions are adjusted directly to
Partners’ Capital Account and balance fluctuates
with these.
2
© ICAI

Method for Goodwill Valuation
1) Average profit basis: Take the Simple or Weighted Average of Past
Profits
Simple Average : If profits show no trend.
Weighted Average : If profits show increasing or decreasing trend, give more weight to
recent profits
2) Super profit basis: Find Excess Profit firm can earn over others
a. Identify Capital Employed
b. Find out the average profit earned
c. Determine normal rate of return
d. Find normal profit by applying normal rate of return on capital employed
e. Find Super Profit i.e. Average Profit – Normal Profit
3) Annuity Method: Present Value of Super Profits
Discount the Super Profits to find our the present value of Super Profits.
4) Capitalization Basis: Difference between Normal Capital Employed
and Actual Capital Employed
a. Determine Normal Rate of return
b. Find out the average profit earned
c. Calculate Capital Employed
d. Find Normal Capital Employed by dividing average profit by normal rate of
return.
e. Find Difference of Actual Capital Employed and Normal Capital Employed
1 Accounting Treatment of Goodwill in case of Admission
of a new partner
If new partner brings own goodwill in cash
“Credit the capital accounts of old partners in sacrificing ratios with cash
brought by new partner”
If new partner does not bring goodwill in cash
“Raise the Goodwill from Capital Accounts of Old Partners in old Profit
Sharing Ratio”
Goodwill A/c Dr. (Amount of Goodwill)
To Old Partners’ Capital A/c (in Old Profit Sharing Ratio)
“Write –off the Goodwill from Capital Accounts of new partners +
remaining partners in new Profit Sharing ratio.”
New + Remaining Partners’ Capital A/c Dr.
(in Old Profit Sharing Ratio)
To Goodwill A/c (Amount of Goodwill)
2
© ICAI

Admission of New Partner1 Accounting Treatment
Any increase in Assets:
Asset A/c Dr.
To Revaluation/P. & L. Adjustment A/c
Any decrease in Assets
Revaluation/P. & L. Adjustment A/c Dr.
To Asset A/c
Any increase in Liabilities
To Liability A/c
Any decrease in Liabilities
Liability A/c Dr.
Any profit accrued not booked
Receivable A/c Dr.
Any losses accrued not booked
To Payable A/c
2a
Accounting Treatment
Transfer balance of Revaluation/Profit & Loss Account to Capital
Accounts :
Partners’ Capital A/c Dr. (If Loss)
Revaluation/P. & L. Adjustment A/c Dr. (If Profit)
To Partners’ Capital A/c
Goodwill Adjustment
- Raise Goodwill in old partners in old PSR
- Write-off in new partners in new PSR
Transfer Reserve in B/S among old partners
Reserve A/c Dr.
To Partners’ Capital A/c
2b
Computation of New Profit Sharing Ratio3
© ICAI

Retirement of Partner
1
Treatment of Joint Life Policy 2
© ICAI

Death of Partner 1
Death of Partner – difference from Retirement
1. Joint Life Policy received at Full Maturity Value rather than
Surrender Value
2. Gain on Joint Life Policy transferred to Capital Accounts
3. Representative of deceased partner is entitled to profit upto date of
death
4. If amount payable to representative of deceased partner not paid
immediately, he is entitled to interest @ 6% or share of profit
earned for the amount due to the deceased partner
2
© ICAI

Void Contract Voidable Contract
Definition A contract which ceases to be enforceable by law
becomes VOID when it ceases to be enforceable
Enforceable by law at the option of one or more
parties, but nor at the option of other
Nature Valid when it is made but subsequently
becomes unenforceable
Voidable at the option of the aggrieved party and
remains valid until rescinded by him
Rights Does not provide any legal remedy for the
parties to the contract
Aggrieved party gets a right to rescind the contract
Chartered Accountancy
CPT Course
Lecture
What is Contract ?
An Agreement enforceable by Law [Section 2(h)]
Agreement:
“Every promise and every set of promises, forming the consideration
for each other” [Section 2(e)]
“When the person to whom the proposal is made signifies his assent
thereto, the proposal is said to be accepted. Proposal when accepted,
becomes a promise” [Section 2(b)]
Enforceable by Law:
“All agreements are contracts if they are made by the free consent of
parties competent to contract, for a lawful consideration and with a
lawful object, and are not hereby expressly declared to be void”
[Section 10]
© ICAI
Voidable Contract
Enforceable by law at the option of one or more
parties, but nor at the option of other
Voidable at the option of the aggrieved party and
remains valid until rescinded by him
Aggrieved party gets a right to rescind the contract
Chartered Accountancy
CPT Course
Lecture 1 – Nature of Contract Quick Revision Notes
“When the person to whom the proposal is made signifies his assent
nt of
1
3
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Void Contract Illegal Contract
Scope It may not be illegal Its is always Void
Effect on
collateral
transaction
Collateral transactions to
the agreement may be
enforced for execution
Collateral transactions to the
agreement also become illegal
and cannot be enforced
Punishment No punishment for
entering
Punishment for entering
4
Session 1, Section B
Mercantile Law
Quick Revision Notes
2
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Illegal Contract
is always Void
Collateral transactions to the
agreement also become illegal
and cannot be enforced
Punishment for entering

Lecture 22 – Company Accounts – Forfeiture Quick Revision Notes
Accounting Entries for Calls in Arrears
Calls-in-arrears A/c Dr.
To Share Allotment A/c
To Share Calls A/c
Accounting Entries for Calls in Advance
Bank A/c Dr.
To Call-in-Advance A/c
1
Accounting Entries for Forfeiture of Shares
Shares originally issued at par
Share Capital A/c Dr. (Total amount called up on forfeited shares)
To Forfeited Shares A/c (Total amount already received on forfeited shares)
To Share Allotment A/c (Amount due not paid)
To Share First Call A/c (Amount due not paid)
To Share Final Call A/c (Amount due not paid)
To Calls in Arrear A/c (Amount due not paid)
Shares originally issued at Discount
To Discount on issue of Share A/c (Discount on forfeited shares)
To Calls in Arrear A/c (Amount due not paid)
To Discount on issue of Share A/c (Discount on forfeited shares)
Shares originally issued at premium - If Premium due but not received
Security Premium A/c Dr. (Premium called but not paid)
2
Accounting Entries for Re-issue
Bank A/c Dr. (Amount Received)
Forfeited Shares A/c Dr. (Loss on re-issue)
To Share Capital A/c
Forfeited Shares A/c Dr. (Profit on forfeiture
To Capital Reserve A/c and re-issue
transferred to
Capital account)
3
© ICAI

Lecture 23 – Company Accounts – Redemption Quick Revision Notes
Accounting Entries -Redemption by Fresh
Issue of Shares
Fresh Issue:
Bank A/c Dr.
To Securities Premium A/c (Premium if any)
Bank A/c Dr.
Discount on issue of Shares A/c Dr.
(Discount if any)
Redemption at par
Redeemable Preference Share Capital A/c Dr.
To Preference Shareholders A/c
Redemption at Premium
Premium on Redemption of Preference Share Capital
A/c Dr.
Payment to Preference Shareholders
Preference Shareholders A/c Dr.
To Bank A/c
Adjustment of premium on redemption
Profit and Loss A/c Dr.
Security Premium A/c Dr.
To Premium on redemption of Preference Share A/c
1
2
Accounting Entries -Redemption by
Profits
Shares are redeemed at par:
Shares are redeemed at a premium
Premium on Redemption of Preference Share A/c r.
Payment made to preference shareholders
Preference Shareholders A/c Dr.
To Bank A/c
Adjustment of premium on redemption
Securities Premium A/c Dr.
To Premium on Redemption of Preference
Shares A/c
Transfer to Capital Redemption Reserve Account
General Reserve A/c Dr.
To Capital Redemption Reserve A/c
3
© ICAI

Lecture 24 – Issue of Debenture Quick Revision Notes
Accounting Entries - Issued at par &
Redeemable at par or discount
Receipt of Application Money
Bank A/c Dr.
To Debenture Application A/c
Transfer of Application Money to Debenture Account
Debenture Application A/c Dr.
To …..% Debenture A/c
Accounting Entries – Issued at discount &
Bank A/c Dr.
Discount on issue of debenture A/c Dr
Accounting Entries – Issued at premium &
Bank A/c Dr.
To Security Premium A/c
1
Accounting Entries – Issued at par &
Redeemable at premium
Bank A/c Dr.
Transfer of Application Money
To ____ % Debenture A/c
Call made consequent allotment
Debenture Allotment A/c Dr.
Loss on issue of debenture A/c Dr.
(Premium on redemption)
To Debenture redemption premium A/c
Accounting Entries – Issued at discount
& Redeemable at premium
Bank A/c Dr.
Discount/Loss on issue of debenture A/c Dr.
(Discount on issue + Premium on redemption)
Accounting Entries – Issued at premium
& Redeemable at premium
Bank A/c Dr.
Loss on issue of debenture A/c Dr.
(Premium on redemption)
To Debenture Premium A/c
Treatment of Discount on issue of Debentures
Redeemable after certain period of time - Written-off equally
throughout life of debentures
Redeemable at Different dates-Total amount written-off in
the ratio of benefit derived from debenture loan (sum of the
year’s digit method)
Irredeemable Debentures-Written-off gradually over a long
period
2
© ICAI

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