AS No.

Title Purpose Key Points

Ensure consistency and

Disclosure of Accounting Disclose significant accounting policies (e.g.,
AS 1 transparency in accounting
Policies depreciation, inventory valuation).
policies.

Value inventory at the lower of cost or net

AS 2 Valuation of Inventories Ensure proper valuation of stock.
realizable value (NRV).

Track and report cash inflows and Classify cash flows into operating, investing,
AS 3 Cash Flow Statements
outflows. and financing activities.

Contingencies and Events Account for events occurring after Adjust or disclose post-balance sheet events
AS 4
After the Balance Sheet Date the reporting date. depending on their impact.

Net Profit or Loss, Prior Period

Standardize reporting of profits, Separate unusual items, disclose prior period
AS 5 Items, and Changes in
errors, and policy changes. adjustments, and explain policy changes.
Accounting Policies

Depreciation Accounting Earlier dealt with depreciation

AS 6 Now covered under AS 10.
(Withdrawn) methods.

Guide revenue recognition for Use the percentage of completion method to

AS 7 Construction Contracts
long-term construction projects. recognize revenue and expenses.

Accounting for Research and

AS 8 Earlier dealt with R&D expenses. Now covered under AS 26.
Development (Withdrawn)

Define when and how to recognize Recognize revenue when the sale is complete
AS 9 Revenue Recognition
revenue. or the service is rendered.

Property, Plant, and Standardize accounting for fixed Fixed assets recorded at cost and depreciated;
AS 10
Equipment assets. revaluation allowed with disclosure.

The Effects of Changes in Account for foreign currency Convert at transaction date rate; revalue
AS 11
Foreign Exchange Rates transactions. monetary items at the closing rate.

Revenue Grants: Recognize in income. Capital

Accounting for Government Guide accounting for grants
AS 12 Grants: Reduce the cost of the asset or show
Grants received from the government.
in a reserve.

Current Investments: Value at lower of cost or

Define treatment for current and
AS 13 Accounting for Investments fair value. Long-Term Investments: Show at
long-term investments.
cost unless impaired.

Guide mergers and acquisitions Use Pooling of Interest for mergers and
AS 14 Accounting for Amalgamations
accounting. Purchase Method for acquisitions.

Recognize short-term and long-term benefits.

Standardize accounting for
AS 15 Employee Benefits Use actuarial valuation for gratuity, pensions,
employee benefits.
etc.

Define treatment of interest on Capitalize borrowing costs directly related to

AS 16 Borrowing Costs
borrowings. asset acquisition; others are expensed.

Report financial results of different Disclose revenue, expenses, and results

AS 17 Segment Reporting
business/geographic segments. separately for each segment.

AS 18 Related Party Disclosures Ensure transparency in Disclose relationships, transactions, and

AS No. Title Purpose Key Points

transactions with related parties. outstanding balances with related parties.

Finance Lease: Record leased assets and

Guide accounting for lease
AS 19 Leases liabilities. Operating Lease: Expense lease
agreements.
payments.

Basic EPS: Net profit/weighted average shares.

Measure profitability per equity
AS 20 Earnings Per Share (EPS) Diluted EPS: Includes potential shares (e.g.,
share.
convertible debentures).

Consolidated Financial Combine financials of a parent and Show assets, liabilities, income, and expenses
AS 21
Statements its subsidiaries. of the group as a whole.

Recognize Deferred Tax Liabilities (DTL) and

Accounting for Taxes on Account for deferred tax due to
AS 22 Deferred Tax Assets (DTA) for timing
Income timing differences.
differences in tax and accounting.

Accounting for Investments in Guide accounting for investments Use Equity Method to record share of
AS 23
Associates with significant influence. profits/losses of associates.

Standardize reporting of closed Disclose details and financial impact of

AS 24 Discontinuing Operations
business units. discontinued operations.

Guide reporting for part-year Provide condensed financial statements for

AS 25 Interim Financial Reporting
periods (e.g., quarterly). shorter periods.

Recognize intangible assets (e.g., patents,

Define accounting for non-physical
AS 26 Intangible Assets goodwill) if future benefits are probable;
assets.
amortize over useful life.

Financial Reporting of Guide accounting for joint Use Proportionate Consolidation for joint
AS 27
Interests in Joint Ventures ventures. venture operations.

Review asset value periodically and write

AS 28 Impairment of Assets Ensure assets are not overvalued.
down if impaired.

Provisions, Contingent
Define treatment for uncertain Recognize provisions for probable outflows.
AS 29 Liabilities, and Contingent
liabilities and gains. Disclose contingent liabilities and assets.
Assets

Guide recognition and Recognize and measure financial

Financial Instruments:
AS 30 measurement of financial assets/liabilities at fair value, amortized cost,
Recognition and Measurement
instruments. or other applicable methods.

Classify instruments as liabilities, equity, or

Financial Instruments: Define presentation of financial
AS 31 both; clarify interest, dividends, and other
Presentation instruments.
returns.

Calculation of Subscription Income for the Current Year

Particulars Amount (₹)

Subscription received during the year (from R&P A/c)

Add: Outstanding subscription (end of the year)

Particulars Amount (₹)

Add: Advance subscription (beginning of the year)

Less: Outstanding subscription (beginning of the year)

Less: Advance subscription (end of the year)

Less: Subscription arrears written off

Net Subscription Income for the Current Year

Comparison: Dissolution of Partnership vs. Dissolution of Firm

Aspect Dissolution of Partnership Dissolution of Firm

Change in the relationship among partners Complete closure of the business and ceasing
Meaning
without ending the business. operations.

Continuation of The business continues with the remaining The business does not continue, and all
Business partners or reconstitution of the partnership. operations are permanently stopped.

- Admission of a new partner - Mutual agreement to close the firm

Cause - Retirement or death of a partner - Insolvency of partners
- Change in profit-sharing ratio - Court order for dissolution

All assets are sold, liabilities are paid, and

Assets and Assets and liabilities remain with the firm and
remaining funds are distributed among
Liabilities are not fully settled.
partners.

Final settlement of all accounts, including

Settlement of Accounts are adjusted but not completely
realization of assets and payment of
Accounts closed.
liabilities.

Legal Entity The firm’s legal entity continues to exist. The legal entity of the firm ceases to exist.

Temporary change or reconstitution of the

Nature Permanent closure of the firm.
partnership.

- A partner retires, and the remaining

- The firm is closed due to heavy losses.
partners continue the business.
Examples - All partners mutually decide to dissolve the
- A new partner joins, altering the
firm.
agreement.

Difference Between Double Entry System and Single-Entry System

Aspect Double Entry System Single Entry System

A system where every transaction affects two A simple system where only one side of a
Meaning accounts: one is debited, and the other is transaction is recorded, often
credited. incomplete.

Accounts Maintained Complete records of all accounts, including Partial records, often focusing only on
Aspect Double Entry System Single Entry System

assets, liabilities, income, and expenses. cash and personal accounts.

More complex and requires proper knowledge Simpler and easier to maintain, but lacks
Complexity
of accounting principles. detailed information.

High accuracy due to the dual effect; the trial Less accurate, as it lacks systematic
Accuracy
balance can detect errors. checks like a trial balance.

Allows preparation of complete financial

Preparation of financial statements is
Financial Statements statements (e.g., Balance Sheet, Profit & Loss
difficult and often involves estimations.
Account).

More reliable, as it provides a full picture of Less reliable due to incomplete

Reliability
the financial position and performance. information and potential for errors.

Suitable for businesses of all sizes, especially Suitable for small businesses or
Users
large and complex organizations. individuals with simple transactions.

Examples of Records mainly cash and credit

Records all types of transactions: cash, credit,
Transactions transactions; adjustments are rarely
adjustments, and more.
Recorded included.

Aspect Capital Expenditure Revenue Expenditure

For acquiring or improving long-term

Purpose For day-to-day operational expenses.
assets.

Nature One-time or infrequent investment. Recurring and ongoing expenses.

Benefits are consumed within the current

Benefit Period Provides benefits over multiple years.
year.

Examples Purchase of machinery, land, or building. Salaries, rent, utility bills, or repair costs.

Accounting Recorded as an asset on the balance Recorded as an expense in the income

Treatment sheet. statement.

Directly reduces the profit for the current

Impact on Profits No direct impact on current year's profit.
year.

Aspect Capital Receipt Revenue Receipt

Non-recurring and linked to long-term Recurring and linked to regular business

Nature
sources. income.

Raised for financing long-term assets or Earned through normal business

Purpose
liabilities. operations.
Aspect Capital Receipt Revenue Receipt

Affects liabilities or assets (e.g., loans increase No significant impact on liabilities or

Impact on Wealth
debt). assets.

Loan proceeds, sale of fixed assets, or equity Sales revenue, rent income, or interest
Examples
infusion. earned.

Accounting Not part of regular income; shown in the Part of the income statement for the
Treatment balance sheet. current year.

Difference between revenue reserve and capital reserve:

Aspect Revenue Reserve Capital Reserve

Generated from the normal business Created from non-operational, exceptional

Source
operations. gains.

To meet future business needs or To cover specific capital-related expenses or

Purpose
contingencies. losses.

Can be used for paying dividends or Cannot be used for dividends or normal
Use
business expansion. business purposes.

Retained earnings, general reserve, or profit Premium on the issue of shares, revaluation
Examples
reserve. surplus.

Accounting Included in the profit and loss appropriation

Not part of the profit and loss statement.
Treatment account.

No impact on profits, comes from capital

Impact on Profits Direct impact, as it comes from profits.
transactions.

Causes of Differences Between Cash Book and Bank Statement

There are several reasons why the balance in the cash book and the bank statement may not match:
1. Deposits in Transit: These are amounts that have been deposited by the business but have not yet been
recorded by the bank.
 o Example: A cheque deposit made by the business at the bank that is not reflected in the bank
statement.
2. Outstanding Cheques: Cheques issued by the business but not yet presented for payment to the bank.
o Example: A cheque given to a supplier that has not yet been cashed or cleared by the bank.

3. Bank Charges and Fees: These are charges deducted by the bank that may not yet be recorded in the
cash book.
o Example: Monthly maintenance charges or transaction fees.

4. Direct Deposits: Payments made directly to the bank (such as customer payments) that are recorded in
the bank statement but not yet entered into the cash book.
5. Errors in Recording: Mistakes either in the bank statement or the cash book (e.g., incorrect entry of
amounts, duplications, or missing transactions).
6. Interest on Bank Balance: If the bank pays interest on the account balance, it may not have been
recorded in the cash book.
7. Bank Drafts: If the business has received or issued a bank draft that is recorded in the bank statement but
not yet in the cash book.