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Financial Accounting 10+1 NCERT E-Book, English


cover pic financial accounting I

Prelims :

Chapter 1: Introduction to Accounting

Over the centuries, accounting has remained confined to the financial record-keeping functions of the accountant. But, today’s rapidly changing business environment has forced the accountants to reassess their roles and functions both within the organisation and the society. The role of an accountant has now shifted from that of a mere recorder of transactions to that of the member providing relevant information to the decision-making team.


Chapter 2: Theory Base of Accounting:

As discussed in the previous chapter, accounting is concerned with the recording, classifying and summarising of financial transactions and events and interpreting the results thereof. It aims at providing information about the financial performance of a firm to its various users such as owners, managers employees, investors, creditors, suppliers of goods and services and tax authorities and help them in taking important decisions. The investors, for example, may be interested in knowing the extent of profit or loss earned by the firm during a given period and compare it with the performance of other similar enterprises. The suppliers of credit, say a banker, may, in addition, be interested in liquidity position of the enterprise. All these people look forward to accounting for appropriate, useful  and reliable information.


Chapter 3: Recording of Transactions-I:


In chapter 1 and 2, while explaining the development and importance of accounting as a source of disseminating the financial information along with the discussion on basic accounting concepts that guide the recording of business transactions, it has been indicated that accounting involves a process of identifying and analysing the business transactions, recording them, classifying and summarising their effects and finally communicating it to the interested users of accounting information.




Chapter 4: Recording of Transactions-II:


In chapter 3, you learnt that all the business transactions are first recorded in the journal and then they are posted in the ledger accounts. A small business may be able to record all its transactions in one book only, i.e., the journal. But as the business expands and the number of transactions becomes large, it may become cumbersome to jour-nalise each transaction. For quick, efficient and accurate recording of business transactions, Journal is sub-divided into special journals. Many of the business transactions are repetitive in nature. They can be easily recorded in special journals, each meant for recording all the transactions of a similar nature. For example, all cash transactions may be recorded in one book, all credit sales transactions in another book and all credit purchases transactions in yet another book and so on. These special journals are also called daybooks or subsidiary books. Transactions that cannot be recorded in any special journal are recorded in journal called the Journal Proper. Special journals prove economical and make division of labour possible in accounting work. In this chapter we will discuss the following special purpose books:


Chapter 5: Bank Reconciliation Statement:


In chapter 4, you have learnt that the business organisations keep a record of their cash and bank transactions in a cash book. The cash book also serves the purpose of both the cash account and the bank account and shows the balance of both at the end of the period. Once the cash book has been balanced, it is usual to check its details with the records of the firm’s bank transactions as recorded by the bank. To enable this check, the cashier needs to ensure that the cash book is completely up to date and a recent bank statement (or a bank passbook) has been obtained from the bank. A bank statement or a bank passbook is a copy of a bank account as shown by the bank records. This enable the bank customers to check their funds in the bank regularly and update their own records of transactions that have occurred.




Chapter 6: Trial Balance and Rectification of Errors:

In the earlier chapters, you have learnt about the basic principles of accounting that for every debit there will be an equal credit. It implies that if the sum of all debits equals the sum of all credits, it is presumed that the posting to the ledger in terms of debit and credit amounts is accurate. The trial balance is a tool for verifying the correctness of debit and credit amounts. It is an arithmetical  check under the double entry system which verifies that both aspects of every transaction have been recorded accurately. This chapter explains the meaning and process of preparation of trial balance and the types of errors and their rectification.


Chapter 7: Depreciation, Provisions and Reserves:


Matching principle requires that the revenue of a given period is matched against the expenses for the same period. This ensures ascertainment of the correct amount of profit or loss. If some cost is incurred whose benefit extend to more than one accounting period, it is not justified to charge the entire cost as expense in the year in which it is incurred. In fact, such a cost must be spread over the periods in which it provides benefits. Depreciation, on fixed assets, which is the main subject matter of the present chapter, deals with such a situation. Further, it may not always be possible to ascertain with certainty the amount of some particular expense. Recall the principle of conservatism (prudence) which requires that instead of ignoring such items of costs, adequate provision must be made and charged against profits of the current period. Moreover, a part of profit may be retained in the business in the form of reserves to provide for growth, expansion or meeting certain specific needs of the business in future. This chapter deals with two distinct topics and hence is being presented in two different sections. First section deals with depreciation and second section deals with provisions and reserves.




Chapter 8: Bill of Exchange:


Goods can be sold or bought for cash or on credit. When goods are sold or bought for cash, payment is received immediately. On the other hand, when goods are sold/bought on credit the payment is deferred to a future date. In such a situation, normally the firm relies on the party to make payment on the due date. But in some cases, to avoid any possibility of delay or default, an instrument of credit is used through which the buyer assures the seller that the payment shall be made according to the agreed conditions. In India, instruments of credit have been in use since timeimmemorial and are popularly known as Hundies.


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  1. Uttam Sharma says:

    very useful thank u so much. keep uploading these kind of useful notes

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