Monthly Archives: July 2018

Accounting Standards

Accounting Standards 2018

Accounting Standards

The Institute of Chartered Accountants of India (ICAI) had established an Accounting Standards Board (ASB) in 1977 with the aim of developing accounting standards and issuing guidelines for implementation thereof.

The Following brief gives the various standards issued by the ICAI as on March 2006.

AS1 – Disclosure of Accounting Policies (January 1979)

This standards deals with the disclosure of significant accounting policies followed in preparing and presenting financial statements. Such policies should form part of the financial statements and be disclosed in one place.

AS2 – Valuation of Inventories (June 1981)

This standard deals with the principles of valuing inventories for financial statements. For this purpose inventories include tangible property held for sale in the ordinary course of business, or in the process of production for such sale, or for consumption in the production of goods or services for sale, including maintenance supplies and consumable other than machinery spares.

AS3 – Cash Flow Statements (June 1981, revised in March 1992)

This standard deals with the financial statement that summarizes, for a given period, the sources and applications of funds of an enterprise. It supersedes Accounting Standards(AS) 3, ‘Changes in Financial Position’, issued in June, 1981. The Cash flows are to e classified into three categories viz., operating activities, investing activities and financing activities.

AS4 – Contingencies and Events Occurring after the Balance Sheet Date (November 1982, revised in April 1995)

This standard deals with the treatment of contingencies and events occurring after the balance sheet date. It, however, does not cover contingency situations relating to the liabilities of life insurance and general insurance enterprises arising from policies issued, obligations under the retirement benefit plan and commitments arising from long-term lease contracts.

AS5 – Net Profit or Loss for the Period, Prior Period items and Changes in Accounting Policies (November 1992, revised in February 1997)

This standard deals with the treatment in the financial statements of prior period and extraordinary items and changes in accounting policies. It does not deal with the tax implications of prior period items, extraordinary items and changes in accounting policies and estimates for which appropriate adjustments will have to be made depending on the circumstances. it also does not deal with adjustments arising out of revaluation of assets.

AS6 – Depreciation Accounting (November 1982)

This standard applies to all depreciable assets. It does not apply to assets in the category of forests, plantations and similar natural resources; wasting assets including expenditure on the exploration for natural non-regenerative resources; expenditure on research and development; goodwill and live stock. This also does not apply to land unless it has a limited useful life for the enterprise.

AS7 – Accounting for Construction Contracts (December 1983, revised in April 2003)

This standard deals with accounting for construction contracts in the financial statements of contractors. This contracts may fall into the category of fixed price contracts or cost plus contracts. The Accounting for such contracts may either on the percentage of completion method or completed contract method.

AS8 – Accounting for Research and Development (January 1985)

This standard deals with the treatment of costs of research and development in financial statements. It, however, does not deal with the accounting implications of the following specialised activites; (i) research and development activities conducted for others under an contract; (ii) exploration for oil, gas and mineral deposits; and (iii) research and development activities of enterprises at the construction stage.

AS9 – Revenue Recognition (November 1985)

This standard deals with the basis for recognition of revenue in the statement of profit and loss of an enterprise. It is concerned with the recognition of revenue arising in the course of the ordinary activities of the enterprise from the sale of goods, the rendering of rendering of services and the use by others of enterprise resources yielding interest, royalties and dividends.

AS10 – Accounting for Fixed Assets (November 1985)

This standard deals with fixed assets grouped into various categories such as land, buildings, plant and machinery, vehicles, furniture and fittings, goodwill, patents, trademarks and designs. It does not deal with the specialised aspects of accounting for fixed assets that arise under a comprehensive system reflecting the effects of changing prices but applies to financial statements prepared on historical cost basis. This also does not deal with accounting for following assets. (i) forests, plantations and similar regenerative natural resources; (ii) wasting assets including mineral rights, expenditure on the exploration for and extraction of minerals, oil, natural gas and similar non-regenerative resources; (iii) expenditure on real estate development; and (iv) livestock.

AS11 – The Effects of Changes in Foreign Exchange Rates (August 1991, revised in 2003)

This standard deals with issues relating to accounting for effect of changes in foreign exchange rates. This applies to accounting in foreign cur-rencies and translating the financial statements of foreign branches for inclusion in the financial statements of the enterprise.

AS12 – Accounting for Government Grants (August 1991)

This standard deals with accounting for government grants. Government grants are sometimes called subsidies. cash incentives. duty drawbacks and so on. This standard does not deal with: (i) the special problems arising in accounting for gov-ernment grants in financial statements reflecting. the effects of changing prices or  in supplementary information of a similar nature; (ii) government assistance other than in the form of government grants; and (iii) government participation in the ownership of the enterprise.

AS13 – Accounting for for Investments (September 1993)

This standard deals with accounting for investments in the financial statements of the enterprise and related disclosure requirements. The issues relating to recogni-tion of interest, dividends and rentals earned on investments, operating or finance lease and investment of retirement benefits plans and life insurance enterprise are not within the purview of this standard.

AS14 – Accounting for Amalgamations (October 1994)

This standard deals with the accounting treatment of any resultant goodwill or reserves in amalgamation of companies. This does not apply to the cases of acquisitions where one company purchases the shares in whole or in part of other company in consideration of cash or by issue of shares of other securities (In such a case the entity of acquired company continues).

AS15 – Accounting for Retirement Benefits in the Financial Statements of Employers (January 1995)

This standard deals with accounting for retirement benefits in the financial state-ments of employers. For this purpose, the retirement benefits considered may be in the form of provident fund, superannuation/ pension, gratuity, leave encashment benefits on retirement, post retirement health and welfare scheme and any other retirement benefits.

AS16 – Borrowing Costs (May 2000)

This standard deals with the issues involved relating to capitalisation of interest on borrowing for purchase of fixed assets. It deals with issues related to identifying the assets which qualify for capitalisaciong of interest, the period for which the interest is to be capitalised and the amount of interest that can be capitalised.

AS17 – Segment Reporting (October 2000)

This standard applies to companies which have an annual turnover of Rs.50 crore or more. it requires that the accounting information should be reported on segment basis. The segments may be based on products, services, geographical areas and so on.

AS18 – Related Party Disclosure (October 2000)

This standard requires certain disclosures which must be made for transactions between the enterprise and related party as an enterprise which has a common control with reporting enterprise, associate or joint venture of reporting enterprise, individual having direct/ indirect interest in the voting power of reporting enterprise and any other key personnel. Basically it includes any enterprise or person over which any person having direct/ indirect interest in voting power or key management personnel of the reporting enterprise, is able to exercise significance influence.

AS19 – Leases (January 20001)

This standard deals with the accounting treatment of transactions related to lease agreements. For this purpose, the standard divides the agreements into operating and financing leases.

AS20 – Earnings Per Share (January 2001)

This standard deals with the presentation and computation of Earning Per Share (EPS). The E{S needs to be calculated on consolidated basis as well as for the parent (holding) company while presenting the financial statements of the parent company. Basic as well as diluted EPS must be computed and presented.

AS21 – Consolidated Financial Statements (1-4-2001)

This standard deals with the preparation of consolidated financial statement to provide information about the activities of a group (parent company and companies under its control. referred to as subsidiary companies).

AS22 – Accounting for Taxes on Income (1-4-2001)

This standard deals with the determination of the amount of tax expenses for related revenues. The tax expense will comprise current tax and deferred tax for the purpose of determing the net profit (loss) for the period.

AS23 – Accounting for Investments in associated in Consolidated Financial Statements (July 2001)

This standard deals with the principles and procedures to be followed for recognis-ing, in consolidated financial statements, the effect of the investments in associ-ates, on the financial position and operating results of a group

AS24 – Discontinuing Operations (February 2002)

This standard lays down the principles for reporting information about discontinued operations with an objective to enhance the ability of users of financial statements to make a projection of an enterprise’s cash flows. earning generating capacity and financial position by segregating information about discontinued operations from information about continuing operations.

AS25 – Interim Financial Reporting (February 2002)

This standard deals with the minimum content of interim financial reports and pre-scribes the principles for recognition and measurement in complete or condensed financial statements for an interim period. It does not say anything about the frequency of such reporting.

AS26 – Intangible Assets (February 2002)

This standard prescribes the accounting treatment for intangible assets which are not covered by any other specific accounting standard.

AS27 – Financial Reporting of interests in Joint Ventures (February 2002)

This standard sets principles and procedures for accounting for interests in joint ventures and reporting of joint ventures’ assets, income and expenses in the financial statements of ventures and investors.

AS28 – Impairment of Assets (2004)

This standard sets principles and procedures that an enterprise needs to apply to ensure that its assets are not carried in the balance sheet at an amount higher that their recoverable value.

AS29 – Provisions. Contingent Liabilities and Contingent Assets

The Objective of this standard is to ensure that appropriate recognition criteria and measurement bases are applied to provision and contingent liabilities. and that sufficient information is disclosed in the notes to the financial statements to enable users to understand their nature, timing and amount. The objective is also to lay down appropriate accounting for contingent assets.

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The While Loop

The While Loop

It is often the case in programming that you want to do something a fixed number of times. Perhaps you want calculate gross salaries of ten different persons, or you want to convert temperatures from Centigrade to Fahrenheit for 15 different cities. The while loop is ideally suited for this.

While Loop

while loop2

Let us look at a simple example, which uses a while loop. The flowchart shown below would help you to understand the operation of the while loop.

The program executes all statements after the while 3 times. The logic for calculating the simple interest is written within a pair of braces immediately after the while keyword. These statements form what  is called the ‘body’ of the while loop. The parentheses after the while contain a condition a condition. So long as this condition remains true all statements within the body of the while loop keep getting executed repeatedly. To begin with, the variable count is initialized to 1 and every time the simple interest logic is executed, the value of count is incremented by one. The variable count is many a time called either a ‘loop counter’ or an ‘index variable’

The operation of the while loop is illustrated in the following figure.

while loop flow chart

Tips and Traps

The general form of while is as shown below:


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Loop Control

Loop Control

Loop Control

loop control

(a) The three types of loops available in C are for, while, and do-while.

(b) A break statement takes the execution control out of the loop.

(c) A continue statement skips the execution of the statements after it and takes the control through the next cycle of the loop.

(d) A do-while loop is used to ensure that the statements within the loop are executed at least once.

(e) The ++ operator increments the oprand by 1, whereas, the — operator decrements it by 1.

(f) The operator +=, *=, /=, %= are compound assignment operators. They modify the value of the operand to the left of them.

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Financial Statements

Financial Statements

Financial Statements

A Financial Statement is a periodic report prepared from the accounting records of a company. Financial statements include the profit and loss statement (or income statement), balance sheet and cash flow statement. Financial statements are usually compiled on a quarterly basis or annual basis.

For reporting convenience, the profit and loss account is divided into:

  • Trading account
  • Profit and Loss account

Financial Statements

The Profit and Loss statement can be further classified into:

  • Gross Profit: Gross Profit is arrived at, after considering the core activi-ties of the company. It is expressed as:

Gross Profit = Net Sales – Cost of Sales

  • Net Profit: Net Profit is arrived at, after considering the other administra-tive costs incurred for the period. It is expressed as:

Net Profit = (Gross Profit + Other Income) – (Selling and Administrative Expenses + Depreciation + Interest + Taxes + Other Expenses)


Compilation and Execution

Compilation and Execution

Once you have written the program you need to type it and instruct the machine to execute it. To type your C program you need another program called Editor. Once the program has been typed it needs to be converted to machine language (0s and 1s) before the machine can execute it. To carry out this conversion we need another program called Compiler. Compiler venders provide an Integrated Development Environment (IDE) which consists of an Editor as the Compiler.

Compilation and Execution

There are several such IDEs available in the market targeted towards different operating systems. Details of which IDE to use, how to procure, install and use it are given in Appendix A. please go through this appendix and install the right IDE on your machine before you try rest of the programs in this book.

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Decision Control Statement in C

Decision Control Statement in C

Decision Control statement in C


(a)    There are three ways for taking decisions in a program. First way is to use the if-else statement, second way is to use the conditional operators and third way is to use the switch statement.

(b)   The default scope of if statement is only the next statement. So, to execute more than one statement they must be written in a pair of braces.

(c)    An if block need not always be associated with an else block. However, an else block must always be associated with an if.

(d)   If the outcome of an if-else ladder is only one of two answer then the ladder should be replaced either with an else-if clause or by logical operators.

(e)   && and || are binary operators, whereas,! Is a unary operator.

(f)     In C every test expression is evaluated in terms of zero and non-zero value is considered to be true.

(g)    Assignment statements used with conditional operators must be enclosed within a pair of parenthesis.


Systems of Accounting

Systems of Accounting

There are many ways of classifying the systems of accounting. The most popular ways are.

  • Single entry system
  • Double Entry system

Single Entry System

It is a system of accounting under which only one aspect (Debit or Credit) of the transaction is recorded. It is usually used by small concerns which have very few transactions.

Double Entry System

Int he double entry system of book-keeping, a complete record of both the aspects of every transaction is maintained. It states that every accounting transaction should always be recognised in two accounts, one as debit and the other as credit.

The following chart explains the way in which accounting transaction are recorded in the double entry system and financial statements are prepared.

Systems of Accounting

Most businesses now follow the double entry system of book-keeping. To under-stand and appreciate the advantages of the double entry system, it is necessary to examine the single entry system of book-keeping which is much simpler. In its most basic form, a single entry system is similar to a register and a single line is entered for every transaction. Each transaction is recorded in one column. Each figure is entered as either a positive or a negative in a single column.

The following example illustrates the single entry system.


Date Particulars Amount
April 1 Balance brought forward 20,000
April 3 Rent paid (2,000)
April 7 Goods purchased (10,000)
April 10 Petrol Bill paid (500)
April 12 Goods sold 7,500
April 20 Goods sold 3,000
April 30 Balance carried forward 18,000



Accounting Cycle

Accounting Cycle

The term ‘Accounting Cycle’ refers to the sequence of accounting procedures followed in recording, classifying and summarising business transactions. In starts with identification of business transactions and ends with the adjustment entries for prepaid and outstanding expenses.

The sequence of accounting procedures is as follows.

  1. Identification of transactions.
  2. Preparation or receipt of business documents.
  3. Recording of transactions in books of original entry.
  4. Posting of transactions to ledgers.
  5. Preparation of trial balance.
  6. Preparation of final accounts.
  7. Passing of closing and adjustment entries.

accounting cycle


A transaction is an event or happening that changes an organisation’s financial position and/ or its earnings. For example, when you deposit cash in the bank, your cash balance increases and your stock reduces.

Transactions can be classified as follows:

  • Receipts – Cash or Bank
  • Payments – Cash or Bank
  • Purchases
  • Sales

Recording Transaction

The essential function of accounting is to record transaction to ascertain the financial status of a company as on a particular date.

  • Purchase of goods, either as raw material for further processing or as finished goods for resale.
  • Payment of expenses incurred towards business.
  • Sale of goods or services.
  • Receipts, in cash or by cheque.
  • Other payments, in cash or by cheque.

Types of Accounts

The three types of accounts maintained for transactions with parties are:

  • Real Accounts
  • Personal Acounts
  • Nominal Accounts

Real Accounts are maintained for assets owned or possessed by the business.

Examples include:

  • Buildings
  • Furniture
  • Cash

Personal Accounts are the accounts of persons with whom the business is required to deal with.

Examples include:

  • Suppliers
  • Customers
  • Lenders

Nominal Accounts are accounts where income and expenses are recorded.

Examples include:

  • Sales
  • Rent expenses
  • Salary expenses

Accounts can e broadly classified under the following five groups:

  • Assets
  • Liabilities
  • Capital
  • Revenue
  • Expenses

Assets, liabilities and capital are taken to the balance sheet. Revenue and expenditure accounts are shown in the profit and loss statement.

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