Untitled Quiz

Study Notes

Corporate Accounting

Corporate accounting is the accounting for corporate bodies, primarily focusing on Indian corporations involved in manufacturing, trading, or service activities.

Accounting Concepts and Conventions

Business Entity Concept: A business is treated as a separate entity distinct from its owners, creditors, and others. Transactions are recorded from the business perspective.
Money Measurement Concept: Only transactions expressed in monetary terms are recorded. Non-monetary events (e.g., manager disputes) aren't included.
Accounting Period Concept: Accounts are closed at regular intervals (e.g., annually) to provide periodic reports.
Going Concern Concept: Businesses are assumed to continue operating indefinitely, influencing asset valuations and depreciation calculations.
Dual Aspect Concept: Every transaction has two sides (e.g., receiving an asset requires giving something of equal value).
Revenue Realisation Concept: Revenue is recognized when it's earned, not when cash is received.
Historical Cost Concept: Assets are recorded at their original purchase price, which is used for subsequent accounting.
Matching Concept: Matching revenues with related expenses to determine profits for a period.
Verifiable and Objective Evidence Concept: All transactions must have verifiable supporting evidence.
Convention of Conservatism: Accountants should err on the side of caution, anticipating losses and not recognizing potential gains prematurely. Inventory is valued at the lower of cost or market.
Convention of Full Disclosure: All material information must be disclosed in financial statements, for example, contingent liabilities and market values of investments.
Convention of Consistency: Consistent accounting methods and principles must be followed over time (e.g., depreciation method should not change arbitrarily).
Convention of Materiality: Accountants should focus on significant transactions and ignore minor ones.

Accounting Standards (AS)

AS-1: Disclosure of accounting policies.
AS-2: Valuation of inventories.
AS-3: Changes in financial position.
AS-4: Contingencies and events occurring after the balance sheet date.
AS-5: Prior period and extraordinary items and changes in accounting policies.
AS-6: Depreciation accounting.
AS-7: Accounting for construction contracts.
AS-8: Accounting for research and development.
AS-9: Revenue recognition.
AS-10: Accounting for fixed assets.
AS-11: Accounting for the effects of changes in foreign exchange rates.
AS-12: Accounting for government grants.
AS-13: Accounting for investments.
AS-14: Accounting for amalgamations.
AS-15: Accounting for retirement benefits.
AS-16: Borrowing costs.
AS-17: Segment Reporting.
AS-18: Related Party Disclosure.
AS-19: Leases.
AS-20: Earnings Per Share.
AS-21: Consolidated financial Statements.
AS-22: Accounting for Taxes on Income.
AS-23: Accounting for investments in consolidated financial statements.
AS-24: Discontinuing operations.

Company Types

Statutory companies: Formed by special Acts of Parliament or state legislatures, with limited liability.
Government companies: At least 51% of share capital held by government.
Foreign companies: Incorporated outside India, but operating in India.
Registered companies: Formed by registration under the Companies Act; can be limited by shares, limited by guarantee, or unlimited.
Private limited companies: Shares are generally not publicly traded; maximum 50 members excluding employees.
Public limited companies: Minimum 7 members; shares are traded publicly; minimum paid-up capital.

Company Structure

A company is a voluntary association of people; it's a separate legal entity distinct from its shareholders.
Shareholders contribute finance, but do not manage the entity. A board of directors elected by shareholders does the managing.
Companies have perpetual existence, meaning they continue even if members come and go.
Companies operate via a common seal as artificial legal entities.
Members' liability is usually limited, only to the extent of unpaid shares.
Company shares are freely transferable (with some limitations for private companies).