Untitled Quiz

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).