BOOK KEEPING

ACCOUNTING

Means the method of recording the business transactions in an order for providing information that may be required to the business in future.

Means recorded information is to be summarised, analysed and submitted in the form of financial results.

ABSORBTION COSTING

MARGINAL COSTING

1. A.C. is the practice of charging all costs both fixed & variable, to operations, processes or products. Variable or fixed cost are treated as product costs in the absorption costing.

2. The stick of finished goods & W.I.P. is valued at total cost, which include both variable & fixed.

3.In A.C. marginal decision-making is based up on profit. Which is the excess of sales value over variable cost. Which is the excess of sales value over variable cost.

In marginal costing, only variable costs are treated as product costs, fixed cost is treated as period cost and is charged to P & L a/c for that period.

In marginal costing such stock are valued at marginal cost i.e. variable cost.

In marginal costing, the managerial decisions are guided by contribution.

JOURNAL

LEDGER

1. Journal in the book of first or original entry. It is also called the book of first entry.

2. When once the entries are posted to ledger the journal looses its importance.

3. In the preparation of final accounts journal is not useful.

4. The authorities generally may not depend on journal.

The ledger is the book of second entry.

It will never loose importance as it is the main book of accounts which is relied upon permanently.

In the preparation of trial balance and final accounts ledger is a must.

In the finalisation of income tax to be paid, the tax authorities depend on ledger.

PROFIT & LOSS A/C

BALANCE SHEET

1.Objective of preparing of p&l a/c to ascertain the net profit /loss of the business during the year.

2. Is an account having debit ad credit, does as such TO and BY are used.

3. Revenue expenditure and incomes are recorded in the P&L a/c.

4.Balancing figure of this account either net profit or net loss.

The objective of preparing balance sheet is to show the financial position of the business on a specific date.

Balance sheet is a statement and balance TP and BY are not used.

Capital incomes and expenditures are shown in the balance sheet.

Balance sheet will not show any balancing figure. A total of liabilities and assets side should always be equal.

JOINT VENTURE

CONSIGNMENT

1.Parties associated are called co- ventures.

2. Capital is contributed by all the ventures.

3.Profit and losses of the joint ventures are shared by all the ventures at agreed ratio.

Parties associated are called consignor and consignee.

Capital is contribution only by consignor.

The consignor receives only commission at a fixed rate & the consignor enjoys all the profits of the consignment.

TRAIL BALANCE

BALANCE SHEET

1. The trail balance is prepared to check the arithmetical accounting of the books of accounts.

2. Trail balance does not show the financial position of the business.

3. The trail balance is prepared based on ledger accounts.

4. The preparation of trail balance is not compulsory.

5. Trail balance can not shown as documentary evidence.

Balance sheet is prepared to know the true position of assets and liabilities on a particular date.

The financial position can be known from balance sheet.

The balance sheet prepared on the base of information from trail balance.

The preparation of balance sheet is must.

But balance sheet will be accepted as a documentary evidence by a tax authorities and courts.

PARTNERSHIP

JOINT VENTURE

1. It is a going concern.

2. It always has a name.

3. Persons carrying a business are called partners.

4. Profits are ascertained at regular intervals i.e. annually.

5. Generally accrual basis of accounting is followed.

It is a terminable venture.

It may not bear a name.

Persons carrying on business are called co- ventures.

The profits are ascertained for each venture separately.

Cash basis of accounting is followed.

COMPANY

PARTNERSHIP

1.Company comes in to existence only when it is registered under the companies act 1956.

2. Membership: Min. Private- 2 members Public – 7 member Max. 50 & no limit.

3. A company on its incorporation enjoys a separate legal entity.

1. In case of company members the liability is limited.

A firm is created by mutual agreement between partners. Registration is optional.

Min. firm : 2 members

Max. banking – 10,

Others- 20.

A firm does not have any separate legal entity.

In case of firms the partners are jointly and severally liable.

DEPOSIT

DEBENTURE

1. Deposits are amounts received by the company from the public.

2. Deposits are short term or middle term financial sources.

3. Deposits are unsecured.

4. It is easy to rise public deposits.

Debenture is a document which acknowledge debt which is issued by company.

Debentures are long term financial sources.

Debentures are generally secured.

Issue of debentures restricted by RBI.

PROMISORY NOTE

BILL OF EXCHANGE

1. In a promissory note there is a promise to pay.

2. In a p.n. there are two parties, i.e., the maker and payee.

3. A Pro. Note can not made payable to the maker himself.

4. The maker a pro.note is primarily.

5. A pro.note is signed by the person liable to pay. So no acceptance is needed.

In a bill there is an order to pay.

In a bill there are 3 parties i.e. Drawer, Drawyee, payee.

In a bill the drawer and payee may be the same.

The maker of a bill is liable only. When the drawee does not accept or pay.

SHARES

DEBENTURES

1. Shares are a part of the capital of the company.

2. Shares holders are members or owners of the company.

3. When recommended by the board dividend could be declared to share holders.

4. Shares do not carry on any charge.

5. Shares have a restrictions issue at a discount.

6. Shareholders have voting rights.

7. Dividend is payable when profits are there.

8. No fixed dividend.

Debentures constitute a loan.

Debenture holders are creditors.

Fixed amount of interest in debentures paid before dividend declaration.

Debentures generally have a charge on the asset of the company.

There are no restrictions to issue at a discount.

They don’t have any voting right.

Interest is payable whether profits are there or not.

Rate of interest is fixed.

SHARES

STOCKS

1. Has a nominal value.

2. May be fully paid or partly paid.

3. Can be transferred in whole numbers and not in fractions.

4. Each and every share shall be of equal denomination.

5. Shares are identifies with distinctive numbers.

6. Can be issued directly to the public.

No nominal value.

Always fully paid.

Can be transferred in fractions also.

May be unequal amounts.

Don’t have any distinctive numbers.

Only fully paid up shares can be converted in to stock and can not be issued directly.

SHARE CERTIFICATE

SHARE WARRANT

1. The holder is a registered member of the company.

2. The holder of a share certificate is a essentially a member.

3. For the issue of share certificate may not required of the central Govt.

4. All companies must issue share certificates.

5. Shares certification issued in partly paid or fully paid.

6. Share certificate is not negotiable.

7. The holder of a share certificate can present a petition for winding up.

The bearer of the share warrant is a not a registered member.

Can be a member if the articles so provided in AOA.(Articles Of Association).

If share warrant is issued, the central Govt. approval is must.

It is only issued by public companies.

Can be issued only fully paid shares.

It is negotiable.

Can not present a petition for winding up.

MEMBER

SHARE HOLDER

1. Name entered in the register of members.

2. Member is also a shareholder.

3. Shares warrant holder is not a member.

Name not entered in the register of members.

Shareholder is a not a member unless name is entered in the register of members.

Shares warrant holder is a shareholder.

PARTNER

DIRECTOR

1. Partner is one of the owners.

2. Partnership is Governed by partnership act 1932.

3. Partner has an unlimited liability.

Director is one of the members of the executive body.

Companies are governed by companies’ act 1956.

Director is generally not liable.

PROVISON

RESERVE

1. Provision is a charge against the profits.

2. Is made for known liability or expenditure.

3. It is used for that purpose only.

4. It shown above the line.

5. Above the line means P&L a/c.

Reserve is an appropriation on profits.

It is made for future unknown liability.

It can be utilised for future purpose.

It shown below the line.

Below the line means P&L appropriation a/c.