Financial Accounting

BOOKS BY THE SAME AUTHORS AND PUBLISHER

1. A Text Book of Accounting for Management

(Second Edition 2010)
For BCom, MCom, CA, CS, & ICWA Examinations

2. Advanced Accountancy – Vol. I

(Tenth Revised & Enlarged Edition, 2009)
For BCom, MCom, CA, CS, & ICWA Examinations

3. Advanced Accountancy – Vol. II

(Tenth Revised & Enlarged Edition, 2009)
For BCom, MCom, CA, CS, & ICWA Examinations

4. An Introduction to Accountancy
(Tenth Revised & Enlarged Edition, 2009)
For BCom (Pass), ICWA (Intermediate), CAIIB, BBA Examinations

5. Corporate Accounting
(Fifth Revised & Enlarged Edition, 2009)
For BCom, MCom, MBA, CA, CS, & ICWA Examinations

6. Financial Accounting
(Fifth Revised Edition, 2012)
For BCom, BCom(Hons) & CS Foundation Courses

7. Financial Accounting for BBA

(First Edition, 2010)

8. Fundamentals of Accounting for CPT

(Second Revised Edition, 2009)
For Common Proficiency Test of ICAI

9. Problems and Solutions in Advanced Accountancy – Vol. I

(Sixth Revised & Enlarged Edition, 2008)
For BCom, MCom, BCA, MCA, MBA, CA, CS, & ICWA Examinations

10. Problems and Solutions in Advanced Accountancy – Vol. II

(Seventh Revised & Enlarged Edition, 2008)
For BCom, MCom, BCA, MCA, MBA, CA, CS, & ICWA Examinations
 Financial Accounting
For BCom, CA, CS and ICWA (Foundation) Courses

FIFTH EDITION

DIRECTOR GENERAL
DELHI INSTITUTE OF ADVANCED STUDIES, DELHI-110085
Formerly, Principal, Hindu College, Delhi University
Professor & Dean, Faculty of Commerce and Business Management, Goa University

PROFESSOR
DIVISION OF ACCOUNTANCY & LEGAL ENVIRONMENT
MARSHALL UNIVERSITY, USA

FINANCE MANAGER
BAKER HUGHES EHO LTD.
DOHA, QATAR

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Fifth Edition 2012
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Copyright © S N Maheshwari, S K Maheshwari, Sharad K Maheshwari

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Printed at Gajendra Printing Press, Delhi-110032
Dedicated to
Shri R.N. Jaju
Humanist, Laureate and Management Wizard
 PREFACE TO THE FIFTH EDITION

We feel pleased and privileged to place before the esteemed readers the Fifth Revised and Enlarged
Edition of our book “Financial Accounting”. The heartwarming response given by the readers to
each new edition of the book is really a matter of great satisfaction to us.
The new edition, besides maintaining the PLUS features of the Fourth Edition, viz., simplicity of
style, exhaustive text with plenty of illustrative material, variety of questions and problems for self-
study, has certain additional welcome features. These include the following:
The book now meets all the more exhaustively the course-content requirements of the
students preparing for the paper Financial Accounting of BCom & BCom (Hons) of Delhi
University, BCom of other Indian universities and Foundation examinations of the Institute
of Chartered Accountants of India, Institute of Company Secretaries of India, and Institute
of Cost & Works Accountants of India.
Since the publication of the Fourth edition, three important developments regarding the
application and convergence of the Indian Accounting Standards (IASs) with the International
Financial Reporting Standards (IFRS) have taken place. These include the following:
• Issue of 32 Accounting Standards in all, by Institute of Chartered Accountants of India
(ICAI) laying standards for recording, presenting and disclosure of accounting
information.
• Formulation of Road map for convergence of Indian Accounting Standards (IASs) with
International Financial Reporting Standards (IFRSs).
• Notification of 35 Indian Accounting Standards (Ind ASs) by the Ministry of Corporate
Affairs, Govt. of India.
All these developments have been incorporated at appropriate places in the book.
A new chapter ‘Basic Accounting Terms’ has been added to Section I of the book. This will
help the students in familiarizing with the terminology used in accounting.
Brief details of all 32 Accounting Standards issued by the ICAI have been incorporated in
Section 1, Chapter 2, “Accounting Principles”, of the book.
The examination-oriented approach of the book has been further sharpened and enhanced.
The book does not presuppose the knowledge of accountancy to the readers and hence is
bound to make learning of accountancy a painless exercise for the beginners.
We hope with all these additions, adaptations and modifications, the readers will find the revised
edition of the book all the more helpful and rewarding.
Constructive and helpful suggestions for improvement in the book will be gratefully acknowledged.

A-2/156, Paschim Vihar,

New Delhi-110063 Authors
 PREFACE TO THE FIRST EDITION

Accounting is a growing and developing subject, as such accounting concepts, procedures and
techniques are also being constantly reviewed and revised. A clear exposition of these concepts,
procedures and techniques is a must for every student planning a career in accounting or related
field. The Universities and Professional Institutes which prepare young men and women for careers
in business and industry have therefore a solemn duty to perform. Their courses must be constantly
updated so that they meet the growing and dynamic needs of business and industry.
Keeping the above objective in view, the Institute of Chartered Accountants of India (ICAI), The
Institute of Company Secretaries of India (ICSI) and the Delhi University (DU) have restructured
their courses. While the two professional institutes, viz., ICAI and ICSI have introduced One-year
Foundation Course as a pre-professional course, the Delhi University has tried to give a new orientation
to its BCom (Hons) course to make it more acceptable to business and industry. “Accounting” is one
of the core papers at all the above courses. The present book “Financial Accounting” has been
primarily written keeping in view the requirements of the students preparing for these courses.
The book has several distinctive features:
Comprehensively meets the combined requirements of the students appearing at BCom
(Hons) I Yr., CA Foundation and CS Foundation Examinations.
Written in simple and straight style.
Gives a lucid explanation of the basic concepts of accounting with plenty of illustrative
material.
The subject matter has been presented in a manner that even a student who has not studied
Accountancy at ‘10 + 2 level’ can easily understand and have a grasp over the subject.
Incorporates at the end of each chapter:
• objective type questions with short answers to enable the students to test their
understanding,
• essay type questions for review, discussion and practice, and
• practical problems with short answers for practice to develop a sense of confidence
amongst the students.
Provides Learning Objectives at the beginning of each chapter to tell the students what they
will learn after studying the chapter.
Defines Key Terms at the end of each chapter for recapitulation and better grasp over the
subject.
I am confident that with all these PLUS features the readers will find the book extremely useful
and rewarding for them. Their constructive and helpful suggestions for improvement in the book will
be gratefully acknowledged.

A-2/156, Paschim Vihar

New Delhi -110 063 DR S N MAHESHWARI
 SYLLABUS
DELHI UNIVERSITY
BCom Semester I
Financial Accounting

Objective: To make the student familiar with generally accepted accounting principles of financial
accounting and their applications in business organizations excluding corporate entities.
Course Content:
Sl Coverage in the book
No. Topic Section Chapter(s)
1 Unit I: Basic Concepts and Conventions, Accounting Standards:
Meaning, Significance, Generally Accepted Accounting Principles (GAAP) I 1
2 Accounting Process: From recording of transactions to preparation of
final accounts. I 2 to 12
3 Final Accounts of Not-for-profit Organization: From receipts and payments
account with additional information and vice-versa. Preparation of
Balance Sheets (opening and closing) from Receipts and Payments
Account and Income Expenditure Account and additional information. I 16
4 Unit II: Consignments: Features, Accounting treatment in the books of
the consignor and consignee. II 1
5 Joint Ventures: Accounting procedures: Joint Bank Account, Records
maintained by co-venturer of (a) all transactions (b) only his own
transactions. (Memorandum joint venture account) II 2
6 Unit III: Depreciation Accounting: Meaning of depreciation, causes,
objects of providing depreciation, factors affecting depreciation,
accounting treatment including provision for depreciation accounting.
Methods of depreciation: Straight line method, Diminishing balance
method, Change of method as per revised AS-6. I 14
7 Accounting for Hire Purchase Transactions, Journal entries and
Ledger accounts in the books of Hire Vendors and Hire Purchaser
for large value items including default and repossession. II 5
8 Unit IV: Inland Branches: Dependent branches only and Ascertainment
of Profit by Debtors method and Stock and Debtors method. II 6
9 Unit V: Dissolution of Partnership Firms: Legal position, Accounting
for simple dissolution, Applications of rule in case of Garner vs Murray
in case of insolvency of partner(s) (excluding piecemeal distribution and
sale of a firm to a company). III 4
 Financial Accounting

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Author : S.N. Maheshwari,

Publisher : SChand Publications ISBN : 9789325956186 S.K. Maheshwari & Sharad
K. Maheswari

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