“ ay ax kw HEE et 3 QSet ae * stomibie Bru sation ae te so 2 ama CAPTAL EXPENDITURE (CAPEX| AND OPERATING EXPENDITURE (OPEN) | Th expend nc n erento cents evening prrstngcpey arrow ss CAPE hich nce prchaerimorevernt dio af ry len tr srt ich t and eq arising, chide Operating expenditure/OPEX/Revenue expenditures are referred to the expenditure incurred by an organisation to manage tide tn et hihi a cet din ep, | REVENUE EXPENDITURE TO BE AS CAPITAL EXPENDITURE|CAPEN): Revenue expenditures may acquire the talus of capital expeniturein the following scenarios: | 1 Leal expenses: Legal expenses such us epistration charges, stamp dy, brokerage extra incur to be treated as cit expenditure and therfore added tothe coe of land and buling/ iat. 2. Wages/ installation charges paid forthe ntalaton ofa machinery, wages paid fer the construction ofa bridge building extra shouldbe treated a apa expenditure, 5. Cort af transport forthe delivery ofa machine tothe busines premicesistobetrestd at capital expenditure 4. Raw material coneumedin the manufacture of fed ste tobe treated at CAPEX 5. Repaircharges ncrred onthe second hand machine made operative forthe ist time is be added tothe cost ofan asset has CAPEK. DEFERRED REVENUE EXPEWOITURE: | Tare are certin expenditures whch may bein the nature of revenue, bt the benefit may net be consumedin the yerin which such expenditure nave been incurred, ater the benefit ay extend a numberof ears are termed as defered at deferred revenue expenditure or example a business spent Rs. 5 lakhs fr advertisement ands estimated that he benefit rom that expenditure will pread over thane 5 years. Therefor the amount spetis divided by the number of yeas that is, 50 kbs /5 0 lak. Therefor 10 lls willbe debited to proft and loss account and balance 40 athe willbe shown inthe E balance sheet as deferred revene exenditure,Coe tet "COs (NCHMCT MODEL) 1. Costs incurred to acquire an asset are condition, but cost incurred to keep them in working 1, Capital expenditure, Revenue expenditure b, Revenue expenditure, Revenue expenditure Capital expenditure, Capital expenditure 4. Revenue expenditure, capital expenditare 2. Amount pad as salary cariage rent, thes extra ar tems of Capital expenditure b, Revenue expenditure «Capital and revenue expenditure None ofthe above3 Which of the following is/are example ofcaptal expenditure 2. Fees paid toa lawyer for making the purchase agreement of land b, Overhauling expences for a second hand machinery |. Cartage pad fr bringing a machinery to the factory |e. All ofthe above 4. Allsums spent up tothe point an asset is read for use should be treated as: 2. Capitl expenditure , Revenue expenditure b Deferred revenue expenditure |, None ofthe above et“ = Hine ‘GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) Generally Aecepted Accounting Principles (GAAP) are basic accounting principles and guidelines which an organisation should follow while preparing financial satements. GAAP i classified into: ‘A Accounting concepts and B. Accounting conventions A. Recounting concepts 4. Business entity concept This conceptimplis that abusiness units separate and dstinet from the person who supply the capital tit, 2. Money measurement concept All the financial transactions of «business should be capable of expressed in monetary unt (For example in INR) and fit not possible todo so, it should not be recorded in the books of accounts of a business 3. Accounting period concept ‘According to ths principle, accounting process should be completed within a financial year and every financial transaction which relates to particular financial year will form apart of financial statements. 4. Histore cost eoncept ‘An assets recorded inthe books atthe price pad to acquire it and market value is ignored, 5. Going concern concept ‘According to this concept business wil continue to operate for an indefinite future period of time,6. Matching concept This concept requires thatthe sales/revenues fr afinanclal year tobe matched with is corresponding, expenditure so as to show the true profit for that perio. 7, Dual epect concept There must be a double entry to complete the complete the record of business transaction thats every debit must have a corresponding crit. 8. Acountng conventions 1. Convention of consistency » According to thi principe, acounting ple should net change frm one year to another 2. Convention of fll disclosure Fall disclosure ofl sgiticant should be made in the form of footnotes 3. Convention of conservatism Thee of this convention in accountng is to anticipate any profit bt provide for allosses and therefore closing stock valued at costar market price whichever I lower, 4. Convention of materiality Meterality depends on the amount involved Inthe transactlon. For example only ound figures shouldbe shown inthe financial statementTo Are yea 5 oe Se Tuco (NenNcT MODEL) (2 GAAP stands for (2) Graal eceptd Accounting Pils (0) Genera Accept ecunting Poles e) Generally Acepted Accounting Principles & (None ofthese 2 Which ofthe accounting principe stats that busines and owner shouldbe treated separate entities. (2) Monetary Unit Assumption (0) mies ty Conca (« PeiyAsumpton (2) ing concar concept 3 contr empanses must ba recorded aha uma tina th revenue ow they corenpondi space by which incl? (0) Matching Prince (9).oing concn Prince (0 coniteney iiple (a) Prudence Pine[ae oo sect Mid yeaa Xs L fg sees Bete 4 Due to which concep, accounting does not record nerfnancil transaction? 2) Going concern concept (+) Money measurement concept & fe) Acrul concept (cos concept 5 As pertheatersal concept of zcountng, any franca or business transaction shouldbe recorded fa] When profs computed [0] When balance sheets prepared fc] when ash ie receved pad (d] When tranecionceursCa ro ‘ Ahad iS ne Bile ap 1 neve Bete [BANK RECONCILIATION STATEMENT (BRS) E Bank gives atrue copy of the depositors’ acount to each of them. The copy of the account of person or an F netuton given by the ban, showing i oer raneatone with the bane know ae bank statement or passbook he format ofa passbook/bank statements en below: Name: Account Number: Date [artes | Debisihrawals) | creds(Dpos) | Balance b ow iis clear that, whenever the businessman debits the bank, the bank credit him and vce vers. fone has @ debit balance, the other will have credit balance and in practice these balances will not be same, In other BS is @ statement, showing the causes of disagreement between passhook bank balance and cash book bank balance on given d Reasons/Causesof disagreement: ® 1. Cheque deposited but not collected bythe bank 2.Cheque issued bur not presented for payment by the customer 3 Direct deposit by customers but not known tothe trader 4.nteest and dividend collected by the bank or payments made by the bank as per standing instruction 5, Bank charges or interest on bank overdraft debited by the bankinthe passbook 6nterest on deposits credited in the passbook 6, Posting or adng or = balancing mistake by the bank or customer.2 >: 5 ee ° = = HE car cen ee anuroe accor mer wer ec i = ’ om Clio i - Stomerine fi Baim 7 YS we ‘ ie Stein ‘MicQs (NcHIACT MODEL) 4 Bank reconciliation statement compares a bank statement (Passbook) with 9} Cash payment journal 1b) Cash receipt journal ) Financial statements 4) Cashbook 2. Bank reconclaton statement s prepared by: 2} Bank Accountant b) Business Manager c) Business Accountant 4) Controller ofthe bank 3. Cesh/ Cheque deposited bythe company i recorded in the bank statement as: a] Credit b) Debit ) Uabiiey 4) Expenses snoEo es 4. Cheque sued bythe company is recorded inthe bank statement a 2) roa 1 debit <)liaity 4) Expenses 5. Bankcharges is record 2) cede Debit )liaitty 4) Expenses in the bank statement as: h LAST LECTURE: ACCOUNTANCY SYLLABUS/PORTION IS OVER. ALL THE BEST FOR FINAL EXAM,