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FINANCIAL ACCOUNTING (B.COM)

Module I (Single entry system)

Single Entry System
According to Kohler “a single entry system is a system of book
keeping in which as a rule only records of cash and personal
accounts are maintained. It is always incomplete double entry
varying with circumstances”
Objectives of single-entry system
 To record business transactions.
 To prepare trial balance.
 To know profit or loss.
 To know financial position.
 To open account and to obtain balances.
Features of single-entry system
 It does not follow double entry system.
 It is an incomplete record.
 It is inaccurate and unscientific.
 It is flexible.
 It is suitable to small concern.
 It maintains personal and cash accounts only.
Advantages / Merits of single entry system
1. It is a simple method of accounting.
2. It is less costly.
3. It is highly flexible.
4. It is suitable for small business.
5. It is possible to record transactions quickly
 Limitations / Demerits / Defects of single entry system
1. It is incomplete and inaccurate.
2. It is unscientific and unsystematic.
3. It is not suitable for large business.
4. It is not acceptable to income tax authorities.
5. It is difficult to value goodwill of the business.
6. It is difficult to detect errors and frauds.
Difference between single entry and double entry system
Single entry system Double entry system
One aspect of transaction is Both the aspect of transactions
recorded. are recorded.
It is incomplete and inaccurate. It is complete and accurate.
It is unscientific and It is scientific and systematic.
unsystematic.
It is suitable for small business. It is suitable for all business.
It is less costly. It is costly.
Trial balance cannot be Trial balance can be prepared.
prepared.
Only personal accounts are Personal, real and nominal
maintained. accounts are maintained.
Types of single entry system
 Pure single entry system
Under this system, no subsidiary books are maintained.
Personal accounts of debtors and creditors are maintained.
 Simple single entry system
Under this system, cash book and personal accounts of debtors
and creditors are maintained.
  Quasi single entry system
Under this system, personal accounts, cash books and some
subsidiary books are maintained.
Statement of profit and loss
It is a statement prepared under single entry system in order to
find out amount of opening capital or closing capital of the
business.
Difference between profit and loss account and statement of
profit and loss
Profit and loss A/c Statement of Profit and loss
It is an account. It is a statement.
It is prepared under double It is prepared under single
entry. entry.
It starts with gross profit or It starts with closing capital.
loss.
It shows exact profit or loss. It shows approximate profit or
loss.
It gives reason for earning It does not give reason for
profit or incurring loss. earning profit or incurring
loss.
Statement of affairs
It is a statement of assets and liabilities prepared under single
entry system to ascertain the financial position of the business.
Difference between statement of affairs and balance sheet
Statement of affairs Balance sheet
It is prepared under single It is prepared under double
entry system. entry system.
It is not reliable. It is reliable.
It is prepared by small It is prepared by big business.
business.
It is prepared to find out capital It is prepared to ascertain
and net profit or loss. financial position.
Trial balance is not prepared Trial balance is prepared
before its preparation. before its preparation.
Conversion method
The process of conversion of single entry to double entry is
called conversion method. It makes it complete, accurate and
scientific recording of transactions.
Objective of conversion
 To overcome defect of single entry system.
 To have complete record of transactions.
 To ascertain correct profit or loss.
 To ascertain true and fair financial position.
 To provide reliable accounting information.
 To maintain accuracy of books of accounts.
 To avoid chances of errors and frauds.
Memorandum Trading Account
It is the trading account prepared to find out missing figures
such as opening stock, closing stock, etc. It is not prepared
according to double entry principle.

Module II (Issue of shares)

Company
According to Lord Justice “Company is an artificial person
created by law with a perpetual success and a common seal.”
Characteristics of a company
1. It is a voluntary association of persons.
2. It has a separate legal entity.
3. It has perpetual succession.
4. It is an artificial person created by law.
5. It has a common seal.
6. It is managed by board of directors.
7. Shares are freely transferable.
Share capital
The capital of a company is called share capital.
Share
The share capital of a company is divided in to small and equal
units. Each unit is called a share.
Shareholder
A person who buys a share is called shareholder or member of
the company.
Types of share capital
1. Registered Capital
The capital with which a company is registered is called
registered capital. It is also known as nominal or authorized
capital.
2. Issued Capital
It is a part of authorized capital which is issued to the public for
subscription.
3. Subscribed Capital
It is a part of issued capital which is subscribed by the public.
4. Called up Capital
It is a part of subscribed capital which the directors have called
from the shareholders.
5. Paid up capital
It is a part of called up capital which is actually paid up by the
shareholders.
6. Reserve capital
It is the amount of the capital which is not called by the
company except in the event of winding up.
Difference between reserve capital and capital reserve
Reserve capital Capital Reserve
It is created out of uncalled It is created out of capital
capital. profit.
It is not compulsory. It is compulsory.
It is used only at the time of It is used at any time during
winding up. the life of the company.
It is not disclosed in the It is disclosed in the
balance sheet. balance sheet.
Special resolution is required. No special resolution is
required.
Kinds / Types of shares
1. Equity Share capital
2. Preference Share capital
Equity Share
Shares which are not preference shares are called equity
shares. These are ordinary shares.
Preference shares
Preference shares are those shares which carries preferential
right with respect to payment of dividend and repayment of
capital.
Types of preference shares
1. Cumulative preference share.
2. Non-cumulative preference shares.
3. Participating preference shares.
4. Non-participating preference shares.
5. Convertible preference shares.
6. Non-convertible preference shares.
7. Redeemable preference shares.
8. Irredeemable preference shares.
Difference between equity shares and preference shares
Equity Shares Preference Shares
It is an ownership security. It is a hybrid security.
Dividend rate is not fixed. Dividend rate is fixed.
Nominal value is lower. Nominal value is higher.
Expenses on issue are lower. Expenses on issue are higher.
Dividend is paid last. Dividend is before paying
equity dividend.
Sweat equity shares
Sweat equity shares are those shares issued by the company to
its directors and employees at a discount or for consideration
other than cash for providing know how or making available
rights in the nature of intellectual property rights or value
additions.
Employees Stock Option Scheme (ESOS)
Under this scheme, the company grands an option to the
employees to acquire shares at a future date with
predetermined price.
Objectives of ESOS
1. To develop the feeling of participation among employees.
2. To attract efficient and skilled employees of the company.
3. To motivate efficient and skilled employees of the company.
4. To encourage to serve the company.
5. To provide long term resources to the employees.
Stock
A set of shares put together in a bundle is called stock.
Difference between Shares and Stock
Shares Debentures
It has nominal value It has no nominal value
It has distinctive numbers It has no such number
It is partly or fully paid up It is always fully paid up
It can be issued directly It cannot be issued directly
It transferred in multiple of It transferred in fractions
one
Raising of capital/ Issue of shares
1. Private placement
2. Right issue
3. Public offer
1. Private placement
Private placement is the issue of securities of a company direct
to one investor or small group of investors.
2. Right issue
It is an issue of shares to the existing shareholders in proportion
to their existing shareholding.
3. Public issue
Public issue means selling of shares or securities to public by
issue of prospectus.
Types of public issue
a) Initial public offer (IPO)
This is a method of raising securities in which a company sells
shares or stocks to general public for first time.
b) Offer for sales
In this method shares are offered to public through the
intermediaries.
Procedure for issuing new shares
1. Approval and filing of prospectus.
2. Issue of prospectus.
3. Receiving of application.
4. Scrutiny of application.
5. Sorting of application.
6. Closure of application list.
7. Record of application.
Terms of issue of shares
1. Issue of shares at par
When shares are issued at a price equal to their face value is
called issue of shares at par.
2. Issue of shares at premium
When shares are issued at a price higher than their face value is
called issue of shares at premium.
3. Issue of shares at discount
When shares are issued at a price lower than their face value is
called issue of shares at discount.
Minimum subscription
It is the minimum amount of capital fixed by the directors to be
raised from the members by way of subscription.
Under subscription
Sometimes, the application for shares will be less than the
number of shares issued. This is called under subscription of
shares.
Over subscription
Sometimes, the application for shares will be more than the
number of shares issued, this is called over subscription of
shares.
Calls in arrears
Some shareholders may fail to pay allotment money or call
money. The unpaid allotment or call money is called calls in
arrears.
Calls in advance
Amount received by a company before calls are made is called
calls in advance
Difference between calls in arrears and calls in advance
Calls in arrears Calls in advance
It is the amount called up by It is the amount not called up
the company. by the company.
It shows a debit balance. It shows a credit balance.
It is the amount due to the It is the amount due from the
company from the company to the shareholders.
shareholders.
The maximum rate of interest The maximum rate of interest
is 10% p.a. is 12% p.a.
It is the liability of the It is the liability of the
shareholders. company.
 Forfeiture of shares
It means cancellation of shares due to non-payment of
allotment money or call money within a specified period.
Procedure of forfeiture of shares
1. Memorandum to each defaulter.
2. List of defaulters.
3. Notice to the defaulters.
4. Resolution for forfeitures.
5. Information of forfeitures.
6. Removal of names.
7. Transfer of forfeited amount.
Pro rata allotment
It refers to the allotment of shares in proportion of the shares
applied for.
Annulment of forfeiture
The cancellation of forfeited shares is known as annulment of
forfeiture.
Surrender of shares
The voluntary return of shares to the company by the
shareholder is called surrender of shares.
Difference between and forfeiture and surrender of shares
Forfeiture of shares Surrender of shares
It is made by the company. It is made by the shareholders.
It is carried out by directors. It is depend on the shareholders
will.
When the shareholders fail to Not compulsory.
pay allotment or call money,
then forfeiture compulsory.
The directors forfeit the share The shares are returned to the
of shareholders. company by the shareholders.
Forfeiture rules are mentioned No rules are mentioned in table A.
in table A.
Lien on shares
Lien on shares means that the member would not be permitted
to transfer his shares unless he pays debt to the company.
Security premium reserve
It is the additional amount charged on the face value of any
shares when the shares are issued, redeemed, and forfeited.
Module III (Issue of debentures)
Debenture
Debenture is an acknowledgement of debt issued by a company
under its common seal.
Bond
It is a fixed obligation to pay that is issued by a corporation or
government entity to investors.
Difference between bond and debenture
Bond Debenture
It is issued without It is issued at predetermined
predetermined rate of interest. rate of interest.
It is issued at maximum It is issued at lesser discount.
discount.
Bonds are less risky. Debentures are at high risk.
It is secured by collateral. It is not secured by collateral.
It is mostly issued by It is mostly issued by private
government. companies.
 Charge
It simply refers to mortgage. There are two types of charge-
fixed charge and floating charge.
Nature of debentures
1. It is a debt instrument
2. It represents loan capital
3. It carries fixed rate of interest.
4. It carries no voting right.
5. It is a long-term finance.
6. It is generally secured.
7. It is issued under a common seal of the company.
Difference between shares and debentures
Shares Debentures
Owned capital Borrowed capital
Dividend is paid on shares. Interest is paid on
debentures.
The rate of dividend varies The rate of dividend is fixed.
Unsecured Secured
Shareholder enjoy voting rights Debenture holder has no
voting right
Shareholder is proprietor. Debenture holder is creditor.
Shares cannot be issued at Debentures can be issued at
discount. discount.
Kinds of debentures (Classification)
A. On the basis of registration
Registered Debenture Bearer Debenture
When the name of debenture These debentures do not have
holder is mentioned on the any name on the certificate
debenture certificate is called and are negotiable
registered debenture. instrument.

B. On the basis of security

Secured Debenture
These debentures are secured
by the assets of the company.
Also called mortgage
debenture.
C. On the basis of redemption
Redeemable Debenture
These debentures are
repayable after a fixed period.
D. On the basis of convertibility
Convertible Debenture
These debentures are
convertible into shares within any options to convert into
or after a certain period.
Unsecured Debenture
These debentures are not
secured on any assets. Also
known as naked debentures.
Irredeemable Debenture
These are not redeemable
during the lifetime of the
company.
Non-convertible Debenture
These debentures do not give
shares.

Debentures with Pari passu clause

This means all debentures of a particular series to be paid
ratably and proportionately in case of short fall.
Terms of issue of debentures
1. Issue of debentures at par
When debentures are issued at a price equal to their face value
is called issue of debentures at par.
2. Issue of debentures at premium
When debentures are issued at a price higher than their face
value is called issue of debentures at premium.
3. Issue of debentures at discount
When debentures are issued at a price lower than their face
value is called issue of debentures at discount.
Collateral security
It means additional or secondary security in addition to the
main or principal security.
Redemption of debentures
It simply refers to repayment of debentures to the debenture
holders.
Issue of debentures and conditions of redemption
1. Issued at par and redeemable at par
2. Issued at premium and redeemable at par
3. Issued at discount and redeemable at par
4. Issued at premium and redeemable at premium
5. Issued at premium and redeemable at premium
6. Issued at discount and redeemable at premium

Module IV (Convergence to IFRS)

Accounting Standards (AS)
Accounting standards are certain set of rules and guidelines for
financial reporting.
Role/Objectives of accounting standards
1. To provide information.
2. To harmonize different accounting processes.
3. To enhance the contents.
4. To communicate uniform results.
5. To improve reliability of the financial statement.
6. To facilitate comparison.
Benefits/Advantages of Accounting Standards
1. Credibility and reliability of financial statements.
2. Uniformity.
3. Elimination of ambiguity.
4. Comparison.
5. Determination of managerial accountability.
6. Raises the standard of auditing.
7. Useful to shareholders, investors, researchers etc.
Accounting Standards Board of India (ASB)
The institute of Chartered Accountants of India established
Accounting Standards Board on 21st April 1977 to harmonies
the diverse accounting policies and practices in India.
Objectives and Functions of Accounting Standards Board
 To determine areas in which accounting standards to be
develop.
 To formulate accounting standards.
 To review the accounting standards at regular intervals.
 To provide time to time interpretation and guidance.
 To give clarification on issue arising therefrom.
Need and importance of global accounting standards
1. Development of Multinational Corporation.
2. Growth of international capital market.
3. Legislative requirement.
4. Increasing investors’ confidence.
5. Better analysis of financial data.
6. Ease in listing of securities.
International Accounting Standards
It is a set of internationally agreed principles and procedures
relating to the way that companies present their accounts.
International Accounting Standards Committee (IASC)
It was an independent private sector organization. The IASC
aimed to achieve uniform accounting principles which
businesses and organizations make use of for the purpose of
financial reporting globally.
International Accounting standards Board (IASB)
IASB is an independent accounting standard setting body based
in London. It is committed in developing a single set of high
quality, understandable and enforceable global accounting
standards.
Role of IASB in developing IFRS
 IASB is committed in developing high quality and
understandable global accounting standards.
 Before developing an accounting standard, IASB has to make
a lot of groundwork.
 IASB conduct public hearing at the time of developing
accounting standards.
 IASB issued exposure draft (ED) before developing
accounting standards.
 IASB issues guidance and interpretations on IFRS.
 IASB is playing a vital role in the harmonization of accounting
policies and practices across the global by issuing IFRS.
 IASB has a decisive role of overall economic development of
many nations.
International Financial Reporting standards (IFRS)
IFRS are principles-based standards, interpretations and the
framework adopted by the IASB. Thus IFRS are accounting
standards developed by IASB.
Features of IFRS
1. These are global accounting standards.
2. These are principle based and not ruled-based.
3. IFRS are developed and maintained by IASB.
4. They ensure high quality and transparency.
5. IFRS ensure comparability.
6. IFRS provides uniformity.
Process of setting IFRS
1. Setting the agenda.
2. Planning the project.
3. Developing and publishing discussion paper.
4. Developing and publishing exposure draft.
5. Developing and publishing the standard.
6. Procedures after a standard is issued.
IFRS Adoption / IFRS Convergence
IFRS convergence means accounting standards of a country
converged with IFRS. In short, convergence means to achieve
harmony with IFRS.
Need / Benefits of IFRS Convergence
1. Better access to foreign capital markets and investments.
2. Improved consistency and transparency of financial
reporting.
3. Standardization of accounting and financial reporting.
4. Improved comparability of financial statement.
5. Improved comparability of financial information with global
competitors.
6. Ensure general understanding of best accounting practices.
7. Ensure financial statements reliable and comparable.
IFRS Interpretation Committee (IFRSIC)
This is a committee for IFRS interpretations. The objective of
the committee is developing interpretations for the IFRS issued
by the IASB.
National Financial Reporting Authority (NFRA)
NFRA is an independent regulatory body to assist in the framing
and enforcement of legislation relating to accounting and audit.
Need / Role / Functions of NFRA
1. Monitor and enforce compliances of accounting standards.
2. Monitor and enforce compliances of auditing standards.
3. Formulation of accounting and auditing policies.
4. Oversee the quality of services of the professionals.
5. Suggest measures for improvement in the quality of service.
Standard Interpretation Committee (SIC)
SIC interpretation were previously issued by the standards
interpretation committee, and were subsequently endorsed by
IASB.
Financial Elements
Financial elements simply mean the elements of financial
statement.
Classification / Types of financial Elements:
The five financial elements are
1. Assets
2. Liabilities
3. Equity
4. Revenue
5. Expenses
1. Assets
These are items of economic benefit that are expected to yield
benefits in future periods. Examples are accounts receivable,
inventory, and fixed assets.
2. Liabilities.
These are legally binding obligations payable to another entity
or individual. Examples are accounts payable, taxes payable,
and wages payable.
3. Equity
This is the amount invested in a business by its owners, plus any
remaining retained earnings.
4. Revenue
This is an increase in assets or decrease in liabilities caused by
the provision of services or products to customers. It is a
quantification of the gross activity generated by a business.
Examples are product sales and service sales.
5. Expenses
This is the reduction in value of an asset as it is used to
generate revenue. Examples are interest expense,
compensation expense, and utilities expense.
Indian Accounting Standards (Ind AS)
Ind AS provides principles for recognition, measurement,
treatment, presentation and disclosure of accounting
transactions in financial statements prepared asper Indian
accounting standards.
 Procedure for formulating Accounting Standards (Standard
setting process in India)
1. Determination of areas of accounting standards.
2. Constitution of study group.
3. Dialogue with various representatives.
4. Preparation of exposure drafts.
5. Issuance for circulation.
6. Consideration of views and drafting the standards.
7. Modification of proposed standard.
8. Issuance of accounting standards.
Difference between IFRS and Ind-AS
IFRS Ind-AS
IFRS is based on fair value Ind-As is based on historical cost
concept
IFRS are developed by IASB Ind-As are developed by MCA
IFRS followed by 144 countries Ind-As followed only in India
across the world
Proposed dividend is not required Proposed dividend is required to be
to be reflected in financial reflected in financial statements
statements under IFRS under AS
Under IFRS prior period items will Under As, it is not so
be given retrospective effect in
opening equity
Under IFRS, EPS has to be This is not required under Ind-As
disclosed separately
Provisions made for dismantling Provisions made for dismantling of
of assets can be capitalized assets cannot be capitalized
Financial Accounting Standards Board (FASB)
It is the independent, private sector nonprofit organization
based in Norwalk, USA. It establishes financial reporting
standards for public and private companies.
Functions of FASB
 To establish generally accepted accounting principles within
USA.
 To prepare research projects, public hearing etc.
 To prepare discussion memoranda, comment letters etc.
 To propagate the pronouncement of various government
agencies and professional bodies.
Generally Accepted Accounting Principles (GAAP)
GAAP are commonly followed and accepted set of rules,
procedures and guidelines adopted by security and exchange
commission for reporting financial statements.
Conceptual Framework of IFRS
Conceptual framework means theoretical principles which
provide the basis for the development of accounting standards.
Elements of Conceptual Framework
 Objectives
 Users
 Underlying assumptions.
 Qualitative characteristics.
 Elements of financial statements.
 Concept of capital maintenance.
Recognition of elements of financial statements
Recognition is the process of recording items in the financial
statements.
Recognition Criteria / Principles
• Assets: An asset is recognized in the balance sheet when it is
probable that the future economic benefits will flow to the
entity and the asset has a cost or value that can be measured
reliably.
• Liabilities: A liability is recognized in the balance sheet when
it is probable that an outflow of resources embodying
economic benefits will result from the settlement of a present
obligation and the amount at which the settlement will take
place can be measured reliably.
• Income: Income is recognized in the income statement when
an increase in future economic benefits related to an increase
in an asset or a decrease of a liability has arisen that can be
measured reliably.
• Expenses: Expenses are recognized when a decrease in future
economic benefits related to a decrease in an asset or an
increase of a liability has arisen that can be measured reliably.
Measurement of elements of financial statement
Measurement simply refers to valuation. It is a process of
determining the monetary amounts at which the elements of
the financial statements are to be recognized and carried in the
financial statements.
Different bases of measurement
(a) Historical cost
Assets are recorded at the amount paid at the time of their
acquisition.
Liabilities are recorded at the amount of proceeds received in
exchange for the obligation.
 (b) Current cost
Assets are carried at the amount of cash or cash equivalents
paid were asset acquired currently.
Liabilities are carried at the undiscounted amount of cash or
cash equivalents to settle the obligation currently.
(c) Realizable (settlement) value.
Assets are carried at the amount of cash or cash equivalents
obtained by selling the assets.
Liabilities are carried at their settlement values.
(d) Present value
Assets are carried at the present discounted value of the future
net cash inflows.
Liabilities are carried at the present discounted value of the
future net cash outflows.
Fair Value
Fair value simply means current market value of an asset. It is
the price that would be received to sell an asset or transfer a
liability in a transaction.
Principles of presentation
1. Fair presentation and compliance with IFRSs
2. Consistency of presentation
3. Materiality and aggregation.
4. Offsetting Assets and liabilities, and income and expenses,
5. Comparative information
6. Structure of statement of financial position.
7. Lin items
8. Format of statement of financial position
9. Statement of profit or loss.
10. Choice in presentation and basic requirements.
11. Profit or loss section or statement.
12. Other comprehensive income statement.
13. Statement in changes in equity.
14. Notes to the financial statement.
Principles of disclosures in financial statement
1. Materiality.
2. Summary of accounting policies.
3. Share capital and reserves.
4. Dividends.
5. Capital disclosure.
Module V (Financial statements of companies)
Financial statement
These are formal records of the financial activities and position
of a business.
Types of Financial statement
1. Balance sheet
2. Statement of profit or loss
3. Statement of changes in equity.
4. Statement of cash flows.
5. Notes for explanatory information.
Key Requirements for presentation of financial statements /
Features of financial statements
 Going concern.
 Accrual basis of accounting.
 Materiality.
 Offsetting.
 Frequency reporting.
 Comparative information.
 Consistency.
 True and fair.
Statement of financial position (SOFP)
SOFP is a statement of assets and liabilities of a business
enterprise on a particular day.
Statement of profit/loss (SOPL)
A statement of profit and loss is an income statement of a
company. It shows the company’s revenue and expenses during
a particular period.
Statement of Changes in equity
A statement of changes in equity is a financial statement that
measures the changes in owner’s equity for a specified
accounting period.
Fixed assets
Long term tangible property or equipment that a firm owns and
uses in its operations is called fixed assets.
Eg: Land and building, Plant and machinery, Computer
Current assets
Current assets are those assets which are used within the
period of one year.
Eg: Cash in hand, Cash at bank, Inventories
Intangible assets
Intangible assets are those assets which cannot be touch, feel
and see. Which do not have physical existence.
Eg: Copyright. Patent, Trademark
Financial assets
Financial assets is a nonphysical asset whose value is derived
from a contractual claim such as bank deposits, Bonds etc…
Biological assets
Biological asset is defined in Ind AS 41 as living animal or plant.
Contingent asset
It is a type of asset, its economic benefits depends on some
uncertain future events.
Contingent liabilities
It is a type of liability that may be incurred by an entity
depending on some uncertain future events.
Depreciation
Decrease in the value of fixed assets due to obsolescence, wear
and tear, passage of time, etc.
Appreciation
Increase in the value of fixed asset is known as appreciation.
Earnings Per Share (EPS)
It is the interest of each ordinary shares of an entity in the
profit or loss of the entity for the reporting period.
Diluted EPS
The reduced EPS is known as diluted EPS.
Divisible profit
Divisible profits are that part of profit which are available to
shareholders for dividend.
Dividend
It is a part of profit which is distributed among its shareholders.
Proposed dividend
It is a type of dividend recommended by board of directors
after close the books of account.
Interim Dividend
It is the dividend paid by the company before the preparation
of final account.
 Final dividend
It is the dividend which is proposed and declared at the end of
the accounting year after close of books of accounts.
Unclaimed dividend
It refers to dividend not yet claimed by the shareholders.
Scrip dividend
In case company does not have sufficient cash to pay dividend,
company may issue promissory notes to shareholders. This is
called scrip dividend.
Corporate Dividend Tax (CDT)
Tax payable by the companies distributing the dividend is called
corporate dividend tax.
Reserve
Reserve is the retention of the profit which is not for any
known liability.
Capital Reserve
The reserve created out from the profit of capital nature is
known as capital reserves.
Revenue Reserve
The reserves created by the retention of a share of net profits
for the year are known as revenue reserve.
Provision
It is the amount which is charged against profit or loss account
for some uncertain amount of known liability.
Difference between reserve and provision
Reserve Provision
It is an appropriation of profit It is a charge against profit
It is made for unknown liabilities It is made for known liabilities
It is created only for profit Creation of provision compulsory
It can be used to distribute as It cannot be used to distribute as
dividend dividend
It is created by debiting profit It is created by debiting profit
and loss appropriation account and loss account.
Miscellaneous expenditure
It includes preliminary expenses, discount on issue of shares
and debentures, share issue expenses etc.
Pro-operative expenses
These are those expenses which are incurred by a company
after the stage of incorporation till the time it starts its
operation.
Current tax
The amount of income tax payable in respect of taxable profit.
Deferred tax
It is the difference between deferred tax liability at the end of
the period and the same at the beginning of the period.
Deferred tax assets
It is the amount of income tax recoverable in future period.
Deferred tax liabilities
The amount of income tax payable in future period.
Preliminary expense
These are expenses which the promoters of a company inquire
at the time of incorporating the company.

This is just a theory short notes from all the modules. You
need to refer all the available materials covering your syllabus
ALL THE BEST
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