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Financial Accounting - I
Revised Fourth Edition
Financial Accounting - I
Revised Fourth Edition
Mohammed Hanif
Sr. Professor of Accounting & Finance
St. Xavier’s College (Autonomous), Kolkata
Amitabha Mukherjee
Formerly Sr. Professor of Accounting & Finance
St. Xavier’s College (Autonomous), Kolkata
McGraw Hill Education (India) Private Limited

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Preface to the Revised Fourth Edition
Firstly, we would like to thank our readers for the overwhelming support they’ve shown for the last three
editions of this book. Throughout this book we have tried to give students a thorough knowledge of the
latest CBCS syllabus
prescribed by University of Calcutta w.e.f. 2017-18. This book has been designed and written exclusively for
students appearing for their B.Com Semester-I examination.
Considering the changing students’ need and valuable feedback from our readers, we have undertaken a
considerable restructuration of the book especially in terms of pedagogical aspect.
� �� Every chapter has been supplemented with adequate number of solved examples, which have been
experience to our readers as they transit from beginning to the end of the chapter.
� �� The in-chapter solved examples are then followed by Previous Years’ C.U. Question Papers (with
solutions). This section is further segregated as- ‘For General Course Students’ and ‘For Honours
Course Students’. These questions will enable students to assess the kinds of questions asked in the
university exams and will also help them in evaluating their conceptual understanding.
� �� Lastly, an exclusive section ‘Special Problems’ has been dedicated for the advance learners. This
� �� Considering the weightage assigned to the theory portion in the university question papers, we have
added an exclusive section ‘Suggested Answers of Short Questions’ at the end of the book. The
answers to the theoretical questions from the previous 7 years’ (2011 to 2017) C.U. Question Papers.
cļǟ!Ƹƛ!ƸŸļ!:ĸŻƽƛƔ
As per the 2017-18 CBCS syllabus prescribed by University of Calcutta, the following two chapters are
exclusive to the current edition.
� �� Chapter-13: Introduction to Accounting Theory
� �� Chapter-14: Introduction to Accounting Standards
Secondly, with the withdrawal of AS-6: Depreciation Accounting and amendments in AS-10: Property,
Plant and Equipment, there was a need to revise the Chapter-9: Depreciation Accounting. Accordingly,
there has been a thoroughly revision of this chapter considering the latest amendments in AS-10.
A number of colleagues, friends and students helped us in the preparation of this book. We thank each and
every one of them.
pmhanif@gmail.com . All suggestions are welcome.

We specially thank Mr. S. Rangarajan for typesetting and formatting this book.
AUTHORS
Preface to the First Edition
!
taking place worldwide, different universities of India are changing the coment of the undergraduate syllabus
continually in a consistent manner.
In the past an accountant’s job was to report past events, however, nowadays an accountant has to take
"
# $ % '
professionals. Throughout this book, we have tried to give students a thorough knowledge in the techniques
The book has been designed in accordance with the latest syllabus of the University of Calcutta. Utmost
care has been taken to balance the book well, with text and problems. We have included numerous fully
solved problems, interspersed within the text. In addition, a variety of chapter and exercises have been
'
various university question papers till 2009. More than 500 solved problems and 300 exercises have been
incorporated into this text. In addition to that, more than 200 multiple choice questions have been added to
help students clear every concept thoroughly.
AS-2, Valuation of Inventories and AS-9, Revenue Recognition, have been dealt with as per the require-
ments of the syllabus.
'
write to the authors at pmhanif@gmail.com. All suggestions for further improvement in the book are also
welcome.
We thank Mr. S. Rangarjan for typesetting and formatting this book. Our students have always been a
source of inspiration and happiness. They never cease to raise good points. We have tried to incorporate all
such points in this book.
We especially thank Master M.H. Kabir for mapping the newly designed rupee symbol “`” throughout
this book.
AUTHORS
Syllabus
Calcutta University
CC 1.1 Ch: FINANCIAL ACCOUNTING -- I
Marks Where you can

Unit Topic Details
allotted find in the Book
Nature of accounting; Users of accounting
information; Qualitative characteristics of
accounting information
Double entry book keeping system -- Basic
accounting equation, meaning of assets,
Chapter 1
liabilities, equity, revenue and expenses
Chapter 2
Accounting cycle -- Recording of
Chapter 3
1 Introduction transactions, journal, ledger and preparation 5
Chapter 4
of Trial Balance.
Chapter 5
Bases of accounting; cash basis and accrual basis.
Chapter 6
Basic concepts and conventions: entity, money
measurement, going concern, cost, realisation,
accruals, periodicity, consistency, prudence
(conservatism), materiality, matching and full
disclosures.
Revenue recognition: Meaning of revenue;
objective; timing of recognition. Recognition
of expenses. Chapter 7
Inventories: meaning. Significance of inventory Chapter 8
valuation. Lower of cost or market value rule;
Inventory ascertainment and reconciliation.
The nature of depreciation. The accounting
concept of depreciation. Factors in the
measurement of depreciation. Methods of
computing depreciation: straight line method and
2 Concepts for diminishing balance method; Disposal of
Determination Chapter 9
depreciable assets; change in estimate and 15
of Business Chapter 10
method of charging depreciation. Accounting for
Income depreciation:
Asset-depreciation, Asset-provision.
Reserves and provisions: Meaning; Objective;
Types & Accounting
Capital and revenue expenditures and receipts:
Chapter 11
general introduction only.
Chapter 12
Adjustment and rectification
x Syllabus
Concept of accounting theory, relation with

Introduction to
practice; GAAP, Capital ---- Capital maintenance
Accounting Chapter 13
concepts. Limitations of Historic Cost accounting,
Theory
3 Introduction to Fair Value accounting. 10
Introduction to Financial accounting standards: concept, benefits,
Accounting procedure for issuing accounting standards in India. Chapter 14
Standard Need for a global standard, IFRS (concept only).
Preparation of financial statements: of sole
Final Accounts of proprietorship business entities from a trial balance Chapter 15
4 15
Trading Concern -- Manufacturing, Trading, P/L A/c and Balance Chapter 16
Sheet
Financial Preparation of financial statements: a) from
Statement of incomplete records b) of non-profit organisation
Chapter 17
5 Incomplete 10
chapter 18
Records and of
NPO
Consignment: Basic features; difference
with sales. Recording in the books of
Consignor -- at cost & at invoice price,
Valuation of unsold stock; Ordinary
Accounting for commission. Treatment and valuation of
Special Sales abnormal & normal loss. Special
Transaction commission; Del credere commission (with
and without bad debt) - use of Consignment
Debtors A/c. Recording in the books of
Consignee
Accounting for sale on approval
Chapter 19
Concept of sectional balancing, preparation Chapter 20
6 Sectional and Self of control accounts. Self balancing Ledger: 25
Chapter 21
Balancing Ledger advantages; Recording process; preparation Chapter 22
of Adjustment accounts.
Loss of stock: Physical & ownership
concept; concept of under-insurance and
average clause; computation of claim -- with
Insurance Claim price change; consideration of unusual
for Loss of Stock selling line; price reduction etc.
and for Loss of Loss of profit: Concept -- insured &
Profit uninsured standing charges, GP rate, short
sales and increased cost of working, average
clause and computation of claim (simple
type)
TOTAL 80
Brief Contents
1. Introduction to Accounting 1.1 - 1.10

2. Double Entry System 2.1 - 2.10
3. Accounting Cycle 3.1 - 3.44
4. The Trial Balance 4.1 - 4.18
5. Bases of Accounting 5.1 - 5.14
6. Accounting Concepts and Conventions 6.1 - 6.8
7. Revenue Recognition 7.1 - 7.10
8. Inventories 8.1 - 8.28
9. Depreciation Accounting 9.1 - 9.44
10. Reserves and Provisions 10.1 - 10.30
11. Capital and Revenue 11.1 - 11.8
13. Introduction to Accounting Theory 13.1 - 13.4

14. Introduction to Accounting Standard 14.1 - 14.8
15. Final Accounts of Trading Concern 15.1 - 15.108
16. Manufacturing Accounts 16.1 - 16.12
18. Incomplete Records 18.1 - 18.64

19. Consignment Accounts 19.1 - 19.58
20. Accounting for Sale on Approval 20.1 - 20.12
21. Self-Balancing Ledger 21.1 - 21.44
22. Insurance Claims 22.1 - 22.44
Suggested Answers to Short Questions (2011–2016) S.1 - S.26
Suggested Answers to Calcutta University Questions (2017) S.27 - S.50
Contents
Preface to the Revised Fourth Edition v

Preface to the First Edition vii
Syllabus ix
Brief Contents xi
1. Introduction to Accounting 1.1 - 1.10

Meaning of Accounting 1.1
Objectives of Accounting 1.1
Advantages of Accounting 1.2
Limitations of Accounting 1.2
Meaning of Book-keeping 1.2
Distinction between Book-keeping and Accounting 1.3
Evolution of Accounting 1.4
' * 1.4
Financial Accounting 1.4
Cost Accounting 1.5
Management Accounting 1.5
Social Accounting 1.5
Human Resource Accounting 1.5
National Accounting 1.5
Distinction between Financial Accounting and Management Accounting 1.6
Users of Accounting Information 1.6
Qualitative Characteristics of Financial Statements 1.7
Understandability 1.8
Relevance 1.8
Reliability 1.8
Comparability 1.9
Key Points 1.9
Theoretical Questions 1.9
Objective Questions 1.10
Guide to Answers 1.10
2. Double Entry System 2.1 - 2.10

Introduction 2.1
Features of Double Entry System 2.1
xiv Contents
Advantages of the Double Entry System 2.1

Disadvantages of the Double Entry System 2.2
Accounting Equation 2.2
Concept of Debit, Credit and Duality 2.2
Elements of Financial Statements 2.6
+ 2.6
Assets 2.7
Liability 2.7
Recognition of the Elements of Financial Statements 2.7
Recognition of Assets 2.7
Recognition of Liabilities 2.7
Recognition of Income 2.7
Recognition of Expenses 2.7
Measurement of Elements of Financial Statements 2.8
Key Points 2.8
Practical Questions 2.9
3. Accounting Cycle 3.1 - 3.44

Accounting Cycle 3.1
Source Documents 3.2
Invoices 3.2
Credit Note 3.2
Voucher 3.3
Features of a Voucher 3.3
Preparing a Voucher 3.3
Meaning of Transaction 3.5
Meaning of Event 3.5
< 3.6
Rules for Determining Cash or Credit Transaction 3.6
< * 3.7
! < * 3.7
< * 3.9
Rules for Debit and Credit (Traditional) 3.10
Journal and Ledger 3.11
The Journal and its Nature 3.11
Ruling of a Journal 3.11
Simple and Compound Journal Entries 3.13
Subdivision of Journal 3.15
The Ledger 3.15
Contents xv
< = > ? 3.15

Subdivisions of Ledger 3.16
Standard Form of Ledger Account 3.17
Running Balance form of Ledger Account 3.17
Sequence and Numbering of Ledger Accounts 3.17
Posting 3.18
The Mechanics of Posting 3.18
Balancing Ledger Accounts 3.18
Purchases Day Book 3.25
Trade Discount 3.26
Posting the Purchases Day Book into the Ledger 3.27
Sales Day Book 3.28
Procedure for Writing up the Sales Day Book 3.28
Sales Book with VAT Column 3.29
Posting the Sales Day Book into the Ledger 3.30
Purchases Returns Book 3.31
Posting the Purchases Returns into the Ledger 3.31
Debit Note 3.32
Credit Note 3.32
Sales Returns Book 3.33
Posting the Sales Returns into the Ledger 3.33
Journal Proper or General Journal 3.34
Opening Entries 3.34
Closing Entries 3.35
Transfer Entries 3.36
Y Z Z 3.36
Adjusting Entries 3.36
Credit Purchase of Assets 3.38
Credit Sale of Worn-Out or Obsolete Assets 3.38
Credit Purchase of Stationery 3.38
Key Points 3.38
4. The Trial Balance 4.1 - 4.18

Meaning of Trial Balance 4.1
Characteristics of a Trial Balance 4.2
Objectives of Drawing up a Trial Balance 4.2
Defects of a Trial Balance 4.2
Construction of a Trial Balance 4.2
xvi Contents
Errors Disclosed by a Trial Balance 4.6

Errors Not Disclosed by a Trial Balance 4.6
Steps to Detect Errors through a Trial Balance 4.7
Suspense Account 4.8
Preparation of the Trial Balance from Given Ledger Balances 4.8
Some Important Items 4.8
Closing Stock 4.8
Cost of Goods Sold 4.9
Carriage Inwards and Carriage Outwards 4.9
Returns Inwards and Returns Outwards 4.9
Correction of Trial Balance 4.10
The Adjusted Trial Balance (Recasting of a Trial Balance) 4.12
Key Points 4.14
5. Bases of Accounting 5.1 - 5.14

Cash Basis of Accounting 5.1
Features 5.1
Advantages 5.1
Disadvantages 5.2
Computation of Net Income under Cash Basis 5.2
Accrual Basis of Accounting 5.2
Features 5.2
Advantages 5.3
Disadvantages 5.3
Distinction between Cash Basis and Accrual Basis 5.3
Computation of Net Income under Accrual Basis 5.3
Mixed Basis of Accounting 5.4
Features 5.4
Computation of Net Income under Mixed Basis 5.4
< [ < \ [ * Basis 5.8
< [ * \ [ < \ 5.10
Journal Entries for Conversion of Cash Basis Accounting into Accrual Basis Accounting 5.12
Key Points 5.13
Contents xvii
6. Accounting Concepts and Conventions 6.1 - 6.8

Accounting Concepts and Conventions 6.1
Basic Concepts and Conventions 6.1
Business Entity Concept 6.1
Money Measurement Concept 6.2
Going Concern Concept 6.2
Historical Cost Concept 6.3
Realisation Concept 6.3
Accrual Concept 6.4
Periodicity Concept 6.4
Consistency Concept 6.4
Prudence (or Conservatism) Concept 6.5
Materiality Concept 6.5
Matching Concept 6.6
Full Disclosure 6.6
Substance over Form 6.6
Key Points 6.7
7. Revenue Recognition 7.1 - 7.10

Introduction 7.1
Objectives of Revenue Recognition 7.1
Accounting Standard [AS - 9: Revenue Recognition] 7.2
Scope 7.2
+ 7.2
Sale of Goods 7.3
Transfer of Legal Title 7.3
Rendering of Services 7.4
Proportionate Completion Method 7.4
Completed Service Contract Method 7.5
Interest, Royalty and Dividends 7.5
Disclosure 7.5
' Z_ 7.5
Recognition of Expenses 7.8
Key Points 7.9
8. Inventories 8.1 - 8.28

Introduction 8.1
Objectives of Accounting for Inventories 8.1
Effects of Errors in Valuing Inventory 8.2
xviii Contents
Accounting Standard [AS-2 : Valuation of Inventories] 8.2

Meaning of Important Terms 8.2
Measurement of Inventories 8.2
Cost of Inventories 8.3
Cost of Purchase 8.3
Cost of Conversion 8.3
Joint Products and By-products 8.4
Excise Duty on Finished Goods 8.5
Cost Excluded from Inventories 8.5
Cost Formulas 8.6
' ` ! 8.6
First In First Out Method (FIFO) 8.6
Techniques for the Measurement of Cost-Standard Cost Method and the Retail Method 8.7
Standard Cost Method 8.7
The Retail Method 8.7
Net Realisable Value (NRV) 8.7
Review Items Individually 8.7
Contract Price and Market Price 8.8
No Write Down when Finished Goods will be Sold at Cost or Above Cost 8.9
Disclosure 8.9
General Illustrations 8.10
Accounting for Inventories 8.13
Perpetual Inventory Method 8.13
Periodic Inventory Method 8.14
Recording Inventory Acquisitions and Sales 8.14
Recording Transaction in Stores Ledger/Stock Cards 8.15
Problems of Stock Taking 8.18
Key Points 8.24
9. Depreciation Accounting 9.1 - 9.44

Nature of Depreciation 9.1
Concept of Depreciation 9.1
Accounting Standard AS-10 : Property, Plant and Equipment 9.2
Needs for Providing Depreciation 9.2
Factors in the Measurement of Depreciation 9.3
Meaning of Cost of the Asset 9.3
Element of Cost 9.3
Contents xix
Useful Life of the Asset 9.3

Residual Value of the Asset 9.4
Methods of Computing Depreciation 9.5
Straight Line/Equal Instalment Method 9.5
Diminishing Balance Method 9.8
Distinction between Straight Line and Diminishing Balance Methods 9.9
Charges for Depreciation and Materiality Concept 9.11
[ = + z_ * 9.11
When no Provision for Depreciation Account is Maintained 9.11
When Provision for Depreciation Account is Maintained 9.16
Change in the Method of Depreciation 9.19
Change in Accounting Estimates 9.19
Sinking Fund Method or Depreciation Fund Method 9.26
Insurance Policy Method 9.29
Sum-of-the-Years’ Digits Method 9.30
Annuity Method 9.31
Revaluation Method 9.32
Depletion Method 9.33
Machine Hour Rate Method 9.34
Production Units Method 9.35
Depreciation and Repairs Fund Method 9.35
Revision of the Estimated Useful Life 9.37
Depreciation on Addition or Extension of the Asset 9.37
Change in the Historical Cost 9.38
Depreciation of Revalued Assets 9.38
` + ' z ? 9.39
Key Points 9.39
10. Reserves and Provisions 10.1 - 10.30

Meaning of Reserve 10.1
Types of Reserves 10.1
Meaning of Reserve Fund 10.2
Distinction between Provisions and Reserves 10.2
Distinction between Capital Reserve and Revenue Reserve 10.2
Sinking Funds 10.3
Difference between a Sinking Fund to replace an Asset and
Sinking Fund to Repay a Liability 10.3
Meaning of Provision 10.3
xx Contents
Accounting for Provision for Bad Debts 10.4

First Method 10.5
Second Method 10.12
Provision for Discount on Debtors 10.15
Reserve for Discount on Creditors 10.18
Recovery of Bad Debts 10.19
Treatment of Bad Debt Recovery in the Books of the Buyer 10.19
Key Points 10.27
11. Capital and Revenue 11.1 - 11.8

Meaning of Capital Expenditure 11.1
Meaning of Revenue Expenditure 11.1
Necessity for Distinction between Capital Expenditure and Revenue Expenditure 11.2
Distinction between Capital Expenditure and Revenue Expenditure 11.2
Rules for Determining Capital Expenditure 11.2
Examples of Capital Expenditure 11.3
Rules for Determining Revenue Expenditure 11.3
Examples of Revenue Expenditure 11.4
Capital and Revenue Receipts 11.4
< Y [ 11.4
Capital and Revenue Losses 11.5
Key Points 11.8
Introduction 12.1
Types of Errors 12.1
Errors of Omission 12.2
Errors of Commission 12.2
Y Errors before the Preparation of the Trial Balance 12.3
Y \
before the Preparation of Final Accounts 12.5
Suspense Account 12.5
Y Preparation of Final Accounts 12.26
Key Points 12.36
Contents xxi

13. Introduction to Accounting Theory 13.1 - 13.4

Introduction 13.1
Generally Accepted Accounting Principles (GAAP) 13.1
Capital Maintenance Concepts 13.2
Limitations of Historical Cost Accounting 13.3
Fair Value Accounting 13.3
Introduction 13.3
+ 13.3
Features 13.4
Advantages 13.4
Limitations 13.4
Current Practice in India 13.4
14. Introduction to Accounting Standard 14.1 - 14.8

Introduction 14.1
Nature 14.1
Scope 14.2
Purposes 14.2
Accounting Standard Board (ASB) 14.3
Procedure for Issuing Accounting Standards 14.3
National and International Accounting Authorities 14.3
Adoption of International Financial Reporting Standard (IFRS) 14.4
Obligation to Comply with Indian Accounting Standards (Ind AS) 14.6
\ * < `zY' 14.6
List of Current Accounting Standards 14.7
15. Final Accounts of Trading Concern 15.1 - 15.108

Introduction 15.1
Trading Account 15.2
Features of Trading Account 15.2
Needs of Preparing Trading Account 15.2
Style of a Trading Account 15.2
Trading Account Items 15.3
Some Important Items 15.6
Carriage Inwards/Carriage Outwards 15.6
[ | ' 15.6
xxii Contents
Discount 15.6
[ = * 15.7
z [ = * 15.8
* [ = * 15.8
[ = * ` 15.10
\ [ = * 15.14
Balance Sheet 15.15
Functions of a Balance Sheet 15.15
\ ' [ = * }Y 15.15
Uses of the Balance Sheet 15.16
Limitations of the Balance Sheet 15.16
+ [ = * \ ' 15.16
Balance Sheet Formats 15.16
Horizontal (Traditional) Format 15.16
Arrangement of Assets and Liabilities 15.16
Vertical Format 15.17
Balance Sheet—A Statement of Assets, Liabilities and Capital 15.18
* < 15.18
= < 15.20
Capital—A Liability of Business 15.21
Adjustments 15.21
Goods Distributed as Free Samples 15.21
Income Tax 15.21
Advance Tax 15.22
Interest on Advance Tax 15.22
Drawings Made by the Proprietor 15.22
Mutual Indebtedness 15.23
Debtors Arising Out of Dishonour of Cheques or Bills 15.23
Abnormal Loss of Stock by Accident [E.g., By Fire] 15.23
Goods Sent on Approval Basis 15.23
Goods Received on Approval Basis 15.24
Interest on Loan—Not yet Paid—Fully or Partly 15.24
Interest on Capital 15.24
Interest on Drawings 15.25
Goods and Services Tax (GST) 15.25
Provident Fund 15.25
Closing Stock 15.26
Suggested Steps for Preparation of Final Accounts 15.28
Advanced Adjustments 15.56
Pre-payment and Outstanding 15.56
Inventories 15.57
Depreciation 15.58
Contents xxiii
Commission to Manager 15.59

Stationery Included in Opening Stock and Closing Stock 15.60
= [ ' Z_ * 15.60
Goods Sent on Consignment 15.61
[ = > 15.62
Petty Cash 15.64
Key Points 15.93
16. Manufacturing Accounts 16.1 - 16.12

Introduction 16.1
The Cycle of Production 16.1
Elements of Cost 16.2
Types of Cost in Manufacturing Account 16.2
The Format of a Manufacturing Account 16.2
Valuation of Stocks in Manufacturing Account 16.3
Distinction between Trading Account and Manufacturing Account 16.3
! * ' ! [ 16.6
Z [ < ' 16.7
Key Points 16.8
Introduction 17.1
z "[ | 17.1
The Constitution of the Organisation 17.2
Composition of Management Committee 17.2
< " | 17.2
Accounting Records 17.3
Non-accounting Records 17.3
+ "[ | [ " | 17.4
Financial Statements 17.4
Receipts and Payments Account 17.4
Income and Expenditure Account 17.5
Distinction between the Receipts and Payments Account and
the Income and Expenditure Account 17.6
xxiv Contents
Distinction between the Income and Expenditure Account and

[ = * 17.6
Balance Sheet 17.7
* "[ | 17.7
Capital Fund 17.7
Donation 17.7
Legacy 17.7
Subscriptions 17.7
Sectional Subscriptions 17.7
Life Membership 17.7
Honorarium 17.8
' ` " | 17.8
z ` * " | 17.8
Membership Subscriptions 17.8
Donation 17.11
Entrance or Admission Fee 17.11
Life Membership Fee 17.11
Legacy 17.12
Restaurant or Bar Trading 17.13
Other Club Activities 17.13
Fund Based and Non-Fund Based Accounting 17.13
Special Kinds of Funds 17.13
Preparation of Income and Expenditure Account and Balance Sheet
when Trial Balance and other Information are Given 17.14
when Receipts and Payments Account and other Information are Given 17.16
from Incomplete Records 17.45
Preparation of Receipts and Payments Account, Income and Expenditure
Account and Balance Sheet when Ledger Balances and other Information are Given 17.49
Preparation of Receipts and Payments Account when Income and
Expenditure Account, Balance Sheet and other Information are Given 17.52
Preparation of Opening and Closing Balance Sheets when Receipts and
Payments Account and Income and Expenditure Account are Given 17.55
Key Points 17.58
18. Incomplete Records 18.1 - 18.64

Introduction 18.1
Features of Incomplete Records (Single Entry System) 18.1
Limitations of Incomplete Records (Single Entry System) 18.2
Difference between Double Entry System and Single Entry System 18.2
* [ = 18.2
Contents xxv
The Transaction Approach 18.2

The Balance Sheet Approach 18.3
Final Statement of Affairs 18.5
Difference between Statement of Affairs and Balance Sheet 18.5
Single Entry System as Applied to Partnerships 18.11
Preparation of Final Accounts from Incomplete Records 18.14
Calculation of Missing Figures 18.15
Key Points 18.53
19. Consignment Accounts 19.1 - 19.58

Introduction 19.1
Economics of Consignment 19.1
Distinction between Sale and Consignment 19.1
Procedure for Consignment Transactions 19.2
Entries in the Books of the Consignor 19.3
Cost Price Method 19.4
Incomplete Consignment and Valuation of Closing Stock 19.6
Valuation of Unsold Stock 19.6
Entries in the Books of the Consignee 19.9
Credit Sales and Del Credere Commission 19.11
Treatment of Discount on Bills in Consignment Account 19.14
Advance Made by the Consignee 19.14
When an Advance is not given as a Security 19.14
When an Advance is given as a Security of the Goods 19.15
Loss of Goods on Consignment 19.17
Normal and Abnormal Losses Simultaneously 19.20
Overriding Commission 19.27
Return of Goods from the Consignee 19.30
Invoice Price Method 19.31
Invoice Price—Memorandum Column Method 19.35
Correction of Errors 19.49
Key Points 19.52
20. Accounting for Sale on Approval 20.1 - 20.12

Introduction 20.1
Economics of Sale or Return 20.2
Accounting Record 20.2
When the Business Sends Goods Casually on Sales or Return 20.2
xxvi Contents
When the Business Sends Goods Frequently on Sale or Return 20.7

When the Business Sends Goods Numerously on Sale or Return 20.8
Key Points 20.10
21. Self-Balancing Ledger 21.1 - 21.44

< = 21.1
Sectional Balancing System 21.2
Temporary Adverse Balances 21.3
Purposes of Using Control Accounts 21.3
Self-Balancing System 21.8
Books of Original Entry used for Self Balancing Debtors Ledger 21.9
Books of Original Entry used for Self-balancing Creditors Ledger 21.10
Advantages of Self-Balancing Ledger 21.11
Distinction between Self-Balancing Ledger and Sectional Balancing Ledger 21.11
Temporary Adverse Balances 21.15
More than One Debtors Ledger 21.17
Transfer between Subsidiary Ledgers 21.19
Y Z Relating to Self-Balancing System 21.31
Balancing and Reconciling Control Accounts 21.33
Key Points 21.36
22. Insurance Claims 22.1 - 22.44

Introduction 22.1
Types of Claims 22.1
Loss of Stock Policy 22.2
Ascertainment of the Value of Stock on the Date of Fire 22.2
Ascertainment of Actual Amount of Claim to be Lodged 22.3
Average Clause 22.6
Poor Selling Goods 22.15
= [ [ 22.27
Some Important Terms/Expressions 22.28
Procedures to Ascertain Amount of Claim 22.29
Key Points 22.38
Suggested Answers to Short Questions (2011–2016) S.1 - S.26
Suggested Answers to Calcutta University Questions (2017) S.27 - S.50
1
Introduction to Accounting
Meaning of Accounting
Accounting may be defined as the process of collecting, recording, summarising and communicating financial
information. Accounting is an art of recording, classifying and summarising in a significant manner and in
terms of money, transactions and events which are, in part at least, of a financial character, and interpreting
the results thereof.
Accounting Principles Board (APB) defines accounting in the following words : ‘Accounting is a service
activity. Its function is to provide quantitative information primarily financial in nature, about economic
entities that is intended to be useful in making economic decisions in making reasoned choices among
alternative courses of action. Accounting includes several branches, e.g., financial accounting, manage-
rial accounting and government accounting’.
Accounting accumulates, measures and communicates numbers and measurable quantities of economic
information about an enterprise. Accumulation refers to recording and classifying data in journals and ledgers.
Measurement refers to the quantification of business transactions that have occurred, or that may occur.
Communication refers to supply of reliable information to users of accounting information.
Objectives of Accounting
The objectives of accounting are :
(i) To keep a systematic record of financial transactions that affect the business enterprise.
(ii) To ascertain the profits earned or losses incurred by the business unit during a particular accounting
period.
(iii) To ascertain the financial position of the business unit at the end of the accounting period.
(iv) To exercise control over business assets and properties.
(v) To facilitate business decision-making.
1.2 Introduction to Accounting
Advantages of Accounting
The advantages of accounting are :
(i) It provides information useful for making economic decisions.
(ii) It serves primarily those users who have limited authority, ability or resources to obtain information
and who rely on financial statements as their principal sources of information about an enterprise’s
economic activities.
(iii) It provides information useful to investors and creditors for predicting, comparing and evaluating
potential cash flows in terms of amount, timing and related uncertainty.
(iv) It supplies information useful in judging the management’s ability to utilise enterprise resources
effectively in achieving primary enterprise goals.
(v) It provides factual and interpretative information about transactions and other events which are useful
for predicting, comparing and evaluating the enterprise’s earning power.
Limitations of Accounting
The limitations of accounting are :
(i) Accounting is historical in nature, it does not reflect the current financial position or worth of a
business.
(ii) The Profit and Loss Account tends to match current revenues with historical costs (expenses) rather
than current costs.
(iii) Accounting statements do not show the impact of inflation.
(iv) The Profit and Loss Account does not reflect those increases in net asset values which are not
considered to be realised.
(v) Accounting principles are not static ----alternative accounting procedures are often equally acceptable.
Therefore, accounting statements do not always present comparable data.
Meaning of Book-keeping
Book-keeping is an activity concerned with the recording of financial data related to business operations in a
significant and orderly manner. Book-keeping is the record-making phase of accounting. Accounting is based
on a careful and efficient book-keeping system.
The main purpose of accounting for business is to ascertain profit or loss for the accounting period. In an
accounting period, there may be numerous financial transactions involved in the business. Without a proper
method of recording transactions, it is not possible to remember the various financial receipts and payments
taking place during a period of time.
The essential idea behind maintaining book-keeping records is to show correct position regarding each head
of income and expenditure. A business may sell goods on credit as well as in cash. When the goods are sold
on credit, a record must be kept of the person owing money. The owner of the business may like to know, from
time to time, what amount is due on credit sales and from whom.
Likewise, a business makes several payments on account of various expenses at regular intervals. If proper
record is not maintained, it is not possible to get details of the transactions in regard to the expenses.
At the end of the accounting period, the owner wants to know how much profit has been earned or loss has
been incurred during the course of the period. For this, a lot of information is needed which can be gathered
from a proper record of the transactions. Therefore, book-keeping, the proper maintenance of books of account,
is indispensable for any business.
The main objectives of book-keeping are to :
1. have a permanent record of each transaction of the business and to show its financial effect on the
business.
2. ascertain the combined effect of all the transactions made during an accounting period upon the
financial position of the business as a whole.
Financial Accounting - I 1.3
Accountancy and Accounting

The word ‘accountancy’ signifies, more or less, a branch of knowledge, which may be referred to as a
subject of study. Accountancy is often used merely as a substitute for accounting, but it is technically
incorrect. Accountancy is the activity of preparing the financial records and statements of organisations.
Accounting is the subject of the process of recording and analysing financial information so as to maximise
the value of the information produced. Accountancy is the art, occupation or profession of the accountant,
whereas accounting refers to the process or system of accounting. Although accountancy may refer to the
entire aspect of theory and practice, it is less frequently used. On the other hand, accounting is the practical
application of those principles and techniques, contained in the broad framework of accountancy with
preferred usage.
From the above, it can be observed that while accounting is mainly the application of the theory,
accountancy covers the dual aspect of theory and practice. Therefore, accountancy is a whole of which
accounting is a part.
Distinction between Book-keeping and Accounting

Book-keeping should not be confused with accounting. Persons with little knowledge of accounting may fail
to understand the difference between book-keeping and accounting. Therefore, it is useful to make a distinction
between the two. Accounting is a broad subject. It calls for a greater understanding of records obtained from
book-keeping and an ability to analyse and interpret the information provided by book-keeping records.
Book-keeping is a small part of the field of accounting and probably the simplest part, just as arithmetic is a
small part of the broad discipline of mathematics.
The main distinction between the two is that where book-keeping is the recording phase, accounting is
concerned with the summarising phase of an accounting system. Therefore, the process of accounting begins
where the book-keeping process ends. Accounting includes not only the maintenance of accounting records,
but also the preparation of the following two financial statements:
1. Trading, and Profit and Loss Account. (How well did the business do during an accounting period ?).
2. Balance Sheet. (How does the business stand on the last day of the accounting period ?).
The distinction between the two are as follows :
Book-keeping Accounting
1. It is the recording phase of an accounting system. 1. It is the summarising phase of an accounting
system.
2. It is the basis of accounting. 2. It is the basis for financial data.
3. Persons responsible for book-keeping are called 3. Persons responsible for accounting are called
book- keepers. accountants.
4. It does not require any special skill or knowledge. 4. It requires special skill and knowledge.
5. Personal judgement of the book-keeper is not 5. Personal judgement of the accountant is essential.
required. For example, at the time of making provision for
bad debts, personal judgement is necessary.
6. Financial statements are not prepared from book- 6. Fin an cial statements are prepared from
keeping records. accounting records.
7. It does not give the complete picture of the 7. It gives the complete picture of the financial
financial condition of the business unit. condition of the business unit.
8. It does not help in complying with legal 8. Legal formalities can be complied with the help
formalities. of accounting.
9. It does not provide any information for taking 9. It provides information for taking managerial
managerial decisions. decisions.
10. It has no branch. 10. It has several branches, e.g., financial accounting,
cost accounting, management accounting, etc.
Evolution of Accounting
No social study has ever been static----it has always evolved. Necessarily, the present-day shape and contents
of accounting are a product of history.
The origin of accounting as a social study can be traced back to very ancient days. Indeed, it is as old as the
beginning of the use of money itself. Even under the barter system, some primitive form of accounting existed.
For, otherwise, how could loss and gain have been calculated? The object of gain has always been the driving
force of any exchange and this gave birth to the need for accounting.
But, till the 13th century, the mode of keeping accounts was primitive. Books of business were no more
than mere note book transactions. A French merchant wrote in his book: ‘Lent 10 gold coins to a man last year,
I forgot his name’. In Europe, calculations were made largely in Roman numerals, and sums were very often
wrong. Long divisions were regarded as something of a mystery, and the use of zero was not clearly
comprehended.
Is it surprising, therefore, that a system of accounting, as we know, could not have been developed?
However, it did develop in the fifteenth century and its genesis can be traced to Double Entry Bookkeeping
which is said to have been fashioned by Fra Luca Pacioli (about 1445 -- 1520), the multi-talented mathema-
tician and philosopher of Venice. His treatise Summa De Arithmatica, Geometrica, Preportioni at Prepor-
tionalita was published in 1494. (However, Pacioli is not regarded as the inventor of the system; he is said to
have just collated the different aspects of it in a comprehensive tract).
Of course, for a considerable time, the Double Entry System remained ignored in Europe; the people thereof
continued following what is called Stewardship Accounting, the method of keeping accounts of household
expenses followed by stewards. (In our country, it may be called the munim system of accounting. For it was
the munims who kept accounts of big households).
When, with the advent of joint stock companies, ownership was separated from the management, the idea
of financial accounting based on the Double Entry Principle came to be recognised and was valued as a principle
of action. The shareholders’ and others’ interests were to be safeguarded; they were to be acquainted with the
performance of the companies. The need was statutorily recognised, and there emerged as an information
system for the investors and others such statements as Balance Sheet, Profit and Loss Account, etc. By and by,
the dimension of this financial information system expanded and it came to be all-pervasive.
Since business and other concerns operate in the social setting, evolution of accounting could not come to
a halt just at providing information to the investors and managers alone. Social cost as well as social benefit
had to be assessed. This brought into being social accounting, an important adjunct to the system of measuring
and assessing. Economic activities, which in economic parlance, are described as ‘activities performed for
making a living’, and which again, in money-economy are nothing other than money-earning and money-
spending activities.
Subfields of Accounting
1. Financial Accounting
Financial accounting is that part of accounting which is mainly concerned with the historical, custodial and
stewardship aspects of external reporting to shareholders, government and other users of accounting informa-
tion outside the business entity.
Financial accounting emphasizes the stewardship aspects of accounting rather than the control or decision-
making aspects of accounting. It is the recording and processing of financial data affecting the business unit,
which relates to the past and is generally for one year. The end-product of financial accounting is the Profit
and Loss Account for the period ended (which shows the profit earned or losses incurred) and the Balance
Sheet as on the last day of the accounting period (which shows the financial position). The preparation of the
financial accounting is based on generally accepted accounting principles enunciated by the accounting
profession and is heavily constrained by legal regulations and accounting standards.
2. Cost Accounting
Cost Accounting is primarily concerned with the cost to produce goods and services. Cost accounting applies
the principles of accounting in such a manner that it is possible to have a detailed recording and analysis of
expenditures incurred in connection with the operation of any business, e.g., manufacturing, administration or
selling, or the production of an article so that it is able to measure performance and control activities.
Cost accounting is made up of the following :
(1) Mechanics of cost keeping, i.e., routines followed in reducing and classifying expenditures.
(2) Analysis of costs to measure managerial efficiency.
(3) Installation and supervision of cost systems.
3. Management Accounting
Any form of accounting which enables a business unit to be conducted more efficiently can be regarded as
management accounting. Management accounting is that part of accounting which is concerned, mainly with
internal reporting to the managers of a business unit. It relates to planning, control and decision-making which
is useful to the management in the discharge of its functions. Thus, it emphasizes the control of decision-making
aspects of accounting, which is tailor-made to suit the needs of the management of a specific enterprise, rather
than stewardship aspects of accounting. Management accounting is ‘forward-looking’ and generally includes
cost accounting and budgeting. The preparation of management accounting is not based on generally accepted
accounting principles and is relatively free of constraints imposed by legal regulations and accounting
standards. Therefore, management accounting is the presentation of accounting information in such a way as
to assist management in the creation of policy and the day-to-day operation of an undertaking. The technique
of accounting is of extensive importance as it works in the most nearly universal medium available for the
expression of facts so that facts of great diversity can be presented in the same picture. It is not the presentation
of these pictures that is the function of management but the use of them.
4. Social Accounting
Social accounting is a branch of accounting which attempts to measure the social benefits that an organisation
provides and the social costs that an organisation imposes. Social accounting is not a new method of keeping
books of account, but a concept based on evaluating the costs and benefits relating to socially responsible
actions by business enterprises. Both social cost and social benefit arise from externalities. Externalities are
the benefits or costs which are not received or borne by the business unit responsible for them. Social costs as
well as social benefits are a function of social perception of what is bad or good about business activity.
5. Human Resource Accounting
Human resource accounting is the accounting for the human resource of an enterprise. It is the process of
identifying and measuring data about human resources and communicating this information to interested
parties. Human resource accounting is, therefore, accounting for people as organisational resource. It is an act
of identifying, measuring and evaluating the worth of human resources of an enterprise in a systematic manner
to the organisation and to society as a whole, and recording these in a significant manner in the financial
statement for presenting the information to the various users and to communicate their worth with changes
over the period as also results obtained from their utilisation to those users.
6. National Accounting
National accounting is the accounting of the transactions of a national economy, as distinct from those of
entities in sectors of the economy, i.e., business enterprises and public authorities. National accounting is not
based on generally accepted accounting principles. It has been developed by economists and statisticians and,
therefore, data for national accounting must be collected from non-accounting sources.
Distinction between Financial Accounting and Management Accounting

Financial Accounting Management Accounting
1. It is primarily for external purposes. 1. It is primarily for internal purposes.
2. It records what has happened based on past 2. It provides information which is used to take
transactions in a true and fair manner. decisions about the future.
3. It is heavily constrained by legal regulation and 3. It is relatively free of constraints imposed by legal
accounting standard. regulation and accounting standards.
4. It must comply with statute and generally 4. It is tailored to suit the needs of the users.
accepted accounting principles.
5. It emphasizes on the type of expenses. 5. It emphasizes on the products, processes and
departments.
6. It emphasizes the stewardship aspect of 6. It emphasizes the control or decision-making
accounting. aspects of accounting.
7. It provides an overall view of the business 7. It gives a detailed analysis of all aspects of the
enterprise. business unit.
Users of Accounting Information

Accounting information is needed by two sets of people----internal and external. Internal users are associated
with management of the concern for which information is sought to be gathered and surveyed. For example,
the directors or the partners, managers and officers.
The external users consist of several explicit groups : (1) investors; (2) lenders; (3) suppliers; (4) customers;
(5) government agencies; (6) the public; and, (7) employees.
Investors : They supply the risk capital to the business unit. Ownership is separated from management in
joint stock companies, hence, investors need to know how their money is being spent by the managers.
Financial information helps them to decide about (a) making investments, (b) quantum of investment, and
(c) holding on to the equities they own.
Lenders : Accounting information provides them with reasonable assurance as to the payment of interest and
repayment of the principal.
Suppliers : They normally sell on credit and they must have reasonable assurance that their credit will be
honoured. Financial information helps them to decide about the credibility of the firm, and whether they should
continue supplying on credit.
Customers : They are a composite group, consisting of (a) producers at every stage of processing, (b)
wholesalers and retailers and (c) the final consumers. Producer at the next stage of processing must be assured
of the input which they obtain from the concern in question. The wholesalers and retailers must also be sure
about the uninterrupted supply of materials. Otherwise, they will be hesitant to stock it. The ultimate consumer
is interested in the continuous availability of the product. Should he come to think that the availability may be
disrupted or stopped, he will shift his preference for another variety or brand. In all these kindred decisions,
accounting information has a significant role to play.
Government agencies : Any economy of the day is, in a way, controlled and regulated by the political
authorities, i.e., the government. Consequently, government agencies rely on the financial information for
permitting expansion or contraction of business, for import and export of products and/or materials, for
allocation of essential resources for regulating labour or taxation, etc.
Public : For members of the public the financial information is of the nature of a health examination report
---- it tells them about employment opportunities and general growth in the individual concern and the economy
as a whole.
Employees : The employees of the concern are interested in the financial information because both, their
present and future are tied up with the company’s fortunes.
Thus, financial information serves diverse interests. Hence, the information should be gathered and
disseminated in a way that benefits each interest. Information should not be biased and should not supress facts
or suggest anything false.
Qualitative Characteristics of Financial Statements

Accounting information must possess some qualitative characteristics. These are the attributes that make the
information provided in the financial statements useful to users. The four main qualitative characteristics are:
(1) Understandability;
(2) Relevance;
(3) Reliability; and
(4) Comparability.
Understandability
Understandability is the quality of accounting information that enables users to perceive its significance, i.e.,
to understand the content and significance of accounting statements and reports. If a user cannot understand
the accounting information given to him, it is not useful, even though it may be relevant to whatever decision
he wants to make. To have the characteristics of understandability, accounting information must be presented
in a manner that users can understand, i.e., it must be expressed in terminology that is understandable to
theusers. Now-a-days, business activities and transactions have become increasingly complex. It may not
always be possible to describe complex transactions in simple terms. It is, therefore, necessary that the users
of the accounting information must attain a minimum level of competence in understanding the terminology
used in accounting statements. It is assumed that the users have a basic knowledge of business accounting, and
they will spend some time and effort in studying the accounting statements. However, the accountant has a
basic responsibility to describe business transactions clearly and concisely.
Relevance
Accounting information must be relevant to the user. Information is relevant if it meets the needs of the user
in decision-making. Relevance is defined in terms of the ability to affect a decision-maker’s course of action,
because whether a particular set of accounting information is relevant or not depends on the specific
decision-maker’s objectives. Thus, for information to be relevant, it must have some bearing on the decision
being made. Relevant accounting information should be capable of making a difference in a decision by helping
users of accounting information to form predictions about the outcomes of past, present and future events. The
decision not to modify or correct previous actions is a very important one. Financial information which does
not have relevance to users is worse than no information at all, i.e., any information does not connote utility if
it is not relevant to the purpose. To be relevant, it should be capable of monetary computation.
Reliability
Accounting information should be reliable. Reliability is the characteristic of accounting information which
gives the user confidence and trust that the reported information is a reasonable representation of the actual
items or events that have occurred. To be reliable, the accounting information should be error-free and neutral
---- an accountant’s bias must not colour his information. The other subsidiary qualities which make information
reliable are as follows :
Faithful representation : Information must faithfully represent the effects of transactions and other events.
If the information is to represent faithfully the transactions and other events that it purports to represent, it is
necessary that they are accounted for and presented in accordance with their substance and economic reality
and not merely their legal form.
For example, X Ltd has purchased a building for their sales office. The rights and beneficial interest
in the property have been transferred but the documentation and legal formalities are pending. It is
to be shown in the financial statement as own property though legally it has not been transferred in
the name of X Ltd.
Substance over Form : The accounting treatment and presentation in financial statements of transactions
and events should be governed by their substance and not merely by the legal form. In accounting, substance
should normally take precedence over form in deciding how a particular transaction should be recorded. The
legal form of a transaction is frequently descriptive of its economic substance. However, the form occasionally
misrepresents the characteristics that are relevant to users. If the substance can be reliably determined, the
accountant should describe the transaction in terms of the substance rather than the form. Accounting for
hire-purchase transactions, for example, is based on the above concept, i.e., it looks at the substance of the
transaction rather than its legal form. The hire-purchaser can record the asset at its cash down price, while
paying for it by instalments over an agreed period of time.
Neutrality : Judgement is required in arriving at many items in the financial statements. Judgement is involved
in valuing stock, determining the amount of doubtful debts, etc. Neutrality means that these judgements are
made without any bias.
Prudence : Caution must be exercised while preparing financial statements and estimating the outcome of
uncertain events. For example, collectability of receivable, the warranty claims that may occur etc. However,
this does not mean, that the approach should be over cautious. The aim should be to report most likely outcome,
with a reasonable element of caution. The financial statements must not be prepared on the most optimistic basis.
Completeness : The information in the financial statements must be complete within the bounds of
materiality and cost.
Comparability
Usefulness is enhanced if accounting information can be compared with similar information for the same
organisation at different times, and for different organisations at the same time. Comparability enhances the
value of accounting information by enabling the users to discern and detect similarities and the dissimilarities
among different concerns as also in respect of the same concern over time. Absoluteness of the information is
not of much use ---- it is the comparability that lends itself to proper decision-making. Whether one is doing
well or not is not the enquiry; the enquiry should be whether one is doing better or more (or worse) than others
or than in other periods. To achieve comparability, consistency and disclosure of accounting policies are
necessary.
Key Points
 Accounting is a service activity. Its function is to provide quantitative information primarily financial in nature, about
economic entities that is intended to be useful in making economic decisions in making reasoned choices among
alternative courses of action. Accounting includes several branches, e.g., financial accounting, managerial
accounting and government accounting.
 The objectives of accounting are :
(i) To keep a systematic record of financial transactions that affect the business enterprise.
(ii) To ascertain the profits earned or losses incurred by a business unit during a particular accounting period.
(iii) To ascertain the financial position of the business unit at the end of the accounting period.
(iv) To exercise control over business assets and properties.
(v) To facilitate business decision-making.
 Book-keeping is an activity concerned with the recording of financial data related to business operations in a
significant and orderly manner. Book-keeping is the record-making phase of accounting. Accounting is based on
a careful and efficient book-keeping system.
 Accounting information is a statement which provides quantitative information about the effect of transactions and
other events on an accounting entity. Accounting information is used for predicting, comparing and evaluating the
earning power and financial position of a business enterprise. It also serves the needs of the users who rely on
accounting statements as their principal source of information for decision-making.
 Accounting information is required by two sets of people----internal and external. Internal users are associated with
management of the concern for which information is sought to be gathered and surveyed. For example, the directors
or the partners, managers and officers.The external users consist of several explicit groups : (1) investors; (2)
lenders; (3) suppliers; (4) customers; (5) government agencies; (6) the public; and, (7) employees.
THEORETICAL QUESTIONS
1. Define accounting and discuss its functions.
2. What are the characteristics of modern accounting ?
State the advantages and limitations of accounting ?
3. What are the objectives of accounting ?
4. Who are the users of accounting information ? Why do they need information ?
5. What are the qualitative characteristics of accounting information ?
OBJECTIVE QUESTIONS
Multiple Choice
Select the best choice to complete each sentence or answer each question below.
1. Which of the following is / are a sub-field(s) of accounting ?
A financial accounting
B cost accounting
C management accounting
D all the above
2. Which of the following is not an internal user of financial statement ?
A board of directors
B managers
C officers
D lenders
3. Accounting information must possess some qualitative characteristics. For example,
(i) reliability (ii) relevance (iii) understandability
Which of the above is / are correct ?
A (i) and (ii) only
B (i) only
C (ii) and (iii) only
D all the above
4. Which of the following is not an external user ?
A investor B government agencies C partners D labour union
5. Which of the following is true ?
A Accounting is the recording phase of past happening
B Accounting reflects the current financial position or worth of a business
C Accounting statements always present comparable data
D Accounting statements show the impact of data
6. Which of the following is true ?
A Human resources accounting is the accounting for the human resources of an enterprise that are included in the
financial statements
B Social responsibility accounting is the reporting of cost and benefits relating to socially responsible actions by
business enterprises
C Cost accounting is a division of financial accounting
D Financial accounting is not concerned with external reporting
7. Which of the following is an advantage of accounting ?
A accounting provides information useful for making economic decisions
B accounting provides comparable data for comparison
C accounting proivides information useful for predicting uncertainty
D accounting information is useful in judging managements’ ability
8. Which of the following is not a limitation of accounting ?
A accounting information is historical in nature
B accounting information does not show the impact of inflation
C accounting reflects those increases in net assets that are realised
D accounting information must possess some qualitative characteristics
Guide to Answers
Multiple Choice
1. D 2. D 3. D 4. C 5. A 6. B 7. B 8. D
2
Double Entry System
Introduction
Double entry is an almost universally used system of business record keeping. It is a system of recording
business transactions which recognises that each transaction has a dual aspect. It is so named because the
principles of double entry book-keeping are based upon every transaction having two aspects or two parts, i.e.,
two accounts are always affected by each transaction. Under this system, each transaction is seen as a flow of
value from one account to another. The receiving account is debited with the amount and the giving account
is credited. Therefore, every debit has an equal and offsetting credit.
If only two accounts are affected (as in the purchase of building for cash), one account, Building is debited
and the other account, Cash is credited for the same amount. If more than two accounts are affected by a
transaction, the sum of the debit entries must be equal to the sum of the credit entries.
Features of Double Entry System
(1) This method records both aspects of each transaction.
(2) Under this system, equal debit and credit entries are made for every transaction in two different
accounts.
(3) Under this system, all transactions are recorded fully.
(4) Under this system, it is possible to prepare a Trial Balance and check the arithmetical accuracy of the
books of account because it records all transactions in full.
(5) Under this system, profit / loss can be found out by showing in detail the expenses and incomes.
(6) Under this system, Balance Sheet can be prepared in detail.
Advantages of the Double Entry System
(1) A complete record of all the transactions relating to a business unit are maintained systematically.
(2) The financial position of the firm can be ascertained.
(3) The arithmetical accuracy of the books of account can be ensured.
(4) Location and rectification of errors are possible.
(5) The system can be applied to any form of organisation.
(6) Consistency can be maintained in the books of account, which help make a comparative study of
current year’s figures with those of the previous year(s).
2.2 Double Entry System
(7) The profits earned or losses suffered for an accounting period can be ascertained.
(8) Amount due to suppliers and due from customers can be easily ascertained.
(9) The amount of cash balance available at any point of time can be ascertained.
(10) It helps take managerial decisions.
(11) Greater control over the affairs of the business can be exercised and, thereby, frauds and misappro-
priations can be minimised.
(12) The business transactions do not get mixed up with private transactions of the owner(s).
Disadvantages of the Double Entry System
(1) This system adopts money as its basic unit of measurement. But money is an inelastic yardstick for
measurement.
(2) Many important events cannot be recorded in the books of account simply because they cannot be
expressed in monetary terms.
(3) Transactions are all historical records and not future probabilities.
(4) If any transaction is not recorded at all in the books of account, it may remain undiscovered.
(5) If the amount of a transaction is wrongly recorded in the books of original entry, it is difficult to detect
the error.
(6) A compensating error may also remain undetected.
(7) This system requires personal judgement of the accountant.
(8) This system is not suitable for small businesses where the owner(s) can directly control the affairs of
the business.
Accounting Equation
The accounting equation is the basis for double entry system of accounting. Total assts of the business unit are
provided by the creditors/lenders and the owners. Therefore, at any point of time, the total assets of the business
are equal to total liabilities. Liabilities to the outsiders are known as liabilities but liability to the owners, in
accounting, is referred to as ‘capital’.
The relationship that exists among assets, liabilities and the capital can be expressed in the form of an
accounting equation which is as follows :
Total Assets = Total Liabilities
OR
Total Assets = Liabilities + Capital
OR
Total Assets -- Liabilities = Capital
Assets and liabilities are two independent variables and capital is the dependent variable, for it is the
difference between assets and liabilities. A transaction may affect either both sides of the equation by the same
amount or on one side of the equation only, by both increasing or decreasing it by equal amounts and thus
netting to zero. An increase in an asset, without a corresponding increase in liability or a corresponding decrease
in another asset, must represent an increase in capital. Conversely, an increase in liability without a correspond-
ing increase in asset, or a corresponding decrease in another liability, will indicate a decrease in capital.
Concept of Debit, Credit and Duality
The rules of Debit and Credit are as follows :
1. Debit : Any increase on the left hand side of the equation
2. Credit : Any decrease on the left hand side of the equation.
3. Debit : Any decrease on the right hand side of the equation
4. Credit : Any increase on the right hand side of the equation.
Illustration 1
(a) If the liabilities of a business is ~ 75,000 and the capital is ~ 85,000. Find out the total assets.
(b) A business has assets of ~ 54,321 and owner’s equity is ~ 34,215. What is the amount of liability?
(c) Cash ~ 10,000; Stock ~ 15,000; Building ~ 10,000; Machinery ~ 1,80,000; Debtors of ~ 45,000 and Creditors
~ 27,500. Ascertain the capital.
Solution
(a) Total Assets -- Liabilities = Capital
or, Total Asset = Capital + Liabilities
 Total Assets = ~ (85,000 + 75,000) = ~ 1,60,000.
(b) Assets -- Liabilities = Capital (Owner’s equity)
or Assets -- Capital = Liabilities
Therefore, liabilities = ~ (54,321 -- 34,215) = ~ 20,106.
(c) Assets -- Liabilities = Capital
or Capital = (Cash + Stock + Building + Machinery + Debtors) -- Creditors
(~ 10,000 + ~ 15,000 + ~ 10,000 + ~ 1,80,000 + ~ 45,000) -- ~ 27,500
= ~ 2,60,000 -- ~ 27,500 = ~ 2,32,500.
Illustration 2
Calculate as directed using accounting equation :
(a) If the total assets of a business are ~ 1,50,000 and capital is ~ 75,000, calculate creditors.
(b) If the capital of a business is ~ 80,000 and the liabilities are ~ 60,000, calculate the total assets of the business.
(c) Calculate total assets if (i) Capital is ~ 50,000; (ii) Creditors ~ 30,000; (iii) Revenue during the period ~ 52,000;
and (iv) Expenses during the same period are ~ 38,000.
Solution
(a) Total Assets -- Liabilities = Capital
or Liabilities = Total Assets -- Capital
or Creditors = Total Assets -- Capital
= ~ 1,50,000 -- ~ 75,000
= ~ 75,000.
(b) Total Assets -- Liabilities = Capital
or Total Assets = Capital + Liabilities
= ~ 80,000 + ~ 60,000
= ~ 1,40,000.
(c) Total Assets -- Liabilities = Capital + Profit
or Total Assets = Capital + Profit + Liabilities
= ~ 50,000 + ~ (52,000 -- 38,000) + ~ 30,000 = ~ 50,000 + ~ 14,000 + ~ 30,0000 = ~ 94,000.
Illustration 3
From the following information calculate total assets of the business : Capital ~ 40,000; Creditors ~ 30,000; Revenue earned
during the period ~ 75,000; Expenses incurred during the period ~ 20,000. Value of stocks unsold ~ 20,000.
Solution
Total Assets -- Liabilities = Capital + Profit
or Total Assets = Capital + Liabilities + Profit
or Total Assets = Capital + Creditors + Profit
= ~ 40,000 + ~ 30,000 + ~ 55,000 (~ 75,000 -- ~ 20,000)
= ~ 1,25,000 (includes ~ 20,000 closing stock).
Illustration 4
Prabhas Senapati has the following assets and liabilities as on 31st December, 2009. Ascertain his capital.
Cash ~ 2,500; Bank ~ 4,750; Debtors ~ 1,800; Creditors ~ 2,200; Plant and Machinery ~ 8,000; Building ~ 20,000;
Furniture ~ 2,400; Bills Receivable ~ 5,650; Bills Payable ~ 2,350.
Solution
Assets -- Liabilities = Capital
or Capital = Assets -- Liabilities
or Capital = (Cash + Bank + Debtors + Plant and Machinery + Building + Furniture + Bills Receivable)
-- (Creditors + Bills Payable)
= ~ (2,500 + 4,750 + 1,800 + 8,000 + 20,000 + 2,400 + 5,650) -- ~ (2,200 + 2,350)
= ~ (45,100 -- 4,550) = ~ 40,550.
Illustration 5
Show the accounting equations on the basis of the following transactions.
(i) Raghunath commenced business with cash ~ 80,000.
(ii) Purchased goods on credit ~ 20,000.
(iii) Withdrew cash for private use ~ 2,000.
(iv) Sold goods on credit (cost-price ~ 15,000) ~ 20,000.
(v) Purchased furniture ~ 1,500.
Solution
Accounting Equation : Total Assets -- Liabilities = Capital
(i) Raghunath commenced business with cash ~ 80,000

Here business is getting ~ 80,000 in the form of cash and owes Raghunath ~ 80,000. Therefore, in the form of accounting equation it can be shown
as follows :
Cash 80,000 -- 0 = 80,000
(ii) Purchased goods on credit ~ 20,000

Here stock of the business will be increased by ~ 20,000 and liabilities in the form of creditor will be increased by the same amount. Therefore, the
new equation will be :
Cash 80,000 -- 0 = 80,000
Stock 20,000 -- Creditors 20,000 = 0
1,00,000 -- 20,000 = 80,000
(iii) Withdrew cash for private use ~ 2,000

Here cash will be reduced by ~ 2,000 and capital will also be reduced by ~ 2,000. Therefore, the new equation will be :
Cash 78,000 -- 0 = 78,000
Stock 20,000 -- Creditors 20,000 = 0
98,000 -- 20,000 = 78,000
(iv) Sold goods on credit ~ 20,000 (cost price ~ 15,000)

Here stock will be reduced by ~ 15,000 and asset in the form of debtors will be increased by ~ 20,000. Capital will be increased by ~ 5,000 profit (~
20,000 -- ~ 15,000). The new equation will be :
Cash 78,000 0 = *83,000
Stock 5,000 Creditors 20,000
Debtors 20,000
1,03,000 -- 20,000 = 83,000
* It includes profit of ~ 5,000 (~ 20,000 -- ~ 15,000).

(v) Purchased furniture ~ 1,500
Here cash will be reduced by ~ 1,500 and furniture will appear in the equation as an asset. The new equation will be :
Cash 76,500 0 = 83,000
Stock 5,000 Creditors 20,000
Debtors 20,000
Furniture 1,500
1,03,000 -- 20,000 = 83,000
Illustration 6
Show the accounting equations on the basis of the following transactions.
(i) D. Mahapatra commenced business with cash ~ 50,000.
(ii) Purchased goods for cash ~ 8,000.
(iii) Sold goods costing ~ 6,000 for ~ 9,000.
(iv) Purchased furniture ~ 20,000.
(v) Took a loan of ~ 10,000 from bank.
(vi) Paid salary ~ 4,000 and insurance ~ 2,000.
(vii) Received rent ~ 3,000 and interest ~ 1,500.
(viii) Paid ~ 800 as premium of life insurance policy.

(ix) Purchased a bicycle for the owners’ son ~ 1,200.
(x) Depreciate furniture by ~ 300.
Solution
Accounting Equation : Total Assets = Total Liabilities OR Total Assets = Capital + Liabilities OR Total Assets -- Liabilities = Capital
(i) D. Mahapatra commenced business with cash ~ 50,000
Here business is getting ~ 50,000 in the form of cash and owes Mahapatra ~ 50,000. Therefore, in the form of accounting equation it can be shown
as follows :
Cash 50,000 -- 0 = 50,000
(ii) Purchased goods for cash ~ 8,000

Here stock of the business will be increased by ~ 8,000 and cash will be reduced by ~ 8,000. Therefore, the new equation will be :
Cash 42,000 -- 0 = 42,000
Stock 8,000 -- 0 = 8,000
50,000 -- 0 = 50,000
(iii) Sold goods costing ~ 6,000 for ~ 9,000

Here stock will be reduced by ~ 6,000 and cash will be increased by ~ 9,000. Capital will be increased by ~ 3,000 profit (~ 9,000 -- ~ 6,000). The new
equation will be :
Cash 51,000 -- 0 = 51,000
Stock 2,000 -- 0 = 2,000
53,000 -- 0 = 53,000
(iv) Purchased furniture ~ 20,000

Here cash will be reduced by ~ 20,000 and furniture will appear in the equation as an asset. The new equation will be :
Cash 31,000 -- 0 = 31,000
Stock 2,000 -- 0 = 2,000
Furniture 20,000 -- 0 = 20,000
53,000 -- 0 = 53,000
(v) Took a loan of ~ 10,000 from bank

Here cash will be increased by ~ 10,000 and liabilities in the form of loan will be increased by the same amount. Therefore, the new equation will be :
Cash 41,000 -- Loan 10,000 = 31,000
Stock 2,000 -- 0 = 2,000
Furniture 20,000 -- 0 = 20,000
63,000 -- 10,000 = 53,000
(vi) Paid salary ~ 4,000 and insurance ~ 2,000

Here cash will be reduced by ~ 6,000 and profit will be reduced by ~ 6,000, i.e., capital will be reduced by ~ 6,000. The new equation will be :
Cash 35,000 -- Loan 10,000 = 25,000
Stock 2,000 -- 0 = 2,000
Furniture 20,000 -- 0 = 20,000
57,000 -- 10,000 = 47,000
(vii) Received rent ~ 3,000 and interest ~ 1,500

Here cash will be increased by ~ 4,500 and capital will be increased by the same amount in the form of profit. Therefore, the new equation will be :
Cash 39,500 -- Loan 10,000 = 29,500
Stock 2,000 -- 0 = 2,000
Furniture 20,000 -- 0 = 20,000
61,500 -- 10,000 = 51,500
(viii) Paid ~ 800 as premium of life insurance policy

Here cash will be reduced by ~ 800 and capital will be reduced by ~ 800 by way of drawing. Therefore, the new equation will be :
Cash 38,700 -- Loan 10,000 = 28,700
Stock 2,000 -- 0 = 2,000
Furniture 20,000 -- 0 = 20,000
60,700 -- 10,000 = 50,700
(ix) Purchased a bicycle for the owner’s son ~ 1,200
Here cash will be reduced by ~ 1,200 and capital will be reduced by ~ 1,200 by way of drawing. Therefore, the new equation will be :
Cash 37,500 -- Loan 10,000 = 27,500
Stock 2,000 -- 0 = 2,000
Furniture 20,000 -- 0 = 20,000
59,500 -- 10,000 = 49,500
(x) Depreciate furniture by ~ 300

Here furniture will be reduced by ~ 300 and capital will be reduced by ~ 300 by way of loss due to depreciation. Therefore, the new equation will be:
Cash 37,500 -- Loan 10,000 = 27,500
Stock 2,000 -- 0 = 2,000
Furniture 19,700 -- 0 = 19,700
59,200 -- 10,000 = 49,200
Elements of Financial Statements

The elements directly related to the measurement of financial position in the Balance Sheet are : assets,
liabilities and equity.
The elements directly related to the measurement of performance in the Statement of Profit and Loss are :
income and expenses.
These definitions applied together with the recognition criteria, helps to understand how and when the
financial effect of transactions should be recognised in the financial statements.
Definitions
(a) An asset is a resource controlled by the enterprise as a result of past events from which future economic
benefits are expected to flow to the enterprise.
(b) A liability is a present obligation of the enterprise arising from past events, the settlement of which is
expected to result in an outflow from the enterprise of resources embodying economic benefits.
(c) Equity is the residual interest in the assets of the enterprise after deducting all its liabilities.
(d) Income is increase in economic benefits during the accounting period in the form of inflows or
enhancements of assets or decrease in liabilities, that in turn increases the equity other than those relating to
contribution from equity participants.
(e) Expenses are decrease in economic benefits during the accounting period in the form of outflows or
depletions of assets or incurrence of liabilities that result in decreases in equity, other than those relating to
distributions to equity participants.
Assets
Assets are those resources that the business owns. They refer to some property or legal right owned by a business
enterprise which can be measured in terms of money.
An asset has the following three essential characteristics :
(1) It has the potential to provide future economic benefits to the enterprise.
(2) It is a result of past transactions or events.
(3) The enterprise has the control over it.
Liability
Liability is a present obligation expressed in terms of money, which arises from transactions or other events
that have already occurred. It involves an enterprise in a probable future transfer of cash, goods or services or
the foregoing of a future cash receipt.
Obligations may arise from normal business practice, custom and a desire to maintain good business
relations.
Recognition of the Elements of Financial Statements

An item that meets the definition of an element (given above) should be recognised if :
(a) it is possible that any future economic benefit associated with the item will flow to or from the
enterprise; and
(b) the item has a cost or value that can be measured with reliability.
In the first criterion, the concept of probability is used to refer to the degree of uncertainty. Assessments
of the degree of uncertainty attaching to the flow of future economic benefits are made on the basis of the
evidence available when the financial statements are prepared.
The second criterion for the recognition of an item is that it possesses a cost or value that can be measured
with reliability. When, however, a reasonable estimate cannot be made, the item is not recognised in the Balance
Sheet or Statement of Profit and Loss.
Recognition of Assets
An asset is recognised in the Balance Sheet when it is probable that the future economic benefits associated
with it will flow to the enterprise and the asset has a cost or value that can be measured reliably.
If there is any doubt about the flow of benefits to the enterprise beyond current accounting period, the
expenditure incurred will not be recognised as an asset.
Recognition of Liabilities
A liability is recognised 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.
Recognition of Income
Income is recognised in the Statement of Profit and Loss 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.
Recognition of Expenses
Expenses are recognised in the Statement of Profit and Loss 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.
An expense is recognised immediately in the Statement of Profit and Loss when an expenditure produced
no future economic benefits. An expense is also recognised to the extent that future economic benefits from
an expenditure do not qualify, or cease to qualify, for recognition in the Balance Sheet as an asset.
Measurement of Elements of Financial Statements

After deciding that an item is to be recognised in the financial statements, the next step is to decide the basis
for its measurement.
The framework refers to four measurement bases that are frequently used in reporting. These are :
1. Historical Cost
2. Current Cost
3. Realisable (Settlement) Value
4. Present Value
In measuring assets and liabilities, the historical cost is most commonly used. This is usually combined
with other measurement bases. For example, inventories are usually carried at lower of cost and net realisable
value (NRV) and pension liabilities are carried at their present value.
Key Points
 Double entry is an almost universally used system of business record keeping. It is a system of recording business
transactions which recognises that each transaction has a dual aspect. It is so named because the principles of
double entry book-keeping are based upon every transaction having two aspects or two parts, i.e., two accounts
are always affected by each transaction.
 The relationship that exists among assets, liabilities and the capital can be expressed in the form of an accounting
equation which is as follows :
Total Assets = Total Liabilities
OR
Total Assets = Liabilities + Capital
OR
Total Assets -- Liabilities = Capital
 Liability is a present obligation expressed in terms of money, which arises from transactions or other events that
have already occurred. It involves an enterprise in a probable future transfer of cash, goods or services or the
foregoing of a future cash receipt.
THEORETICAL QUESTIONS
1. What do you mean by double entry system ?
2. What are the features of double entry system ?
3. What are the advantages and disadvantages of double entry system ?
4. What is accounting equation ?
5. What are the elements of financial statements ?
OBJECTIVE QUESTIONS
Multiple Choice
Select the best choice to complete each sentence or answer each question below.
1. Which of the following equations is correct ?
A total assets -- liabilities = capital -- profit
B total assets -- liabilities = capital + profit
C total assets + profit = capital + liabilities
D total assets + liabilities = capital -- profit
2. Robin introduces his car into his business. Which parts of the business accounting equation will change?
A capital and liability
B liabilities and assets
C capital and profit
D assets and capital
3. Which of the following equation is wrong ?

A net assets = proprietor’s fund
B net assets = capital + profit + drawings
C net assets = capital + profit -- drawings
D fixed assets + net current assets = capital + profit -- drawings
4. Which of the following is a correct version of the ‘fundamental accounting equation’ ?
A assets = capital less liability
B assets = liabilities
C assets plus liabilities = capital
D assets = capital + liabilities
5. Consider the following statements :
(i) ‘Double entry book-keeping’ means that two sets of records are maintained.
(ii) In double entry book-keeping we have a basic check on the accuracy of the entries as the total value of the debit
entries and total value of the credit entries should be equal.
Are the statements true or false ?
Statement (i) Statement (ii)
A True True
B True False
C False True
D False False
6. A business borrowed ~ 60,000 from its bank, and used the cash to buy a new computer. How is accounting equation
Affected by these transactions ?
Assets Liabilities
A unchanged decreased
B unchange dincreased
C increased increased
D increased decreased
PRACTICAL QUESTIONS
1. (a) If the capital of the firm is ~ 1,50,000 and creditor is ~ 50,000. Find out the total assets.
(b) A business has total assets of ~ 85,000 and capital is ~ 35,000. What is the amount of liability ?
(c) Plant and machinery ~ 1,00,000; Land and Building ~ 2,00,000; Stock ~ 50,000; Cash in hand ~ 10,000; Cash
at Bank ~ 40,000; Sundry Debtors ~ 50,000 and Sundry Creditors ~ 1,00,000. Ascertain the capital.
2. Show accounting equations on the basis of the following transactions.
(a) Ganguly commenced business with ~ 1,00,000.
(b) Purchased machinery for ~ 30,000.
(c) Purchased goods for ~ 40,000.
(d) Sold all goods for cash ~ 60,000.
3. Show the accounting equations on the basis of the following transactions.
(a) Commenced business with cash ~ 40,000.
(b) Deposited ~ 10,000 in SBI.
(c) Purchased machine from Amar & Sons ~ 30,000.
(d) Purchased goods from Bijoy Bros. ~ 30,000.
(e) Purchased goods for cash ~ 18,000.
(f) Half of the goods purchased from Bijoy Bros are sold at a profit of 40% on cost price for cash. The remaining
half were sold on credit to Chitra Suppliers at a profit of 50% on selling price.
(g) Paid ~ 15,000 cash and ~ 7,000 by cheque to Amar & Sons.
(h) Owner withdraw ~ 1,000 for personal expenses.
4. Dinesh starts business with cash ~ 50,000 and furniture ~ 20,000. The details of his transactions are given below:
(i) Purchased goods on credit from Eknath ~ 60,000 at 10% discount.
(ii) Goods costing ~ 20,000 are sold for ~ 35,000.
(iii) Goods costing ~ 10,000 are sold to Fakir & Co. for ~ 18,000.
(iv) Fakir returned 1/5th of the goods.
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capable of producing so much sound. I have never observed this
habit upon a dull or cloudy day.”
Mr Nuttall having presented me with the nest of this species
attached to the twig to which the bird had fastened it, my amiable
friend Miss Martin has figured it for me, as well as the plant, about
which these lovely creatures are represented. The nest, which
measures two inches and a quarter in height, and an inch and three
quarters in breadth, at the upper part, is composed externally of
mosses, lichens, and a few feathers, with slender fibrous roots
interwoven, and lined with fine cottony seed-down.
Trochilus rufus, Gmel. Syst. Nat. vol. i. p. 497.

Trochilus collaris, Lath. Ind. Ornith. vol. i. p. 318.
Trochilus (Selasphorus) Rufus, Swainson.
Cinnamon or Nootka Humming Bird, Richards. and Swains. Fauna Bor.-
Amer. vol. ii. p. 324.
Adult Male. Plate CCCLXXIX. Figs. 1, 2.

Bill long, straight, subulate, somewhat depressed at the base, acute;
upper mandible with the dorsal line straight, the ridge narrow at the
base, broad and convex toward the end, the sides convex, the edges
overlapping, the tip acuminate; lower mandible with the angle very
long and extremely narrow, the dorsal line straight, the edges erect,
the tip acuminate. Nostrils basal, linear.
Head of ordinary size, oblong; neck short; body slender. Feet very
small; tarsus very short, feathered more than half-way down, toes
small; the lateral equal, the middle toe not much longer, the hind toe
a little shorter than the lateral, anterior toes united at the base; claws
rather long, arched, compressed, laterally grooved, very acute.
Plumage soft and blended; feathers on the throat, fore part and sides
of the neck oblong-obovate, with the filaments towards the end
thickened and flattened, with metallic gloss, those on the sides of the
neck elongated and erectile. Wings rather short, extremely narrow,
falcate, pointed; the primaries rapidly graduated, the second being
longest, but only slightly longer than the first; these two quills taper to
a point; the rest are broader, and gradually become less pointed; the
secondaries are extremely short, and only five in number. Tail rather
long, broad, graduated, the lateral feathers four and a half twelfths of
an inch shorter than the central; the latter are extremely broad,
measuring four and a half twelfths across, and the rest gradually
diminish to the lateral, which are very narrow; all obtusely pointed.
Bill brownish-black; toes brown, claws dusky. The general colour of
the upper parts is bright cinnamon or reddish-orange; the head
bronzed green, the wings dusky, the coverts glossed with green, the
primaries with purplish; each of the tail-feathers has a narrow
longitudinal lanceolate median streak toward the end. The loral
space, a narrow band over the eye, another beneath it, and the
auriculars are reddish-orange; the scale-like feathers of the throat
and sides of the neck are splendent fire-red, purplish-red, yellowish-
red, greenish-yellow or yellowish-green, according to the light in
which they are viewed; behind them, on the lower part of the neck, is
a broad band of reddish-white; the rest of the lower parts are like the
upper, the abdomen inclining to white.
1/2
Length to end of tail 3 7/12 inches; bill along the ridge 7 /12, along
the edge of lower mandible 9 1/4/12; wing from flexure 1 7 1/4/12; tail
1 3 1/2/12; tarsus 1 1/2/12; hind toe 1 1/2/12, its claw 1 1/4/12; middle toe
2 1/4/ , its claw 1
1/2
/12.
12
Adult Female. Plate CCCLXXIX. Fig. 3.

The Female has the bill and feet coloured as in the male. The upper
parts are gold-green, the head inclining to brown; the wings as in the
male; the tail-feathers reddish-orange at the base, brownish-black
toward the end, the tip white. The lower parts are white, tinged with
rufous, of which colour, especially, are the sides; the throat marked
with roundish spots of metallic greenish-red.
Length to end of tail 3 7 1/2/12 inches; bill along the ridge 8 3/4/12; wing
from flexure 1 10/12; tail 1 1 1/2/12.
The above descriptions are from two individuals shot by Dr

Townsend on the “Columbia River, 30th May 1835.” A “young male,
Columbia River, 29th May 1835,” resembles the female as above
described, differing only in having the metallic spots on the throat
larger. A “young female, Columbia River, June 10th 1835,” differs
from the adult only in wanting the metallic spots on the throat, which
is spotted with greenish-brown.
Cleome heptaphylla.
The beautiful plant represented in the plate belongs to Tetradynamia

Siliquosa of the Linnæan arrangement, and to the genus Cleome,
characterized by having three nectariferous glandules at each corner
of the calyx, the lower excepted; all the petals ascending; the
germen stipitate; the siliqua unilocular, two-valved. The species, C.
heptaphylla, is distinguished by its septenate leaves, of which the
leaflets are lanceolate, acuminate, and of a deep green colour. It
grows in South Carolina and Georgia.
TENGMALM’S OWL.
Strix Tengmalmi, Gmel.

PLATE CCCLXXX. Male and Female.
I procured a fine male of this species at Bangor, in Maine, on the

Penobscot River, in the beginning of September 1832; but am
unacquainted with its habits, never having seen another individual
alive. Dr Townsend informs me that he found it first on the Malade
River Mountains, where it was so tame and unsuspicious, that Mr
Nuttall was enabled to approach within a few feet of it, as it sat
upon the bushes. Dr Richardson gives the following notice
respecting it in the Fauna Boreali-Americana:—“When it accidentally
wanders abroad in the day, it is so much dazzled by the light of the
sun as to become stupid, and it may then be easily caught by the
hand. Its cry in the night is a single melancholy note, repeated at
intervals of a minute or two. Mr Hutchins informs us that it builds a
nest of grass half-way up a pine tree, and lays two white eggs in the
month of May. It feeds on mice and beetles. I cannot state the extent
of its range, but believe that it inhabits all the woody country from
Great Slave Lake to the United States. On the banks of the
Saskatchewan it is so common that its voice is heard almost every
night by the traveller, wherever he selects his bivouac.”
Strix Tengmalmi, Gmel. Syst. Nat. vol. i. p. 291.—Lath. Ind. Ornith. vol. i. p.
65.
Strix Tengmalmi, Tengmalm’s Owl, Swains. and Richards. Fauna Bor.-
Adult Male. Plate CCCLXXX. Fig. 1.

Bill short, very deep, strong; upper mandible with its dorsal line
curved from the base, its ridge convex, as are the sides, the edges
sharp and incurved anteriorly, the tip very acute, and at its extremity
nearly perpendicular; the cere short, and bare on its upper part; the
lower mandible has the angle broad and short, the dorsal line slightly
convex, the edges inflected, towards the end incurved, with a notch
on each side close to the abruptly-rounded tip. Nostrils broadly
elliptical, oblique, in the fore part of the cere, which bulges
considerably behind them.
The head is extremely large, roundish, when viewed from above
somewhat triangular; the eyes large. The conch of the ear very large,
of an elliptical form, extending from the base of the lower jaw to near
the top of the head, being an inch and a quarter in length, with an
anterior semicircular operculum stretching along its whole length,
and an elevated margin behind. The neck is very short and thin; the
body very slender; but both appear very full on account of the vast
mass of plumage. The feet are rather short, and strong; the tarsi and
toes covered with very soft downy feathers, the extremities of the
latter with two scutella. The claws are slender, tapering to a fine
point, compressed, and curved.
The facial disk is complete, as is the ruff. The plumage is full, very
soft, and blended; the feathers broadly oblong and rounded. The
wings are rather long, very broad, much rounded; the third primary
longest, the fourth almost equal, the second four-twelfths of an inch
shorter, the first equal to the seventh; the barbs of the outer web of
the first, of half the second, and the terminal part of the third, free
and recurved. Tail of moderate length, arched, slightly rounded, of
twelve broad, rounded feathers.
Bill greyish-brown, yellowish-white at the end; claws yellowish-
brown, their tips dusky. The general colour of the upper parts is
greyish-brown tinged with olive. The feathers of the head have an
elliptical central white spot; those of the neck are similarly marked
with larger white spots, of which some are disposed so as to form a
semicircular band; the scapulars have two or four large round spots
near the end, and some of the dorsal feathers and wing-coverts have
single spots on the outer web. All the quills have marginal white
spots on both webs, arranged in transverse series, there being six
on the outer web of the third quill. On the tail are five series of
transversely elongated narrow white spots. The disk is yellowish-
white, anteriorly black; the ruff yellowish-white, mottled with dusky.
The throat is brown, the chin white. The general colour of the lower
parts is yellowish-white, longitudinally streaked with brown, some of
the feathers of the sides have two white spots near the end; the
tarsal and digital feathers greyish-yellow, with faint transverse bars of
brown.
Length to end of tail 11 inches; wing from flexure 6 10/12; bill along
the ridge 1; tarsus 11/12; hind toe 5/12, its claw 5/12; middle toe 9/12, its
claw 8/12.
Adult Female. Plate CCCLXXX. Fig. 2.

The Female resembles the male, but is considerably larger.
SNOW GOOSE.
Anser hyperboreus, Bonap.

PLATE CCCLXXXI. Adult Male and Young Female.
The geographical range of the Snow Goose is very extensive. It has

been observed in numerous flocks, travelling northward, by the
members of the recent overland expeditions. On the other hand, I
have found it in the Texas, and it is very abundant on the Columbia
River, together with Hutchins’s Goose. In the latter part of autumn,
and during winter, I have met with it in every part of the United States
that I have visited.
While residing at Henderson on the Ohio, I never failed to watch the
arrival of this and other species in the ponds of the neighbourhood,
and generally found the young Snow Geese to make their
appearance in the beginning of October, and the adult or white birds
about a fortnight later. In like manner, when migrating northward,
although the young and the adult birds set out at the same time, they
travel in separate flocks, and, according to Captain Sir George
Back, continue to do so even when proceeding to the higher
northern latitudes of our continent. It is not less curious that, during
the whole of the winter, these Geese remain equally divided, even if
found in the same localities; and although young and old are often
seen to repose on the same sand-bar, the flocks keep at as great a
distance as possible.
The Snow Goose in the grey state of its plumage is very abundant in
winter, about the mouths of the Mississippi, as well as on all the
muddy and grassy shores of the bays and inlets of the Gulf of
Mexico, as far as the Texas, and probably still farther to the south-
west. During the rainy season, it betakes itself to the large prairies of
Attacapas and Oppellousas, and there young and adult procure their
food together, along with several species of Ducks, Herons, and
Cranes, feeding, like the latter, on the roots of plants, and nibbling
the grasses sideways, in the manner of the Common Tame Goose.
In Louisiana I have not unfrequently seen the adult birds feeding in
wheat fields, when they pluck up the plants entire.
When the young Snow Geese first arrive in Kentucky, about
Henderson for instance, they are unsuspicious, and therefore easily
procured. In a half-dry half-wet pond, running across a large tract of
land, on the other side of the river, in the State of Indiana, and which
was once my property, I was in the habit of shooting six or seven of
a-day. This, however, rendered the rest so wild, that the cunning of
any “Red Skin” might have been exercised without success upon
them; and I was sorry to find that they had the power of
communicating their sense of danger to the other flocks which
arrived. On varying my operations however, and persevering for
some time, I found that even the wildest of them now and then
suffered; for having taken it into my head to catch them in large
traps, I tried this method, and several were procured before the rest
had learned to seize the tempting bait in a judicious manner.
The Snow Goose affords good eating when young and fat; but the
old Ganders are tough and stringy. Those that are procured along
the sea-shores, as they feed on shell-fish, fry and marine plants,
have a rank taste, which, however suited to the palate of the epicure,
I never could relish.
The flight of this species is strong and steady, and its migrations over
the United States are performed at a considerable elevation, by
regular flappings of the wings, and a disposition into lines similar to
that of other Geese. It walks well, and with rather elevated steps; but
on land its appearance is not so graceful as that of our common
Canada Goose. Whilst with us they are much more silent than any
other of our species, rarely emitting any cries unless when pursued
on being wounded. They swim buoyantly, and, when pressed, with
speed. When attacked by the White-headed Eagle, or any other
rapacious bird, they dive well for a short space. At the least
appearance of danger, when they are on land, they at once come
close together, shake their heads and necks, move off in a contrary
direction, very soon take to wing, and fly to a considerable distance,
but often return after a time.
I am unable to inform you at what age the Snow Goose attains its
pure white plumage, as I have found that a judgment formed from
individuals kept in confinement is not to be depended upon. In one
instance at least, a friend of mine who had kept a bird of this species
four years, wrote to me that he was despairing of ever seeing it
become pure white. Two years after, he sent me much the same
message; but, at the commencement of next spring, the Goose was
a Snow Goose, and the change had taken place in less than a
month.
Dr Richardson informs us that, this species “breeds in the barren
grounds of Arctic America, in great numbers. The eggs of a
yellowish-white colour, and regularly ovate form, are a little larger
than those of the Eider Duck, their length being three inches, and
their greatest breadth two. The young fly in August, and by the
middle of September all have departed to the southward. The Snow
Goose feeds on rushes, insects, and in autumn on berries,
particularly those of the Empetrum nigrum. When well fed it is a very
excellent bird, far superior to the Canada Goose in juiciness and
flavour. It is said that the young do not attain the full plumage before
their fourth year, and until that period they appear to keep in
separate flocks. They are numerous at Albany Fort in the southern
part of Hudson’s Bay, where the old birds are rarely seen; and, on
the other hand, the old birds in their migrations visit York Factory in
great abundance, but are seldom accompanied by the young. The
Snow Geese make their appearance in spring a few days later than
the Canada Geese, and pass in large flocks both through the interior
and on the coast.”
The young birds of this species begin to acquire their whiteness
about the head and neck after the first year, but the upper parts
remain of a dark bluish colour until the bird suddenly becomes white
all over; at least, this is the case with such as are kept in captivity.
Although it is allied to the White-fronted or Laughing Goose, Anser
albifrons, I was surprised to find that Wilson had confounded the
two species together, and been of opinion that the Bean Goose also
was the same bird in an imperfect state of plumage. That excellent
ornithologist tells us that “this species, called on the sea-coast, the
Red Goose, arrives in the river Delaware, from the north, early in
November, sometimes in considerable flocks, and is extremely noisy,
their notes being shriller and more squeaking than those of the
Canada, or common Wild Goose. On their first arrival, they make but
a short stay, proceeding, as the depth of winter approaches, farther
south; but from the middle of February, until the breaking up of the
ice in March, they are frequently numerous along both shores of the
Delaware, about and below Reedy Island, particularly near Old Duck
Creek, in the State of Delaware. They feed on roots of the reeds
there, which they tear up like hogs.”
This species is rare both in Massachusetts and South Carolina,
although it passes over both these States in considerable numbers,
and in the latter some have been known to alight among the
common domestic Geese, and to have remained several days with
them. My friend Dr Bachman, of Charleston, South Carolina, kept a
male Snow Goose several years along with his tame Geese. He had
received it from a friend while it was in its grey plumage, and the
following spring it became white. It had been procured in the autumn,
and proved to be a male. In a few days it became very gentle, and
for several years it mated with a common Goose; but the eggs
produced by the latter never hatched. The Snow Goose was in the
habit of daily frequenting a mill-pond in the vicinity, and returning
regularly at night along with the rest; but in the beginning of each
spring it occasioned much trouble. It then continually raised its head
and wings, and attempted to fly off; but finding this impossible, it
seemed anxious to perform its long journey on foot, and it was
several times overtaken and brought back, after it had proceeded
more than a mile, having crossed fences and plantations in a direct
course northward. This propensity cost it its life: it had proceeded as
far as the banks of the Cooper River, when it was shot by a person
who supposed it to be a wild bird.
In the latter part of the autumn of 1832, whilst I was walking with my
wife, in the neighbourhood of Boston in Massachusetts, I observed
on the road a young Snow Goose in a beautiful state of plumage,
and after making some inquiries, found its owner, who was a
gardener. He would not part with it for any price offered. Some
weeks after, a friend called one morning, and told me that this
gardener had sent his Snow Goose to town, and that it would be sold
by auction that day. I desired my friend to attend the sale, which he
did; and before a few hours had elapsed, the bird was in my
possession, having been obtained for 75 cents! We kept this Goose
several months in a small yard at the house where we boarded,
along with the young of the Sand-hill Crane, Grus Americana. It was
fed on leaves and thin stalks of cabbage, bread, and other vegetable
substances. When the spring approached, it exhibited great
restlessness, seeming anxious to remove northward, as was the
case with Dr Bachman’s bird. Although the gardener had kept it four
years, it was not white, but had the lower part of the neck and the
greater portion of the back, of a dark bluish tint, as represented in
the plate. It died before we left Boston, to the great regret of my
family, as I had anticipated the pleasure of presenting it alive to my
honoured and noble friend the Earl of Derby.
There can be little doubt that this species breeds in its grey plumage,
when it is generally known by the name of Blue-winged Goose, as is
the case with the young of Grus Americana, formerly considered as
a distinct species, and named Grus Canadensis.
Anas hyperborea, Gmel. Syst. Nat. vol. i. p. 504.—Lath. Ind. Orn. vol. ii. p.
837.
Snow Goose, Anas hyperborea, Wils. Amer. Ornith. vol. viii. p. 76, pl. 68,
fig. 3, Male, and p. 89, pl. 69, fig. 5, Young.
Anser hyperboreus, Ch. Bonaparte, Synopsis of Birds of United States, p.
376.
Anser hyperboreus, Snow Goose, Richards. and Swains. Fauna Bor.-
Snow Goose, Nuttall, Manual, vol. ii. p. 344.
Adult Male. Plate CCCLXXXI. Fig. 1.

Bill about the length of the head, much higher than broad at the
base, somewhat conical, compressed, rounded at the tip. Upper
mandible with the dorsal line sloping, the ridge broad and flattened at
the base, narrowed towards the unguis, which is roundish and very
convex, the edges beset with compressed, hard teeth-like lamellæ,
their outline ascending and slightly arched; lower mandible
ascending, nearly straight, the angle long and of moderate length,
the dorsal line beyond it convex, the sides erect, and beset with
lamellæ; similar to those of the upper, but more numerous, the
unguis obovate and very convex. Nasal groove oblong, parallel to
the ridge, filled by the soft membrane of the bill; nostrils medial,
lateral, longitudinal, narrow-elliptical, open, pervious.
Head of moderate size, oblong, compressed. Neck rather long and
slender. Body full, slightly depressed. Feet rather short, strong,
placed about the centre of the body; legs bare a little above the joint;
tarsus rather short, strong, a little compressed, covered all round
with hexagonal, reticulated scales, which are smaller behind; hind
toe very small, with a narrow membrane; third toe longest, fourth
considerably shorter, but longer than the second; all the toes
reticulated above at the base, but with narrow transverse scutella
towards the end; the three anterior connected by a reticulated
membrane, the outer having a thick margin, the inner with the margin
extended into a two-lobed web. Claws small, arched, rather
compressed, obtuse, that of the middle toe bent obliquely outwards,
and depressed, with a curved edge.
Plumage close, full, compact above, blended beneath, as well as on
the head and neck, on the latter of which it is disposed in longitudinal
bands, separated by narrow grooves; the feathers of the lateral parts
small and narrow, of the back ovato-oblong, and abruptly rounded, of
the lower parts curved and oblong. Wings rather long, broad;
primaries strong, incurved, broad, towards the end tapering, the
second longest, but only a quarter of an inch longer than the first,
which scarcely exceeds the third; the first and second sinuate on the
inner web, the second and third on the outer. Secondaries long, very
broad, rounded, the inner curved outwards. Tail very short, rounded,
of sixteen broad rounded feathers.
Bill carmine-red, the unguis of both mandibles white, their edges
black. Iris light brown. Feet dull lake, claws brownish-black. The
general colour of the plumage is pure white; the fore part of the head
tinged with yellowish-red; the primaries brownish-grey, towards the
end blackish-brown, their shafts white unless toward the end.
Length to end of tail 31 3/4 inches, to end of claws 33 1/2, to end of
wings 31 3/4, to carpus 14; extent of wings 62; wing from flexure
19 1/2; tail 6 1/4; bill along the ridge 2 5/8, along the edge of lower
mandible 3 1/4; bare part of tibia 3/4; tarsus 3 5/8; hind toe 1/2, its claw
4 1/2/ ; middle toe 3, its claw 4/12. Weight 6 3/4 lb.
12
Young Female, in first winter. Plate CCCLXXXI. Fig. 2.

The colours of the young bird, in its first plumage, are unknown; but
in its second plumage, in autumn and winter, it presents the
appearance exhibited in the plate. The bill is pale flesh-colour, its
edges black, and the unguis bluish-white; the feet flesh-colour, the
claws dusky. The head and upper part of the neck are white, tinged
above with grey, the lower part of the neck all round, the fore part of
the back, the scapulars, the fore part of the breast, and the sides,
blackish-grey; paler beneath. The hind part of the back and the
upper tail-coverts, are ash-grey; as are the wing-coverts; but the
secondary coverts are greyish-black in the middle; and all the quills
are of that colour, the secondaries margined with greyish-white; the
tail-feathers dusky-grey, broadly margined with greyish-white. The
dark colour of the fore part of the breast gradually fades into greyish-
white, which is the colour of the other inferior parts, excepting the
axillar feathers, and some of the lower wing-coverts, which are white.
Length of an individual in this plumage, kept four years, to end of tail
26 inches, to end of claws 25; extent of wings 55; bill along the ridge
2 1/4, from frontal angle 2 1/2; tarsus 2 7 1/2/12; hind toe 6/12, its claw
4 1/2/12; middle toe 2 1/4, its claw 4/12. Weight 2 lb. 13 oz. The bird
very poor.
In an adult male preserved in spirits, the roof of the mouth is
moderately concave, with five series of strong conical papillæ
directed backwards. The posterior aperture of the nares is linear,
margined with two series of extremely slender papillæ. The marginal
lamellæ of the upper mandible are 25, of the lower about 45. The
tongue is 2 inches 5 twelfths long, nearly cylindrical, with strong
pointed papillæ at the base, and on each side a series of flattened,
sharp lamellæ, directed backwards, together with very numerous
bristle-like filaments. It is fleshy, has a soft prominent pad at the base
above, and towards the end has a median groove, the point rounded
thin, and horny. The œsophagus; which is 17 inches long, has a
diameter of 9 twelfths at the upper part, and at the lower part of the
neck is dilated to 1 inch. The proventricular glands are cylindrical,
simple, and arranged in a belt nearly 1 inch in breadth. The other
parts were removed.
The reddish tint on the head affords no indication of the age of the
bird, some individuals of all ages having that part pure white, while
others have it rusty. The same remark applies to our two Swans.
SHARP-TAILED GROUS.
Tetrao Phasianellus, Linn.

PLATE CCCLXXXII. Male and Female.
This is another species of our birds with the habits of which I am

entirely unacquainted. Dr Richardson’s account of it is as follows:
—“The northern limits of the range of the Sharp-tailed Grous is Great
Slave Lake, in the sixty-first parallel; and its most southern recorded
station is in latitude 41°, on the Missouri. It abounds on the outskirts
of the Saskatchewan plains, and is found throughout the woody
districts of the Fur Countries, haunting open glades or low thickets
on the borders of lakes, particularly in the neighbourhood of the
trading paths, where the forests have been partially cleared. In
winter it perches generally on trees, in summer is much on the
ground; in both seasons assembling in coveys of from ten to sixteen.
Early in spring, a family of these birds select a level spot, whereon
they meet every morning, and run round in a circle of fifteen or
twenty feet in diameter, so that the grass is worn quite bare. When
any one approaches the circle, the birds squat close to the ground,
but in a short time stretch out their necks to survey the intruder; and,
if they are not scared by a nearer advance, soon resume their
circular course, some running to the right, others to the left, meeting
and crossing each other. These “Partridge dances” last for a month
or more, or until the hens begin to hatch. When the Sharp-tailed
Grous are put up, they rise with the usual whirring noise, and alight
again at the distance of a few hundred yards, either on the ground,
or on the upper branches of a tree. Before the cock quits his perch,
he utters repeatedly the cry of cuck, cuck, cuck. In winter they roost
in the snow like the Willow Grous, and they can make their way
through the loose wreaths with ease. They feed on the buds and
sprouts of the Betula glandulosa, of various willows, and of the
aspen and larch; and in autumn on berries. Mr Hutchins says that
the hen lays thirteen white eggs with coloured spots early in June;
the nest being placed on the ground and formed of grass, lined with
feathers.”
Dr Townsend informs me that while crossing the north branch of the
Platte (Lorimie’s Fork), he found this species breeding, and that as
an article of food it proved to be a very well-flavoured and plump
bird, considerably superior to any of the other larger species that
occur in the United States.
Tetrao Phasianellus, Linn. Syst. Nat. vol. i. p. 273.—Lath. Ind. Ornith. vol.
ii. p. 635.—Ch. Bonaparte, Synopsis of Birds of United States, p. 127.
Tetrao Phasianellus, Sharp-tailed Grous, Ch. Bonaparte, Amer. Ornith.
vol. iii. p. 37, pl. 19.
Tetrao (centrocercus) Phasianellus, Swains. Sharp-tailed Grous,
Richards. and Swains. Fauna Bor.-Amer. vol. ii. p. 361.
Sharp-tailed Grous, Nuttall, Manual, vol. i. p. 669.
Adult Male. Plate CCCLXXXII. Fig. 1.

Bill short, strong, as broad as high; upper mandible with the dorsal
line arcuato-declinate, the ridge narrow at the base on account of the
great extent of the nasal sinus, which is feathered, the sides convex
toward the end, the edges overlapping and thin, the tip declinate and
blunt, but thin-edged; lower mandible with the angle of moderate
length and width, the dorsal line ascending and convex, the edges
sharp and inclinate, the tip obtuse.
Head rather small, oblong; neck of moderate length; body full. Feet
rather short, stout; tarsus roundish, feathered, bare and reticulated
behind. Toes of moderate size, with numerous scutella above, but
covered over at the base by the hair-like feathers which grow from
the sides and the intervening basal membranes, laterally pectinate
with long slender projecting flattened scales; first toe small, second a
little longer than fourth, third much longer. Claws slender, arched,
moderately compressed, rather obtuse; that of the third toe with the
inner edge dilated.
Plumage dense, soft, rather compact, the feathers in general broadly
ovate; those on the head and upper part of the neck short, but some
on the upper and hind part of the former elongated and forming a
slight crest. There is a papillate coloured membrane over the eye, as
in the other species; and on each side of the neck is a large bare
space, concealed by the plumage, which I have no doubt is inflated,
as in Tetrao Cupido and T. Urophasianus, during the love season.
Wings rather short, concave, much rounded; the primaries stiff and
very narrow, so as to leave large intervals when the wing is
extended; the third quill longest, the fourth next, the second shorter
than the fifth, the sixth longer than the first. Tail short, much
graduated, of sixteen feathers, of which the lateral are three inches
shorter than the central; all the feathers are more or less concave,
excepting the two middle worn along the inner edge, obliquely and
abruptly terminated, the two middle projecting an inch beyond the
next.
Bill dusky above, brown beneath; iris light hazel; superciliary
membrane vermilion; toes brownish-grey, claws brownish-black. The
upper parts are variegated with light red or brownish-orange,
brownish-black and white; the black occupying the central part of the
feathers, the light red forming angular processes from the margin,
generally dotted with black, and a lighter bar near the end; the white
being in terminal, triangular, or guttiform spots on the scapulars and
wing-coverts. The alula, primary coverts, secondary coverts, and
quills are greyish-brown, the coverts spotted and tipped with white;
the primaries with white spots on the outer web, the inner tipped with
white, as are all the secondaries, of which the outer have two bars of
white spots, and the inner are coloured like the back. The tail is
white, at the base variegated, and the two middle feathers like the
back. Loral space, and a line behind the eye, white; a dusky streak
beneath the eye, succeeded by a light coloured one. The throat is
reddish-white, with some dusky spots; the fore part and sides of the
neck barred with dusky and reddish-white: on the lower part of the
neck and fore part of the breast, the dusky bars become first curved,
and then arrow-shaped, and so continue narrowing on the hind part
of the breast, and part of the sides, of which the upper portion is
barred; the abdomen, lower tail-coverts, axillar feathers, and most of
the lower wing-coverts, white. The hair-like feathers of the tarsi are
light brownish-grey, faintly barred with greyish-white.
Length to end of tail 17 1/2 inches, to end of wings 14, to end of
claws 17; extent of wings 23; wing from flexure 8 1/4, tail 4 1/2; bill
along the ridge 10 1/2/12, along the edge of lower mandible 1 1 1/2/12;
1/2 1/2
tarsus 1 7 /12; hind toe 6/12, its claw 6/12; middle toe 1 7 /12, its
claw 7/12.
Adult Female. Plate CCCLXXXII. Fig. 2.

The Female is considerably smaller, but is coloured like the male,
the tints being duller.
LONG-EARED OWL.
Strix otus, Linn.

PLATE CCCLXXXIII. Male.
This Owl is much more abundant in our Middle and Eastern Atlantic
Districts than in the Southern or Western parts. My friend Dr
Bachman has never observed it in South Carolina; nor have I met
with it in Louisiana, or any where on the Mississippi below the
junction of the Ohio. It is not very rare in the upper parts of Indiana,
Illinois, Ohio, and Kentucky, wherever the country is well wooded. In
the Barrens of Kentucky its predilection for woods is rendered
apparent by its not being found elsewhere than in the “Groves;” and
it would seem that it very rarely extends its search for food beyond
the skirts of those delightful retreats. In Pennsylvania, and elsewhere
to the eastward, I have found it most numerous on or near the banks
of our numerous clear mountain streams, where, during the day, it is
not uncommon to see it perched on the top of a low bush or fir. At
such times it stands with the body erect, but the tarsi bent and
resting on a branch, as is the manner of almost all our Owls. The
head then seems the largest part, the body being much more
slender than it is usually represented. Now and then it raises itself
and stands with its legs and neck extended, as if the better to mark
the approach of an intruder. Its eyes, which were closed when it was
first observed, are opened on the least noise, and it seems to squint
at you in a most grotesque manner, although it is not difficult to

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Financial Accounting - I, Revised Fourth Edition

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Concept of accounting theory, relation with

1. Introduction to Accounting 1.1 - 1.10

13. Introduction to Accounting Theory 13.1 - 13.4

18. Incomplete Records 18.1 - 18.64

Preface to the Revised Fourth Edition v

1. Introduction to Accounting 1.1 - 1.10

2. Double Entry System 2.1 - 2.10

Advantages of the Double Entry System 2.1

3. Accounting Cycle 3.1 - 3.44

< = > ? 3.15

4. The Trial Balance 4.1 - 4.18

Errors Disclosed by a Trial Balance 4.6

5. Bases of Accounting 5.1 - 5.14

6. Accounting Concepts and Conventions 6.1 - 6.8

7. Revenue Recognition 7.1 - 7.10

8. Inventories 8.1 - 8.28

Accounting Standard [AS-2 : Valuation of Inventories] 8.2

9. Depreciation Accounting 9.1 - 9.44

Useful Life of the Asset 9.3

10. Reserves and Provisions 10.1 - 10.30

Accounting for Provision for Bad Debts 10.4

11. Capital and Revenue 11.1 - 11.8

Objective Questions 12.36

13. Introduction to Accounting Theory 13.1 - 13.4

14. Introduction to Accounting Standard 14.1 - 14.8

15. Final Accounts of Trading Concern 15.1 - 15.108

Commission to Manager 15.59

16. Manufacturing Accounts 16.1 - 16.12

Distinction between the Income and Expenditure Account and

18. Incomplete Records 18.1 - 18.64

The Transaction Approach 18.2

19. Consignment Accounts 19.1 - 19.58

20. Accounting for Sale on Approval 20.1 - 20.12

When the Business Sends Goods Frequently on Sale or Return 20.7

21. Self-Balancing Ledger 21.1 - 21.44

22. Insurance Claims 22.1 - 22.44

Accountancy and Accounting

Distinction between Book-keeping and Accounting

Distinction between Financial Accounting and Management Accounting

Users of Accounting Information

Qualitative Characteristics of Financial Statements

(i) Raghunath commenced business with cash ~ 80,000

(ii) Purchased goods on credit ~ 20,000

(iii) Withdrew cash for private use ~ 2,000

(iv) Sold goods on credit ~ 20,000 (cost price ~ 15,000)

* It includes profit of ~ 5,000 (~ 20,000 -- ~ 15,000).

(viii) Paid ~ 800 as premium of life insurance policy.

(ii) Purchased goods for cash ~ 8,000

(iii) Sold goods costing ~ 6,000 for ~ 9,000

(iv) Purchased furniture ~ 20,000

(v) Took a loan of ~ 10,000 from bank

(vi) Paid salary ~ 4,000 and insurance ~ 2,000

(vii) Received rent ~ 3,000 and interest ~ 1,500

(viii) Paid ~ 800 as premium of life insurance policy