FOUNDATION : PAPER - 2

FUNDAMENTALS OF
ACCOUNTING FOUNDATION

STUDY NOTES

The Institute of Cost Accountants of India

CMA Bhawan,12, Sudder Street, Kolkata - 700 016
First Edition : January 2013
Revised Edition : April 2013
Second Edition : December 2014

Published by :
Directorate of Studies
The Institute of Cost Accountants of India (ICAI)
CMA Bhawan, 12, Sudder Street, Kolkata - 700 016
www.icmai.in

Printed at :
Repro India Limited
Plot No. 02, T.T.C. MIDC Industrial Area,
Mahape, Navi Mumbai 400 709, India.
Website : www.reproindialtd.com

Copyright of these Study Notes is reserved by the Insitute of Cost

Accountants of India and prior permission from the Institute is
necessary for reproduction of the whole or any part thereof.
 Syllabus
Paper 2: Fundamentals of Accounting (FOA)

Syllabus Structure

A Fundamentals of Financial Accounting 60%

B Fundamentals of Cost & Management Accounting 40%

B A
40% 60%

ASSESSMENT STRATEGY

There will be written examination paper of three hours

OBJECTIVES

To gain comprehensive understanding of all aspects relating to financial statements, principles,

procedures of accounting and their application to different practical situations

Learning Aims

The Syllabus aims to test the student’s ability to:

l Understand and explain the conceptual framework of Accounting

l Prepare Accounts for various entities under different situations
l Acquire basic concepts of Cost & Management Accounting relevant for managerial decision
making
Skill sets required
Level A: Requiring the skill levels of knowledge and comprehension

Section A : Fundamentals of Financial Accounting 60%

1. Accounting Process
2. Reconciliation Statement
3. Accounting for Depreciation
4. Preparation of Final Accounts
5. Accounting for Special Transactions
Section B: Fundamentals of Cost & Management Accounting 40%
6. Fundamentals of Cost Accounting
7. Preparation of Cost Statements
8. Fundamentals of Management Accounting – basic knowledge and its
application

Section A : Fundamentals of Financial Accounting [60 marks]

1. Accounting Process
(a) Theoretical Framework ( meaning, scope and usefulness of Accounting; Generally Accepted
Accounting Principles, Concepts and Conventions)
(b) Capital and Revenue transactions- capital and revenue expenditures, capital and revenue receipts
(c) Measurement, Valuation and Accounting estimates
(d) Double entry system, Books of prime entry, Subsidiary Books
(e) Recording of Cash and Bank transactions
(f) Preparation of Ledger Accounts
(g) Preparation of Trial Balance- interpretation and usefulness
(h) Rectification of Errors
(i) Opening entries, Transfer entries, Adjustment entries, Closing entries
2. Reconciliation Statements
(a) Bank Reconciliation Statement
(b) Receivables / Payables Reconciliation Statement
(c) Stock Reconciliation Statement
3. Accounting for Depreciation
(a) Depreciation Policy
(b) Methods, computation and Accounting treatment
4. Preparation of Final Accounts:
(a) Of a Profit making concern (for sole proprietorship concern and partnership firm only)
(i) Preparation of Trading Account, Profit & Loss Account and Balance Sheet
(ii) Accounting treatment of bad debts, reserve for bad and doubtful debts, provision for
discount on debtors and provision for discount on creditors
(b) Of a Not-for-Profit making concern
(i) Preparation of Receipts and Payments Account;
(ii) Preparation of Income and Expenditure Account
(iii) Preparation of Balance Sheet
(c) Under Single Entry System including conversion of single entry into double entry system (basic
level)
(i) Concept of Single Entry System and preparation of Statement showing Profit and Loss ,
Statement of Affairs
(ii) Conversion of Single Entry System into Double Entry System of Accounting