BCOC-131
Financial Accounting
Indira Gandhi
National Open University
School of Management Studies
Block
1
THEORETICAL FRAMEWORK
UNIT 1
Nature and Scope of Accounting 5
UNIT 2
Accounting Process and Rules 23
UNIT 3
Accounting Principles 37
UNIT 4
Accounting Standards 60
,Theortical Framework
PROGRAMME DESIGN COMMITTEE B.COM (CBCS)
Prof. Madhu Tyagi Prof. D.P.S. Verma (Retd.) Faculty Members
Director, SOMS, IGNOU Department of Commerce SOMS, IGNOU
University of Delhi, Delhi
Prof. N V Narasimham
Prof. R.P. Hooda
Former Vice-Chancellor Prof. K.V. Bhanumurthy (Retd.) Prof. Nawal Kishor
MD University, Rohtak Department of Commerce Prof. M.S.S. Raju
University of Delhi, Delhi
Prof. B. R. Ananthan Dr. Sunil Kumar
Former Vice-Chancellor Prof. Kavita Sharma Dr. Subodh Kesharwani
Rani Chennamma University Department of Commerce
University of Delhi, Delhi Dr. Rashmi Bansal
Belgaon, Karnataka
Dr. Madhulika P Sarkar
Prof. I. V. Trivedi Prof. Khurshid Ahmad Batt Dr. Anupriya Pandey
Former Vice-Chancellor Dean, Faculty of Commerce &
M. L. Sukhadia University Management
Udaipur University of Kashmir, Srinagar
Prof. Purushotham Rao (Retd.) Prof. Debabrata Mitra
Department of Commerce Department of Commerce
Osmania University, Hyderabad University of North Bengal
Darjeeling
Prof. R. K. Grover (Retd.)
School of Management Studies
IGNOU
COURSE DESIGN COMMITTEE
Prof. Madhu Tyagi Faculty Members
Director, SOMS, IGNOU SOMS, IGNOU
Prof. N. V. Narasimham
Prof. A.A. Ansari Prof. Nawal Kishor
Jamia Millia Islamia, New Delhi Prof. M.S.S. Raju
Dr. Sunil Kumar
Ms. Surbhi Gupta Dr. Subodh Kesharwani
Vivekananda College Dr. Rashmi Bansal
University of Delhi, Delhi Dr. Madhulika P. Sarkar
Dr. Anupriya Pandey
COURSE PREPARATION TEAM
Dr. Sunil Kumar (Unit-4) Prof. M.S.S. Raju (Course Coordinator & Editor)
Dr. Sunil Kumar (Course Coordinator & Editor)
Preparatory Course in Commerce: PCO-01 (Unit-1, 2 and 3 Revised by Dr. Sunil Kumar)
Prof. J. Satyanarayan, Osmania University, Hyderabad
Prof. V. Vishwanadham, Osmania University, Hyderabad
Dr. D. Obul Reddy, Osmania University, Hyderabad
Shri M. Satyanarayana, Badruka College, Hyderabad
Print Production
Sh. Y. N. Sharma Sh. Sudhir Kumar
Assistant Registrar (Pub.) Section Officer (Pub.)
MPDD, IGNOU MPDD, IGNOU
June, 2019
Indira Gandhi National Open University, 2019
ISBN-978-93-89200-06-5
All rights reserved. No part of this work may be reproduced in any form, by mimeograph or any
other means, without permission in writing from the Indira Gandhi National Open University.
Further information on the Indira Gandhi National Open University courses may be obtained from
the University’s Office at Maidan Garhi, New Delhi-l10068 or website of INGOU www.ignou.ac.in
Printed and published on behalf of the Indira Gandhi National Open University, New Delhi by
Registrar, MPDD, IGNOU, New Delhi.
Laser Typeset by : Rajshree Computers, V-166A, Bhagwati Vihar, (Near Sec. 2, Dwarka), Uttam
Nagar, New Delhi-110059
2 Printed by :
,BLOCK 1 THEORETICAL FRAMEWORK
This block will introduce you to the core area in Commerce. In order to
appreciate the need for accounting, You have to practice accounting and require
a clear understanding of the nature and scope of accounting, the language used
in accounting and the principles that guide the accountant. This block also deals
with basic rules of double entry system and accounting standards which provides
the basis for accounting policies in order to prepare the financial statements.
This block is structured to cover these and other related aspects. It is hoped
that this block will provide you the necessary theoretical background to
understand and appreciate accounting in the right perspective. It covers four
units.
Unit 1 explains the nature and scope of accounting and the importance of
accounting information to various parties.
Unit 2 analyse the basic rules of double entry system and their application.
Unit 3 presents some of the terms commonly used in accounting and the basic
concepts underlying accounting.
Unit 4 deals with Accounting Standards which provides the basis for accounting
policies and for preparation of financial statements.
3
, Theortical Framework
4
Financial Accounting
Indira Gandhi
National Open University
School of Management Studies
Block
1
THEORETICAL FRAMEWORK
UNIT 1
Nature and Scope of Accounting 5
UNIT 2
Accounting Process and Rules 23
UNIT 3
Accounting Principles 37
UNIT 4
Accounting Standards 60
,Theortical Framework
PROGRAMME DESIGN COMMITTEE B.COM (CBCS)
Prof. Madhu Tyagi Prof. D.P.S. Verma (Retd.) Faculty Members
Director, SOMS, IGNOU Department of Commerce SOMS, IGNOU
University of Delhi, Delhi
Prof. N V Narasimham
Prof. R.P. Hooda
Former Vice-Chancellor Prof. K.V. Bhanumurthy (Retd.) Prof. Nawal Kishor
MD University, Rohtak Department of Commerce Prof. M.S.S. Raju
University of Delhi, Delhi
Prof. B. R. Ananthan Dr. Sunil Kumar
Former Vice-Chancellor Prof. Kavita Sharma Dr. Subodh Kesharwani
Rani Chennamma University Department of Commerce
University of Delhi, Delhi Dr. Rashmi Bansal
Belgaon, Karnataka
Dr. Madhulika P Sarkar
Prof. I. V. Trivedi Prof. Khurshid Ahmad Batt Dr. Anupriya Pandey
Former Vice-Chancellor Dean, Faculty of Commerce &
M. L. Sukhadia University Management
Udaipur University of Kashmir, Srinagar
Prof. Purushotham Rao (Retd.) Prof. Debabrata Mitra
Department of Commerce Department of Commerce
Osmania University, Hyderabad University of North Bengal
Darjeeling
Prof. R. K. Grover (Retd.)
School of Management Studies
IGNOU
COURSE DESIGN COMMITTEE
Prof. Madhu Tyagi Faculty Members
Director, SOMS, IGNOU SOMS, IGNOU
Prof. N. V. Narasimham
Prof. A.A. Ansari Prof. Nawal Kishor
Jamia Millia Islamia, New Delhi Prof. M.S.S. Raju
Dr. Sunil Kumar
Ms. Surbhi Gupta Dr. Subodh Kesharwani
Vivekananda College Dr. Rashmi Bansal
University of Delhi, Delhi Dr. Madhulika P. Sarkar
Dr. Anupriya Pandey
COURSE PREPARATION TEAM
Dr. Sunil Kumar (Unit-4) Prof. M.S.S. Raju (Course Coordinator & Editor)
Dr. Sunil Kumar (Course Coordinator & Editor)
Preparatory Course in Commerce: PCO-01 (Unit-1, 2 and 3 Revised by Dr. Sunil Kumar)
Prof. J. Satyanarayan, Osmania University, Hyderabad
Prof. V. Vishwanadham, Osmania University, Hyderabad
Dr. D. Obul Reddy, Osmania University, Hyderabad
Shri M. Satyanarayana, Badruka College, Hyderabad
Print Production
Sh. Y. N. Sharma Sh. Sudhir Kumar
Assistant Registrar (Pub.) Section Officer (Pub.)
MPDD, IGNOU MPDD, IGNOU
June, 2019
Indira Gandhi National Open University, 2019
ISBN-978-93-89200-06-5
All rights reserved. No part of this work may be reproduced in any form, by mimeograph or any
other means, without permission in writing from the Indira Gandhi National Open University.
Further information on the Indira Gandhi National Open University courses may be obtained from
the University’s Office at Maidan Garhi, New Delhi-l10068 or website of INGOU www.ignou.ac.in
Printed and published on behalf of the Indira Gandhi National Open University, New Delhi by
Registrar, MPDD, IGNOU, New Delhi.
Laser Typeset by : Rajshree Computers, V-166A, Bhagwati Vihar, (Near Sec. 2, Dwarka), Uttam
Nagar, New Delhi-110059
2 Printed by :
,BLOCK 1 THEORETICAL FRAMEWORK
This block will introduce you to the core area in Commerce. In order to
appreciate the need for accounting, You have to practice accounting and require
a clear understanding of the nature and scope of accounting, the language used
in accounting and the principles that guide the accountant. This block also deals
with basic rules of double entry system and accounting standards which provides
the basis for accounting policies in order to prepare the financial statements.
This block is structured to cover these and other related aspects. It is hoped
that this block will provide you the necessary theoretical background to
understand and appreciate accounting in the right perspective. It covers four
units.
Unit 1 explains the nature and scope of accounting and the importance of
accounting information to various parties.
Unit 2 analyse the basic rules of double entry system and their application.
Unit 3 presents some of the terms commonly used in accounting and the basic
concepts underlying accounting.
Unit 4 deals with Accounting Standards which provides the basis for accounting
policies and for preparation of financial statements.
3
, Theortical Framework
4
