FA Notes (CFA510) - Accounting [CFA510] 1. 2. 3. 4. 5. Cost...

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Accounting [CFA510] 1. Cost of goods sold = Opening Stock + Net Purchases – Closing Stock + Direct Expenses. 2. Scrap or waste material is measured at net realisable value and not at cost value. 3. AS-2 states that inventories should be valued at lower of historical cost or net realisable value 4. The journal is called the book of original entry, subsidiary book or book of prime entry. 5. When the payment side of the cash book is undercast results in undercasting of overdraft balance, hence the overdraft balance as per cash book will be less than the overdraft balance as per pass book. 6. A three-columnar cash book also records bank and discount transactions. 7. Cash A/C will always show debit balance. 8. A bank reconciliation Statement is a statement and not an account. 9. Cost of production = Prime cost + manufacturing cost + opening WIP – Closing WIP + Administrative Expenses. 10. The retail method is often used in the retail trade for measuring inventories of large numbers of rapidly changing items that have similar margins and for which it is impracticable to use other costing methods. 11. Since the provision for bad debts is a credit balance account, if the actual bad debts exceed the provision created, then there will be debit balance of provision for bad debts account. 12. Only those expenses which relate to and specifically attributable to the asset are capitalised. 13. Overstatement of closing stock results in overstatement of profit and overstatement of opening stock results in understatement of profit. 14. An error in casting the subsidiary books is an error of commission. 15. Net Profit = Gross Profit – Administration and other expenses. 16. Gross Profit = Sales – cost of goods sold. 17. Sales = Gross Profit + Opening Stock + Direct expenses + Purchases – Closing Stock 18. Revenue expenditure is an expenditure whose benefit expires within the current accounting period and is in the nature of recurring and is therefore written off of P/L A/C. 19. A capital expenditure is a non-recurring expenditure whose benefit lasts for more than one accounting period. 20. Deferred revenue expenditure is a revenue expenditure whose benefit lasts for more than one accounting periods and is therefore written off during the periods over which the benefit lasts. 21. Cost concept and Business entity concepts are related to balance sheet. 22. Realisation and matching concepts are related to P/L account. 23. In contract accounting, there is a reasonable certainty that the project would be completed and the return consideration is realised. In fact, return consideration may begin as soon as the work begins. So, revenue may be recognised at work-in-progress. 24. Contingency: A condition or situation the ultimate outcome of which, gain or loss, will be known or
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This note was uploaded on 07/20/2010 for the course ICFAI CFA taught by Professor Cfa during the Fall '09 term at Indian School of Business.

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FA Notes (CFA510) - Accounting [CFA510] 1. 2. 3. 4. 5. Cost...

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