SESSION 2022-23, ODD SEM

Notes:
Accounting and Financial Analysis
(BBA 104)
I SEM BBA (D,E & F)
 UNIT -1

Basic Accounting Terms

These basic accounting terms are critical for any student who wants to develop a
deeper understanding of the subject and pursue further studies in this stream. These
terms and their definitions are as follows:
 Business Transaction – A business transaction is a financial event between
two or more parties. It involves an exchange of goods, services or money
and gets recorded in the books of accounts for the organisations involved.
 Capital – Capital is a critical component of any business to run its daily
operations and help its future growth. The capital for a business comes either
from its owners or from outsiders (shares, debentures or bonds).
 Drawings – Drawings refer to the withdrawals made by the owners of a
business for personal use. It gets deducted from the Owner’s Capital in the
Liabilities side of a Balance Sheet.
 Liabilities (Non-Current and Current) – Current Liabilities are the
amount due to the creditors of a business that has to be paid back within
twelve months. Non-Current Liabilities are the long-term obligations of a
company that are not due for payment before a year.
 Assets (Non-Current and Current) – Current Assets are the assets that a
firm can liquidate within twelve months. Non-Current Assets are the long-
term investments of a business that they cannot liquidate within a year.
 Fixed assets (Tangible and Intangible) – Tangible Fixed Assets are the
long-term investments of a business that have a physical existence.
Intangible Fixed Assets are the long-term investments made by a company
that doesn’t have a physical existence.
 Expenditure (Capital and Revenue) – A business incurs Capital
Expenditure to acquire assets for long-term income generation. It also incurs
Revenue Expenditure to run the day-to-day operations of a business.
 Expense – Expenses in accounting refer to the cost incurred or money the
business owners spend to generate revenue. A business must keep its
expenses under control to generate profits both in the short and long run.
 Income – Income is the revenue that a business earns from the sale of its
goods or services. It is essential for the survival and growth of any
 enterprise, and the failure to generate revenue can lead to a shutdown of the
business.
 Profit – Profit is the positive difference between the income generated from
selling goods or services and the Expenses incurred to perform that business
activity. Profit is the excess of revenues over the expenses.
 Gain – A Gain is an increase in the total value of an asset of a business. It
takes place when the current price of the asset exceeds its original purchase
price. It can occur at any time during the useful life of an asset.
 Loss – Loss is the excess of the Expenses incurred from selling goods or
services over the income generated to perform that business activity.
Sustained losses over time can lead to the shutdown of a business
organisation.
 Purchase – Purchase is the activity of buying an item to either use it in the
production of goods and services or resell it to another entity.
 Sales – Sales is an economic activity where a business exchanges goods or
services with another entity for money. It is the primary source of revenue
for any organisation.
 Goods – Goods are the items that a company manufactures to sell to another
entity in exchange for money. When an organisation buys goods, it is known
as purchases, and when it sells goods, it is known as sales.
 Stock – A stock is a financial instrument that represents the part ownership
of a company. Organisations use this instrument to raise capital for their
business.
 Debtor – A debtor is an individual or entity that owes money to a business.
Companies treat it as an asset because they will get money from them in the
near or distant future.
 Creditor – A creditor is an individual or entity to whom a business owes
money. Companies treat it as a liability because they will have to pay them
in the near or distant future.
 Voucher – A Voucher is an internal document that a company uses as
supporting evidence for accounting entries. Businesses treat it as a
redeemable transaction bond as it has a monetary value and is helpful in
specific cases.
 Discount (Trade Discount and Cash Discount) – A Trade Discount is a
discount that a seller can offer to the buyer by reducing the price of an item.
It helps to increase sales of a product, and it doesn’t get recorded in the
accounting books. A Cash Discount is a discount that a seller can offer to the
 buyer at the time of payment by reducing the invoice price of an item. It
helps to ensure timely payment for a product, and it gets recorded in the
accounting books.

Q.1 What will be effect of the following on the Accounting Equation?

(i) Started business with cash ₹ 45,000
(ii) Opened a Bank Account with a deposit of ₹ 4,500
(iii) Bought goods from M\s. Sun & Co. for ₹ 11,200
The solution for this question is as follows:

Therefore,
Liabilities = 11,200
Capital = 45,000
Assets = Liabilities + Capital
= 45,000 + 11,200 = 56,200
Q.2 Show the Accounting Equation for the following transactions:

(i) Gopinath started business with cash 25,000

(ii) Purchased goods from Shyam 10,000

(iii) Sold goods to Sohan costing ₹ 1,800 1,500

(iv) Gopinath withdrew from business 5,000

The solution for this question is as follows:

Here,
Liabilities = 10,000
Capital = 19,700
Assets = 10,000 + 19,700 = 29,700
Q.3 Show the effect of the following transactions on the Accounting
Equation:
(i) Started business with cash ₹ 50,000.
(ii) Salaries paid ₹ 2,000.
(iii) Wages Outstanding ₹ 200.
(iv) Interest due but not paid ₹ 100.
(v) Rent paid in advance ₹ 150.
The solution for this question is as follows:
Classification of Accounts in Accounting
 Personal Account
 Real Account
o Tangible Real Account
o Intangible Real Account
 Nominal Account
Personal Account
These accounts types are related to persons. These persons may be natural persons
like Raj’s account, Rajesh’s account, Ramesh’s account, Suresh’s account, etc.

These persons can also be artificial persons like partnership firms, companies, bodies
corporate, an association of persons, etc.
For example – Rajesh and Suresh trading Co., Charitable trusts, XYZ Bank Ltd, C
company Ltd, etc.

There can be personal representative accounts as well.

For example – In the case of Salary, when it is payable to employees, it is known

how much amount is payable to each of the employee. But collectively it is called as
‘Salary payable A/c’.

Rule for this Account

Debit the receiver.

Credit the Giver.

For Example – Goods sold to Suresh. In this transaction, Suresh is a personal

account as being a natural person. His account will be debited in the entry as the
receiver.

Real Accounts
These account types are related to assets or properties. They are further classified as
Tangible real account and Intangible real accounts.

Tangible Real Accounts

These include assets that have a physical existence and can be touched. For example
– Building A/c, cash A/c, stationery A/c, inventory A/c, etc.
Intangible Real Accounts
These assets do not have any physical existence and cannot be touched. However,
these can be measured in terms of money and have value. For Example – Goodwill,
Patent, Copyright, Trademark, etc.

Real Account Rules

Debit what comes into the business.

Credit what goes out of business.

For Example – Furniture purchased by an entity in cash. Debit furniture A/c and
credit cash A/c.

Learn more about Classification of Accounting here in detail

Nominal Account
These accounts types are related to income or gains and expenses or losses. For
example: – Rent A/c, commission received A/c, salary A/c, wages A/c, conveyance
A/c, etc.

Rules
Debit all the expenses and losses of the business.

Credit the incomes and gains of business.

For Example – Salary paid to employees of the entity. Salary A/c will be debited
when the expenses are incurred. Whereas, when an entity receives any interest,
discount, etc these are credited whenever these are received by the entity.

RULES OF DEBIT ANDCREDIT

Basically, debit means to enter an amount to the left side of an account and credit
means to enter an amount to the right side of an account. In the abbreviated form Dr. stands for debit
and Cr. stands for credit. Both debit and credit may represent either increase or decrease depending
 upon the nature of an account.

The Rules for Debit and Credit are given below :

Types of Accounts Rules for Debit Rules for Credit

(a) For Personal Accounts Debit the receiver Credit the giver

(b) For Real Accounts Debit what comes in Credit what goes out

(c) For Nominal Accounts Debit all expenses and Credit all incomes
losses and gains

What are the Different Accounting Concepts?

Following are the different accounting concepts that are widely used all around
the world and hence are termed as universally accepted accounting rules. The
different accounting concepts are:

Business Entity Concept

This concept assumes that the organization and business owners are two
independent entities. Hence, the business translation and personal transaction of
its owner are different. For example, when the business owner invests his money
in the business, it is recorded as a liability of the business to the owner. Similarly,
when the owner takes away from the business cash/goods for his/her personal
use, it is not treated as a business expense. Thus, the accounting transactions
are recorded in the books of accounts from the organization's point of view and
not the person owning the business.

Example:
Suppose Mr. Birla started a business. He invested Rs 1, 00, 000. He purchased
goods for Rs 50,000, furniture for Rs. 40,000, and plant and machinery for Rs.
10,000 and Rs 2000 remained in hand. These are the assets of the business and
not of the business owner. According to the business entity concept, Rs.1,00,000
will be assumed by a business as capital i.e. a liability of the business towards
the owner of the business.

Now suppose, he takes away Rs. 5000 cash or goods for the same worth for his
domestic purposes. This withdrawal of cash/goods by the owner from the
business is his private expense and not the business expense. It is termed as
Drawings.

Therefore, the business entity concept states that the business and the business
owner are two separate/distinct persons. Accordingly, any expenses incurred by
the owner for himself or his family from business will be considered as expenses
and it will be represented as drawings.

Accrual Concept
The term accrual means something is due, especially an amount of money that is
yet to be paid or received at the end of the accounting period. It implies that
revenue is realized at the time of sale through cash or not whereas expenses are
recognized when they become payable whether cash is paid or not. Therefore,
both the transactions are recorded in the accounting period in which they relate.

In the accounting system, the accrual concept tells that the business revenue is
realized at the time goods and services are sold irrespective of the fact when
cash is received for the same. For example, On March 5, 2021, the firm sold
goods for Rs 55000, and the payment was not received until April 5, 2021, the
amount was due and payable to the firm on the date goods and services were
sold i.e. March 5, 2021. It must be included in the revenue for the year ending
March 31, 2021.

Similarly, expenses are recognized at the time services are provided, irrespective
of the fact that cash paid for these services are made. For example, if the firm
received goods costing Rs.20000 on March 9, 2021, but the payment is made
on April 7, 2021, the accrual concept requires that expenses must be recorded
for the year ending March 31, 2021, although no payment has been made until
this date though the service has been received and the person to whom the
payment should have been made is represented as a creditor of business firm.

In brief, the accrual concept states that revenue is recognized when realized and
expenses are recognized when they become due and payable irrespective of the
cash receipt or cash payment.

Accounting Cost Concept

The accounting cost concept states all the business assets should be written
down in the book of accounts at the price assets are purchased, including the
cost of acquisition, and installation. The assets are not recorded at their market
price. It implies that the fixed assets like plant and machinery, building, furniture,
etc are recorded at their purchase price. For example, a machine was purchased
by ABC Limited for Rs.10,00,000, for manufacturing bottles. An amount of
Rs.2,000 was spent on transporting the machine to the factory site. Also,
Rs.2000 was additionally spent on its installation. Hence, the total amount at
which the machine will be recorded in the books of accounts would be the total of
all these items i.e. Rs.10, 040, 00. This cost is also termed as historical cost.

Dual Aspect
The dual aspect is the basic principle of accounting. It provides the basis for
recording business transactions in the books of accounts. This concept assumes
that every transaction recorded in the books of accountants is based on dual
concepts. This implies that the transaction that is recorded affects two accounts
on their respective opposite sides. Hence, the transaction should be recorded at
dual places. It implies that both aspects of the transaction should be recorded in
the books of account. For example, goods purchased in exchange for cash have
two aspects such as paying cash and receiving goods. Therefore, both the
aspects should be registered in the books of accounts. The duality of the
transaction is commonly expressed in the terms of the following equation given
below:

Assets = Liabilities + Capital

The dual concept implies that every transaction has a similar effect on assets
and liabilities in such a way that the value of total assets is always equal to the
value of total liabilities.

Going Concepts
The Going concept in accounting states that a business activities will be carried
by any firm for an unlimited duration This simply means that every business has
continuity of life. Hence, it will not be dissolved shortly. This is an important
assumption of accounting as it provides a base for representing the asset value
in the balance sheet.

For example, the plant and machinery was purchased by a company of Rs. 10
lakhs and its life span is 10 years. According to the Going concept, every year
some amount of assets purchased by the business will be represented as an
expense and the balance amount will be shown as an asset in the books of
accounts. Thus, if an amount is incurred on an item that will be used in business
for several years ahead, it will not be proper to charge the amount from the
revenues of that particular year in which the item was purchased Only a part of
the purchase value is shown as an expense in the year of purchase and the
remaining balance is shown as an asset in the balance sheet.
Money Measurement Concept
The money measurement concept assumes that the business transactions are
made in terms of money i.e. in the currency of a country. In India, such
transactions are made in terms of the rupee. Hence, as per the money
measurement concept, transactions that can be expressed in terms of money
should be recorded in books of accounts. For example, the sale of goods worth
Rs. 10000, purchase of raw material Rs. 5000, rent paid Rs.2000 are expressed
in terms of money, hence these transactions can be recorded in the books of
accounts.

Accounting Period Concepts

Accounting period concepts state that all the transactions recorded in the books
of account should be based on the assumption that profit on these transactions is
to be ascertained for a specific period. Hence this concept says that the balance
sheet and profit and loss account of a business should be prepared at regular
intervals. This is important for different purposes like calculation of profit and
loss, tax calculation, ascertaining financial position, etc. Also, this concept
assumes that business indefinite life is divided into two parts. These parts are
termed accounting periods. It can be one month, three months, six months, etc.
Usually, one year is considered as one accounting period which may be a
calendar year or financial year.

The year that begins on January 1 and ends on January 31 is termed as

calendar year whereas the year that begins on April 1 and ends on March 31 is
termed as financial year.

Realization Concept
The term realization concept states that revenue earned from any business
transaction should be included in the accounting records only when it is realized.
The term realization implies the creation of a legal right to receive money. Hence,
it should be noted that selling goods is considered as realization whereas
receiving order is not considered as realization.

In other words, the revenue concept states that revenue is realized when cash is
received or the right to receive cash on the sale of goods or services or both
have been created.

Matching Concepts
The Matching concept states that revenue and expenses incurred to earn the
revenue must belong to the same accounting period. Hence, once revenue is
realized, the next step is to assign the relevant accounting period. For example,
if you pay a commission to a salesperson for the sale that you record in March.
The commission should also be recorded in the same month.

The matching concept implies that all the revenue earned during an accounting
year whether received or not during that year or all the expenses incurred
whether paid or not during that year should be considered while determining the
profit and loss of the business for that year. This enables the investors or
shareholders to know the exact profit and loss of the business.

What are Accounting Conventions?

Accounting conventions are certain restrictions for the business transactions that
are complicated and are unclear. Although accounting conventions are not
generally or legally binding, these generally accepted principles maintain
consistency in financial statements. While standardized financial reporting
processes, the accounting conventions consider comparison, full disclosure of
transaction, relevance, and application in financial statements.

Four important types of accounting conventions are:

 Conservatism: It tells the accountants to err on the side of caution when
providing the estimates for the assets and liabilities, which means that
when there are two values of a transaction available, then the always lower
one should be referred to.
 Consistency: A company is forced to apply the similar accounting
principles across the different accounting cycles. Once this chooses a
method it is urged to stick with it in the future also, unless it finds a good
reason to perform it in another way. In the absence of these accounting
conventions, the ability of investors to compare and assess how the
company performs becomes more challenging.
 Full Disclosure: Information that is considered potentially significant and
relevant is to be completely disclosed, regardless of whether it is
detrimental to the company.
 Materiality: Similar to full disclosure, this convention also bound
organizations to put down their cards on the table, meaning they need to
totally disclose all the material facts about the company. The aim behind
this materiality convention is that any information that could influence the
person’s decision by considering the financial statement must be included.
Accounting Principles
Accounting principles are a set of guidelines and rules issued by accounting
standards like GAAP and IFRS for the companies to follow while presenting or
recording financial transactions in the books of account. This enables companies
to present a true and fair view of the financial statements.

Here is the list of the top 6 accounting principles that companies follow quite
often:
1. Accrual Principle
2. Consistency Principle
3. Conservatism Principle
4. Going Concern Principle
5. Matching Principle
6. Full Disclosure Principle

Accounting Convention Methods

There are four main accounting conventions designed to assist accountants:
 Conservatism: Playing it safe is both an accounting principle and
convention. It tells accountants to err on the side of caution when
providing estimates for assets and liabilities. That means that when two
values of a transaction are available, the lower one should be favored.
The general concept is to factor in the worst-case scenario of a firm’s
financial future.
 Consistency: A company should apply the same accounting principles
across different accounting cycles. Once it chooses a method it is
urged to stick with it in the future, unless it has a good reason to do
otherwise. Without this convention, investors' ability to compare and
assess how the company performs from one period to the next is made
much more challenging.
 Full disclosure: Information considered potentially important and
relevant must be revealed, regardless of whether it is detrimental to the
company.
 Materiality: Like full disclosure, this convention urges companies to lay
all their cards on the table. If an item or event is material, in other words
important, it should be disclosed. The idea here is that any information
that could influence the decision of a person looking at the financial
statement must be included.
What are Accounting Standards?
Companies make many transactions on a daily basis in order to run and engage in their businesses.
 They have to make many statements in this regard, particularly for banks and creditors to
make evaluations before lending them funds. The most important statements are
the balance sheet and the profit and loss account (also known as the income statement).
 These statements reveal the financial health of the company and enable banks and financial
institutions to make sound evaluations.
 Accounting is an intricate process and this allows companies to alter their accounting
principles to suit themselves.
 This does not allow other entities to make any comparisons.
 This is precisely the reason accounting standards are recommended.
 Recognised accounting bodies set standards of accounting so that there is a harmonised
accounting principle for companies to adhere to.

International Financial Reporting Standards (IFRS)

The IFRS was instituted by the International Accounting Standards Board (IASB). The IASB was
formed in 2001 with the objective of issuing the IFRS. The IASB replaced the earlier body, the
International Accounting Standards Committee (IASC). The IASB is headquartered in London. The
purpose of issuing the IFRS was to have a common accounting language to increase transparency
in the presentation of financial information.

Ind AS Adoption
The Ind AS is in the process of being adopted by the companies in India in phases. In the first and
second phases, all listed and unlisted companies adopted the Indian Accounting Standards.
In the third and fourth phases, banks and non-banking financial companies (NBFCs) were supposed
to adopt these standards.
Although the NBFCs have already come under the Ind AS, the banks are yet to adopt them. This is
because the RBI deferred this on account of two factors:
1. There was a requirement of amending the Banking Regulation Act, 1949 – which is yet to be
done by the Parliament.
2. The banking sector itself was not deemed ‘prepared’ for the change.
The RBI postponed the implementation of Ind AS on banks from April 2018 to April 2019. Then
again, it deferred this implementation indefinitely in April 2019.
The banking sector was always opposed to the adoption of Ind AS because of many factors,
notwithstanding the already mentioned factors. The implementation of the Ind AS will bring in many
changes in the accounts of the companies.
ICAI’s AS-1: Disclosure of Accounting Policies
AS-1 of ICAI deals with the disclosure of significant accounting policies followed in
preparing and presenting financial statements, by way of a separate statement/ notes
forming part of such financial statements, to facilitate meaningful comparison of financial
statements of different enterprises/ periods.
ICAI’s AS-2: Valuation of Inventories
AS-2 of ICAI deals with the determination of value at which inventories are carried in the
financial statements, including the ascertainment of cost of inventories and any write-
down thereof to net realisable value.

ICAI’s AS-3: Cash Flow Statements

AS-3 of ICAI deals with the provision of information about the historical changes in cash
and cash equivalents of an enterprise by means of a Cash Flow Statement which
classifies cash flows during the period from operating, investing and financing activities.

ICAI’s AS-4: Contingencies and Events Occurring After Balance Sheet

Date
ICAI’s AS-5: Net profit or Loss for the period, Prior Period Items and
Changes in Accounting Policies
AS-5 of ICAI should be applied by an enterprise in presenting profit or loss from
ordinary activities, extraordinary items and prior period items in the Statement of Profit
and Loss, in accounting for changes in accounting estimates, and in disclosure of
changes in accounting policies.

ICAI’s AS-7: Construction Contracts

AS-7 of ICAI prescribes the accounting for construction contracts in the financial
statements of contractors.

ICAI’s AS-9: Revenue Recognition

AS-9 of ICAI deals with the bases for recognition of revenue in the Statement of Profit
and Loss of an enterprise. The Standard is concerned with the recognition of revenue
arising in the course of the ordinary activities of the enterprise from: a) Sale of goods; b)
Rendering of services; and c) Interest, royalties and dividends.

ICAI’s AS-10: Property, Plant and Equipment

The objective of AS-10 of ICAI is to prescribe the accounting treatment for property,
plant and equipment (PPE).

ICAI’s AS-11: The Effects of Changes in Foreign Exchange Rates

AS-11 of ICAI lays down principles of accounting for foreign currency transactions and
foreign operations, i.e., which exchange rate to use and how to recognise in the
financial statements the financial effect of changes in exchange rates.

ICAI’s AS-12: Government Grants

AS-12 of ICAI deals with accounting for government grants. Government grants are
sometimes called by other names such as subsidies, cash incentives, duty drawbacks,
etc.

ICAI’s AS-13: Accounting for Investments

AS-13 of ICAI deals with accounting for investments in the financial statements of
enterprises and related disclosure requirements.
ICAI’s AS-14: Accounting for Amalgamations
AS-14 of ICAI deals with accounting for amalgamations and the treatment of any
resultant goodwill or reserves.

ICAI’s AS-15: Employee Benefits

ThAS-11 of ICAI lays down principles of accounting for foreign currency transactions
and foreign operations, i.e., which exchange rate to use and how to recognise in the
financial statements the financial effect of changes in exchange rates.

ICAI’s AS-12: Government Grants

AS-12 of ICAI deals with accounting for government grants. Government grants are
sometimes called by other names such as subsidies, cash incentives, duty drawbacks,
etc.

ICAI’s AS-13: Accounting for Investments

AS-13 of ICAI deals with accounting for investments in the financial statements of
enterprises and related disclosure requirements.

ICAI’s AS-14: Accounting for Amalgamations

AS-14 of ICAI deals with accounting for amalgamations and the treatment of any
resultant goodwill or reserves.

ICAI’s AS-15: Employee Benefits

The objective of AS-15 of ICAI is to prescribe the accounting treatment and disclosure
for employee benefits in the books of employer except employee share-based
payments. It does not deal with accounting and reporting by employee benefit plans.

ICAI’s AS-16: Borrowing Costs

AS-16 of ICAI should be applied in accounting for borrowing costs. This Standard does
not deal with the actual or imputed cost of owners’ equity, including preference share
capital not classified as a liability.

ICAI’s AS-17: Segment Reporting

The objective of AS-17 of ICAI is to establish principles for reporting financial
information, about the different types of segments/ products and services an enterprise
produces and the different geographical areas in which it operates.

ICAI’s AS-18: Related Party Disclosures

AS-18 of ICAI should be applied in reporting related party relationships and transactions
between a reporting enterprise and its related parties. The requirements of this
Standard apply to the financial statements of each reporting enterprise and also to
consolidated financial statements presented by a holding company.

ICAI’s AS-19: Leases

The objective of AS-19 of ICAI is to prescribe, for lessees and lessors, the appropriate
accounting policies and disclosures in relation to finance leases and operating leases.
ICAI’s AS-20: Earnings Per Share
AS-20 of ICAI prescribes principles for the determination and presentation of earnings
per share which will improve comparison of performance among different enterprises for
the same period and among different accounting periods for the same enterprise.

ICAI’s AS-21: Consolidated Financial Statements

The objective of AS-21 of ICAI is to lay down principles and procedures for preparation
and presentation of consolidated financial statements. These statements are intended
to present financial information about a parent and its subsidiary(ies) as a single
economic entity to show the economic resources controlled by the group, obligations of
the group and results the group achieves with its resources.

ICAI’s AS-22: Accounting for Taxes on Income

The objective of AS-22 of ICAI is to prescribe accounting treatment of taxes on income
since the taxable income may be significantly different from the accounting income due
to many reasons, posing problems in matching of taxes against revenue for a period.

ICAI’s AS-23: Accounting for Investments in Associates

AS-23 of ICAI should be applied in accounting for investments in associates in the
preparation and presentation of consolidated Financial Statements (CFS) by an
investor.

ICAI’s AS-24: Discontinuing Operations

The objective of AS-24 of ICAI is to establish principles for reporting information about
discontinuing operations, thereby enhancing the ability of users of financial statements
to make projections of an enterprise’s cash flows, earnings generating capacity, and
financial position by segregating information about discontinuing operations from
information about continuing operations. AS 24 applies to all discontinuing operations of
an enterprise.

ICAI’s AS-25: Interim Financial Reporting

AS-25 of ICAI applies if an entity is required or elects to publish an interim financial
report. The objective of this standard is to prescribe the minimum content of an interim
financial report and to prescribe the principles for recognition and measurement in
complete or condensed financial statements for an interim period.

ICAI’s AS-26: Intangible Assets

AS-26 of ICAI prescribes the accounting treatment for intangible assets (i.e. identifiable
non-monetary asset, without physical substance, held for use in the production or
supply of goods or services, for rental to others, or for administrative purposes).

ICAI’s AS-27: Financial Reporting of Interests in Joint Ventures

The objective of AS-27 of ICAI is to set out principles and procedures for accounting for
interests in joint ventures and reporting of joint venture assets, liabilities, income and
expenses in the financial statements of venturers and investors.
ICAI’s AS-28: Impairment of Assets
The objective of AS-28 of ICAI is to prescribe the procedures that an enterprise applies
to ensure that its assets are carried at no more than their recoverable amount. The
asset is described as impaired if its carrying amount exceeds the amount to be
recovered through use or sale of the asset and AS 28 requires the enterprise to
recognise an impairment loss in such cases. It should be noted that AS 28 deals with
impairment of all assets unless specifically excluded from the scope of the Standard.

ICAI’s AS-29: Provisions, Contingent Liabilities and Contingent

Assets
The objective of AS-29 of ICAI is to ensure that appropriate recognition criteria and
measurement bases are applied to provisions and contingent liabilities and that
sufficient information is disclosed in the notes to the financial statements to enable
users to understand their nature, timing and amount. The objective of this Standard is
also to lay down appropriate accounting for contingent assets.

Note:
1. ICAI has withdrawn the AS 8 on Accounting for Research and Development.
2. ICAI Amends AS 2, AS 4, AS 10, AS 13, AS 14, AS 21, AS 29 and withdraws AS 6.
3. ICAI withdraws its Announcement on Treatment of exchange differences under AS
11
4. Companies (Accounting Standards) Amendment Rules, 2018 notified by MCA: AS 11
amended