CA Foundation PAPER 1: ACCOUNTING Syllabus

PAPER 1: ACCOUNTING syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for PAPER 1: ACCOUNTING in CA Foundation, not a summary of it.

1. 1

   Theoretical Framework

   8 topics

   • Meaning and Scope of Accounting
   • Accounting concepts, principles and conventions
   • Capital and revenue expenditure
   • Capital and revenue receipts
   • Contingent assets and contingent liabilities
   • Accounting policies
   • Accounting as a measurement discipline – valuation principles, accounting estimates
   • Accounting Standards - concepts and objectives
2. 2

   Accounting Process

   3 topics

   • Recording accounting transactions:
     • principles of double entry book keeping
     • books of original entry - journal
     • subsidiary book
     • cash book
     • ledger-format
     • posting from journal and subsidiary books
     • balancing of accounts
   • Preparation of trial balance
   • Rectification of errors
3. 3

   Bank Reconciliation Statement

   1 topic

   • Introduction, reasons and preparation of bank reconciliation statement
4. 4

   Inventories

   3 topics

   • Meaning, basis and technique of inventory valuation, cost of inventory, net realizable value and record system
   • Cost of inventory
   • Net realizable value and record system
5. 5

   Depreciation and Amortisation

   1 topic

   • Tangible and intangible assets-Meaning and difference, concepts, methods of computation and accounting treatment of depreciation / amortisation, change in depreciation method
6. 6

   Bills of exchange and Promissory notes

   1 topic

   • Meaning of bills of exchange and promissory notes and their accounting treatment; accommodation bills
7. 7

   Preparation of Final accounts of Sole Proprietors

   4 topics

   • Elements of financial statements of manufacturing and non manufacturing entities
   • closing adjustment entries of manufacturing and non manufacturing entities
   • trading account of manufacturing and non manufacturing entities
   • profit and loss account and balance sheet of manufacturing and non manufacturing entities
8. 8

   Financial Statements of Not-for-Profit Organizations

   3 topics

   • Significance and preparation of receipt and payment account
   • Income and expenditure account and balance sheet
   • Difference between profit and loss account and income and expenditure account
9. 9

   Accounts from Incomplete Records (excluding preparation of accounts based on ratios)

   overview

   Examined as a single unit within PAPER 1: ACCOUNTING — no further topic split in the official outline.

10. 10

    Partnership and LLP Accounts

    3 topics

    • Final accounts of partnership firms and LLPs
    • Admission, retirement and death of a partner including treatment of goodwill
    • Dissolution of partnership firms and LLPs including piecemeal distribution of assets
11. 11

    Company Accounts

    4 topics

    • Definition of shares and debentures
    • Issue of shares and debentures, forfeiture of shares, re-issue of forfeited shares
    • Redemption of preference shares and debentures (excluding purchase and redemption of own debentures and sinking fund method)
    • Accounting for bonus issue and right issue

PAPER 1: ACCOUNTING flashcards for CA Foundation

19 of 78 cards from the PAPER 1: ACCOUNTING deck — real questions with worked answers.

1. Define accounting and state its primary purpose.

   Accounting is the 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. Its purpose is to provide financial information for decision-making.

2. What are the four sequential functions (stages) of the accounting process?

   (1) Recording (Journal), (2) Classifying (Ledger), (3) Summarising (Trial Balance and Final Accounts), and (4) Analysing/Interpreting and Communicating the results.

3. State the accounting equation.

   Assets = Liabilities + Capital (or Capital = Assets − Liabilities). It reflects that total assets are financed by owners' funds and outside liabilities.

4. Explain the Money Measurement Concept.

   Only transactions and events that can be measured and expressed in monetary terms are recorded in the books. Non-monetary facts (e.g., management quality, staff morale) are excluded even if important.

5. What does the Going Concern Concept assume?

   It assumes the business will continue to operate for the foreseeable future and has neither the intention nor necessity to liquidate or curtail materially the scale of operations. Hence assets are recorded at cost, not break-up value.

6. Explain the Accrual Concept (mercantile basis).

   Revenues and costs are recognised when they are earned or incurred (not when cash is received or paid) and recorded in the accounting period to which they relate.

7. State the Matching Concept.

   Expenses incurred in an accounting period should be matched with the revenues recognised in that same period to determine correct profit or loss.

8. What is the Dual Aspect (Duality) Concept?

   Every transaction has two aspects — a debit and a credit of equal amount. This is the foundation of the double-entry system and the accounting equation.

9. Distinguish between the Conservatism (Prudence) Convention and the Consistency Convention.

   Conservatism: anticipate no profit but provide for all possible losses (e.g., value stock at cost or NRV, whichever is lower). Consistency: the same accounting policies/methods should be followed from one period to the next to allow comparability.

10. What is the Materiality Convention?

    Only items significant enough to influence the decisions of users need be disclosed/recorded separately; insignificant items may be aggregated or treated in a convenient manner.

11. Define capital expenditure and give two examples.

    Expenditure incurred to acquire/improve a fixed asset or to increase its earning capacity, the benefit of which extends beyond one accounting period. Examples: purchase of machinery, cost of additions to a building.

12. Define revenue expenditure and give two examples.

    Expenditure whose benefit is consumed within the current accounting period and is incurred to maintain earning capacity. Examples: repairs, salaries, rent, purchase of goods for resale.

13. What is deferred revenue expenditure?

    Revenue expenditure whose benefit extends over more than one accounting period; it is written off over those periods (e.g., heavy advertising for launching a new product). The unwritten-off portion is shown as an asset.

14. Distinguish capital receipts from revenue receipts.

    Capital receipts arise from non-recurring transactions affecting capital/liabilities or sale of fixed assets (e.g., capital introduced, loan taken, sale of machinery) and are shown in the Balance Sheet. Revenue receipts arise from normal operations (e.g., sale of goods, interest, commission earned) and are credited to the Trading/P&L account.

15. Define a contingent liability.

    A possible obligation arising from past events whose existence depends on the occurrence/non-occurrence of one or more uncertain future events not wholly within control of the entity; OR a present obligation not recognised because outflow is not probable or cannot be reliably measured. It is disclosed by way of a note, not recorded.

16. Define a contingent asset and state how it is treated.

    A possible asset arising from past events whose existence depends on uncertain future events not wholly within the entity's control. It is NOT recognised in the financial statements (as per prudence) and not even disclosed in the financial statements; it may be disclosed in the approving authority's report when realisation is virtually certain.

17. What are accounting policies?

    The specific accounting principles and the methods of applying those principles adopted by an enterprise in preparing and presenting financial statements (e.g., method of depreciation, valuation of inventories, treatment of goodwill).

18. Name the three fundamental accounting assumptions underlying financial statements (AS 1).

    Going Concern, Consistency, and Accrual. If they are followed, no specific disclosure is required; if any is not followed, the fact must be disclosed.

19. What three major considerations govern the selection of accounting policies (AS 1)?

    Prudence, Substance over Form, and Materiality.

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