ACCOUNTANCY
A textbook for the professional accountancy and advanced commercial examinations
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Preface to the first edition
As tutor, lecturer, and examiner for many years, I have observed that most students for the professional accountants' examinations enter the examination hall ill-prepared for the work they are expected to perform to the reasonable satisfaction of the examiners. To a great extent the fault lies solely, or largely, with themselves--lack of consistent and careful preparation throughout the whole period prior to the examination being the most usul fault. One of the most consistently presented excuses is that the text book employed contains an insufficient number of illustrations and too profu e a display of extraneous matter.
With a view to affording the maximum assistance available by the medium of a textbook in the form that, after extensive inquiry. I am convinced beyond all doubt the student requires, I have attempted in the following pages to explain and illustrate the fundamental principles calling for application in the examinations.
The work is intended for one section of the accountancy profession, viz. for students reading for the Intermediate and Final examinations of the Institute of Chartered Accountants, the Society of Incorporated Accoun- tants and Auditors, the Association of Certified and Corporate Accoun- tants, the Institute of Certified Public Accountants, and kindred bodies. In order to deal as adequately as space will permit with Accountancy proper, the subjects of Executorship and Costing are omitted, as an attempt to deal with them in a few cursory pages would be both dangerous and futile. With the same considerations in mind, discussions of purely legal and economic subjects are almost entirely excluded, and where introduced are done so only in so far as they relate to Accountancy. The same reasons are the justification for the brief chapter on Income Tax.
It may occur to the reader-and certainly would strike the practitioner forcibly that certain topics absorb more space, illustrations, and com- ment than others. To the practitioner, the matter briefly dealt with may appear-and doubtless very properly-much more vital to him than a topic which occupies several pages. The reply is that the book is for the examination candidate, and from close observation I have learned that certain types of question cause difficulty to the student; and wherever a repetition of type appears in this work, it is on the ground of special difficulty to the student, or in one or two instances because of the partiality of the examiner for the type of problem in question.
It is my pleasure to acknowledge the assistance afforded me in the preparation of this work by my clerk, Mr C. E. Ruddin, B.A.(Com.),
Statements of Standard Accounting Practice
STATEMENTS of Standard Accounting Practice ('accounting standards') are issued periodically by and with the associated approval of the Councils of The Institute of Chartered Accountants in England and Wales, The Institute of Chartered Accountants of Scotland, The Institute of Chartered Accountants in Ireland, The Association of Certified Accountants and The Institute of Cost and Management Accountants. Members of these bodies expected, under possible penalty of disciplinary action, to observe where practicable the accounting standards when producing U.K. financial accounts so as to present a true and fair financial position. Indeed, where financial accounts depart significantly from accounting standards this fact should be stated and, explained in the accounts and material effects disclosed. Members acting as auditors or reporting accountants should not only ensure disclosure of significant departures from accounting standards but must also, where applicable, justify any concurrence, stated or im- plied, with such departures.
New accounting standards are produced and existing ones altered in the light of changes in business and economic needs.
Extracts of certain accounting standards are reproduced with kind permission at relevant points in this book.
Note. In so far as they are not replaced by Statements of Standard Accounting Practice the 'Recommendations of Accounting Principles' (issued by the Institute of Chartered Accountants in England and Wales) continue as guidance statements and indicators of best practice.
Contents
Note. The pages in this edition have been numbered in a decimal system. The chapters are numbered 01 to 32, and each chapter is paged independently from 01. The first page is therefore 0101, the second 0102, and so on. This system gives the author and publisher greater flexibility in keeping the book up to date, as any chapter may be revised without disturbing the entire pagination.
Book-keeping to the trial balance 0101
Bank reconciliation statements and petty cash 0201
Arithmetic of accountancy 0301
Accounts current and average due date 0401
Trading and profit and loss account-balance sheet 0501
Bills of exchange 0601
Depreciation, reserves, and provisions 0701
Capital and revenue expenditure 0801
Self-balancing ledgers and sectional balancing 1001
Single entry →→ 1101
Receipts & payments, and income & expenditure accounts 1201
Tabular book-keeping 1301
Correction of errors 1401
Royalty accounts 1501
Joint venture accounts 1601
Consignment accounts 1701
Departmental accounts 1801
Branch accounts 1901
Hire purchase accounts 2001
Income tax in relation to accounts 2101
Partnership accounts
A - General standards and division of benefits 2201
B - Admission of a partner
C - Amalgamations and acquisitions of organization
D - Retirement of partner
E - Retirement and admission
F - Continuance of personnel with revised profit-sharing ratio 22137
G - Annuities
H - Dissolution
I - Limited partnership
J - Miscellaneous 22200
Limited company accounts
A - Introduction
B - Bookkeeping period, bookkeeping records, obligations of chiefs and so forth. 2310
C - Organization tax collection partnership charge, advance enterprise charge (ACT), treatment of tax assessment in restricted organization accounts, close organizations
D - Share capital 2375
E - Debentures
F - Alterations of share capital 23144
G - Acquisition entries 23155
H - Separable benefits and last records
I - Dividends 23251
J - Reconstructions, amalgamations, and absorptions
K - The Companies Acts 1980 to 1981
L - Different Explanations of Standard Bookkeeping Practice
Holding companies 2401
Double account system 2501
Stock exchange transactions, investment accounts, valuation of
shares, investment trusts and unit trusts 2601
Insurance claims 2701
Bankruptcy
Liquidation. 2901
Manufacturing accounts
Management accounting, aids and techniques
A - Introduction 3101
B - Interpretation of accounts
C - Balance-sheet criticism and accounting ratios 3138
D - Takeover bids 3153
E - Budgetary control
F - Marginal costing
G - Mechanical aids in accounting 3171
H - Electronic data processing (E.D.P.)
I - Investment appraisal
J - Operational research (O.R.) 3187
