Class 11 Accountancy Notes

The syllabus is not a list of unrelated topics but a pipeline. Chapters 1 and 2 give the language and the rules, Chapters 3 and 4 turn transactions into books, Chapters 5 and 6 test and correct those books, Chapter 7 values the assets and the liabilities, and Chapters 8 and 9 publish the result.

• Chapters 1 and 2 give the meaning of accounting, its users, its objectives, the accounting principles, the GAAPs and the accrual basis.
• Chapters 3 and 4 record transactions: a journal entry, posting to a ledger, subsidiary books, the cash book, and the treatment of GST.
• Chapter 5 reconciles the cash book with the pass book, and Chapter 6 tests the whole ledger with a trial balance and rectifies the errors it exposes.
• Chapter 7 deals with depreciation, provisions and reserves, which are the adjustments that value the assets and liabilities before they are published.
• Chapters 8 and 9 build the trading account, the profit and loss account and the balance sheet, and then apply the twelve adjustments that make those statements true at the closing date.

These two chapters are the conceptual base, and they are worth reading properly because every later chapter depends on the vocabulary they fix. The essay questions in the examination are usually drawn from this material.

• Accounting as an information language: it identifies, classifies, summarises, interprets and communicates economic information so that a user can take a decision.
• Users of accounting: internal users such as owners, managers and employees, and external users such as creditors, banks, investors, governments, regulators and suppliers.
• Objectives and characteristics of accounting, and the difference between book-keeping and accountancy.
• The accounting principles: business entity, going concern, money measurement, cost, dual aspect, revenue, matching, objectivity, consistency, accrual, conservatism, materiality and consistency.
• The accounting standards, the Ind AS framework, and the difference between GAAP, accounting policies and accounting standards.
• The accrual basis of accounting, the accounting period, the accounting entity and the money measurement assumption.

These two chapters cover the mechanics of record-keeping and they carry the most marks for routine accuracy. Chapter 3 handles the source documents and the journal and ledger, and Chapter 4 adds the subsidiary books, the cash book and GST.

• Source documents: the invoice, the debit note, the credit note, the bill of exchange, the receipt, the cash memo, the cheque, the pay-in slip, the bank statement, the deposit slip, the statement of account, and the asset memorandum.
• The journal and the ledger, the difference between a debit note and a credit note, the asset memorandum and the memorandum of valuation.
• Subsidiary books: purchases book, sales book, purchase returns book, sales returns book and cash book, with the journal entries in each.
• The three-column cash book with the discount column, and the difference between a cash book and a bank column.
• GST: CGST, SGST, IGST and UTGST, the input tax credit, the output tax credit, and the GST ledger and the treatment of the tax in the final statements.

Chapter 5 is a reconciliation between two records of the same cash, and Chapter 6 is a test of the whole ledger. Both are short on theory and heavy on the direction of each item, which is where the marks are.

• Bank reconciliation statement: the starting balance, the items to add and to deduct, the treatment of an overdraft, and the reconciliation of errors in the cash book and in the pass book.
• Trial balance: the balance method, the order of accounts, the treatment of debit and credit balances, the totals, and the use of a suspense balance.
• Rectification of errors before and after the trial balance: error of commission, error of principle, error of carrying forward, an error of casting, an error in posting to the wrong side, an error of original entry, and errors that do not affect the trial balance.
• The suspense account: its purpose, how it is opened, how it is cleared, and the warning that it must never be left in the books.

This chapter supplies the values that the final statements depend on. It is short, and it is also the most frequently confused, because a provision and a reserve are opposite things even though the names are similar.

• Depreciation: the meaning, the causes of depreciation, the SLM, WDV and the units of production methods, the change in the method, the change in the rate, and the calculation on the SLM and WDV methods with their formulas.
• The SLM formula with the remaining useful life, and the WDV formula with the written-down value and the remaining useful life.
• The provision for doubtful debts, the provision for discount on debtors, and the provision for an outgoing shipment of goods in transit.
• The accounting treatment of depreciation, the provision for doubtful debts and the provision for discount on debtors, in the profit and loss account and in the balance sheet.
• Provisions, reserves and the appropriation account, and the distinction between the two.
• The treatment of the depreciation fund in an insurance business, and the central value of a fixed asset under a new rate.

The last two chapters are the payoff. Chapter 8 builds the statements, and Chapter 9 adjusts them so that they are accurate at the closing date. Together they are the largest question in the paper.

• The stakeholders, their information needs, and the objectives of financial statements.
• The distinction between capital and revenue, and between capital and revenue expenditure, with receipts and payments classified.
• The trading account, net purchases, direct and indirect expenses, and closing stock.
• The profit and loss account: gross profit, operating expenses, operating profit, interest, tax and non-operating items, and the appropriation account.
• The balance sheet: its need, the grouping of assets and liabilities, and the process of marshalling.
• The opening entry, and the closing of the profit and loss appropriation account into capital.
• The twelve adjustments: closing stock, goods taken by the proprietor, outstanding expense, prepaid expense, accrued income, income received in advance, further bad debts, bad debts recovered, provision for doubtful debts, provision for discount on debtors, interest on capital and manager's commission.

The same handful of errors accounts for most of the marks lost in the numerical questions. None of them is a failure to understand the topic; they are all failures to follow a discipline.

• Confusing the debit note with the credit note, and therefore reversing the direction of a purchase return.
• Treating the cash book as if the cash column and the bank column were the same account, and mixing up the discount column with the balance column.
• Adding a bank interest credit when the reconciliation starts from the cash book, when it must be deducted, and deducting a direct deposit that must be added.
• Computing the provision for doubtful debts on sales, or computing the provision for discount on debtors on the original debtor figure instead of the reduced one.
• Putting income tax above operating profit, or adding rent received to the trading account, so operating profit comes out wrong even though net profit is unchanged.
• Carrying down gross purchases instead of net purchases, and forgetting that carriage inward belongs inside the purchase figure.
• Leaving an unexplained suspense balance or an unbalanced trial balance in the answer.
• Recording interest on capital as an expense instead of an appropriation of profit.

Accountancy is not read the way a history chapter is. The chapters are procedural, and the way to learn a procedure is to work it until the hand knows it.

• Read Chapters 1 and 2 for the definitions, and write each principle in your own words with one example from daily life.
• For Chapters 3 and 4, practise the journal entry first and the ledger second, and check the trial balance of every question you attempt.
• For Chapter 5, keep a two-column page for the items to add and the items to deduct, and never start a reconciliation until the starting balance is written.
• For Chapter 6, learn the suspense entries as a list of eight patterns, because they are memorised rather than derived.
• For Chapter 7, write the two depreciation formulas on a card, and revise them the night before the test.
• For Chapters 8 and 9, make one page for the trading account, one for the profit and loss account, one for the balance sheet order, and one for the twelve adjustments.
• Attempt a full-length question under timed conditions every week, and mark it against the examiner's expectations rather than your own reading of it.