1. Capital expenditure
2. Revenue expenditure
3. Deferred revenue expenditure

The external users of accounting are:
(i) Creditors and financial institutions: Suppliers of goods and services, commercial banks, public deposit holders and debenture holders are included in this category. They are interested in knowing the liquidity position and repaying capacity of the business enterprise.
(ii) Investors: Persons who are interested in investing their funds in an organisation should know about the financial condition of a business unit while making their investment decisions.
(iii) Customers: Customers who buy and use the products and services of business enterprises are interested in knowing the details of the products and the prices charged to them.
(iv) Tax authorities and other regulatory bodies: Accounting information helps the tax authorities in computing income tax and taxes on goods and services and other taxes to be collected from business units. Other regulatory bodies also require information about revenues, expenses and other financial aspects of business to ensure that the enterprises comply with statutory requirements.
(v) Government: The scarce resources of the country are used by business enterprises. Information about performance of business units in, different industries helps the government in policy formulation for development of trade and industry, allocation of scarce resources, grant of subsidy, etc., Government also administers prices of certain commodities. In such cases, government agencies have to ensure that the guidelines for pricing are followed.
(vi) Researchers: Researchers to carry out their research can use accounting information and make use of the published financial statements, for analysis and evaluation.
(vii) General public: From accounting information, the general public at large can get a view of the earning capacity and stability of the enterprise as well as the social responsibility measures undertaken by the enterprise, particularly in its area of operation and also the employment opportunities provided to the local people.

Bad debts
(i) Debts which cannot be recovered or become irrecoverable are called bad debts.
(ii) It is a loss for the business and should be adjusted against profit
Provision for doubtful debts:
In addition to the actual bad debts, a business unit may estimated at the end of the accounting period that certain debts are doubtful, i.e., the amount to be received from debtors mayor may not be received.
Provision for discount on debtors:
(i) Cash discount is allowed by the suppliers to customers for prompt settlement of cash.
(ii) A provision created on sundry debtors for allowing such discount is called provision for discount on debtors.

(i) Simple petty cash book:
(a) A simple petty cash book resembles the single column cash book. But the ruling is different.
(b) On the debit side, only one amount will be recorded which is the advance received from the head cashier.
(c) On the credit side, all payments are recorded in only one column. This is known as simple petty cash book.
(ii) Analytical petty cash book:
(a) In analytical petty cash book, a separate column is provided for different heads of payments and one column for total payments.
(b) When the petty expenses are recorded in the total payment column, the same amount is also recorded in the appropriate expense column. This is known as Analytical petty cash book.

The advantages of maintaining subsidiary books can be summarised as under :
(i) Proper and systematic record of the business transactions : All the business transactions are classified and grouped conveniently as cash and non cash transactions, which are further classified as credit purchases, credit sales and returns etc.
(ii) Convenient posting: All the transactions of a particular nature are recorded at one place, i.e., in one of the subsidiary books. For Example: All credit purchases of goods are recorded in the purchases book and all credit sales of goods are recorded in the sales book.
(iii) Division of work: As journals are sub-divided, the work will be sub-divided and different persons can work on different books at the same time and the work can be speedily completed.
(iv) Efficiency: The sub-division of work gives the advantage of specialisation. Thus specialisation leads to efficiency in accounting work.
(v) Helpful in decision making: Subsidiary books provide complete details about every type of transactions separately. Hence the management can use the information as the basis for deciding its future actions.
(vi) Prevents errors and frauds: Internal check becomes more effective as the work can be divided in such a manner that the work of one person is automatically checked by another person. With the use of internal check, the possibility of occurrence of errors or fraud may be avoided or minimised.
(vii) Availability of requisite information at a glance : The maintenance of subsidiary books helps in obtaining the necessary information at a glance.

(i) Accounting Standards provide the framework and norms so that the financial statements of different enterprises become comparable.
(ii) It becomes necessary to standardise the accounting principles and policies to ensure consistency, comparability, adequacy and reliability of financial reporting.
(iii) Accounting standards in India are issued by the Institute of Chartered Accountants of India (lCAI).
Definition:
In the words of Kohler, "Accounting standards are codes of conduct imposed by customs, law or professional bodies for the benefit of public accountants and accountants generally".

Ledger accounts

Trial Balance

Book-keeping has the following advantages:
(i) Transactions are recorded systematically in chronological order in the book of accounts. Thus, book-keeping provides a permanent and reliable record for all business transactions.
(ii) Book-keeping is useful to get the financial information.
(iii) It helps to have control over various business activities.
(iv) Records provided by business serve as a legal evidence in case of any dispute.
(v) Comparison of financial information over the years is possible. Also comparison of financial information of different business units is facilitated.
(vi) Book-keeping is useful to find out the tax liability.

(i) In the earliest days of civilisation, accounting was done by stewards who managed the properties of wealthy people. They rendered accounts periodically to the owners of property.
(ii) The stewardship accounting is said to be the root of accounting. Records of debit and credit were found in the 12^th century itself.
(iii) In 1494, Luca Pacioli an Italian developed double-entry book-keeping system.
(iv) Due to the industrial revolution in the 18th and 19^th centuries, large scale operations were carried on and joint stock companies emerged as an important form of organisation which required separation of ownership from management.
(v) Hence, to safeguard the interest of owners and investors, the business establishments required detailed information about business which paved the way for development of comprehensive financial accounting information system.
(vi) In the 20^th century, the need for analysis of financial information for managerial decision making caused emergence of Management Accounting as a separate branch of accounting.
(vii) Though accounting was individual centric in the initial stage of evolution of accounting, it has gradually developed into Social Responsibility Accounting in the 21^st century, due to the vast growth in business activities as a result of development in various fields.

Liability refers to the financial obligation of the business.

(i) This method is also known as written down value method or reducing instalments method. It is known as written down value method as the, depreciation is charged at a fixed percentage en the written down value of the asset every year,
(ii) It is known as reducing, instalments method as the amount of depreciation en asset goes en diminishing year after year, This method is recognised and accepted by income tax authorities.

Isurance premium paid but not entered in cash book is Rs. 2,500

Cost of goods sold = Opening stock + Net purchases + Direct expenses – Closing stock
= 8,000 + 60,000 + 5,000 – 9,000
= Rs. 64,000
Note: Indirect expenses do not form part of cost of goods sold.

i. Rs.5,000 spent towards additions to buildings is capital expenditure.
ii. The entire amount of  Rs.32,000 should be treated as capital expenditure.
iii. Rs.10,000 spent on painting the new factory should be treated as capital expenditure.
iv. Freight, cartage and erection charges are capital expenditures.
v. Rs.150 being expense to bring the asset in usable condition, is a capital expenditure.

(i) Cheque is a negotiable instrument. Cheque book is issued by bank to its customers to use it for making payment.
(ii) By issue of cheque, a bank is directed to pay a specific amount of money from a person's account to the person in whose favour the cheque has been issued.
(iii) Each cheque book has record slips for entering the details of cheques issued.

Simple column cash book 

(i) Invoice is a business document or bill or statement giving the details of goods sold as to the quantity, quality, price, total value, etc.
(ii) Thus the invoice is a source document of prime entry both for the buyer and seller. It is purchase invoice or inward invoice for the buyer and sales invoice or outward invoice for a seller

The process of transferring the debit and credit items from the journal to the ledger accounts is called posting.