STUDY MATERIAL
FOUNDATION PROGRAMME
FUNDAMENTALS OF
ACCOUNTING AND
AUDITING
PAPER 4
ICSI House, 22, Institutional Area, Lodi Road, New Delhi 110 003
tel 011-4534 1000, 4150 4444 fax +91-11-2462 6727
email website www.icsi.edu
i
, © THE INSTITUTE OF COMPANY SECRETARIES OF INDIA
TIMING OF HEADQUARTERS
Monday to Friday
Office Timings – 9.00 A.M. to 5.30 P.M.
Public Dealing Timings
Without financial transactions – 9.30 A.M. to 5.00 P.M.
With financial transactions – 9.30 A.M. to 4.00 P.M.
Phones
41504444, 45341000
Fax
011-24626727
Website
www.icsi.edu
E-mail
Laser Typesetting by AArushi Graphics, Prashant Vihar, New Delhi, and
Printed at IPP Printers/1500/July 2014
ii
, FOUNDATION PROGRAMME – IMPORTANT NOTE
The study material has been written in lucid and simple language and conscious efforts have been made to
explain the fundamental concepts and principles of accounting and auditing. This study material is divided into
two main parts –
Part-A Fundamentals of Accounting, and
Part-B Fundamentals of Auditing
There is computer based examination for the Foundatian Programme. Where Student are required to answer
multiple choice questions.
For supplementing the information contained in the study material, students may refer to the economic and
financial dailies, commercial, legal and management journals, Economic Survey (latest), CS Foundation Course
e-Bulletin, Suggested Readings and References mentioned in the study material and relevant websites.
The objective of the study material is to provide students with the learning material according to the syllabus of
the subject of the Foundation Programme. In the event of any doubt, students may write to the Directorate of
Academics in the Institute for clarification at
Although due care has been taken in preparing and publishing this study material, yet the possibility of errors,
omissions and/or discrepancies cannot be ruled out. This publication is released with an understanding that the
Institute shall not be responsible for any errors, omissions and/or discrepancies or any action taken on the basis
of contents of the study material.
Should there be any discrepancy, error or omission noted in the study material, the Institute shall be obliged if
the same are brought to its notice for issue of corrigendum in the e-Bulletin CS Foundation Course.
iii
, SYLLABUS
PAPER 4: FUNDAMENTALS OF ACCOUNTING AND AUDITING
Level of Knowledge: Basic Knowledge
Objective: To familiarize and develop an understanding of the basic aspects of accounting, auditing concepts
and their principles.
PART A: FUNDAMENTALS OF ACCOUNTING (70 MARKS)
1. Theoretical Framework
– Meaning and Scope of Accounting; Accounting Concepts; Accounting Principles, Conventions and
Standards – Concepts, Objectives, Benefits; Accounting Policies; Accounting as a Measurement
Discipline – Valuation Principles, Accounting Estimates
2. Accounting Process
– Documents & Books of Accounts: Invoice, Vouchers, Debit & Credit Notes, Day books, Journals,
Ledgers and Trial Balance
– Capital and Revenue: Expenditures and Receipts; Contingent Assets and Contingent Liabilities
– Rectification of Errors
3. Bank Reconciliation Statement
– Meaning; Causes of difference between Bank Book Balance and Balance as per Bank Pass Book /
Bank Statement; Need of Bank Reconciliation Statement; Procedure for Preparation of Bank
Reconciliation Statement
4. Depreciation Accounting
– Methods, Computation and Accounting Treatment of Depreciation; Change in Depreciation Methods
5. Preparation of Final Accounts for Sole Proprietors
– Preparation of Profit & Loss Account, Balance Sheet
6. Partnership Accounts
– Goodwill
– Nature of and Factors Affecting Goodwill
– Methods of Valuation: Average Profit, Super Profit and Capitalization Methods
– Treatment of Goodwill
– Final Accounts of Partnership Firms
– Admission of a Partner
– Retirement/Death of a Partner
– Dissolution of a Partnership Firm
7. Introduction to Company Accounts
iv
FOUNDATION PROGRAMME
FUNDAMENTALS OF
ACCOUNTING AND
AUDITING
PAPER 4
ICSI House, 22, Institutional Area, Lodi Road, New Delhi 110 003
tel 011-4534 1000, 4150 4444 fax +91-11-2462 6727
email website www.icsi.edu
i
, © THE INSTITUTE OF COMPANY SECRETARIES OF INDIA
TIMING OF HEADQUARTERS
Monday to Friday
Office Timings – 9.00 A.M. to 5.30 P.M.
Public Dealing Timings
Without financial transactions – 9.30 A.M. to 5.00 P.M.
With financial transactions – 9.30 A.M. to 4.00 P.M.
Phones
41504444, 45341000
Fax
011-24626727
Website
www.icsi.edu
Laser Typesetting by AArushi Graphics, Prashant Vihar, New Delhi, and
Printed at IPP Printers/1500/July 2014
ii
, FOUNDATION PROGRAMME – IMPORTANT NOTE
The study material has been written in lucid and simple language and conscious efforts have been made to
explain the fundamental concepts and principles of accounting and auditing. This study material is divided into
two main parts –
Part-A Fundamentals of Accounting, and
Part-B Fundamentals of Auditing
There is computer based examination for the Foundatian Programme. Where Student are required to answer
multiple choice questions.
For supplementing the information contained in the study material, students may refer to the economic and
financial dailies, commercial, legal and management journals, Economic Survey (latest), CS Foundation Course
e-Bulletin, Suggested Readings and References mentioned in the study material and relevant websites.
The objective of the study material is to provide students with the learning material according to the syllabus of
the subject of the Foundation Programme. In the event of any doubt, students may write to the Directorate of
Academics in the Institute for clarification at
Although due care has been taken in preparing and publishing this study material, yet the possibility of errors,
omissions and/or discrepancies cannot be ruled out. This publication is released with an understanding that the
Institute shall not be responsible for any errors, omissions and/or discrepancies or any action taken on the basis
of contents of the study material.
Should there be any discrepancy, error or omission noted in the study material, the Institute shall be obliged if
the same are brought to its notice for issue of corrigendum in the e-Bulletin CS Foundation Course.
iii
, SYLLABUS
PAPER 4: FUNDAMENTALS OF ACCOUNTING AND AUDITING
Level of Knowledge: Basic Knowledge
Objective: To familiarize and develop an understanding of the basic aspects of accounting, auditing concepts
and their principles.
PART A: FUNDAMENTALS OF ACCOUNTING (70 MARKS)
1. Theoretical Framework
– Meaning and Scope of Accounting; Accounting Concepts; Accounting Principles, Conventions and
Standards – Concepts, Objectives, Benefits; Accounting Policies; Accounting as a Measurement
Discipline – Valuation Principles, Accounting Estimates
2. Accounting Process
– Documents & Books of Accounts: Invoice, Vouchers, Debit & Credit Notes, Day books, Journals,
Ledgers and Trial Balance
– Capital and Revenue: Expenditures and Receipts; Contingent Assets and Contingent Liabilities
– Rectification of Errors
3. Bank Reconciliation Statement
– Meaning; Causes of difference between Bank Book Balance and Balance as per Bank Pass Book /
Bank Statement; Need of Bank Reconciliation Statement; Procedure for Preparation of Bank
Reconciliation Statement
4. Depreciation Accounting
– Methods, Computation and Accounting Treatment of Depreciation; Change in Depreciation Methods
5. Preparation of Final Accounts for Sole Proprietors
– Preparation of Profit & Loss Account, Balance Sheet
6. Partnership Accounts
– Goodwill
– Nature of and Factors Affecting Goodwill
– Methods of Valuation: Average Profit, Super Profit and Capitalization Methods
– Treatment of Goodwill
– Final Accounts of Partnership Firms
– Admission of a Partner
– Retirement/Death of a Partner
– Dissolution of a Partnership Firm
7. Introduction to Company Accounts
iv
