Prefatory Items
LETTER OF TRANSMITTAL
August 08, 2018.
Dr. Vijay Wagh
Director,
Sheila Raheja School of Business Management & Research,
Bandra, Mumbai – 400051.
Re: Project is an attempt to study the Auditing and Review of Jaylon Impex Pvt Ltd.
Dear Sir,
The report outline in the research proposal of August 27, 2018 is complete. We have personally supervised the project, conducted the statically analysis and prepared this report.
The report addresses the research on Auditing and Review of Jaylon Impex Pvt Ltd. We are about to submit the report on the causes of accident and its prevention on Western express highway. The report will consist of the brief research study on condition of the road, weather condition, number of deaths happened, people are not following the rules and regulations on Western Express Highway. The report will help us in managing t Auditing & review will helps to protect assets and reduce the possibility of fraud.
So please allow us to start this research work about Auditing and Review.
Thanking You,
Yours Sincerely,
Roll no Name Signature
153 Prince R. Yadav
A PROJECT REPORT ON
To study the Auditing & review process of Jaylon Impex Pvt Ltd
SUBMITTED BY
Sr.No Names Roll No.
1 Prince R. Yadav 148
SUBMITTED TO
Dr. Vijay Wagh
Sheila Raheja School of Business Management & Research
ACADEMIC YEAR
2017-2019
FYMMS SEM
Declaration
I declare that this report “A STUDY ON FINANACIAL PERFORMANCE OF TATA STEEL BY USING FINANACIAL RATIOS”.
Is my original work and not copied from elsewhere nor submitted before for any degree, diploma or course to any Institute or university or due acknowledgement has been given in the bibliography to all sources be they printed electronic or personal.
This project is done in the partial fulfillment of the requirement for the degree of MASTER OF MANAGEMENT STTUDIES by MUMBAI UNIVERRSITY.
This information incorporated in this project is true and original to the best of my knowledge.
Signature
ACKNOWLEDGEMENT
I take this opportunity to specially gratify Dr. Vijay Wagh. Director, Sheila Raheja School of Business Management & Research, for permitting me to undertake this study and also Placement Head. Prof. Vivek Sharma. For his exemplary guidance, monitoring and constant encouragement throughout the course of internship project.
I am deeply indebted to my guide Prof, Komal Kashyap for not only for her valuable and enlightened, but also for the freedom she rendered me during this project work.
Faculty members, who have extended their kind help, guidance and suggestion without which it could not have been possible for me to complete this project.
I also take this opportunity to express my gratitude to Company Mentor Mr. Jay Kaushik for his cardinal support, valuable information and guidance, which has help me in completing this task through various phases during the project.
Prince Yadav
Roll No. F 148
Specialization- Finance
SRBS, Mumbai
LETTER OF AUTHORIZATION
March,23 2018.
Dr. Vijay Wagh
Director,
Sheila Raheja School of Business Management & Research,
Bandra, Mumbai – 400051.
Report: Presentation of research report
Respected sir,
The report outlined in the research proposal of March23, 2018, is complete. We have personally supervised the project, conducted the statistical analysis and prepared the report along with the research associates:-
Prince Yadav
The report addresses the key causes of the increase in the accident on Western Express Highway. The key research question involves To Examine the accidents on western express highway.it presents conclusions which should enable you to make informed decisions. Thus the conclusions confirm to the deliverables described in the proposal letter.
We successfully accomplished the research project as described in the outline. We were able meet our goals for interviewing the students, corporate personnel and common people of all the age groups in the timely fashion.
Sincerely,
Dr. Vijay Wagh,
Director,
Sheila Raheja School of Business Management, Bandra.
Sign (Dr. Vijay Wagh)
————————————-
CERTIFICATE
This is certify to that the project entitled ” A study on Auditing and Review of Jaylon Impex Pvt Ltd.” is he bonafied work carried out by MAYUR .K.TARE student of M.M.S, SHEILA RAHEJA SCHOOL OF BUSINESS MANAGEMENT. During the year 2018-2019 in the partial fulfillment of the requirement for the degree of Master of Management Studies and that the project has not formed the basis for the award of any other degree, associateship, fellowship or any other similar titles.
Place: Mumbai
Date:
Signature of the GuideSignature of Director
Executive
Summary
Executive summary
Executive Summary :-
A research conducted under the accident happened on Western Express Highway.
The report addresses the key causes of being why the most accidents happened in western express highway. Executive summary is presented in three parts consisting of a conceptual analysis followed by an analysis of relevant existing literature review in the area of understanding the causes of accidents as well as rules and regulations
Problem Statement :-To study the effect of accidents on Western Express Highway.
Research Objective:-
1) To study the impact of Traffic Rules at W.E.H
2) To study the weather condition on W.E.H.
3) To study the Traffic on W.E.H.
Hypothesis
Hypothesis set 1
H0– Traffic will not have an impact on W.E.H.
H1– Traffic will have an impact on W.E.H.
Hypothesis set 2
H0 – Condition of road does not an impact on W.E.H.
H1– Condition of road has an impact on W.E.H.
Hypothesis set 3
H0 – weather conditionon road does not have an impact on W.E.H.
H1– weather condition on road has an impact on W.E.H.
Research Design
This Research Design is a combination of Exploratory Research and descriptive research.
Literature Review:
This Research conducted by various elements including primary data collection by circulating questionnaire, secondary data through various online articles, books, websites, newspapers etc. This Project gives idea about the accidents on western express highway. For more detail study in which this is defined.
Introduction to Accidents on Western Express Highway.
How road Accidents Happened
How different factors of Roads contribute in Accidents:
About Western Express Highway
Accidents happened On Western Express Highway
Death spots on Western Express Highway
Major spots where Accidents happened
Some of the cases of deadly Accidents happened on Western Express Highway
Hospitals on around Western Express Highway in case accidents happened.
How to reduce or prevent road accident on western express highway
Accident rate which are caught by police
Ways to Avoid Car Accidents
Data collection method:-
Collection method:- Survey
Instrument:- Questionnaire
Contact method:- Internet.
Sampling strategy
UNIVERSE:
The study is all about the “Accident rate On W.E.H”
Hence, object of the study to examine the people who are being part of accident on W.E.H
TARGET SAMPLE:
People who are being part of accident on W.E.H
SAMPLING METHOD:
In this can we will use Probability Sampling.
1. Homogeneity is very high.
2. The Sampling frame is available.
3. Density of Population is very high.
SAMPLING PROCEDURE:
In this method we will apply Multistage area sample.
SAMPLE SIZE:
Sample size for this research will be 120 People.
DETAILS OF SAMPLE:
Gender: Male and Female.
Age: Above 20 years.
Profile: Common People, Business man and open for all other above age group of 20 years.
Planned for Data Analysis
Data gathering through survey (questionnaire) and calculations will be performed on the historical data with the help of Microsoft Excel.
Findings
Finding No. 01:It is observed that 48% of the respondent that Not following the rules is the main reason for the accident on Western Express Highway.
Finding No. 02:It is revealed that 57.6% of the respondent Accident happens at age of 18-25, such while 32% at age of 26-35,such while 7.2% at age of 36-45 and remaining 3.2% at the age of 45 and above.
Finding No. 03:It is observed that 48% respondent that most of the accidents are happen on Western Express Highway at Night.
Finding No. 04:It is noticed that, 34.4% respondent that Motorcycle are most victims of accident, such while 39.2% for Motor Cars, such while 19.2% for truck and remaining 7.1 % for buses.
Finding No. 05:It is noticed that, 32.8% respondent that Steering Mechanism or Braking System failure are the main causes that vehicle condition is affect to accident on WEH.
Finding No. 06:It is noticed that, 60.8% of 125 respondents that Fog and Rainfall weather condition they both are effected for accident on Western Express Highway, such while 23.2% for rainfall and remaining 16% for fog .
Finding No. 07:It is noticed that, 38.4% of 125 respondents that Poth Holes are the Main Factor of road condition that affects the accidents on Western Express Highway, such while 21.6% for Slippery Road and Street Light condition and remaining 17.6% for wrongly placed Speed Breaker.
Finding No. 08:It is observed that 40% of the respondent 0-5% of the chance that road crossing affects the accident on Western Express Highway.
Finding No. 09:It is revealed that, 88.8% of respondents using mobile Phones while driving can affects the accidents happening on western express highway, such while remaining 11.2% no for the using mobile Phones while driving can affects the accidents.
Finding No. 10:It is noticed that, 42.4% of all respondents chosen3.5% of peoplenon licensed people contributed in accidents on Western Express Highway.
Finding No. 11:It is noticed that, 42.4% of all respondents thinks that deaths due to road accidents are increasing on Western Express highway.
Hypothesis Testing:
Findings of Set 1: –% respondent prefer that traffic have impact on western express highway. Hence, WE ACCEPT H1 and REJECT HO.
Findings of Set 2: –% respondents are prefer that Condition of road has an impact on western express highway. Hence, WE ACCEPT H1 and REJECT H0.
Findings of Set 3: –% respondents that weather condition on road has an impact on western express highway. Hence, WE ACCEPT H1 and REJECT H0.
CONCLUSION
The WEH, divided into 12 traffic divisions, is akin to the spine of Mumbai, but the 25.33-km stretch from Dahisar to Bandra is definitely not a smooth ride.
During peak hours, the priority is to keep the traffic moving. The offences are registered during non-peak hours to ensure smooth traffic.
The intensity of traffic is higher in the evening than in the morning. The main reason is because traffic is on the left side in the morning while in the evening; vehicles are on the right side.
Most vehicles moving from north Mumbai towards Bandra have the commonly-used diversions on the left, as a result of which traffic moves faster in the morning than in the evening.
The conditions are worse in the monsoon as the roads are riddled with potholes. The root cause of Mumbai’s pothole troubles is the poor quality of roads built by contractors. Substandard work is a recurring theme every monsoon
Road safety will only be completely observed if appropriate action is initiated against contractors who don’t do their jobs properly. We would need to do something to improve bandwidth of highway
Sr. No Topics Page no
Prefatory Items 1
1 Title Page 2
2 Declaration 3
3 Acknowledgement 4 Letter of Authorization 4
5 Letter of Transmittal 6 Certificate 7 Executive Summary 5-10
8 Table of Contents 11
Chapter Index 12
Table Index 13
Graph Index 14
Introduction 15
Problem Statement 16
7 Research Objective 17
8 Research Hypothesis 18
9 Research Design 19
10 Literature Review 20-96
Methodology 97
12 Data Collection 102-103
13 Data Analysis 104-116
14 Hypothesis Testing 117-121
15 Limitations 122-123
Conclusions 124
16 Findings 125-126
Appendices 127
18 Research Proposal 131-138
19 Bibliography 139-141
Exercises : Rough Assignments 142-143
Introduction
Problem Statement
To Study the Auditing & review process of Jaylon Impex Pvt Ltd.
Research Objectives
To study the Auditing & review process of Jaylon Impex Pvt Ltd
Hypothesis sets
Hypothesis set 1
H0– Auditing & review will not helps to protect assets and reduce the possibility of fraud.
H1– Auditing & review will helps to protect assets and reduce the possibility of fraud.
Research Design
This Research Design is a combination of Exploratory Research and descriptive Research.
Literature Review
Literature Review
What is Auditing ?
Introduction of Auditing
The audit is an intelligent and critical examination of the books of accounts of the business.
Auditing is done by the independent person or body of persons qualified for the job with the help of statements, papers, information and comments received from the authorities so that the examiner can confirm the authenticity of financial accounts prepared for a fixed term and report that:
The balance sheet exhibits an accurate and fair view of the state of affairs of concern;
The profit and loss accounts reveal the right and balanced view of the profit and loss for the financial period;
The accounts have been prepared in conformity with the law.
Thus, it will be seen that the duty of an auditor is much more than a mere comparison of the balance sheet and accounts with the books.
But, apart from doing this, he has to satisfy himself according to his information and the explanations given to him.
Meaning of Auditing
The term audit is derived from a Latin word “audire” which means to hear authenticity of accounts is assured with the help of the independent review.
Audit is performed to ascertain the validity and reliability of information. Examination of books and accounts with supporting vouchers and documents to detect and prevent error, fraud is the primary function of auditing.
Auditor has to check the effectiveness of internal control systems for determining the extent of checking out the audit.
Initially its meaning and use were confined merely to cash audit, and the auditor has to ascertain whether the persons are responsible for the maintenance of accounts had adequately accounted for all the cash receipts and the payment on behalf of this principle.
But the word audit has an extensive usage, and it now means a thorough scrutiny of the books of accounts and its ultimate aim is to verify the financial position disclosed by the balance sheet and profit and loss accounts of a company.
In short, an audit implies an investigation and a report. The process of checking and vouching continues until the study is completed and the auditor enables himself to report under the terms of his appointment.
DEFINITION
The term auditing has been defined by different authorities.
1. Spicer and Pegler: “Auditing is such an examination of books of
accounts and vouchers of business, as will enable the auditors to
satisfy himself that the balance sheet is properly drawn up, so as
to give a true and fair view of the state of affairs of the businessand that the profit and loss account gives true and fair view of the
profit/loss for the financial period, according to the best of
information and explanation given to him and as shown by the
books; and if not, in what respect he is not satisfied.”
2. Prof. L.R.Dicksee. “auditing is an examination of accounting
records undertaken with a view to establish whether they correctly
and completely reflect the transactions to which they relate.
FEATURES OF AUDITING
(a). Audit is a systematic and scientific examination of the books of
accounts of a business;
(b). Audit is undertaken by an independent person or body of persons
who are duly qualified for the job.
(c) Audit is a verification of the results shown by the profit and loss
account and the state of affairs as shown by the balance sheet.
(d). Audit is a critical review of the system of accounting and internal
control.
(e). Audit is done with the help of vouchers, documents, information and
explanations received from the authorities.
(f) The auditor has to satisfy himself with the authenticity of the
financial statements and report that they exhibit a true and fair view
of the state of affairs of the concern.
(g )The auditor has to inspect, compare, check, review, scrutinize the
vouchers supporting the transactions and examine correspondence,
minute books of share holders, directors, Memorandum of
Association and Articles of association etc., in order to establish
correctness of the books of accounts.
OBJECTIVES OF AUDITING
There are two main objectives of auditing. The primary objective
and the secondary or incidental objective.
a. Primary objective – as per Section 227 of the Companies Act
1956, the primary duty (objective) of the auditor is to report to
the owners whether the balance sheet gives a true and fair view
of the Company’s state of affairs and the profit and loss A/c
gives a correct figure of profit of loss for the financial year.
b. Secondary objective – it is also called the incidental objective
as it is incidental to the satisfaction of the main objective. The
incidental objective of auditing are:
i. Detection and prevention of Frauds, and
ii. Detection and prevention of Errors.
Detection of material frauds and errors as an incidental objective of
independent financial auditing flows from the main objective of
determining whether or not the financial statements give a true and
fair view. As the Statement on auditing Practices issued by the
Institute of Chartered Accountants of India states, an auditor should
bear in mind the possibility of the existence of frauds or errors in the
accounts under audit since they may cause the financial position to
be mis-stated.
Fraud refers to intentional misrepresentation of financial information
with the intention to deceive. Frauds can take place in the form of
manipulation of accounts, misappropriation of cash and
misappropriation of goods. It is of great importance for the auditor
to detect any frauds, and prevent their recurrence. Errors refer to
unintentional mistake in the financial information arising on account
of ignorance of accounting principles i.e. principle errors, or error
arising out of negligence of accounting staff i.e. Clerical errors.
The auditor is given a free hand to the books, accounts, statements enabling him to thoroughly check them and if satisfied to certify that books have been properly drawn up and represent a true view of the financial position of the business. He gives his special attention to the direction of errors which may be innocently or intentionally committed.
In the case of former the auditor discovers the errors by vouching the transactions and by comparing and tallying the balances between and amongst various books. But in the case of latter such errors are classified as frauds as it leads to defrauding the proprietors. The frauds could be detected by a thorough checking of the books and documents such as cash book, vouchers, invoices, wage sheets, etc
DETECTION OF FRAUD ; ERRORS
The term fraud means the willful misrepresentation made with an
intention of deceiving others. It is a deliberate mistake committed in the
accounts with a view to get personal gain. In accounting, fraud means two
things.
a. Defalcation involving misappropriation of either cash or goods.
b. Fraudulent manipulation of accounts not involving defalcation.
Fraud Covers the Following
FRAUD THROUGH DEFALCATION.
1 By misappropriating the receipt by not recording the same in the
cashbook
2 By destroying the carbon copy or counter foil of the receipt and
misappropriating the cash received
3 By entering lesser amount on the counterfoil and misappropriating
the difference between money actually-received and the amount
entered on the counterfoil of the receipt book
4 By not recording the receipt of sale of a casual nature for example
sale of scrap, sale of old newspapers etc.
5 By omitting to record cash donations received by non-profit making
charitable institutions
6 By misappropriating the cash received on discounting the bills
receivable and showing them as bills outstanding on hand.
7 By misappropriating cash received from debtors and concealing the
same by giving artificial credit to the debtors in the form of bad debts,
discount or sales return etc.
8 By adopting the method of “teeming and lading” or “lapping process”.
Under this method cash received from one debtor is misappropriated
and deficiency in that debtors account is made good when another
payment is received from second debtor by crediting the second
debtors account less by that amount. This process is carried outround the year.
9 By suppressing the cash sales by not recording them or by treating
the cash sales as credit sales.
10 By misappropriating the sale proceeds of VPP sales or sales of
goods on approval basis by treating the transaction as goods
received or not approved.
11 By under casting receipt side total of the cashbook
12 By recording fictitious or bogus payments
13 By recording more payments than actual amounts paid by altering
the figures on the vouchers.
FRAUD THROUGH MANIPULATION OF ACCOUNTS
It implies presentation of accounts more favorably than what they
actually are. Window dressing means showing a wrong picture. The fraud
through manipulation of accounts is also known as window dressing
because accounts are manipulated to show a wrong picture of the profit
or loss of the business and its financial state of affairs. Generally this type
of fraud is committed by the people at the top management level. This
does not involve any misappropriation of cash or goods but it is either
over statement of profit or understatement of the same. Such fraud is
committed with certain objective and is relatively difficult to detect.
THE AUDITOR CAN SUSPECT FRAUD UNDER THE
FOLLOWING CIRCUMSTANCES.
1. When vouchers, invoices, cheques, contracts are missing etc.
2. When control account does not agree with subsidiary books.
3. When the difference in trial balance is difficult to locate.
4. When there are greater fluctuation in G.P. and N.P. ratios.
5. When there is difference between the balance and the confirmation
of the balance by the parties.
6. When there is difference between the stock as per records and the
stock physically counted.
7. When the explanation given by the client is not satisfactory.
8. When there is a overwriting of some figures.
9. When there is a contradiction in the explanation given by different
parties.
PROCEDURE TO BE FOLLOWED TO DETECT ERRORS
1. Check the opening balances from the balance sheet of the last year.
2. Check the posting into respective ledger accounts
3. Check the total of the subsidiary books.
4. Verify all the castings and the carry forwards.
5. Ensure that the list of debtors and creditors tally with the ledger
accounts.
6. Make sure that all accounts from the ledger are taken into accounts.
7. Verify the total of the trial balance.
8. Compare the various items from the trial balance with that of the
previous year.
9. Find out the amount of difference and see whether an item of half or
such amount is entered wrongly.
10. Check differences involving round figures as Rs. 1,000; Rs. 100 etc .
11. See where there is misplacement or transposition of figures that is 45
for 54; or 81 for 18 etc.
12. Ultimately careful scrutiny is the only remedy for detection of errors.
13. See that no entry of the original book has remained unposted.
THE AUDITOR SHOULD PERFORM THE FOLLOWING DUTIES IN RESPECT OF FRAUD.
1. Examine all aspects of the finance.
2. Vouch all the receipts from the counterfoils or carbon copies or cash
memos, sales mart reports etc.
3. Check thoroughly the salary and wages register.
4. Verify the methods of valuation of stocks.
5. Check up stock register, goods inwards notes, goods out wards
books and delivery challans etc
6. Calculate various ratios in order to detect fraudulent manipulation of
accounts
7. Go through the details of unusual items.
8. Probe into the details of the problems when there is a suspicion.
9. Exercise reasonable skill and care while performing the duty.
10. Make surprise visit to check the accounts.
LIMITATIONS OF AUDITING
At this stage, it must be clear that the objective of an audit of
financial statements is to enable an auditor to express an opinion
on such financial statements. In fact, it is the auditor’s opinion which
helps determination of the true and fair view of the financial position
and operating results of an enterprise. It is very significant to note
that the AAS-2 makes it a subtle point that such an opinion
expresses by the auditor is neither an assurance as to the future
viability of the enterprise nor the efficiency or effectiveness with
which management has conducted affairs of the enterprise. Further,
the process of auditing is such that it suffers from certain inherent
limitations, i.e., the limitation which cannot be overcome
irrespective of the nature and extent of an audit procedure. It is very
important to understand these inherent limitations of an audit since
understanding of the same would only provide clarity as to the
overall objectives of an audit. The inherent limitations are
I. First of all, auditor’s work involve exercise of judgment, for
example, in deciding the extent of audit procedures and in
assessing the reasonableness of the judgment and
estimates made by the management in preparing the
financial statements. Further much of the evidence available
to the auditor can enable him to draw only reasonable
conclusions there from. The audit evidence obtained by an
auditor is generally persuasive in nature rather than
conclusive in nature. Because of these factors, the auditor
can only express an opinion. Therefore, absolute certainty in
auditing is rarely attainable. There is also likelihood that
some material misstatements of the financial information
resulting from fraud or error, if either exists, may not be
detected.
II. The entire audit process is generally dependent upon the
existence of an effective system of internal control. Further, it
is clearly evident that there always be some risk of an
internal control system failing to operate as designed. No
doubt, internal control system also suffers from certain
inherent limitations. Any system of internal control may be
ineffective against fraud involving collusion among
employees or fraud committed by management. Certain
levels of management may be in a position to override
controls; for example, by directing subordinates to records
transactions incorrectly or to conceal them, or by
suppressing information relating to transactions. Such
inherent limitations of internal controls system also contribute
to inherent limitations of an audit.
Generally following are the Limitations of auditing
1. Non-detection of errors/frauds:- Auditor may not be able to detect
certain frauds which are committed with malafide intentions.
2. Dependence on explanation by others:- Auditor has to depend on
the explanation and information given by the responsible officers of
the company. Audit report is affected adversely if the explanation
and information prove to be false.
3. Dependence on opinions of others:- Auditor has to rely on the views
or opinions given by different experts viz Lawyers, Solicitors,
Engineers, Architects etc. he can not be an expert in all the fields
4. Conflict with others: – Auditor may have differences of opinion with
the accountants, management, engineers etc. In such a case
personal judgement plays an important role. It differs from person to
person.
5. Effect of inflation : – Financial statements may not disclose true
picture even after audit due to inflationary trends.
6. Corrupt practices to influence the auditors :- The management
may use corrupt practices to influence the auditors and get a
favourable report about the state of affairs of the organisation.
7. No assurance :- Auditor cannot give any assurance about future
profitability and prospects of the company.
8. Inherent limitations of the financial statements :- Financial
statements do not reflect current values of the assets and liabilities.
Many items are based on personal judgement of the owners. Certain
non-monetary facts can not be measured. Audited statements due to
these limitations can not exhibit true position.
9. Detailed checking not possible :- Auditor cannot check each and
every transaction. He may be required to do test checking.
TRUE AND FAIR VIEW
An audit of accounts by an independent expert assures the
outside users that the accounts are proper and reliable. The outsiders can
rely on the accounts if the auditor reports that the accounts are true and
fair. The accounts are said to be true and fair:
1. When the profit and loss shown in the profit and loss account is
true and fair, and
2. Also when the value of assets and liabilities shown in the
balance sheet is true and fair. What constitutes true and fair is not
defined under any law. However the following general guidelines may
be laid down in connection with true and fair.
a) Conform to accounting principles: The books of accounts
must be kept according to the normally accepted accounting
principles such as the concept of entity, continuity, periodical
matching of costs and revenue, accrual and double entry system
etc.
b) No window dressing or secret reserves: The accounts must
show the financial position and the profit or loss as they are. I.e.
there is neither an overstatement nor an understatement. There
should be in other words neither window dressing nor secret
reserves. In window dressing the accounts are made in such a
way as to show a much better condition than the actual
condition. The profit and the net worth are overstated
The accounts are said to show true and fair view when the
accounts show only the actual conditions as it is. i.e. the profit
and the net worth are shown as they are.
In order to show a true and fair view the auditor should ensure that:
1. The final accounts agree with the books of accounts.
2. The provision for depreciation is proper.
3. The closing stock is physically verified and valued properly.
4. Intangible assets like goodwill, patents, preliminary expenses or other
deferred revenue expenses are written off properly.
5. Proper provision is made for bad and doubtful debts.
6. Capital expenses is not treated as revenue expenses and vice versa.
7. Capital receipts are not treated as revenue receipts.
8. Effect of changes in rate of foreign exchange on value of assets and
liabilities is recorded in the books properly.
9. Contingent liabilities are not treated as actual liabilities and vice
versa.
10. Provision is made for all known losses and liabilities
11. A reserve is not shown as a provision and vice versa
12. Cut off transactions are recorded properly, so that all sales invoices
are matched with goods delivered and all purchase invoices are
matched with goods received.
13. Transactions are recorded on accrual basis, i.e. outstanding
expenses, prepaid expenses, income accrued and advance income
are recorded properly.
14. Expected or anticipated gains are not credited to the profit and loss
account.
15. Effect of events after the balance sheet date on the value of an asset
and liability is disclosed in the accounts properly
16. The exceptional or non-recurring transactions are disclosed
separately in the accounts.
3. Disclose all material facts: The books of accounts must disclose all
material facts regarding revenue, expenses, assets and liabilities. Material
means important and essential. The disclosure of important matters in the
accounts helps the users in taking business decisions. There should be
neither suppression of vital facts nor mis-statements.
4. Legal requirements: In case of limited company the account must
disclose the matters required to be disclosed under the Companies Act.
The final accounts must be in the format prescribed under Schedule VI of
the Companies Act, 1956. Special companies such as banks, insurance,
electricity supply companies prepare accounts as prescribed under
special laws. A co-operative society, a trust etc. must also prepare the
accounts as required under relevant laws.
5. Requirements of Institute of Chartered Accountants of India: The
accounts must also be in accordance with the various guidelines
prescribed by the ICAI. These guidelines are contained in the statements,
standard and guidance notes issued by the institute from time to time.
