Theory Base of Accounting
Class 11 · Accountancy
4 ideas in Class 11 Accountancy, explained in plain words, with games and quizzes to practise.
GAAP and Assumptions
Part of: GAAP and Entity Concepts
GAAP unifies recording; business entity separates owner; money measurement counts rupees; going concern assumes continuity; period splits time.
Why it matters. Uniformity enables comparison. Assumptions frame books.
Formulas
- Owner and business stay separate in every entry
- Record only events with a rupee value
Key words
- GAAP
- : Uniform rule set keeping accounts comparable.
- Business entity
- : Owner kept apart from the business in books.
- Money measurement
- : Only rupee-valued events enter the books.
- Going concern
- : Business assumed to continue for the foreseeable future.
- Accounting period
- : Life split into yearly spans for reporting.
- Capital as liability
- : Owner capital treated as a business liability.
Try it in two minutes
- Separate owner-firm.
- Count money only.
- Assume continuity.
Try at home. Separate home vs shop cash.
Accrual and Prudence
Part of: GAAP and Entity Concepts
Accrual books earned, not cashed; consistency keeps methods stable; disclosure reveals all material facts; conservatism books losses early, gains late.
Why it matters. Timing shapes profit. Prudence guards shocks.
Formulas
- Book revenue when earned, not when cash arrives
- Provide for expected losses first, never for expected gains
Key words
- Accrual concept
- : Recording revenue when earned, not when cash arrives.
- Consistency
- : Keeping the same methods stable every year.
- Full disclosure
- : Revealing all material facts in statements.
- Conservatism
- : Booking losses early while waiting on gains.
- Lower-of-cost rule
- : Stock valued at cost or market, whichever is lower.
- Outstanding expense
- : Unpaid March salary belonging to the March year.
Try it in two minutes
- Book earned, not cashed.
- Keep methods stable.
- Provide for losses.
Try at home. Accrue monthly subscriptions.
Matching Cost and Revenue
Part of: Matching and Measurement
Matching pairs period costs with revenues; historical cost books purchase price; revenue recognition waits for realisation; objectivity demands vouchers.
Why it matters. Pairs reveal true profit. Vouchers prove entries.
Formulas
- Match each periods costs against its revenues
- Record assets at purchase price, not market value
Key words
- Matching concept
- : Pairing period costs with the revenues they earn.
- Historical cost
- : Assets booked at their purchase price.
- Revenue recognition
- : Revenue booked only after realisation by sale.
- Objectivity
- : Evidence-backed entries through vouchers.
- Prepaid expense
- : Next-year payment held as an asset for now.
Try it in two minutes
- Match costs to sales.
- Book purchase cost.
- Attach vouchers.
Try at home. Match party costs to funds.
Systems and Standards
Part of: Matching and Measurement
Double entry debits one, credits another; single entry stays incomplete; IFRS converges globally; materiality ignores trivia.
Why it matters. Duality balances books. Standards ease global read.
Formulas
- Every debit has an equal and opposite credit
- Assets = Capital + Liabilities
Key words
- Double entry
- : Two-sided recording of debit against credit.
- Single entry
- : Partly kept books missing the full picture.
- IFRS
- : Worldwide convergence of reporting norms.
- Materiality
- : Leaving out trivial items that sway nobody.
- ICAI
- : Body setting accounting standards in India.
- Dual aspect
- : Every debit matched by a credit of the same sum.
Try it in two minutes
- Debit one account.
- Credit another.
- Ignore trivia.
Try at home. Dual-record pocket money.
What your child will practise
- Accrual and Prudence: Candy Puzzle (Clue Puzzle)
- Accrual and Prudence: Candy Quick Fire (Quick Fire)
- GAAP and Assumptions: Desert Puzzle (Clue Puzzle)
- Matching Cost and Revenue: Candy Quest (Flip and Match)
- Systems and Standards: Ocean Quick Fire (Quick Fire)
- Quiz: Accrual and Prudence (8 questions)
- Quiz: GAAP and Assumptions (8 questions)
- Quiz: Matching Cost and Revenue (8 questions)
- Quiz: Systems and Standards (8 questions)