 So what I discussed you in the previous session is basically the concept, the base key concept which all of you must you know recollect in one way again because we have taken one hour on that and that one hour is very important, the small term it was you know 15 minutes but I have given you one hour because I want to put everybody's heart to this concept this is an entity, this is different, owner is different, okay, so whatever transaction is carried in any institution, any trade, any commerce, this has got nothing to do, okay. The owner is also liability for this, this you note down in the hard bold word the owner's amount, the owner's capital, the owner's profit, net earning are also liability for this till it finally discharge all the liability of owner make nil, no asset, no liability, no payment, no receipt, okay, so this is the main thing I discussed with you and second thing I want to discuss with you that every transaction, everything you understand in one set of mind that if any amount is paid or payable is either asset or an expenditure, any amount is received, any amount is received is either a income or a liability, why income or liability because all incomes are liability for this, even some professionals might be sitting here but this concept should be finally whenever they go you know in the business world they should teach this, this is very important, the most and you know the highest drawback of our Indian economy because this is telecasted everywhere and I am proud to say and I do not you know I hesitate to saying this that the basic accounting system has not been given due recognition in any of the department, they have gone by their own conventional methods, they have never thought that accounting system should be a top priority for each and every sector, each and every department, at each and every place, they created a legal entity, the government of India created a legal entity before the constitution of the government came in play, in 1949 the Charred Accountant Act was made and in 1950 the constitution came in effect before that because at that time they wanted that there must be an accountant, there must be a qualified experienced trained person to look after all accounting, financial reporting, auditing and all aspect so that whatever comes in the constitution can be taken care properly but unfortunately the most drawback of this Indian economic system is that the legal person created by the government, by the constitution itself has not been used for the purpose. I can understand all of your problem because whenever new systems, new entities, new trend comes in you will not be able to address every issue, you need one professional in your department, you can carry out all transaction, you can make entries, you can understand, you can make you know the evidences, you can prepare trial and etc. But for understanding the transaction, for making the financial reporting, for making the figures in comparative form, for analyzing information, you need a professional person in your sector. So kindly insist wherever you go in your institution that a qualified professional under an act, a Charred Accountant should be employed in each and every organization so that all of you can powerfully take up this accounting and auditing department. This must, I think none of the institution at the time of appointment of finance people, the criteria is that it should be Charred Accountant, nowhere I think. So you should have it because academic quality is different, professional quality is different. You have it so that you can you know you can work in the different manner whatever you know your generation comes you know professional etc. Our all consulted library is to take this profession, take this country in different manner. If we are not using the expertise accounting, not only accounting only, accounting you people are doing but auditing concept, financial information, financial analysis, data analysis, recovery of the dues you know and taking action, drafting the agreement, drafting the financial document etc. etc. you need a financial expert and that is why it is to be taken care and now MHRD is taken you know very good stand for it that you know throughout the country you know the accounting with the IKAI is taken up. So we have come to the conclusion that we must have you know the accounting concept in our institution. So that you are aware that where we are standing. So this we have come to the first part. I came to the terminology used in the Palantra Accountants, we will run fast okay. If you are able to have you know if you are not able to understand anything and you want to query you can stop me any moment because there are a lot of accounting concept I will take it because other lectures are there then they will teach you accounting standard etc. etc. that will go from your head because till you do not understand the basic concept accounting. I am not able to understand those standard etc. etc. So let us understand this accounting in a very fruitful and a different manner so that everything comes in your mind. So only four transactions are there either there is a income or there is a liability either there is a asset or there is a expenditure. A slip of mind a small slip of mind can convert an asset into an expenditure because in one side debit side only while making a posting amount paid to Shyamlal Agarwal you say Shyamlal Agarwal okay here it is always expenditure. So you put expenditure you give me advance amount is not required it has gone to expenditure. A small slip of mind a liability somebody is giving you the money your income you can say no no I have to pay back to him it will become a liability. So a small slip of sense will make income a liability and asset an expenditure. So you have to understand that the side in one a set extra side is one and liability and income side I told you why liability is one side that everything comes okay and the there are only two account or all practical but there may be different lot of final two final final account only one is income and expenditure account or profit and loss account it may be called by any name but when one side there will be all incomes income means which are not payable after the close of the period to which it is prepared expenditure whatever incurred is not recoverable anything out after the period is over. Once you incurred the expenditure it is not recovered in the future there is no endeavouring benefit for next period you are preparing out 30% mark 2014 any expenditure incurred or income on expenditure will not give benefit in through the 15th salary paid for mark finish April you work you will ask salary more okay so it will not carry further but amount which will carry further will become a asset because you want to recover in future year. So suppose salary paid for two month advance one month is expenditure one month you will recover next year so next year it will carried on so that is the concept so on that basis of that you must understand asset liability and income and expenditure so that is close I think everybody is capable to take up your mind take up his mind at this stage okay now I go to account terminology account lot of trumps will come in your life your accounting so I will explain to you what is the terminology you must understand account account means one account so first you under account account means any account one account it may be sub account it may more sub account more sub account there may be control account because all account suppose there are four account only one is income one is liability one is asset one is there are four major head now under four major head there can be group head so one group head is in asset we can say fixed asset we can say fixed asset fixed it means they said which are not consumed during the operation if you consume it become current suppose I purchase a purchase a cotton and make you know the cloth so cloth is sellable so cotton is consumed I use labor labor is consumed okay so everything the whatever asset I purchase I purchase any item suppose I purchase this I am selling the furniture so furniture I am buying this board and selling it so what the board has converted to table so table is not a fixed asset because it itself is you know consume in the operation and it will be sellable item so fixed asset is asset which provides support for the production for the operation for the service as a institution is furniture is providing you support furniture not consumed it is depreciated so we provide depreciation not consumed okay so fixed asset means asset which give you enduring benefit for the next period asset that other is current asset current asset means the asset which is used in operation current is used in cycle like your operating cycle your institution so in your institution what is current asset you have given some advance salary advance for some supplier advance for consultants advance for anything cash balance in your bank account bank on balance okay all these are the current asset because they are assets for you but they are changing from time to time period to period and at least in next 12 month they will be converted to cash or cash will be converted to current asset so they are current asset they are moving okay now fixed asset suppose you are building is you are made so building will not build in the fix okay it will not be consumed so like fixed asset and current asset there are two things in asset side and liability side there is a capital capital means whatever amount I have given I see I will not take it back it is liability ultimately it has come to me only for business liability but I put the money not as a loan if I give a loan I will pay interest so one is liability means capital if it is one person it is a proprietor if it is two persons taking together their partner if we incorporate a company enter company it becomes a company okay so it is capital second is amount given to this entity which is recoverable in cash paid in cash recovered in cash that becomes loan if paid in cash recovered in kind that becomes advance okay if paid in cash recovered in cash it becomes loan so one is loan and one is capital third is third is the current liability like current asset current liability okay suppose I have given advance to this fellow it will it will not a loan then against the advance it will give me some material some amount some services so it becomes advance because I have given cash but will return the other item not cash if given cash taking cash back it is a loan giving cash and taking some services some material then it is advance okay and liability I have purchased something but I have not paid it is a liability means I have taken material but to pay cash pay cash to take a material taken material or to pay cash both are not cash so that is a current liability so one is capital one is loan and third is current liability these are the basic terms which normally comes in your under other things you will automatically understand when you will go through those things what is current what is non-current what under fix what are the brackets fixed may they are going to building they are going to fixture there will be machinery there will be typewriter there can be computer because I purchased not be consumed I am using it for providing lecture to you so it is not you pan I am using it will finish today's night finish so pan is consumed a stationary consume but this will available to download all other things etc this is equipment equipment you can say fix that there can be furniture there can be fixture there can be equipment there can be machine there can be computer whatever category one you can have lot of category out of those categories you can make subcategory one type of thing you can pay to one place okay other culture other nature type you can put other place or under law something is required you have to group this way will go that way so we will assemble the head in such a manner that either it comply your requirement and also the complies the requirement of the law or of the institution or whatever it is so that way the account and heads are created so this I give brief before going it so that you can understand all the concept very nicely the account I told you it is one account it may be 100 sub head it may carry a hundred sub account it may be sub head of a main account but account means one type of transaction collected at one place net balance you can know if I am dealing with samal agarwal what I have to pay samal agarwal or why I would recover to him or samal was in my expenditure how much expenditure incurred on samal agarwal in a particular period at one place I must know what is the status of a particular type of transaction carried out in a particular period okay accounting entry now a basic system which we normally carry and I have discussed at the time case accounting is we have to make accounting entry any transaction have to make accounting and whatever I make I given cash to the come I made an entry this entity made an entry cash account debit to samal agarwal this is entry this is me this this is known as accounting entry if somebody given furniture to this furniture account debit to X and company because X money has to pay it if paid cash then to cash so this is accounting and debit and credit or credit or debit but first normally we do debit always the system of entry always first we do debit then we do credit so that once we give somebody then we can say to whom to pay back that is the concept that is why we have taken debit first and then credit second something has to be there to debit somebody then only we can pay to somebody so the concept is always to debit first money came no entry to whom to give to cash book then yes cash book debit then I credit samal because I will recover from this I will pay till I am not sure from where I will recover I will not credit anybody okay till it is in the hands here and there only land is allotted by the government without any code land become a set of the come of the institution at rupee one okay just accounting entry why repeat one why repeat one because one rupee means week we have to make account of the land otherwise it will not be in the books so we standard standard will take place whenever standard will be taught to you every entry even if even if it is made nil value you have to account for for asset for expenditure you may not account for asset land for IIT center two thousand six hundred is given by government of India free of course one rupee or there are certain expenses incurred on the land transfer charges resistance charges stem charges duty charges whatever it is one rupee two rupee stamp paper that will form the cost of the land whatever cost incurred to you is the cost of land and that is represented in fixed asset because land is not consume if you are a real estate developer you purchase land and sale the land then land is not your fixed asset it is sailing so it will be correct asset it's token trade land two thousand biga okay next year sale one thousand biga it will remain one thousand biga that is okay so that is account so accounting entry you must have every transaction every transaction is to have accounting entry first to debit and then next to credit account payable account payable means suppose you brought furniture then you have to pay you have to pay this entity accent company because you are not paid cash account payable payable means the company the entity has to pay somebody this account payable so you will say how much total amount payable in this year so we'll say Ramlal, Shyamlal, Mohanlal, Jyobin, Namlaki whatever name but all these persons I have to pay amount and total amount payable comes to this month that is account payable so individual account payable you have to prepare then total account payable will be available to you accounting period accounting period is for you know if they are the period for which the accounts are prepared in year is not discussed right particularly because there can be a separate period for separate account sometimes we prepare account for three months six months normally we take finances period means it you must know before preparation of any account what is accounting period so that what will happen when we go to acral accounting then we have to account for all the libraries that are said till that date so we must know the accounting period so accounting period means for the period we are preparing the account or we have to prepare the account suppose initially started capital entry but I must know this day that I have entered this entry but my accounting period will end on 31st March so my account will be prepared on 31st March till then whatever transaction taken place net balance on 31st March will be reflected in the net statement of this balance sheet account if it is capital or P and L account if it is other account so that is the accounting period accounting principle the accounting principle basically what accounting principles you are following I will not take detail here accounting principle again there are certain accounting principles will take it later on accounting principle whatever account the principle which guide to prepare the account the principle which guide to prepare the account now we say single accounting principle we are following double entry accounting with the acral accounting principle you are applying or some again some there are certain accounting principle separately also but for view view people I will know this is principal as a technical. You should understand only one thing, whatever principle, there are certain principles which are fundamental accounting principles. Now fundamental accounting principles say, you have to prepare your account on acro-base of accounting, but you are preparing case-base accounting, you are not following fundamental accounting. So I will not go by principle. I will go by only one thing that what are the accounting principles, so that you must know if somebody is acro-accounting, okay, okay, acro-accounting is a principle, but we are preparing the books on double-entry accounting case system. So acro-accounting principle we are not following. So you must know what is accounting principle available, what you follow, they are different. It is not necessary that all accounting principles, all entities are following, but we must ensure that when we become perfect accountant, perfect account unit, then we must follow all the applicable accounting principles to that entity. So principles may be different to you, for education there may be, the principle may apply in a different manner, or in a different manner. Though principles are same always, principles are guiding force, but interpretation of those principles may be, in your case may be different. So I will not go what principle should follow, what not follow, because if I educate that or discuss that, then you will be misguided. At this juncture you must in your life understand, there are certain accounting principles which should be followed while preparing the account, okay, and one of two of three them which we discuss, others I don't know. If we don't, if we discuss other and I don't know it will confuse everything, okay. So next, account receivable, I have sold you the goods, but you not paid me the account, so it is account receivable. So I have to take money from you, receivable, okay. What receivable means? I have to receive, payable means I have to pay, means I have not received cash while selling the goods or giving the services, but it is payable or receivable as the case may be. So it is receivable, simple term. Accounting standard, accounting standard we are the regulator of the accounting, so we prepare the accounting standard applicable as Mr. Patak was telling that there should be separate accounting system for education institution, but you know accounting standard are prepared based on certain accounting principle. So those accounting standard are applicable as applicable to you under different scenario, but it is true and I think we have discussed with ministry also, not HRD, other ministry also, that any accounting standard applicable to a particular type of department should be made separate. So that whenever he you know understand and discuss the accounting standard, he will understand only those standard. In one accounting there are thousands of systems which are not applicable to you. So we'll see that accounting standard as applicable to education institution will be made available or will be called out from the accounting standard applicable so that you can easily understand those standard only. So standard means standard prescribed by the government of India, only one. Who can prescribe accounting? Bharat Sarkar, government of India. No state government can prescribe accounting standard. Whenever from account it comes, it is government of India. Government of India means ICI prepare, recommend, approve and submit to government of India to government and say okay go ahead. Or they amend something, it is amended. But ultimately it is approved by the government of India. It is not approved to government of India, then till then no separate account will be approved. The account is not prepared by Institute of Chartered Accounts of India will apply. Okay. Why standard is used? Can somebody tell? What is standard? Now accounting standard is the simplest thing which is you know which I think when you will see the lecture of Mr. Goyal and Banka, you will say it is very complicated. I'll request both of them to teach in a very simple manner. Yeah please. So I have one question. You have told about that every transaction has to be entered in the books of accounts. There should be an entry. But my experience is that there are many items which are not entered into the books of accounts also. There are institutes like IITs or Institutes of Higher Learning where they have many patents, copyrights etc. But they are not reflected in books of accounts. They carry the value. They are the assets. Those are the assets, copyrights and patents. So which accounting standard has been developed for incorporating the values of these patents and copyrights and what is the best way to depict it in the books of accounts? Actually what is happened? Again I told you anything which is earned you know that becomes your earning but anything which is earned as a asset and the enduring benefit available in future that becomes your asset. So for copyright, patent etc. etc. if you know you are not able to quantify in terms of money you take rupees one and specify it. If you incurred R&D expenditure on that patent etc. that will become your asset on that value. But if somebody is not accounting for because he is not following actual system of accounting. If he is following actual system of accounting then he has to account for each and every transaction under these specified heads. If you are creating R&D and you are creating an asset then you have to create that asset as a fictitious asset, as an intangible asset but as a asset. There are two types of asset. One is physical asset. One is tangible, one is intangible. There can be intangible asset also. So that is also clutch that there is also accounting standard. How to value, how to account for every standard there but I am telling what is standard. I am discussing standard with you. The standard is the simplest term in a man's life. Simplest term because in 33 years of my career I have not seen anything which I cannot understand the standard. The sun rises in the east. Sun rises in the east. Everybody knows. If it starts rising different east or like that. If everybody of us, one 33 members, you know, we used to wear pant shirt, okay. Used to eat something. Used to do something. Used to work something. And we say, somebody has to you know examine what is the standard of wearing of a man. Then say sir pant and shirt. Shirt may be full or half but it is pant and shirt. It becomes standard. Now somebody comes wearing a kurta pajama. It will be a division from the standard. The standard means a general layman having a basic conceptual, a normal level of knowledge will work in the manner. And the work in the manner will be acceptable to mass of the public. Means more than 90 percent, 95 percent or general layman. It becomes the standard. Standard. Yes, everybody drinks water after having food. They eat food. Lunch time is a day or two. It becomes standard. Lunch time is 30 days. What happened? So that night party is you know morning and then so it becomes division. What is standard? A general people are doing. If you are understanding a projection in a manner that suppose you are earning 10,000 rupees a month. How much you should expand? More than 10,000 or less than 10,000? If you spend more than 10,000 then standard will apply. Where you are going? More than 10,000. Oh my God, see. So there we have to, why you spend? Where you board the money? When you will recover? What will happen to you? Why so much question? Because you are deviated in the standard. So standard means the things which apply everybody or a common mass of general people. Whenever a person working in underground mine, he has to wear the helmet. It is a division. Okay? Because he has to go somewhere in such a situation. Somebody going hill areas he has to wear some different dress. Because there is a division. The country is not covered by all hill areas. You will not carry all the clothes to go hill areas. You will not carry all the clothes through the downward. So standard is very simple. So whenever accounting standard says, first accounting standard says that you should have accrual basis of accounting. What do you say? Accrual, why accrual basis accounting? Because at the year of end you must know how much is recovered, how much is payable. If you don't know and you carry the transaction year to year, you will send down the shop at one point of time. For government is not bothered because government you earn, you don't earn. As you have to run, it will be run by the government budget. They have to see government budgetary and all things. So standard applies to government of India, not to you. But in any of the general mode, standard means you must know at particular date what is your asset, what is your liability, how much you have earned, how much you have lost. The standard says, the basic principle says, you must carry on your activity. Like, today you are running institution, tomorrow you will also run. After three you will also run. After five years, otherwise you are entering the person for five year course and tomorrow you are not certain how you can enter a student for five year course. Means you assume that it will run for the years two together. The standard says that whatever you purchase, if it is not consumed this year, it becomes your asset because the benefit of it will be accrued to next year only. So suppose I purchase a set of ten crore and this year I do business of one crore only. I put all ten crore as expenditure. So nobody will give you the loan, fund etc. I will finish one year only. But say ten crore as a purchase and one year I will use only 7% of it, 70 lakhs this year. Then I justify yes. So you must account for the expenditure only to the extent matching the revenue or it will actually consume. It is a standard. Now what happens after two or three years, whatever asset is there, you debit all the expenditure. Then you will say, what happened to you? Now machine becomes obsolete. New machines came. Nobody is buying this equipment. Nobody is doing this transaction. So that becomes deviation. So we will say you have not followed the standard and deviation is because of this reason. So we will justify the transaction that standard in this case is not followed because of this reason. So wherever standard is applied, you have to see three things. Number one, whether standard has been followed? Yes, finished. If not followed, reason, why not followed? Quantification, if would have been followed, then what would have been the result? Suppose you are running 5 lakhs per year today. Now if you follow the standard, what would have been your income? Either 10 lakh or 2 lakh or what quantum effect of it. And then disclosure. Disclose means disclose right in the book. So either can understand. You vote upon the institution running very nicely. At one fine morning it has gone down. So they will understand because of these specified courses closed by the government of India. No permission granted. Nothing has taken place. All building machinery has become obsolete. Thereup it has to be written off. So that is why the expenditure has gone up. So this is the standard and deviation. So standard is a very simple thing. You understand every standard in a very simplicity, a simple manner. Standard both, it is very simple. Not following, what is the reason? So standard will come from your own heart. I have taken more time with standard because standard, there are only after this you will learn only standards only. What is one, what is two, what is three, what is the count of these only. So wherever I go and teach, standard is a very simplest thing as if I am making a simple accounting entry in the book. Only three things. If the standard you do not follow, you have to find what is the reason. If reason, then is reason is affected, how much amount and then disclose the book. Finish. That is the standard. Accounting unit. So suppose you in an institution you can have different accounting unit. Suppose separate budget is given. So separate department has to prepare separate account. Separate trial bank. So all department trial bank say one unit trial bank will consolidate one place. Account there can be one unit. So you can prepare for institution, unit-wise account also. So that will become your accounting unit. Accounting here, we discussed one accounting here. Accrual, again I discussed accrual. Accrual means recognition of all transactions in a particular period, particular year matching with that particular period. Accrual. Like I prepare the accounting for financial year, then till this financial year how much amount is due, how much account is recoverable, how much amount is payable, whatever transactions I have carried this year. All transactions should be valued, accounted for in such a manner that on a particular date at the end of the year, whether it is paid or not paid, whether accounted or not accounted, it should be accounted for on the value for which either it is payable or it is receivable. In case of a set, it is created at what value? In case of liability, it is created at what value? That is the accrual basis of accounting. Now what is different between you and me? Suppose somebody is not giving the fees, some students or you are not paid, not refunded certain money received to you or you have incurred the expenditure but not paid salary of certain people. You are not paid bills of certain expenditure. So in case accounting, you will account for only income and expenditure what is received but you will not account for the expenditure which already incurred but you didn't pay because bill didn't receive by you or don't pay because you don't have the money or don't pay because your accountant has not verified the bill or don't pay because the officer says no, no, no, I will take time, let him come to me. As he said, I will not pay this big amount, let him discuss. There may be 1,000 these are. Liability and action, what is happening? If these are not cleared or these are not paid or received, how these are cleared? Clear. Clear means suppose a simple example, you take only one example and then make your mind complete work. Simple example, suppose you have done 12 months work in the IIT, okay, 12 month IIT, okay. Now you have to pay, your salary is 1 lakh per year. So total salary payable due for this year is 12 lakh, not 12 lakh. If IIT does not pay me for 1 month. You does not pay for 1 month. So what I will say, I will make an entry, salary account debit due to salary has to be 12 lakh for this year. Salary account debit to you because it is payable to you. And if IIT does not clear for years together for how many years that should be carried? No, not so many. It will remain as liability. You have to pay. If you do not pay, that is a legal issue. If you do not pay, that is your legal issue. You do not have money. Is there any standard for clearance of that also? Standard is if any liability is not cleared within the period of 3 years. Or any current non-payment has been for 3 or 1 year, then auditor or the management can examine that issue whether it is really payable or not. Whether it was really payable or not, whether there is a claim against you, whether you have not performed well, whether you have to make deduction or whether it was not payable wrongly accounted for. No, wrongly it was not wrongly accounted for. No, but there can be situation. There can be situation when suppose you did not come 1 month or you came all half an hour and there is a complaint against you. So it was not payable as per law because there is a complaint and you didn't do it in full time. Suppose somebody is coming for a whole of the year. He is not paid. There is no example. I am not saying that. I go to question. Your question is suppose it is accounted for not paid. Not paid we don't have rule. Because that is the entity business rule. That is the business has to do. Because the institute or accounting but does not run the business. You don't pay, you will file suit against you, file suit. Then court will tell you to pay with interest. Now court has ordered that you have to pay within 1 month otherwise you have to pay interest. Accountant will say if you are not paid you again credit interest. So we will make entry interest credit to you also. That will do. But we cannot compel. The standard cannot compel you should pay in 2 months. If you are not paid in 1 year you have to disclose non-current liability. It is not a current. It is non-current. So that people should know this much because non-current liability has not been paid within 12 months. That standards are coming. But we cannot say you are not paid. Or if it is not payable you reverse it. Or auditor will qualify and report this amount due from long period is not paid. My question is that after how much time that should be revert back. So much time not paid that management and you have to decide. Law says income tax department will what income tax will do. Whatever you want not paid after 3 years he will treat as your income. Because liability income one side. So it will treat income. He will put tax on you. And accounting people auditing will report in the books they are not paying. But if either the receivable or the payable person has to you know put claim or file a suit against you in the legal court. Okay. Accurate basis of accounting you have discussed accrued and due. Accrued and due means on 31st March you have done some work. And the amount was also payable on 31st March. It becomes accrued and due. Suppose your salary or I have given you services for accounting. I have prepared account of 31st March. But my amount was also payable at the end of the month. But at end of month it means account accrued and due. Interest in the bank you borrow the money. So interest is payable on 31st March. So accrued and due is not paid. But interest is not due. So it is accrued and due. Accrued but not due. Suppose interest up to 31st March payable in April by 15th. So it is accrued but not due. So the people should know that certain amount which was accrued and due payable you are not paid. But other thing means accrued but not due. It was not payable I have not paid I have not committed a mistake. So accrued and due and accrued not due we have concept has come. Sir all transactions they are qualified by the documents supporting documents. Now the in case of procurement of assets suppose a purchase order is issued. So purchase order is nothing but it is document. So a commitment is made along with the purchase order a commitment is made. Now suppose the purchase order is issued but the payment is not made by 31st March. Neither the goods are paid. Now how do we exhibit this this account is means basically what happened what is the transaction you and your very good question what is the transaction you had committed a liability what transaction you have committed a liability will purchase this and you pay it. But since asset has not come you cannot account for it. You cannot account for it. But you have to show in the notes along with the account that this much amount is committed by me as liability. Means ultimately I have given the purchase order and in future if somebody read my books he must understand that already he has given order for 10 lakh rupees to purchase he is having banked 5 lakh rupees. So I will not make him transaction. So you will show in the books as committed liability. So commitments made as on 31st March not materialized and also no transaction has been taken place. No asset has come or no revenue has earned or no transaction taken place then it will be a committed liability and will be shown in the books of account as contingent liability under committed liability. Now we are discussing accounting standards and there I notice that a significant aspect which needs to be covered here. Maybe you have already planned it or not. That is the disclosure. Disclosure is gaining significance from as accounting standards are coming in practice. Conventionally we were not disclosing normal disclosures that we have now accounting policy or through notes on accounts. Even that is a new phenomena that has been added to the accounts. Now in view of the accounting standards we are required to disclose a number of aspects. There are several disclosures that are to be made. But there is no standard language and the people who are dealing with accounts usually do not have an idea of the extent to which disclosures to be made or what language to be used or how just how go about disclosing. There are general accounting principles. Whenever you prepare account there are general accounting principles and general accounting principle cover all these things. Whenever you have a general accounting principle applicable applicable to all. This simple accounting principle if you have committed a liability you should show in the notes on account. Every accounting will say you. If you entered into a transaction, transaction means you started a dialogue and that has created a liability on you. Suppose tomorrow you given a purchase order and you don't purchase. Then say if not purchase then you have to pay 1 lakh at damages. So liability has come on you. So that is a general accounting principle and all standard if not you know specified for a particular thing. It applicable to you also to the extent applicable. So whatever standard made applicable that system are discussing is that for a specific account whatever standard applicable should be carved out in a manner that they can read at one place all the standard. That system is coming. So that system when comes then you will be facilitating at one place everything. Otherwise general accounting applicable whatever account should be taken in the book. They all are applicable. When actual accounting now certain transactions you are not carrying like stock and trade. So institutions will not have a stock and trade because they are not trading unit for trading but you may have books to purchase and sale sometime. So that will cover in the trading unit also. Some are applicable to manufacturing you are not manufacturing. So those part will not be applicable to you. That is like that only. So you have to understand only basic principle basic system that whatever applicable to a institution as a matter of general practice the layman thinking you will see yes it should be applicable. So my query is probably my query is slightly different what I was trying to make out of was that in case of deviation from standards we are required to quantify and disclose. That disclosure is sometimes it is to be in the form of foot note sometimes to be in the say accounting policy sometimes it is in the notes and accounts. That is notes and account whenever there are now the new format which has come from companies that we are making applicable to everybody. So there has to be a annexure to the balance sheet attached. You understand annexure only with note in different language is a part of finance statement. Notes on account the notes on account will be compulsorily there. Whatever note available in the because in balance sheet you cannot write lot of things. So you can refer note number this you can put it is already standard practice to prepare account. It is standard practice also. And what about accounting policy I mean just as I said you are not preparing in Jamia. I am preparing accounting policy accounting policy notes everything is applicable. Everything is there but as you just mentioned that in case there is any deviation from accounting status. You are not reporting. Yes. That should report. That disclosure because you are not reporting because you are not following accurate basis of accounting Jamia Nushti. You are following cash system of accounting. No. You are following accurate basis of accounting. Yes. We are strictly following a approval system of accounting. Accrual system of accounting I mean accrual our accounts are made on accrual system and the balance sheet that we the format that we have that is. No, no, no there is a accurate basis of accounting there cannot be a situation where the division is not reported. It has to be there. Otherwise there is no division. I do not understand but there can be no division. What I was asking that the just now you mentioned that accounting standards when there is any deviation the deviation is to be quantified and to be disclosed. That area is gaining significance and often we are faced with a problem that the disclosure part. Is not doing. No, no disclosure how that deviation is to be disclosed. The language for disclosure or the standard I was trying to make out that this should be adequately discussed, covered by in your lecture. No, that would be because next lecture I am going to explain you why this is not applicable to all the students. They will also tell you this standard applicable if not applied how to disclose. How to quantify. They will tell you everything. As far as Jamath accounts are concerned available on Jamath website and there is adequate disclosure. You may anybody can visit the site and see it. Accumulated depreciation Accumulated depreciation because on asset. Hello sir, I am from the North Eastern Hill University. I have encountered problem about the unclaimed checks these last 2 years. Unclaimed checks means checks not presented before the bank. So can these checks, can these these amounts be credited back can they be credited back into our asset and then can the liability also be provided again. I think it cannot be done because it will be repeating the expenditure of the previous previous years. Though audit is insisting that these should be credited back unclaimed checks. Unclaimed tax. Unclaimed checks. Payment made but not claimed. I understand that is the problem of every student. Because you prepare the check for every payment even 25 rupees you pay to convince from this room to that room to the professor. You go to take a lecture from this room to that room you pay him the convince. Every lecture every class etc. Special lecture you are paying the local convince. Some amount you are paying to some vendors for some small amount you prepare the check. And the number one by the vendor in one situation and sometimes some checks are taken by them they are not depositing the account and in third cases when they are depositing the account sometime they are time barred sometime they are you know outdated check etc. In that case what you should do whatever checks remain unclaimed and the due date means the date by which the validity date of check is expired ok. Those checks particularly you should you should arrive at in different manner that these are the complete checks you know unclaimed check and that liability should be shown separately in the bank reconsider statement. What is happening? You are issuing the check you are creating the bank. Bank balance is reduced but on the other side you should increase the bank balance and take the liability against the unclaimed checks. That will create that will make your issue easy because whenever they will go to bank they will not be in case because the validity of the check is expired. When validity of the check is expired then it will it will come to you again. So you can see style check. You can say keep a separate hand under liability style check. Payable payable and bank balance you can increase. That is permissible because you cannot credit style checks you have to carry till it is not written off finally otherwise you have to assess again and three year period is expired and after three year no claim is there then you can credit that check in your income side or reverse the expenditure whatever it is. Hello one question sir. Actually generally in educational institution we are maintaining for accounting purpose we are maintaining financial year but for admission purpose we are maintaining account year June to July. So we are collecting admission fee for the whole year that is from June to July and how we will treat this admission fee in two how we adjust this in two years. Otherwise I will tell you one simple system because in educational system there is a standard system accounting is already prescribed that whenever you account for a particular fees receipt for a particular session there are two methods of accounting one way you can segregate the fees by period and say accrued income not accrued but not due or income not accrued or un-earned income if receipt accrued not due if amount received then un-earned income un-earned income un-earned income number one No no not earned you have received the income not earned you will earn only when you will provide the service there is a difference between receipt and earning if you receive the income but you have not earned you will earn only when you will give the expenditure again that suppose I have given you to you have given me 10000 to teach up to December 2015 so 2015 means every month 1500 water come so it is not it is received but not earned by me it will be earned only when I finish the last lecture so the difference is earned and received number one number two you can go by accounting policy there can be accounting policy that the institution the admission fees received will be treated as the income in the receipt of the year so that accounting policy will suffice because that is a continuing accounting policy that will not have effect in the further years you are following a policy year to year and you eject quantum and eject classification of that may not be giving a justice to the accounting when you are seeing any income where you are confirm that a classification of the income from one year to other will not give a justice you may have the accounting policy that this income will be accountable in the receipt year all two methods are there but you have to disclose the accounting principle but basic accounting principle says it should be segregated in the manner that income earned and income not earned that way it is the basic principle so it will go by fees wise some examination fees you take fees taken for forgery exams held in my that can be the criteria that is the regular system in that case only you have to go by the accounting system and accounting policy that is the only thing there are certain fees which we received for three years also in that situation that has to be segregated 100% like affiliation fees affiliation fees is not three years there cannot be applicable for three years affiliation fees affiliation fees is definitely three years affiliation you have to divide it three years nobody can do it four years five years it is lapse of one month two months coming year to year that can be covered by accounting policy okay