# 115 Accounting AS Level Text book Series Theory and Practice

## **Accounting AS Level Text book Series Theory and Practice 6th Edition**

  
Current financial reporting practices have been under major review with the approach of a single market, moving towards harmonization. Consequently, all global syllabuses, from December 2007 onwards, use international terminology.

The globalized frame work of Cambridge International Advanced Level, in practice over 125 countries, has led to the introduction of an international format and layout for all its syllabuses.

This book Accounting A Level Theory and Practice Article Number 115 is intended to cover the accounting content of CIE Advanced Level syllabus 9706 comprehensively. With a thorough discussion of the basic double entry principles for the beginners, it is also useful for those who have some knowledge. **(Accounting AS Level)**

The strengths and weaknesses of accounting practices are reinforced by a set of Review Questions at the end of each chapter, enabling the students to put, what is learnt, into practice. These Questions have been developed by the author and are not taken from past exam papers.

(Accounting AS Level)

The Review Questions have been set in increasing order of difficulty and each odd number Question is complimented by an even numbered question with the same difficulty level.

Solutions to odd numbered questions are given in the appendix at the end of the book. In addition solutions to even numbered questions are available in a separate manual. Teachers using “AS Accounting Theory and Practice” as a text book, may get the manual by applying officially on a school letterhead. Providing the students with a solid foundation in the “Why” as well as the “How” of accounting concepts, the emphasis is put on understanding rather than mere cramming.

A brief list of learning objectives at the beginning of each chapter will assist the readers to determine the things they should understand while going through the chapter. Hence, checking back may help them to identify weak areas which still need thorough review. I would like to thank numerous people for the contribution they made to the writing of this book. In particular,

I gratefully acknowledge the input that Mr. Sajid Munir made in developing the Review Questions, text for various chapters and for his constructive criticism throughout the process of developing the book. In addition, my thanks owe to the Sheraz Siddiq, Waseem Zia, Zafar Hashmi, Rabia Malik for their continuous support, insightful comments and suggestions during several stages of the book development.

Following are the topics covered in this book

**TABLE OF CONTENTS**  
**PREFACE (Accounting AS Level)**

**UNIT A BOOKKEEPING & ACCOUNTING**  
**A.1 BRANCHES OF ACCOUNTING**  
**A.2 ACCOUNTING EQUATION**  
A.2.1 Assets  
A.2.2 Liabilities  
A.2.3 Equity  
A.2.4 Drawings  
A.2.5 Treatment of transactions relating to owners  
A.2.6 The dual aspect concept and the accounting equation  
**A.3 TRANSACTION**  
A.3.1 Cash Transactions  
A.3.2 Credit Transactions  
**A.4 STATEMENT OF FINANCIAL POSITION**  
A.4.1 Statement of financial postion (Horizontal Style)  
A.4.2 Statement of financial postion (Vertical Style)  
**REVIEW QUESTIONS**

**UNIT B DOUBLE ENTRY FOR ASSETS, LIABILITIES & CAPITAL**   
**B.1 EVOLUTION OF BOOKKEEPING**  
**B.2 ACCOUNT**  
**B.3 “T” Account**  
**B.4 RULES OF DEBIT AND CREDIT**  
**B.5 THREE-COLUMN LEDGER ACCOUNT (RUNNING BALANCE METHOD)**  
**B.6 LEDGER**  
**B.7 DOUBLE-ENTRY RELATING TO ASSETS AND LIABILITIES**  
B.7.1 EXAMPLE  
**B.8 BALANCING OF AN ACCOUNT**  
B.8.1 When should accounts be balanced?  
**B.9 TRIAL BALANCE**  
B.9.1 Uses of a Trial Balance  
B.9.2 Why is it Necessary for a Trial Balance to ‘Balance’?  
B.9.3 Trial Balance - An aid to Financial Statements  
**REVIEW QUESTIONS**

**UNIT C ACCOUNTING FOR GOODS**  
**C.1 INVENTORY OF GOODS**  
**C.2 BOOKKEEPING FOR INVENTORY OF GOODS**  
**C.3 WHY ONVENTORY ACCOUNTS DO NOT RECORD PURCHASES AND SALES OF GOODS**  
**C.4 PURCHASES**  
C.4.1 Cash Purchases  
C.4.2 Credit Purchases  
**C.5 SALES**  
C.5.1 Cash Sales  
C.5.2 Credit Sales  
**C.6 PURCHASES RETURNS (RETURN OUTWARDS)**  
**C.7 SALES RETURNS (RETURNS INWARDS)**  
**C.8 TRADING SECTION OF INCOME STATEMENT**  
**C.9 CLOSING OF INCOMES AND EXPENSES**  
**C.10 CLOSING INVENTORY**  
**C.11 OPENING INVENTORY**  
**REVIEW QUESTIONS**

**UNIT D ACCOUNTING FOR INCOMES & EXPENSES**  
**D.1 INCOMES**  
**D.2 EXPENSES**  
**D.3 DOUBLE-ENTRY FOR EXPENSES AND INCOMES (REVENUES)**  
**D.4 BOOKKEEPING FOR INCOMES AND EXPENSES**  
**D.5 CALCULATION OF PROFIT FOR THE YEAR**  
**D.6 CLOSING OF INCOMES AND EXPENSES**  
**REVIEW QUESTIONS**

**CHAPTER E FINANCIAL STATEMENTS-AN INTRODUCTION**  
**E.1 NEED FOR STATEMENT OF PROFIT OR LOSS**  
**E.2 USES OF STATEMENT OF PROFIT OR LOSS**  
**E.3 CARRIAGE INWARDS**  
**E.4 CARRIAGE OUTWARDS**  
**E.5 FINANCIAL STATEMENT-AN IMPORTANT CONSIDERATION**  
**E.6 ACCOUNTING PERIOD**  
**E.7 DRAWINGS**  
**E.8 ASSETS**  
E.8.1 Non-Current Assets  
E.8.2 Current Assets  
**E.9 LIABILITIES**  
E.9.1 Current Liabilities  
E.9.2 Non-Current Liabilities  
**REVIEW QUESTIONS**

**UNIT F BOOKS OF PRIME ENTRY & DIVISION OF LEDGER**  
**F.1 SALES JOURNAL**  
F.1.1 Posting from the Sales Journal to the Ledger  
F.1.2 Trade Discount  
F.1.3 Sales on Credit Card  
**F.2 PURCHASES JOURNAL**  
F.2.1 Posting from the Purchases Journal to the Ledger  
**F.3 RETURN INWARDS JOURNAL**  
F.3.1 Posting from the Returns Inwards Journal to the Ledger  
**F.4 RETURN OUTWARDS JOURNAL**  
F.4.1 Posting from the Returns Outwards Journal to the Ledger  
**F.5 GENERAL JOURNAL**  
**F.6 CASH BOOK**  
F.6.1 Two-Column Cash Book  
F.6.2 Cash Discounts  
F.6.3 Three Column Cash Book  
**F.7 PERSONAL LEDGERS**  
**F.8 GENERAL LEDGER**  
**REVIEW QUESTIONS**

UNIT G USERS OF ACCOUNTING INFORMATION  
G.1 OWNERS  
G.2 MANAGERS  
G.3 EMPLOYES  
G.4 INVESTORS AND LENDERS  
G.5 SUPPLIERS  
G.6 CUSTOMERS  
G.7 GOVERMNENT  
G.8 PUBLIC  
G.9 ENVIRONMENTAL BODIES

**CHAPTER 1 BANK RECONCILIATION STATEMENTS**  
**1.1 DIEEFERENCE BETWEEN BANK STATEMENT AND CASH BOOK**  
**1.2 REASONS FOR DIFFERENCE BETWEEN BANK STATEMENT AND CASH BOOK BALANCE**  
1.2.1 Items in the Bank Statement but not in the Cash Book  
1.2.2 Items in the Cash Book but not in the Bank Statement  
**1.3 BANK RECONCILIATION STATEMENT**  
**1.4 STEPS FOR PREPARING A BANK RECONCILIATION STATEMENT**  
**1.5 USES OF BANK RECONCILIATION STATEMENT**  
**1.6 LIMITATIONS OF BANK RECONCILIATION STATEMENT**  
**REVIEW QUESTIONS**

**CHAPTER 2 ACCOUNTING FOR TRADE RECIEVABLES**  
**2.1 IRRCOVERABLE DEBTS**  
**2.2 IRRCOVERABLE DEBTS RECOVERY**  
**2.3 DOUBTFUL DEBTS**  
**2.4 ALLOWANCE FOR IRRCOVERABLE DEBTS**  
2.4.1 Calculation of allowance for irrecoverable debts  
2.4.2 Treatment of allowance in financial statements  
2.4.3 General journal enteries  
**2.5 AGEING SCHEDULE**  
**2.6 WHY ALLOWANCES ARE MADE FOR BAD IRRECVERABLR DEBTS**  
**REVIEW QUESTIONS**

**CHAPTER 3 ACCOUNTING FOR NON-CURRENT ASSET**  
**3.1 DEPRECIATION**  
**3.2 CAUSES FOR DEPRECIATION**  
**3.3 FACTORS FOR CALCULATING DEPRECIATION**  
3.3.1 The Original Cost of Asset  
3.3.2 The Estimated Useful Economic Life  
3.3.3  The Approximate Residual Value  
**3.4 CHARACTERISTICS OF DEPRECIATION**  
**3.5 METHODS FOR CALCULATING DEPRECIATION**  
3.5.1 Revaluation Method  
3.5.2 Straight Line Method or Original Cost Method  
3.5.3 Reducing Balance Method  
**3.6 ANNUAL DEPRECIATION UNDER REDUCING BALANCE & STRAIGHT-LINE METHODS**  
**3.7 DISTINCTIVE FEATURES OF STRAIGHT LINE AND REDUCING BALANCE METHOD**  
3.7.1 STRAIGHT LINE METHOD  
3.7.2 rEDUCING BALANCE METHOD  
**3.8 DIFFERENCE BETWEEN DEPRECIATION AND PROVISION FOR DEPRECIATION**  
**3.9 DEPRECIATION POLICIES**  
**3.10 DEPRECIATION ACCOUNTING**  
**3.11 DEPRECIATION AND ACCOUNTING CONCEPTS**  
**REVIEW QUESTIONS**

**CHAPTER 4 ACCOUNTING CONCEPTS**   
**4.1 ACCOUNTING CONCEPTS – AN IMPLICATION**  
**4.2 DUALITY (DUAL ASPECT) CONCEPT**  
**4.3 BUSINESS ENTITY CONCEPT**  
**4.4 PRUDENCE CONCEPT**  
**4.5 CONSISTENCY CONCEPT**  
**4.6 MATERIALITY CONCEPT**  
**4.7 REALISATION CONCEPT**  
**4.8 ACCRUAL CONCEPT**  
**4.9 MATCHING CONCEPT**  
**4.10 REALISATION ACCURAL AND MATCHING & CONCEPTS COMPARED**  
**4.11 SUBSTANCE OVER FORM**  
**4.12 OBJECTIVITY**  
**4.13 MONEY MEASUREMENT CONCEPT**  
**4.14 HISTORICAL COST CONCEPT**  
**4.15 GOING CONCERN**  
**4.16 LIMITATIONS OF ACCOUNTING CONCEPTS**  
**4.17 A USES OF ACCOUNTING CONCEPTS**  
**REVIEW QUESTIONS**

**CHAPTER 5 SOLE TRADERS**  
**5.1 SOLE TRADERS**  
5.1.1 Advantages of Operating as a Sole Trader  
5.1.2 Disadvantages of Operating as a Sole Trader  
**5.2 CASH AND ACCURA; BASIS OF ACCOUNTING**  
**5.3 NEED FOR ADJUSTMENTS**  
**5.4 TYPES OF ADJESTMENTS**  
5.4.1 Inventory at Year-End  
5.4.2 Closing Inventory in Trial Balance  
5.4.3 Accrued Expenses  
5.4.4 Accrued Incomes  
5.4.5 Prepaid Expenses (Other Receivables)  
5.4.6 Pre-received/Deferred Incomes  
5.4.7 Drawings by Owner  
**5.5 DEPRECIATION**  
5.5.1 Methods of Depreciation  
5.5.2 Depreciation Policies  
5.5.3 Recording of Depreciation  
**5.6 IRRECOVERABLE DEBTS**  
5.6.1 Irrecoverable debts written off (included in the trial balance)  
5.6.2Irrecoverable debts to be written off (given as an adjustment)  
**5.7 ALLOWANCE FOR IRRECOVERABLE DEBTS**  
**5.8 ADJUTING MORE THAN TWO ACCOUNTS**  
**5.9 GOODS ON SALE OR RETURN**  
5.9.1 Goods Sent to Customers on Sale or Return (Approval) Basis  
5.9.2 Goods Received from Suppliers on Sale or Return (Approval) Basis  
5.9.3 Disposal of non-current assets  
**5.10 Benefits of Preparing Financial Statements**  
**5.11 Limitations of Financial Statements**  
**5.12 Calculation of Profits for Service Businesses**  
**REVIEW QUESTIONS**

**CHAPTER 6 PARTNERSHIPS**  
**6.1 CHARACTERISTICS OF PARTNERSHIP**  
**6.2 ADVANTAGES AND DISADVANTAGES OF THE PARTNERSHIP**  
**6.3 PARTNERSHIP AGREEMENT**  
6.3.1 Contents of Partnership Agreement  
**6.4 PROVISIONS OF PARTNERSHIP ACT 1890 WHEN NO PARTNERSHIP AGREEMENT EXISTS**  
**6.5 FINANCIAL STATEMENTS OF A PARTNERSHIP**  
6.5.1 Appropriations of profit  
6.5.2 Statments of Financial Position of Partnerships  
**6.6 ACCOUNTING RECORDS FOR PARTNERS**  
6.6.1 Partners' Capital Accounts  
6.6.2 Benefits (Uses) of of Having Separate Current Accounts  
6.6.3 Reasons for keeping separate partner's capital and current Accounts  
6.6.4 Drawings Accounts  
**6.7 PARTNER'S LOAN ACCOUNT**  
6.7.1 Reasons for partner's loan in adition to capital Accounts  
**6.8 INTREST ON CAPITAL**  
**6.9 CALCULATION OF INTEREST ON DRAWINGS**  
**16 PARTNER’S GUARANTEED SHARE IN PROFIT**  
**REVIEW QUESTIONS**

**CHAPTER 7 CAPITAL & REVENUE**   
**7.1 TREATMENT OF CAPITAL AND REVENUE ITEMS IN FINANCIAL STATEMENT**  
**7.2 DISTINCTION BETWEEN CAPITAL AND REVENUE EXPENDITURES**  
7.2.1 Expenditures for Acquisition of a Non-current asset  
7.2.2 Expenditures for Improving Efficiency /Capacity of a Non-current asset  
7.2.3 Expenditure at the Initiation of Business  
7.2.4 Expenditure on Extension of Business  
7.2.5 Expenditures to Increase the Useful Life of an Asset  
7.2.6 Expenditures of Abnormal Amounts  
**7.3 APPLICATION OF MATERIALITY CONCEPT**  
**7.4 DIFFERENCE BETWEEN CAPITAL AND REVENUE RECEIPTS**  
7.4.1 Revenue Receipts  
7.4.2 Capital Receipts  
**7.5 EFFECTS OF WRONG TREATMENT OF CAPITAL AND REVENUE ITEMS**  
**REVIEW QUESTIONS**

**CHAPTER 8 CORRECTION OF ERRORS**   
**8.1 TYPES OF ERRORS**  
8.1.1 Errors Not Affecting Agreement of Trial Balance  
8.1.2 Errors Affecting Agreement of Trial Balance  
**8.2 SUSPENSE ACCOUNT**  
**8.3 EFFECT ON PROFIT OF CORRECTING ERRORS**  
**8.4 EFFECTS ON BALANCE SHEET OF CORRECTING ERRORS**  
**REVIEW QUESTIONS**

**CHAPTER 9 CONTROL ACCOUNTS**  
**9.1 CONTROL ACCOUNTS IN CAMBRIDGE A LEVEL SYLLABUS**  
**9.2 THE FORMAT OF SALES LEDGER AND PURCHASE LEDGER CONTROL ACCOUNTS**  
**9.3 HOW CONTROL ACCOUNTS ARE PREPARED?**  
**9.4 CONTRA ENTRY**  
**9.5 BENEFITS OF OFFERING CASH**   
**9.6 EFFECTS OF CHARGING INTEREST ON OVERDUE BALANCES OF CUSTOMERS**  
**9.7 TWO BALANCES OF CONTROL ACCOUNTS**  
9.7.1 Reasons for Having Two Balances of a Control Account  
9.7.2 Treatment of Two Balances in the Balance Sheet  
**9.8 CORRECTION OF ERRORS IN CONTROL ACCOUNTS**  
**9.9 ADVANTAGES AND USES OF CONTROL ACCOUNTS**  
**9.10 LIMITATIONS (DISADVANTAGES) OF PREPARING CONTROL ACCOUNTS**  
**REVIEW QUESTIONS**

**CHAPTER 10 ACCOUNTS FROM INCOMPLETE RECORDS**  
**10.1 THE REASONS FOR INCOMPLETE RECORDS**  
**10.2 NEED FOR PREPARING FINANCIAL STATEMENT FROM INCOMPLETE RECORDS**  
**10.3 CALCULATING PROFITS AND LOSSES FROM CHANGES IN CAPITAL/NET ASSETS**  
10.3.1 Statement of Affairs  
10.3.2 Statement of Profit or Loss  
**10.4 PREPARATION OF FINANCIAL STATEMENTS FROM INCOMPLETE RECORDS**  
10.4.1 Calculation of Opening capital through Statement of Affairs  
10.4.2 Preparation of Cash/Bank Account  
10.4.3 Calculation of Total Sales  
10.4.4 Calculation of Total Purchases  
**10.5 MARK-UP AND MARGIN**  
10.5.1 Use of Mark up and Margin to calculate Missing Items in Trading Section  
10.5.2 Conversion of Mark-up into Margin  
10.5.3 Conversion of Margin into Mark-up  
**10.6 CALCULATION OF INCOME/EXPENSES TO BE SHOWN IN STATEMENT OF PROFIT OR LOSS**  
**10.7 CALCULATION OF DEPRECIATION**  
**10.8 CALCULATION OF GOODS LOST BY THEFT OR FIRE**  
**10.9 PREPARING BALANCE SHEET FROM INCOMPLETE RECORDS**  
**10.10 INVENTORY COUNT AND THE STATEMENT OF FINANCIAL POSITION DATE**  
**10.11 DISADVANTAGES OR DEFECTS OF ACCOUNTS PREPARED FROM INCOMPLETE RECORDS**  
**10.12 ADVANTAGE OF ACCOUNTS PREPARED FROM INCOMPLETE RECORDS**  
**REVIEW QUESTIONS**

**CHAPTER 11 LIMITED COMPANIES - SHARES & DEBENTURES**  
**11.1 The Need for Companies**  
**11.2 Choice between a Partnership and a Limited Company**  
**11.3 Advantages and Disadvantages of Forming a Limited Company**  
11.3.1 Advantages of a Limited Company  
17.3.2 Disadvantages of Forming a Limited Company  
**11.4 Sources of Finance for a Company**  
11.4.1 Ordinary Shares  
11.4.2 Debentures  
**11.5 Forms of Capital**  
11.5.1 Authorised Share Capital  
**11.6 prices of a Share**  
11.6.1 Face Value  
11.6.2 Issue Price  
11.6.3 Book Value  
11.6.4 Market Value  
**11.7 Selling Shares to the General Public**  
11.7.1 Issue of Shares at Par  
11.7.2 Issue of Shares at Premium (at a price more than face value)  
**11.8 Rights Issue**  
11.8.1 Advantages of Rights Issue  
11.8.2 Disadvantages of Rights Issue  
11.8.3 Advantages of Rights Issue for Shareholders  
**11.9 Reserves**  
11.9.1 Capital Reserves  
11.9.2 Revenue Reserves  
**11.10 Bonus or Scrip Issue**  
11.10.1 Reasons for Bonus Issue  
11.10.2 Effect on Earnings per Share (EPS)  
11.10.3 Advantages of Bonus Issue  
11.10.4 Disadvantages of Bonus Issue  
**11.11 DlFFERENCE BETWEEN RIGHTS AND BONUS ISSUE**  
**11.12 Issue of Loans and Debentures**  
11.12.1 Issue of Debentures at Par  
11.12.2 Issue of Debentures at Premium (at a Price more than Face Value)  
11.12.3 Issue of Debentures at Discount (at a Price below Face Value)  
**REVIEW QUESTIONS**

**CHAPTER 12 LIMITED COMPANIES - FINANCIAL STATEMENTS**  
**12.1 Financial Statements of Limited Companies**  
**12.2 Statement of Changes in Equity**  
12.2.1 Dividends on Ordinary Shares  
12.2.2 Transfer to General Reserve  
**12.3 FINANCIAL STATEMENTS IN CIE EXAMS**  
**12.4 A Comparison of Financial Statements of Business Organisations**  
**REVIEW QUESTIONS**

**CHAPTER 13 ACCOUNTING RATIOS**  
**13.1 Financial Ratios**  
**13.2 Analysis of Ratios**  
13.2.1 Comparing one Year with Another (Trend or Time Series Analysis)  
13.2.2 Comparing one Business with another Business (Cross-Sectional Analysis)  
**13.3 DEMONSTRATION OF RATIOS**  
**13.4 Profitability Ratios**  
13.4.1 Gross Profit Margin  
13.4.2 Profit for the year Ratio  
13.4.3 Operating expenses to revenue ratio  
13.4.4 Return on Capital Employed                                                         (ROCE)  
**13.5 Liquidity Ratios**  
13.5.1 Current Ratio  
13.5.2 Acid Test (Liquid) Ratio  
**13.6 Efficiency Ratios**  
13.6.1 Rate of Inventory Turnover  
13.6.2 Trade Receivables'Turnover (days)  
13.6.3 Trade payables'Turnover (days)  
13.6.4 Non-Current Asset Turnover  
**13.7 LIMITATIONS OF ACCOUNTING INFORMATION**  
**13.8 Uses of Ratio Analysis**  
**13.9 Limitations of Ratio Analysis**  
**13.10 Users of Financial Ratios**  
**13.11 Preparation of Financial Statements with the help of ratios**  
**REVIEW QUESTIONS**

**CHAPTER 14 COMPUTERS IN ACCOUNTING**  
**14.1 Manual Accounting**  
14.1.1 Challenges Faced In Manual Accounting  
**14.2 The Advent of Computerised Accounting**  
**14.3 Use of Computerised Accounting Systems in Recording Financial Transactions**  
**14.4 The Advantagesand Disadvantages of Introducing a Computerised Accounting System**  
14.4.1 The Advantages/Uses of Introducing a Computerised Accounting System  
14.4.2 Disadvantages/Limitations of Introducing a Computerised Accounting System   258  
**14.5 Differences between Manualand Computerised Accounting Systems**  
**14.6 Security of Data in Computerised Accounts**

**CHAPTER 15 COST ACCOUNTING - AN INTRODUCTION**  
**15.1 Difference between Costand Expense**  
**15.2 Cost classification by changes in activity**  
15.2.1 Fixed Cost  
15.2.2 Variable Costs  
15.2.3 Mixed Costs  
15.2.4 Step Costs  
**15.3 Cost classification by traceability**  
15.3.1 Direct Costs  
15.3.2 Indirect Costs  
15.3.3 Sunk Costs  
**15.4 Costing Systems/Methods**  
15.4.1 Specific Order Costing  
15.4.2 Continuous Costing

**CHAPTER 16 MATERIAL & LABOUR COSTING**  
**16.1 Inventory Valuation Methods**  
16.1.1 First in First out (FIFO)  
16.1.2 Last in First out (LIFO)  
16.1.3 Weighted Average Cost (AVCO)  
**16.2 Relationship of Inventory Valuation Methods with Physical Flow of Goods**  
**16.3 Bases of Inventory Valuation**  
**16.4 Role of Accounting Concepts in Inventory Valuation**  
**16.5 Separate Valuation of Inventory Items**  
**16.6 Effects of Errors in Valuing Inventory**  
**16.7 Systems of Inventory Accounting**  
16.7.1 Periodic Inventory System  
16.7.2 Perpetual Inventory System  
**16.8 JUST-IN-TIME INVENTORY SYSTEM**  
16.8.1 Benefitsof Just In Time  
16.8.2 Risks of Just In Time  
**16.9 Direct Labour Cost**  
**16.10 Indirect Labour Cost**  
**16.11 Calculation of Labour Cost**  
16.11.1 Piece Work Wage System  
16.11.2 Time Wage System (Pay on Time Basis)  
**16.12 Overtime**  
**16.13 Incentives and Bonuses**  
**REVIEW QUESTIONS**

**CHAPTER 17 ABSORPTION COSTING**  
**17.1 Absorption Costing**  
**17.2 COST CENTER**  
**17.3 COST Un IT**  
**17.4 Calculation of Total Production Cost**  
**17.5 Absorption costing in price setting**  
**17.6 Step l: Allocation of production overheads**  
**17.7 Step 2: Apportionment of Production Overheads**  
**17.8 Step 3: Allotment of Service Department Costs to Production Departments**  
17.8.1 Production Cost Centers  
17.8.2 Service Cost Centers  
**17.9 Step 4: Calculation of Overhead Absorption Rates**  
17.9.1 Advantages of using Predetermined Overhead Absorption Rates  
17.9.2 Problems of Using Predetermined Overhead Absorption Rates  
17.9.3 Limitations of Using Actual Overhead Rates  
17.9.4 Single (Factory wide) Overhead Absorption Rate  
17.9.5 Departmental Overhead Absorption Rate  
**17.10 Step 5: Absorption of Overheads**  
**17.11 Step 6: Over/Under Absorbed Overheads**  
17.11.1 Over-Absorbed Overheads  
17.11.2 Under-Absorbed Overheads  
**17.12 Advantages of using Absorption Costing**  
**17.13 limitations of using Absorption Costing**  
**REVIEW QUESTIONS**

**CHAPTER 18 MARGINAL COSTING - BREAK-EVEN**  
**18.1 Marginal Cost**  
**18.2 The Principles of Marginal Costing**  
**18.3 Contribution**  
**18.4 Break-Even Analysis**  
18.4.1 Break-Even Point  
18.4.2 Break-Even Point in Sales ($) Value  
18.4.3 Target Profits  
18.4.4 Break-Even Chart  
18.4.5 Assumptions and Limitations of Break-Even Analysis  
18.4.6 Significance of Break-Even Analysis  
**18.5 Margin of Safety**  
**18.6 Profit-Volume Chart**  
18.6.1 How to Increase Contribution Ratio  
**REVIEW QUESTIONS**

**CHAPTER 19 MARGINAL COSTING - DECISION MAKING**  
**19.1 Make or Buy Decision**  
19.1.1 Qualitative Factors for Make or Buy Decision  
**19.2 SPECIAL ORDER TO USE UP SPARE CAPACITY**  
19.2.1 Conditions for accepting Order below NormaI Price  
19.2.2 Considerations for accepting order below Normal Price  
19.2.3 Consequences of Acceptance of Order below Normal Price  
19.2.4  Acceptance of Order with Negative Contribution  
**19.3 Abandonment of a Product Line/Department**  
19.3.1 Factors to be Considered Before Closure of a Department  
**19.4 Advantages and Disadvantages of Marginal Costing Technique**  
19.4.1 Advantages  
19.4.2 Disadvantages  
**19.5 The Uses of Marginal Costing**  
**19.6 Cost-Volume-Profit Analysis**  
19.6.1 Advantages of Cost-Volume-Profit Analysis  
19.6.2 Limitations of Cost-Volume-Profit Analysis  
**19.7 Similarities between Marginal Costing and Cost-Volume-Profit Analysis**  
**19.8 Difference between Marginal Costing and Cost-Volume-Profit Analysis**  
**19.9 Role of Non-Fi nancial Factors in Decision Making**  
**REVIEW QUESTIONS**

**CHAPTER 20 LI MITING FACTORS IN MARGINAL COSTING**  
**20.1 Examples of Limiting Factors**  
**20.2 Reducing the Effects of Limiting Factors**  
**20.3 Decision-Making Process to Reduce Effects of a Limiting Factor**  
**REVIEW QUESTIONS**

**CHAPTER 21 MARGINALS. ABSORPTION PROFIT STATEMENTS**  
**21.1 Profits of Marginal Costing and Absorption Costing**  
**21.2 Inventory Valuation under Marginal Costing and Absorption Costing**  
**21.3 Difference between Marginal and Absorption Costing**  
**21.4 Usefulness of Marginal and Absorption Costing**  
**REVIEW QUESTIONS**

**SOLUTIONS TO ODD NUMBERED QUESTIONS**  
UNIT A...................................335  
UNIT B...................................336  
UNIT C...................................338  
UNIT D...................................340  
UNIT E....................................342  
UNIT F.....................................344  
CHAPTER 1..............................347  
CHAPTER 2..............................348  
CHAPTER 3..............................350  
CHAPTER 4..............................352  
CHAPTER 5..............................352  
CHAPTER 6..............................356  
CHAPTER 7..............................361  
CHAPTER 8..............................361  
CHAPTER 9..............................363  
CHAPTER 10.............................365  
CHAPTER 11.............................369  
CHAPTER 12.............................371  
CHAPTER 13.............................374  
CHAPTER 16.............................377  
CHAPTER 17.............................380  
CHAPTER 18.............................382  
CHAPTER 19.............................384  
CHAPTER 20.............................385  
CHAPTER 21.............................387  
KEY TO EVEN NUMBERED QUESTION..........389  
INDEX .................................397

## Details

- **Price:** 2000.0 PKR
- **Vendor:** Read & Write
- **Tags:** A Level, A Level Accounting, Accounting

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| Default Title | 2000.00 PKR | In stock |

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- 115 Accounting AS Level Text book Series Theory and Practice
- 115 Accounting AS Level Text book Series Theory and Practice

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> Source: [Read and Write Publications](https://readnwrite.org/products/accounting-as-level-theory-and-practice)
> Updated: 2026-09-29