💰 ACCOUNTANCY — THE CHEAT SHEET

30 of 120 marks — the single biggest block on the paper. Built from all 60 accountancy questions across the two real FAA papers — 6 Mar 2022 and 28 Jan 2024 — plus the 600-MCQ bank.

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🎯 PART 0 — THE SCOREBOARD

What was actually asked — all 60 questions, both REAL FAA papers

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🔁 PART 1 — THE 7 QUESTIONS THAT REPEATED FAA 2022 → FAA 2024

Plus four that crossed from the Panchayat 2020 paper into FAA 2024

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🧱 PART 2 — FOUNDATIONS (Ch 1–4) · every year

Ch 1 — Introduction

Luca Pacioli, 1494, Italy — "Father of Accounting" · Book-keeping = FIRST step · Communication = LAST step · Stewardship = the root cause of accounting

Understandability = clear · Comparability = common format ⚠️ MCQ Q3 in the book is WRONG — the answer is A) Understandability, not Reliability.

Ch 2 — Basic Terms

• Drawings and the proprietor's income tax → reduce CAPITAL
• Installation wages → capitalise into the asset (not an expense)
• Depreciation = a non-cash operating expense
• Goods = what the business trades in (a computer is goods for a computer shop, an asset for a bakery)
• ⭐ Trade discount at the time of sale (never recorded) · Cash discount at the time of payment (recorded)
• Receipt = proof of payment · Invoice = only a demand

Capital vs Revenue: capital = benefit beyond one year, goes to the Balance Sheet · revenue = consumed within the year, goes to P&L.

➕ Three terms the PYQs actually tested (GAP-FILL, 1 Sep 2026)

⚠️ The word "tangible" in the stem is what rules out amortization. ⭐ Copyright is an intangible ASSET (2022 Q31) · preliminary expenses are a FICTITIOUS asset (2022 Q60). ⭐ Depreciation is a NON-CASH, OPERATING expense (PAA Q106) — which is why it is added back in cash-flow.

Ch 3 — Accounting Concepts ⭐

⭐ The three FUNDAMENTAL assumptions = Going Concern · Consistency · Accrual.

Ch 4 — Accounting Equation

$\mathbf{A = L + C} \qquad \mathbf{C = A - L}$ Based on the Dual Aspect concept · drawings reduce BOTH assets and capital ⭐ In a balance-sheet-total question, net profit and provisions go on the LIABILITIES side.

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✍️ PART 3 — THE RECORDING CHAIN (Ch 5–10)

Ch 5 — Double Entry & the Golden Rules (only 1 mark across both FAA papers — the "7 marks" figure came from the Panchayat paper)

• Impersonal = Real + Nominal
• Drawings = Personal · Outstanding / Prepaid = Representative Personal
• ⭐ Purchases & Sales = NOMINAL (per the author's own corrigendum — the book's body says otherwise)
• Journal = book of ORIGINAL entry · Posting = journal → ledger

➕ The account tree — three PYQs come straight from it (GAP-FILL)

⭐ Real and Nominal are BOTH "Impersonal" (PAA Q102) · Drawings is a PERSONAL account (PAA Q85) · a Nominal account with a DEBIT balance = an expense or loss (PAA Q86) · "Receiver debit, giver credit" is the personal-account rule (PAA Q110). ⭐ Goods given as charity: Dr Charity, Cr PURCHASES (PAA Q107) — not sales, nothing was sold.

Ch 6 — Vouchers

⭐ Credit note = SALES return · Debit note = PURCHASE return External = received from outside · Internal = issued by you ⚠️ Corrigendum: "Cash memo received from seller" = EXTERNAL voucher.

Ch 7 — Ledger

Journal = original entry · Ledger = final entry · Left = Debit, Right = Credit ⭐ Assets & Expenses = DEBIT balance · Liabilities, Capital & Income = CREDIT balance Suppliers → Purchases Ledger · Customers → Sales Ledger

Ch 8 — Subsidiary Books

⭐ The 8 books: Cash · Purchases · Sales · Purchases Returns · Sales Returns · Bills Receivable · Bills Payable · Journal Proper

• Purchases/Sales books record GOODS on CREDIT only
• Assets bought on credit + all closing entries → Journal Proper
• Cash Book is BOTH a subsidiary AND a principal book

Ch 9 — Cash Book

• Cash Book IS the Cash A/c · Receipts = debit, Payments = credit
• ⭐ The cash column can NEVER have a credit balance · a credit balance in the bank column = OVERDRAFT
• Contra entry = cash ↔ bank, for office use only (personal withdrawal = drawings) · only in a 3-column cash book
• Favourable = debit balance

Ch 10 — Trial Balance

A STATEMENT, on a DATE, checking the ARITHMETICAL accuracy of the LEDGER · contains all accounts · difference → Suspense A/c ⭐ It CANNOT detect: errors of omission, principle, or compensating errors. ⭐ Closing stock appearing IN the trial balance → goes to the Balance Sheet ONLY.

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📑 PART 4 — FINAL ACCOUNTS (Ch 11–14) · ⚠️ ZERO marks in BOTH FAA papers — the 6-mark figure came from the Panchayat paper. Skim only.

$\textbf{Gross Profit} = \text{Net Sales} - \text{COGS}$ $\textbf{COGS} = \text{Opening Stock} + \text{Net Purchases} + \text{Direct Expenses} - \text{Closing Stock}$ $\textbf{Net Profit} = \text{Gross Profit} + \text{Other Income} - \text{Indirect Expenses}$

⭐ The Trading vs P&L split — the most-tested distinction

Adjustments — each hits TWO places

• Closing stock valued at cost OR market, whichever is LOWER (Conservatism)
• Charity / free samples / drawings of goods → DEDUCT from Purchases
• P&L starts with GP on the CREDIT side; a debit balance = NET LOSS
• Net profit is CREDITED to Capital
• ⭐ Omitting an expense OVERSTATES net profit — gross profit is unaffected
• Provision charge = required − existing

➕ Provision for bad and doubtful debts — two PYQs, one formula (GAP-FILL)

Additional provision for doubtful debts charged to P&L = Required provision − Existing provision

PAA Q89: debtors ₹1,00,000 · provision to be 5 % = ₹5,000 · existing ₹1,000 → charge ₹4,000, not ₹5,000. ⚠️ The existing provision is never re-charged.

Prepaid expense — the year-end adjusting entry (PAA Q88): Dr Prepaid Expense · Cr Expense. ⚠️ Dr Prepaid, Cr Cash is the entry when you pay in advance — not the adjustment.

Omitting a provision overstates profit (PAA Q109) → net profit increases. ⭐ Provisions hit the P&L only — gross profit can never change.

Balance Sheet

A STATEMENT, on a DATE — no debit/credit, only Assets & Liabilities. Assets − Liabilities = Capital

• Fictitious assets (preliminary expenses) are not real assets
• ⭐ Contingent liabilities appear as a FOOTNOTE, not in the Balance Sheet
• Land = tangible · Goodwill = intangible

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🏦 PART 5 — BANK RECONCILIATION (Ch 15) ⭐⭐ 6 marks across both FAA papers — second only to Taxation, and rising 2→4

BRS is a STATEMENT prepared by the BUSINESS (not the bank).

⭐ Starting from the CASH BOOK balance

⭐ Starting from the PASS BOOK → reverse every sign. ⚠️ Discount received does NOT affect a BRS.

Practise: MCQs Q174–197 and Q350–362 — 37 questions covering essentially every angle. These are definition-based, not long sums.

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➕ Deposit in transit (GAP-FILL — 2024 Q40)

Deposit in transit = you have recorded it, the bank has not yet credited it. Starting from the BANK balance → ADD it to reach your cash book. (Its mirror: direct deposits by customers, starting from the CASH BOOK → ADD to reach the pass book — PAA Q104.)

⭐ The one question to ask on any BRS item: "who knows about it already?" Whatever the other side has not yet recorded is the adjustment.

🤝 PART 6 — PARTNERSHIP (Ch 16) ⭐⭐ 5 marks — every year

Indian Partnership Act 1932 · min 2, max 50 · liability UNLIMITED · mutual agency

⭐ No partnership deed → the default rules

• Fixed capital → Capital A/c holds only capital; everything else → Current A/c
• Interest on drawings DEBITS the partner
• Goodwill → compensates the SACRIFICING partners
• A new partner brings his share of the VALUED goodwill; an asset brought in is recorded at MARKET value
• Dissolution → Realisation A/c · ⭐ Garner v. Murray → solvent partners bear the loss in their CAPITAL RATIO

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➕ The four types of partnership (GAP-FILL — PAA Q98)

⭐ An incoming partner's contribution is credited at CURRENT MARKET VALUE (PAA Q81) — not cost, not book value.

📝 PART 7 — SINGLE ENTRY (Ch 17) · every year

• Incomplete, unscientific, used by SOLE TRADERS, not accepted by tax authorities
• ⭐ A Trial Balance CANNOT be prepared
• Statement of Affairs: Assets − Liabilities → CAPITAL is the balancing figure
• Net Worth method = Statement of Affairs method

$\textbf{Profit} = (\text{Closing Capital} + \text{Drawings}) - (\text{Opening Capital} + \text{Additional Capital})$

Debtors A/c → find credit SALES · Creditors A/c → find credit PURCHASES

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🧾 PART 8 — TAXATION (Ch 23) ⭐⭐⭐ 8 marks across both FAA papers — the single biggest chapter, and still growing (3 → 5)

ROR = taxed on GLOBAL income · income RECEIVED in India is taxable for ALL residency statuses.

GST

From 1 July 2017 · DESTINATION-based Intra-state = CGST + SGST · Inter-state = IGST · Exports = ZERO-RATED · Reverse charge = the RECIPIENT pays

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➕ Tax terms and exemptions the PYQs hit (GAP-FILL)

⭐ Agricultural income is EXEMPT under section 10(1) (2022 Q46) — the standard "direct tax not applicable" answer. ⭐ "Goods" under CGST section 2(52) = every kind of movable property including actionable claims, but EXCLUDING money and securities (2024 Q56).

🏭 PART 9 — COST ACCOUNTING (Ch 24) ⭐ 3 marks in 2024

⭐ The cost ladder — learn this in order

$\textbf{Prime Cost} = \text{Direct Material CONSUMED} + \text{Direct Labour} + \text{Direct Expenses}$ $+ \text{Factory OH} = \textbf{Works Cost} \;\to\; + \text{Admin OH} = \textbf{Cost of Production}$ $\to + \text{Selling \& Distribution} = \textbf{Cost of Sales} \;\to\; + \text{Profit} = \textbf{SALES}$

⭐ Fixed cost: constant in TOTAL, decreases PER UNIT as output rises. ⭐ All indirect costs = OVERHEADS.

$\textbf{Contribution} = \text{Sales} - \text{Variable Cost}$ $\textbf{BEP (units)} = \frac{\text{Fixed Cost}}{\text{Contribution per unit}} \qquad \textbf{Target profit} = \frac{\text{Fixed} + \text{Profit}}{\text{Contribution per unit}}$

⚠️ Process costing is a METHOD, not a technique.

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🏛️ PART 10 — PFMS, FINANCE, AUDIT & SOCIAL (Ch 18–22, 25–27)

Ch 22 — PFMS ⭐ every year — and its question has now repeated three times

• Run by the Office of the CGA, Ministry of Finance · NITI Aayog is the owner
• Integrated with the CORE BANKING SYSTEM · enables DBT and real-time expenditure tracking
• Started 2008-09 in MP, Bihar, Punjab, Mizoram for MGNREGA, NRHM, SSA, PMGSY
• Plan / non-plan distinction scrapped in 2017

Ch 18 — Financial Management

⭐ Goal = WEALTH maximisation, not profit maximisation

Working Capital = CA − CL · Financial leverage = EBIT ÷ EBT · Operating leverage = Contribution ÷ EBIT · Capital budgeting = long-term investment decisions

Ch 19 — Financial Audit (every year)

• Independent examination to express an OPINION · ⭐ REASONABLE assurance, NEVER absolute
• ⭐ "Auditing begins where accounting ends" · First step = PLANNING
• Internal auditor → appointed by MANAGEMENT, checks controls · Statutory auditor → appointed by SHAREHOLDERS
• ⭐ 4 opinions: Unqualified · Qualified · Adverse · Disclaimer · standards by ICAI

➕ The objective, and the order (GAP-FILL)

⭐ The MAIN objective of audit is to express a TRUE AND FAIR OPINION on the financial statements (2022 Q43). ⚠️ Detecting errors and fraud is INCIDENTAL — it is the single most-chosen wrong answer. ⭐ The first step of an audit is PLANNING (PAA Q101); defining the scope happens within planning.

Ch 20–21 — Social Accounting & Social Audit

⭐ Accounting = REPORT · Audit = VERIFY · CSR = SPEND

• CSR = Section 135, Companies Act 2013 · 2% of average net profit of 3 years · India ranks 1st in CSR implementation
• Social Audit is a PROCESS, not an event · statutory under MGNREGA · done by the Gram Sabha · recommended by the 2nd ARC

➕ Two facts, both asked in FAA 2022 (GAP-FILL)

⭐ The term "social accounting" was introduced by J. R. HICKS (2022 Q58). ⭐ Social accounting classifies the economy by TRANSACTOR / SECTOR — households, government, enterprises (2022 Q34). ⚠️ The trap: income, product, expenditure are the three methods of measuring national income, not social-accounting classes.

Ch 25 — Budget

• Budget = prepared BEFORE the period, for a definite period
• Master Budget = summary of all functional budgets · Sales Budget = functional · Capital Expenditure Budget = long-term
• ⭐ KEY FACTOR limits activity — budget it FIRST (under quota restrictions, materials become the key factor)
• Budget Controller heads it; the Budget Committee assists

Ch 26 — Indian Financial System

Primary = new issues (IPO) · Secondary = stock exchange ⭐ Commercial Paper = UNSECURED short-term · ⭐ Repo = against securities; BANK RATE = without securities RBI = lender of last resort · SEBI 1988, statutory 1992 · Finance Bill → Act = both Houses + PRESIDENT'S ASSENT

➕ The four issue types (GAP-FILL — 2022 Q42)

Ch 27 — Developments

Luca Pacioli, 1494 · Stewardship = the root · HRA values people as assets — R. Likert gave the first model New branches: Human Resource · Environmental · Carbon · Social · Forensic · Responsibility · Inflation accounting ⭐ "Concept" question → Money Measurement · "Branch" question → HRA

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🚩 PART 11 — FOUR WRONG ANSWERS IN THE BOOK'S OWN KEY

Plus the author's corrigendum: Purchases & Sales = NOMINAL accounts · "Cash memo received from seller" = EXTERNAL voucher.

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🪤 PART 12 — THE TRAP TABLE

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⏱️ PART 13 — EXAM-DAY PLAN

30 questions. Budget ~25 minutes. Accountancy has the longest questions on the paper — do not start here.

Negative marking −0.25. Accountancy is definition-heavy — attempt everything where you can eliminate one option.

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🎯 IF YOU REMEMBER NOTHING ELSE

⭐ Eight chapters came in BOTH papers — 1, 3, 4, 15, 16, 17, 19, 22 — worth ~13 marks every year. That is your floor.

⭐ Four questions repeated word-for-word: Money Measurement excludes human resources · PFMS ← CPSMS · Pass book = the bank's ledger · Statement of Affairs = incomplete records.

⭐ A = L + C. GP = Sales − COGS. Debit the receiver, debit what comes in, debit expenses.

⭐ The paper is moving steadily toward applied finance. Taxation 3→5, BRS 2→4, Costing 0→3. Lead with those; keep the cheap definitional chapters (Ch 2, 3, 4) warm as insurance.

⭐ Income tax has changed: "TAX YEAR", Act of 2025, in force 1 April 2026.

🔗 Related

• FAA-ACCOUNTANCY-ALL-SHORT-NOTES — the full 27-chapter notes
• FAA-ACCOUNTANCY-PLAN · FAA-MASTER-PLAN
• FAA-2022-Accountancy-Chapterwise · 2024-Accountancy-Chapterwise
• ⭐ Accountancy-Tagged-Answers — all 60 questions worked · Accountancy-Chapterwise-Weightage — tiers and hour budget
• Four-Paper-Comparison
• Home