Accounting Made Easy

ACCOUNTING MADE EASY About the Authors Rajesh Agrawal Rajesh Agrawal is currently Director of Finance at the International Crops Research Institute for the Semi Arid Tropics (ICRISAT), a leading United Nations research organization. He is a graduate in commerce from St. Xavier’s College, Kolkata and a chartered accountant and cost accountant. He was a faculty member in the Finance & Accounting Area at the Indian Institute of Management, Ahmedabad [IIMA] for a five year period starting 1997. He was the Chairman of the Finance & Accounting Area at IIMA during the period 1999-2000. Before joining the faculty at IIMA he was a faculty member at Institute of Rural Management, Anand for over six years. His areas of specialisation and research are financial accounting and financial reporting, strategic cost management and management control systems. He has been a consultant to the industry, government, non-governmental organisations and Food and Agricultural Organisation of the United Nations. R Srinivasan Srinivasan is currently Professor, Finance & Control Area, and Dean (Academic) at Indian Institute of Management Bangalore (IIMB). He is also the chairperson of the Centre for Financial Markets and Institutions: Microfinance Group at IIMB. He was previously the chairperson of the Finance & Control Area. His areas of interest are corporate finance, project management, management control and microfinance. He has an MSc in Physics from the Indian Institute of Technology, Bombay, and a post-graduate diploma in management & Fellow title (doctorate) from the Indian Institute of Management, Ahmedabad. He was previously a member of the faculty at the Institute of Rural Management, Anand. Prior to that he worked with a commercial bank, and with an engineering and construction company. His consulting experience covers international organizations, the corporate and development sector. ACCOUNTING MADE EASY Rajesh Agrawal Director of Finance, International Crops Research Institute for the Semi Arid Tropics (Formerly Associate Professor, IIM Ahmedabad) R Srinivasan Dean (Academic) and Professor, IIM Bangalore Tata McGraw-Hill Publishing Company Limited NEW DELHI McGraw-Hill Offices New Delhi New York St Louis San Francisco Auckland Bogotá Caracas Kuala Lumpur Lisbon London Madrid Mexico City Milan Montreal San Juan Santiago Singapore Sydney Tokyo Toronto Information contained in this work has been obtained by Tata McGraw-Hill, from sources believed to be reliable. However, neither Tata McGraw-Hill nor its authors guarantee the accuracy or completeness of any information published herein, and neither Tata McGraw-Hill nor its authors shall be responsible for any errors, omissions, or damages arising out of use of this information. This work is published with the understanding that Tata McGraw-Hill and its authors are supplying information but are not attempting to render engineering or other professional services. If such services are required, the assistance of an appropriate professional should be sought. Copyright © 2005, by Tata McGraw-Hill Publishing Company Limited. No part of this publication may be reproduced or distributed in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise or stored in a database or retrieval system without the prior written permission of the publishers. The program listings (if any) may be entered, stored and executed in a computer system, but they may not be reproduced for publication. This edition can be exported from India only by the publishers, Tata McGraw-Hill Publishing Company Limited. ISBN 0-07-060060-0 Published by the Tata McGraw-Hill Publishing Company Limited, 7 West Patel Nagar, New Delhi 110 008, typeset in Palatino at The Composers, 260, C.A. Apt., Paschim Vihar, New Delhi 110 063 and printed at Sai Printo Pack Pvt. Ltd., A