FINANCIAL STATEMENT ANALYSIS
FINANCIAL STATEMENT ANALYSIS•Financial.•Statement.•Analysis.
What is meant by “ Financial”?
FINANCIAL•   Financial means related to finance.•   Financial comes from the word ‘ finance’.•   Finance means money or mo...
What is meant by “ Statement”?
Statement• It comes from the word “ state” which means:• To set forth in words; to express or present in  non-verbal way.S...
What is meant by “ Financial Statement”?
“ Financial Statement”•Statement which presents financial position of an activity in a summarized way.
Financial Statements of    a business entity• Trial Balance.• Profit and Loss Account/ Income statement• Balance Sheet.
“Financial Statement Analysis” is not possible without having little knowledge about the nature, contents and preparation ...
The discipline whichdeals with thepreparation and analysisof these statements iscalled Accounting.
ACCOUNTING
• ACCOUNTING• It comes from the ‘ word’ count.• Accounting means : Systematic  recording,classifying, summarizing, analyzi...
BUSINESS
Mr. A has sold his house forRs.5 Millions …………Is it abusiness transaction or not ?
Mr. A has sold his house forRs.5 Millions which wasbought against Rs.4Millions….. Is it a businesstransaction or not ?
Mr. A purchases housesand sells … is it abusiness?
BUSINESS:            A CONTINUOUS VENTURE TO EARN PROFIT.
BUSINESSKinds of Business :    1-Manufacturing business.    2-Trading business.    3- Service related business.
Manufacturing business: Goods are made or  manufactured in an industry and sold.Trading business: Goods are not manufactur...
BUSINESS AND NON-BUSINESS DEALINGS
BUSINESS AND NON-BUSINESS DEALINGSBusiness Dealings:• It involves reciprocity of monetary interests or  other benefits.• M...
Business or non-business dealings  Mr. A has purchased a car from ABC car  dealer.  Mr. B has gifted a car to his nephew. ...
MAIN ELEMENTS OF BUSINESS• PROFIT• RISK
PROFIT
PROFIT: Excess of sale price over purchase price/manufacturing price.
RISK
Risk• Risk is the effect of uncertainty.• Business always involves a risk.• Businessman earns profit through risk  managem...
RISK MANAGEMENT :i.   Identification, assessment, and prioritization of     risks;ii. Then by coordinated and economical a...
BUSINESS TRANSACTIONS.• Business transaction is a business event.• Business event is an event involving monetary  implicat...
DEFINITION OF ACCOUNTING
DEFINITION OF ACCOUNTING• ACCOUNTING IS AN ART OF SYSTEMATIC:  i- Recording;  ii-Classifying;  iii- Summarizing and  iv- A...
On 01-01-10 ,I sold goods of Rs.3000/-on credit to A and on same day I purchased material from B for Rs 2,000/- On 02-03-1...
ACCOUNTING EDUCATION• Accounting education means learning the art of  systematic recording of the business transactions.• ...
RECORDING• Every thing happening in the business is to be in  written form( be made a part of record).• Recording is requi...
CLASSIFYING• Recorded information needs to be classified.• For recording, classes of income and expenses  to be made.• Cla...
SUMMARIZING• After making classification it is required to sum  up the income and expenses.• All sales to be summed up .• ...
ANALYZING• On the basis of accounting information,  progress of the various departments of  business is analyzed.
REPORTING• Accountants are to present all desired  accounting statements to the directors/  owners of the business.• Repor...
KINDS OF ACCOUNTING• Financial Accounting.• Cost Accounting.• Management Accounting.
FINANCIAL ACCOUNTING• Recording of business transaction in a day book called  .. Journal entries.• Transferring these entr...
COST ACCOUNTING.• Unit cost of the goods manufactured is  calculated.• On unit cost basis sale price is fixed.
MANAGEMENT ACCOUNTING• Use of accounting information for business  decision making.• Analyzing accounting information for ...
BOOK-KEEPING AND ACCOUNTING• “Book-keeping” and “Accounting’ are often used  synonymously.• Book-keeping is related to rec...
WHY ACCOUNTING?i. It provides useful information to the owner     for making economic decisions.ii. Financial statements r...
ACCOUNTING AND PUBLIC SECTOR
ECONOMY AND PUBLIC SECTOR
HAVE A CIVIL SERVANT ANY ROLE INECONOMIC DECISION MAKING ANDMANAGEMENT?
ACCOUNTING AND PUBLIC SECTOR• Public sector means Government sector.• Govt.Departments can not function without  money.• M...
ACCOUNTING AND PUBLIC SECTOR CORPORATIONS• Civil servants are to serve in various public  sector corporations.• In public ...
IMPORTANT ACCOUNTING TERMS
IMPORTANT ACCOUNTING TERMS•   Capital.•   Liabilities.•   Assets.•   Inventory.•   Drawing.•   Accounts receivable.•   Acc...
Connect With Us        ULTRASPECTRA                    OPEN AcademyFacebook.com/Ultraspectra       Facebook.com/openacadem...
Upcoming SlideShare
Loading in …5
×

Financial Accounting

1,134 views
999 views

Published on

Published in: Business, Economy & Finance
0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
1,134
On SlideShare
0
From Embeds
0
Number of Embeds
43
Actions
Shares
0
Downloads
0
Comments
0
Likes
2
Embeds 0
No embeds

No notes for slide

Financial Accounting

  1. 1. FINANCIAL STATEMENT ANALYSIS
  2. 2. FINANCIAL STATEMENT ANALYSIS•Financial.•Statement.•Analysis.
  3. 3. What is meant by “ Financial”?
  4. 4. FINANCIAL• Financial means related to finance.• Financial comes from the word ‘ finance’.• Finance means money or money worth.• Money is a medium of exchange of goods and services.• Barter system was replaced by money.• Money worth means a thing which can be converted into money.• Business finance: The money put into business.
  5. 5. What is meant by “ Statement”?
  6. 6. Statement• It comes from the word “ state” which means:• To set forth in words; to express or present in non-verbal way.STATEMENT:• Act of stating.• Abstract.
  7. 7. What is meant by “ Financial Statement”?
  8. 8. “ Financial Statement”•Statement which presents financial position of an activity in a summarized way.
  9. 9. Financial Statements of a business entity• Trial Balance.• Profit and Loss Account/ Income statement• Balance Sheet.
  10. 10. “Financial Statement Analysis” is not possible without having little knowledge about the nature, contents and preparation of these statements .
  11. 11. The discipline whichdeals with thepreparation and analysisof these statements iscalled Accounting.
  12. 12. ACCOUNTING
  13. 13. • ACCOUNTING• It comes from the ‘ word’ count.• Accounting means : Systematic recording,classifying, summarizing, analyzing and reporting of business transactions.
  14. 14. BUSINESS
  15. 15. Mr. A has sold his house forRs.5 Millions …………Is it abusiness transaction or not ?
  16. 16. Mr. A has sold his house forRs.5 Millions which wasbought against Rs.4Millions….. Is it a businesstransaction or not ?
  17. 17. Mr. A purchases housesand sells … is it abusiness?
  18. 18. BUSINESS: A CONTINUOUS VENTURE TO EARN PROFIT.
  19. 19. BUSINESSKinds of Business : 1-Manufacturing business. 2-Trading business. 3- Service related business.
  20. 20. Manufacturing business: Goods are made or manufactured in an industry and sold.Trading business: Goods are not manufactured by the seller. He gets goods from the manufacturer in bulk and sells.Service business: In such business, services are sold instead of goods: Insurance, banking; telephone, consultancy service, repair service, etc…..
  21. 21. BUSINESS AND NON-BUSINESS DEALINGS
  22. 22. BUSINESS AND NON-BUSINESS DEALINGSBusiness Dealings:• It involves reciprocity of monetary interests or other benefits.• Money or money worth comes or goes.Non-business dealings:• Reciprocity of monetary interests is not involved in it.
  23. 23. Business or non-business dealings Mr. A has purchased a car from ABC car dealer. Mr. B has gifted a car to his nephew. Mr. A is a lawyer and obtained fees from B in a case. Mr. A gave Rs 1000/- to a bagger.
  24. 24. MAIN ELEMENTS OF BUSINESS• PROFIT• RISK
  25. 25. PROFIT
  26. 26. PROFIT: Excess of sale price over purchase price/manufacturing price.
  27. 27. RISK
  28. 28. Risk• Risk is the effect of uncertainty.• Business always involves a risk.• Businessman earns profit through risk management.• More risk more profit or loss.• Loss can be avoided or minimized through risk management.
  29. 29. RISK MANAGEMENT :i. Identification, assessment, and prioritization of risks;ii. Then by coordinated and economical application of resources to minimize the risks;iii. And to maximize the profit.• Risk Management is not possible without Accounting.
  30. 30. BUSINESS TRANSACTIONS.• Business transaction is a business event.• Business event is an event involving monetary implication.• Any thing purchased or sold for business is a business event.• Any expense incurred for business is a business event.• Any investment made in business is a business event.• Any loan obtained is a business event, etc…..
  31. 31. DEFINITION OF ACCOUNTING
  32. 32. DEFINITION OF ACCOUNTING• ACCOUNTING IS AN ART OF SYSTEMATIC: i- Recording; ii-Classifying; iii- Summarizing and iv- Analyzing and Reporting of business transactions.
  33. 33. On 01-01-10 ,I sold goods of Rs.3000/-on credit to A and on same day I purchased material from B for Rs 2,000/- On 02-03-10 I sold goods for Rs.1500/- on cash……………………IS IT RECORDING OR SYSTEMATIC RECORDING ?
  34. 34. ACCOUNTING EDUCATION• Accounting education means learning the art of systematic recording of the business transactions.• This art is a product of the businessmen wisdom developed all over the world after a long period of time.• With the introduction of electronic aids, the field of Accounting (systematic recording) has further developed but this art in substance has not changed yet.
  35. 35. RECORDING• Every thing happening in the business is to be in written form( be made a part of record).• Recording is required due to the problem of memory capacity of human being.Examples• Sales to be recorded.• Purchases to be recorded.• Employees salaries to be recorded.
  36. 36. CLASSIFYING• Recorded information needs to be classified.• For recording, classes of income and expenses to be made.• Classes of income may be : sales; dividend; interests on deposits etc..• Classes of expenses: wages; purchases; utility expenses; marketing expense etc….
  37. 37. SUMMARIZING• After making classification it is required to sum up the income and expenses.• All sales to be summed up .• All purchases to be summed up.• All utility expenses to be summed up.• Then to work out profit or loss for a given period of time.• Preparation of the financial statements come under the summarizing.
  38. 38. ANALYZING• On the basis of accounting information, progress of the various departments of business is analyzed.
  39. 39. REPORTING• Accountants are to present all desired accounting statements to the directors/ owners of the business.• Reporting is required to review things and to take future business decisions.
  40. 40. KINDS OF ACCOUNTING• Financial Accounting.• Cost Accounting.• Management Accounting.
  41. 41. FINANCIAL ACCOUNTING• Recording of business transaction in a day book called .. Journal entries.• Transferring these entries in to accounts…… ledger accounts.• Preparation of Trial Balance.• Preparation of Trading Account and Profit and Loss Account.• Preparation of Balance Sheet.• Preparation of mandatory financial statements under taxation laws.
  42. 42. COST ACCOUNTING.• Unit cost of the goods manufactured is calculated.• On unit cost basis sale price is fixed.
  43. 43. MANAGEMENT ACCOUNTING• Use of accounting information for business decision making.• Analyzing accounting information for internal control and future planning.
  44. 44. BOOK-KEEPING AND ACCOUNTING• “Book-keeping” and “Accounting’ are often used synonymously.• Book-keeping is related to recording business transactions in different books.• 1st stage is Book-keeping and the next is Accounting.• Book-keeping is a clerical activity.• Accounting functions are related to preparation of Financial Statements and their analysis/ communication too.
  45. 45. WHY ACCOUNTING?i. It provides useful information to the owner for making economic decisions.ii. Financial statements reflect principal information about the business economic health/ activities which are requiring to the lending agencies and investors.iii. Preparation of accounting statements is required under certain laws.
  46. 46. ACCOUNTING AND PUBLIC SECTOR
  47. 47. ECONOMY AND PUBLIC SECTOR
  48. 48. HAVE A CIVIL SERVANT ANY ROLE INECONOMIC DECISION MAKING ANDMANAGEMENT?
  49. 49. ACCOUNTING AND PUBLIC SECTOR• Public sector means Government sector.• Govt.Departments can not function without money.• Money is needed to pay salaries; to pay utility bills; for office furniture; for stationeries, etc….• For each rupee, incharge of the office is accountable.• A successful officer needs to have a reasonable grip on financial matters.
  50. 50. ACCOUNTING AND PUBLIC SECTOR CORPORATIONS• Civil servants are to serve in various public sector corporations.• In public sector corporation, officer can not perform without having sound knowledge of accounting.
  51. 51. IMPORTANT ACCOUNTING TERMS
  52. 52. IMPORTANT ACCOUNTING TERMS• Capital.• Liabilities.• Assets.• Inventory.• Drawing.• Accounts receivable.• Accounts payable.• Current Assets.• Current Liabilities.• Good will.• Depreciation.
  53. 53. Connect With Us ULTRASPECTRA OPEN AcademyFacebook.com/Ultraspectra Facebook.com/openacademy.isbTwitter.com/Ultraspectra Twitter.com/openacademyisbYouTube.com/user/ultraspectra YouTube.com/user/openacademyLinkedIn.com/in/Ultraspectra LinkedIn.com/in/openacademyForum.ultraspectra.com

×