1. ACCOUNTING 101
Specially for Startups!
Objective
 To understand what financial statements are.
 To understand what accounting really means.
 How to tackle certain situations which you will certainly face.
Jaydeep S. Halbe
Disclaimer: This slide deck will not teach you to do accounting. You don’t need to know
how to do it.

2. The Accounting Pillars
All the transactions of a business can be broken down
into 4 major categories / pillars:
 Assets
 Liabilities
 Expenditure
 Income
Whether you’re Apple Inc., Google or Facebook or
running a tea stall, all your transactions come under one
of the 4 categories above!

3. Assets
Those items which you paid for which will give you
benefit for more than 1 year are called assets. Simple!
 You buy a laptop, that’s an asset. Will last 2 years.
 You buy a car, that’s an asset. Will last 3/4 years.
 You buy a pen, that’s not an asset. Will not last > 1 year.
 You buy a meal, that’s not an asset. Will last 30 mins!

4. Expenditure
Items which you paid money for, which are NOT assets is
expenditure
 The laptop you bought is not expenditure. It’s an asset.
 The car you bought is not expenditure. It’s an asset.
 The pen you bought is expenditure. It’s an not asset.
 The meal you bought is expenditure. It’s an not asset.

5. Liabilities
Money that you received which you need to pay back
to someone at a future point in time is a liability
 Your dad lends you Rs. 100,000 to help you. That’s a liability. You
owe your dad the money.
 You purchased items from a vendor on credit. That’s a liability. After
the credit period, you need to pay the vendor.
 You received Rs. 150,000 from a customer. That’s not a liability.
 You received Rs. 5,000 from the bank as interest. That’s not a liability.

6. Income
Money that you received which you need NOT pay
back to someone is income. You receive income for
services / products you provide.
 You received Rs. 150,000 from a customer. That’s an income. The
money is paid to you for a service / product you provided.You don’t
need to give it back to the customer. You’ve earned it!
 You received Rs. 5,000 from the bank as interest. That’s not a liability.
The money is paid to you for depositing money in a bank. You don’t
need to give it back to the bank. You’ve earned it!

7. Financial Statements
Statement where you summarize amounts for Assets,
Liabilities, Income and Expenditure is called Financial
Statement.
Consists of:
1) Balance Sheet : Summary of Asset & Liability
2) Profit & Loss Account : Summary of Income & Expenditure
3) Cash Flow Statement : Summary of Cash Inflow & Outflow

8. Accounting
Now that we’ve seen the end-result of the process,
which is Financial Statements, it’s easy to explain
Accounting.
It’s just recording of transactions to create books of
account (contains details of transactions).
Books of account are summarized to prepare Financial
Statements.

9. What you need to do?
To your service provider, provide the following things:
 Bank Statement of the company(current) account.
 File containing invoices raised on customers.
 File containing bills received from suppliers / vendors.
 Details of employees and their salaries.
 Details of loans received / given to people.

10. Paid using personal Credit Card?
Did you pay your office expense using your personal
credit card? No worries. Do one or the other:
 Save the bill and ask for it to be treated as official
expense paid by employee
(or)
 Out of your total credit card amount due, pay the
official expense by cutting a cheque from your
company bank account.

11. Lost a Bill / Invoice?
Did you lose, misplace or forget to get an bill for a legit
expenditure that you incurred? No worries. Do one or the
other:
 If the bill was paid for by company cheque or
company debit card, it’ll be in the bank statement.
Locate it in the bank statement.
(or)
 If bill was paid in cash, make a note somewhere
about it. You might forget to include it later in the
accounts. Your service provider will take care.

12. Incur frequent cash expenditure?
Do you frequently have the need to incur cash
expenditure where the amount is small and the nature of
transaction doesn’t let you get a bill? No worries. Do the
following:
 From your company bank account withdraw money
once a month in cash and spend from that.
 At the end of the month, give an expense claim to the
company detailing how much advance you took and
how you spent the money.
That’ll do!

13. This whole accounting thing for your business
doesn’t seem like a big thing after all, does it?
For any queries, you can contact me:
E-mail: jay@kenspire.com
Twitter: @jayhalbe