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FINANCIAL ACCOUNTING   PGDM –Ist TRIMESTER
• Concepts• Terms• Adjustments
BASIC CONCEPTS & QUES.• WHAT IS ACCOUNTING?• NEED FOR ACCOUNTING?• DOUBLE ENTRY BOOK KEEPING SYSTEM
• Accounting is the art of recording ,classifying  and summarizing in a systematic manner and  in terms of money, transact...
PARTS OF ACCOUNTING                   ACCOUNTINGJOURNAL   LEDGER    TRIAL BAL. FINAL A/C   RATIOS CFS & FFS
GAAPCONCEPTS              CONVENTIONSSEPARATE ENTITY       CONSERVATISMGOING CONCERN         FULL DISCLOSUREMONEY MEASUREM...
GOLDEN RULES• PERSONAL A/C• REAL A/C• NOMINAL A/C• REVENUE EXPENSES & INCOMES• CAPITAL EXPENSES & INCOMES
CLASSIFICATION OF ITEMS• ASSETS• LIABILITY• EXPENSES & LOSSES• INCOMES & GAINS• RESERVES• PROVISIONS
FINAL A/C• TRADING A/C• PROFIT & LOSS A/C• BALANCE SHEET
Benefits of IFRS• Comparability of financial statements of  companies belonging of one or more countries• Facilitate conso...
IFRS -1- FIRST TIME ADOPTION OF IFRS• It contains the details about the first time  adoption of IFRS and transition from G...
IFRS-2 – SHARE BASED PAYMENT• It specifies the parameters about reporting and  disclosure of share-based payment transacti...
• Measurement IssuesMeasure the goods and services procured at  the fair value of these goods or services, if the  value ...
IFRS – 3 BUSINESS COMBITIONS• How acquirer should report – recognize and  measure different assets acquired and liabilitie...
IFRS-4 INSURANCE CONTRACT• It deals about the accounting provision regarding the  reporting and disclosure of insurance po...
DIFFERENCES B/W AS AND IFRSPOINTS                 IFRS                    INDIAN GAAPCOMPONENTS OF          1. STATEMENT O...
INTANGIBLE ASSETS       MEASURED AT FAIR VALUE   AT COSTCHANGE IN DEP. METHOD   Prospective effect       RETROSPECTIVELEAS...
IFRS – 5 Non Current Assets Held for   Sale and Discontinued Operations• It include assets like Financial instrument and  ...
4. Assets related to discontinued operation   should be reported separatelyDisclosure:Criteria of identification of assets...
IFRS 6 – EXPLORATION FOR ANDEVALUATION OF MINERAL RESOURCES• It is related to exploration expenditure incurred  by compani...
• If carrying amount of exploration assets  exceeds its recoverable amount then it should  be impaired so as to have true ...
IFRS – 7 FINANCIAL INSTRUMENT• It requires the disclosure of different financial  instrument in the financial statementsMa...
IFRS- 8 OPERATING SEGMENT• Disclosure :1. Information about different operating   segments2. Information about different p...
EPS• RETEROSPECTIVE EPSADJUSTED EPS= EQUITY SHAREHOLDERS EARNING/  WEIGHTED AVEG NO. OF EQ. SHILL: X LIMITED IS HAVING 1,0...
FINANCIAL RATIO’S
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Financial accounting

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Financial accounting

  1. 1. FINANCIAL ACCOUNTING PGDM –Ist TRIMESTER
  2. 2. • Concepts• Terms• Adjustments
  3. 3. BASIC CONCEPTS & QUES.• WHAT IS ACCOUNTING?• NEED FOR ACCOUNTING?• DOUBLE ENTRY BOOK KEEPING SYSTEM
  4. 4. • Accounting is the art of recording ,classifying and summarizing in a systematic manner and in terms of money, transactions and events which are, in part at least , of financial character and interpreting the results thereof. American Institute of certified public Accountants
  5. 5. PARTS OF ACCOUNTING ACCOUNTINGJOURNAL LEDGER TRIAL BAL. FINAL A/C RATIOS CFS & FFS
  6. 6. GAAPCONCEPTS CONVENTIONSSEPARATE ENTITY CONSERVATISMGOING CONCERN FULL DISCLOSUREMONEY MEASUREMENT CONSISTENCYDUAL ASPECT MATERIALITYACCOUNTING PERIOD TIMELINESSHISTORICAL COSTMATCHINGREALIZATION
  7. 7. GOLDEN RULES• PERSONAL A/C• REAL A/C• NOMINAL A/C• REVENUE EXPENSES & INCOMES• CAPITAL EXPENSES & INCOMES
  8. 8. CLASSIFICATION OF ITEMS• ASSETS• LIABILITY• EXPENSES & LOSSES• INCOMES & GAINS• RESERVES• PROVISIONS
  9. 9. FINAL A/C• TRADING A/C• PROFIT & LOSS A/C• BALANCE SHEET
  10. 10. Benefits of IFRS• Comparability of financial statements of companies belonging of one or more countries• Facilitate consolidation of financial statement• To bring harmony in the efforts of country specific standard setters• Cutting down the cost of formulation and implementation of AS• Facilitate entry and working of multinational companies across the gross without any accounting hindrance.
  11. 11. IFRS -1- FIRST TIME ADOPTION OF IFRS• It contains the details about the first time adoption of IFRS and transition from GAAP to IFRS. It specifies the plan about transition from respective GAAP to IFRS.• Main Provisions: Recognition of all assets and liabilities as per IFRS Derecognition of all assets and liabilities not permitted IFRS Reclassification of assets and liabilities as per IFRS
  12. 12. IFRS-2 – SHARE BASED PAYMENT• It specifies the parameters about reporting and disclosure of share-based payment transaction in the financial statement. It requires a business entity to report in the P&L A/C and in the financial position the effect of share- based payment transactions, such as option granted to employees or other parties to be settled in cash , other assets and equity instrument. Share – based payment for the goods and services Cash settled share based payment transaction Transaction of purchase of goods and services for which settlement is to be done either in cash or in equity instrument of business entity.
  13. 13. • Measurement IssuesMeasure the goods and services procured at the fair value of these goods or services, if the value of good and services cannot be established then fair value of equity instrumentFair value of equity can be estimated at market price
  14. 14. IFRS – 3 BUSINESS COMBITIONS• How acquirer should report – recognize and measure different assets acquired and liabilities assumed. It require in which manner consolidated financial statement of acquirer /investor should report• All assets and liabilities should be recorded at fair market value at the acquired date and minority interest should also be at market value• Exception to this – Items in lease aggreement
  15. 15. IFRS-4 INSURANCE CONTRACT• It deals about the accounting provision regarding the reporting and disclosure of insurance policies and related assets and liabilities. Only the provisions for claims that exist at the date of reporting date should be disclosed and not for expected claim An adequacy test for the insurance liabilities should be assumed Liabilities should be disclosed until these are discharged Insurance liabilities should be measure at current market price
  16. 16. DIFFERENCES B/W AS AND IFRSPOINTS IFRS INDIAN GAAPCOMPONENTS OF 1. STATEMENT OF 1. B/SFINANCIAL STATEMENTS FINANCIAL POSITION 2. P&L A/C 2. COMPREHENSIVE 3. CFS INCOME 4. NOTES TO A/C 3. CFS 4. ST. OF CHANGE IN EQUITY 5. NOTES TO A/CFORMAT NO SPECIFIC SCH VIINCOME STATEMENT SPECIFIC FROMAT SCH VICFS MANDATORY EXEMPTEDEXTRA ORDINARY ITEM PROHIBITS THE MANDATORY PRESENTATIONGOODWILL SUBJECT TO ANNUAL AMORTIZED IN 5 YRS IMPAIRMENT
  17. 17. INTANGIBLE ASSETS MEASURED AT FAIR VALUE AT COSTCHANGE IN DEP. METHOD Prospective effect RETROSPECTIVELEASE OF LAND & CONTAINS PROVISIONS DOES NOT CONTAILBUILDINGINCEPTION AND DIFFERENTIATE DOES NOTCOMMENCEMENT DATE
  18. 18. IFRS – 5 Non Current Assets Held for Sale and Discontinued Operations• It include assets like Financial instrument and Investment PropertyMain ProvisionsAssets held for sale must be reported in annual a/cs:1. Cost or Fair Value which ever is less2. Cost of sell or depreciation should be adjusted in from the reported amount3. These assets should be reported separately
  19. 19. 4. Assets related to discontinued operation should be reported separatelyDisclosure:Criteria of identification of assets should disclosed
  20. 20. IFRS 6 – EXPLORATION FOR ANDEVALUATION OF MINERAL RESOURCES• It is related to exploration expenditure incurred by companies in relation to technical feasibility of mining of mineral resources .This IFRS is about recognition and measurement of exploration expenditure1. A business entity should determine suitable accounting policy for classifying exploration assets as cash generating units2. Policy for Impairment test for the assets acquired under exploration activities
  21. 21. • If carrying amount of exploration assets exceeds its recoverable amount then it should be impaired so as to have true presentation of FS and impairment loss should be recognised
  22. 22. IFRS – 7 FINANCIAL INSTRUMENT• It requires the disclosure of different financial instrument in the financial statementsMain Provisions:1. It should disclose the criteria for qualitative and quantitative for the classification of Financial Instruments, financial assets , financial liability and Equity instrument.2. Disclosure of Risk management practices for financial instrument and their impact on financial position
  23. 23. IFRS- 8 OPERATING SEGMENT• Disclosure :1. Information about different operating segments2. Information about different products , services , geographical areas and major customers3. P&L from all segments4. Impact of business conditions concerning different segments
  24. 24. EPS• RETEROSPECTIVE EPSADJUSTED EPS= EQUITY SHAREHOLDERS EARNING/ WEIGHTED AVEG NO. OF EQ. SHILL: X LIMITED IS HAVING 1,00,000 EQ SH ON I APR 2010 . DURING THE YEAR IT ISSUE 20000 SH ON 1 JULY 2010 AND ON 1 JAN 2011 30000 MORE SH .WEIGTED AVG SH = 100000X 3/12 + 120000 X 6/12 + 150000 X 3/12 = 122500
  25. 25. FINANCIAL RATIO’S

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