The document outlines key concepts of financial accounting, focusing on classifications of investments, liabilities, capital, reserves, and profit/loss accounts. It defines long-term and short-term loans, the portion of loans payable within a year, and provisions as anticipated expenses. Additionally, it explains the use of reserves for future purposes and details the various types of current liabilities.

1. Financial Accounting
1
Lecture – 30
Classification of Investments
• Long term investments are those investments that are
meant to be held for a long term period.
• If it is decided to dispose off a long term investment, then its
classification is changed to current investment from long
term.

2. Financial Accounting
2
Lecture – 30
Balance Sheet (Liabilities)
Particulars Amount Rs. Amount Rs.
ASSETS
Non Current Assets
Fixed Assets
Capital Work In Progress
Deferred Costs
Long Term Investments
Current Assets
X
X
X
X
X
TOTAL X
LIABILITIES
Capital and Reserves
Capital
Reserves
Profit and Loss Account
X
X
X X
Long Term and Deferred Liabilities
Long Term Loans
Liability Against Lease Finance
Other Long Term Liabilities
Deferred Tax
X
X
X
X X
Current Liabilities
Trade Creditors
Short Term Borrowings
Other Payables
Current Portion of Long Term Borrowings
X
X
X
X X
TOTAL X

3. Financial Accounting
3
Lecture – 30
LIABILITIES
Capital and Reserves
Capital
Reserves
Profit and Loss Account
X
X
X X
Long Term and Deferred Liabilities
Long Term Loans
Liability Against Lease Finance
Other Long Term Liabilities
Deferred Tax
X
X
X
X X
Current Liabilities
Trade Creditors
Short Term Borrowings
Other Payables
Current Portion of Long Term Borrowings
X
X
X
X X
TOTAL X

4. Financial Accounting
4
Lecture – 30
• Capital
 It is the total of resources supplied to a business by its
owners.
 Capital is termed as “Share Capital” in case of Limited
Companies.

5. Financial Accounting
5
Lecture – 30
• Capital Introduced By Owner In form of Assets
Debit Fixed Assets Account
Credit Capital Account

6. Financial Accounting
6
Lecture – 30
• Reserves
 Reserve is the portion of profit set aside for use in future
years for a specific purpose.

7. Financial Accounting
7
Lecture – 30
• Profit and Loss / Accumulated Profit and Loss Account
 It is that portion of the profit that is reemployed in the
business.
OR
 This is the accumulated balance of undistributed profit.

8. Financial Accounting
8
Lecture – 30
• Accumulated Profit and Loss Account
 In the first year of business this account shows following
figure:
Profit for the year X
Less: Transferred to Reserve X
Less: Profit distributed X
Balance carried to Balance Sheet X
 In Subsequent years balance brought forward from
previous years and profit for the year is added and
distributed as above and the balance is carried to next
year.

9. Financial Accounting
9
Lecture – 30
• Long Term Loans
 Loans that are payable later than a period of more than
twelve months from the balance sheet date.
• Short Term Loans
 Loans that are payable within twelve months of the
balance sheet date.

10. Financial Accounting
10
Lecture – 30
• Current Portion of Long Term Loans
 It is that portion / installment of the long term loan that is
payable with in next twelve months.

11. Financial Accounting
11
Lecture – 30
• Other Long Term Liabilities
 These include all other liabilities that are payable after a
period of one year of balance sheet date.
 For example staff gratuity and other benefits, liability
against lease finance and other liabilities that become
payable after a period of one year.

12. Financial Accounting
12
Lecture – 30
• Provision
 Provision is charge created for an expected expense or
loss whose actual amount is not known.
 It is usually shown as a reduction in the asset to which it
relates
• Reserves
 Reserve is the portion of profit set aside for use in future
years for a specific purpose.
 It is usually created at the discretion of the owners an is
shown as a liability.

13. Financial Accounting
13
Lecture – 30
• Current Liabilities
 Trade Creditors
 Short Term Borrowings
 Other Short Term Liabilities
o Salaries Payable
o Accrued Expenses
o Bills payable
o Advances From Customers
 Current Portion of Long Term Liabilities