The document provides details on accounting procedures and concepts. It discusses: 1. The basic accounting equation that assets must equal liabilities plus equity. It explains debits and credits in accounting entries. 2. How accounting records like journals and ledgers are used to record transactions and summarize them in a trial balance. 3. Key financial statements like the balance sheet and income statement. The balance sheet presents assets, liabilities, and equity on a particular date while the income statement shows profits/losses over a period. 4. Illustrative examples are provided of balance sheet preparation from trial balance details for different companies. Accounting ratios and limitations of financial statements are also briefly covered.

1. 18CHT71 – PROCESS ENGINEERING
AND ECONOMICS

2. Outlines of Accounting Procedure
 As a design engineer, to analyses the costs and
profits
 Whether capital should be invested in a
particular project.
 records must be maintained to check the
actual financial results.
 These records are interpreted by accountants.

3. Why accounting for engineers?
 Purpose of accounting – record and analyze the financial
transactions that have an influence on the utility of capital
 Accounts of expense, income, assets, liabilities are
maintained.
 These records gives the engineer, errors were made in
the past estimation and give information that can be
useful in future evaluations.
 Knowledge of basic principles as applied in economic
evaluations

4. Outlines
of
accounting
procedure

5. It shows the standard accounting procedure starting with
the recording of the original business transactions and
proceeding to the final preparation
Journal – Day-by-day business transactions occur and
recorded.
Single journal may be used for all entries in small
businesses
But large concerns ordinarily use several types of journal
such as cash, sales, purchase and general products.

6. To assemble the journal entries under appropriate
account headings, in the Ledger.
The process of transferring the daily entries to the ledger
is called Posting.
Financial condition of business are prepared from ledger
accounts.
Financial statement presented in the form of Balance
sheet and Income statement.

7. Balance Sheet Income Statement
It shows the financial condition
of the business at a particular
time
It is the record of the financial
gain or loss of the organization
over a particular period of time.

8. BASIC RELATIONSHIPS IN ACCOUNTING
 In the broadest sense, an asset may be defined as anything of value,
such as cash, land, equipment, raw materials, finished products, or
any type of property.
 At any given instant, a business concern has a certain monetary
value because of its assets.
 At the same instant, many different persons may have a just claim,
or equity, to ownership of the concern’s assets.
 Certainly, any creditors would have a just claim to partial ownership,
and the owners of the business would have some claim to
ownership.

9. Assets = Equities ------- (1)
 Equities can be divided into two general classes:
 Proprietorship – Claims of the concern or person who
owns the asset. Often referred as Net worth or
Ownership or Capital
 Liabilities – Claim of anyone other than the owner.
Assets = Liabilities + Proprietorship ------ (2)

10.  For example,
 Five students have gone together and purchased a
secondhand, automobile worth $1000.
 Because they did not have the necessary $1000 they
borrowed $400 from one of their parents.
Asset = $ 1000
Proprietorship = $ 600
Liabilities = $ 400

11.  From equation (2) is the basis for balancing assets
against equities at any given instant.
 A similar equation can be presented for balancing costs
and profits over any given time period. The total income
must be equal to the sum of all costs and profits.
Total Income = Costs + Profits -------- (3)

12. Maintaining Accounting Records
 Balance sheets and Income statements are summarizing
records showing the important relationships among assets,
liabilities, income and costs at one particular time or over a
period of time.
 Journals and Ledgers – must be used for recording the day-
by-day events.
 Journal – can be a book, group of vouchers or some other
convenient computer printout in which the original record of
a transaction is listed.
 Ledger – group of accounts giving condensed and classified
information from the journal

13. Debits and Credits
 While recording the business transactions,
 Debit – Entry represents an addition to an account
 Credit – Entry represents a deduction from an account
In more precise terms,
 Debit – entry is one which increases the assets
 Credit – entry is one which decreases the assets
Accounting records must always show a balance
between assets and equities, any single transaction
must affect both assets and equities.

14. Journal

15. Ledger

16. BALANCE SHEET
 It gives the financial situation of the company for the particular
period of time.
 Based on equation (1) & (2) it shows the financial condition at any
given date.
 Consolidated balance sheets based on the last day of the financial
year are included in the annual report of a corporation.
 These reports are intended for distribution to stockholders, and the
balance sheets present the detailed and relevant information without
listing each individual asset and equity in detail.

17.  Generally two columns are there.
 Asset - Left hand side
 Liabilities – Right hand side
 As indicated in Equation (1), the total value of the asset
must be equal to the total value of liabilities.
Asset = Equities
 In modern balance sheet often use the term Liabilities in
the place of Equities.

18. Items appearing under ASSET
1. Non-Current Assets
a) Fixed Assets:
(i) Tangible Assets: (Land, Building, Plant and Equipment, Furniture &
Fixture, Vehicles, Office Equipment)
Note: Incase depreciation given for tangible asset means, we have to
subtract depreciation value from the asset value.
(ii) Intangible Assets:
 Goodwill
 Brand / Trademarks
 Computer Software & Mining rights
 Publishing titles.
 Copyrights
 Patents
 Other IPR

19. (b) Investments /Trade Investments and Non-trade
investment (If it is a long term)
(c) Long-term Loans, Capital Advances and Security
Deposits.
(d) Other non-current assets:-
 Preliminary Expenses
 Discount on Issue of shares/ debentures
 Deferred revenue expenses/ Discount on issue of
shares/debenture/Share expenses

20. 2. Current Asset:
(a) Current Investments: Shares, Debentures, mutual funds
(b) Inventories: Which includes
(i) Raw Material
(ii) Work-in-progress
(iii) Finished Goods
(iv) Stock- in- trade (in respect of goods acquired for trading)
(v) Stores and Spares
(c) Trade Receivables:
Debtors, Sundry Debtors, Bills Receivables, Inventories

21. (d) Cash and cash equivalents:
(i) Balance with banks / Cash in bank
(ii) Cheques, drafts on hand.
(iii) Cash in hand
(iv) Deposit with Banks.
(e) Short term loans, Short term investment, advances given to
employees.
(f) Others:
 Interest on investment
 Advance taxes
 Pre-paid expenses

22. Items appearing under LIABILITIES
(1) Shareholders Funds
 Share capital
 Reserves and surplus / Capital reserves
 Profit and loss Account
(2) Non- Current Liabilities:
 Long term borrowings : Bonds, Bank loans, mortgage loans,
public deposit.
 Long term trade payables
 Long term Provisions: PF, Welfare fund, gratuity fund, provision
for pension fund

23. (3) Current Liabilities:
(i) Short-term Borrowings:
 Loans Repayable
 Bank overdrafts
 Cash credits
(ii) Trade payables:
 Sundry creditors
 Bills payable
 Outstanding expenses
 Provision for taxation
 Expenses outstanding
 Unclaimed dividends
 Advanced payments received

24. Limitations of Financial Statements
 Financial statements are really interim reports and not the final one.
 These statements are drawn form actual happenings of the
transactions.
 Actually modern management is interested more in future planning
but these not providing the sufficient information for facilitating future
planning.
 For these reasons we have to analyze and interpretation of the
financial statements is needed. We have to find the realistic picture
of the business.

25. Ratio Analysis
 This reveals the financial position of the firm.
 This helps banks and insurance companies before
sanctioning loan to them
 useful for inventors for finding the profitability of the firm.
 This rations are helpful to compare the performance of a
firm of a current year with the previous year.

32. Illustration–3
From the following given details of Regal Limited as on 31st March 2015.
You are required to prepare the Balance sheet as on 31st March 2015 as
per schedule III companies act.
Particulars Amount in Rs.
Office Equipment 4,80,600
General Reserve 4,15,000
Plant & Machinery 18,00,000
Creditors for Goods 1,68,500
9% Debentures in APCO Ltd., 2,45,000
Creditors for expenses 36,000
Cash credit 75,000
Loose tools 1,63,000
Computer software 83,250
Mortgage loan 3,10,000

33. Debtors for goods 1,90,000
Advertisement (written off) 30,000
8% preference share capital 5,50,000
Equity share capital 15,00,000
Stores and Spares 1,00,200
Staff welfare fund 85,000
Provision for Taxation 26,550
Interest accrued on investment 51,000
Cash at bank 23,000

34. Illustration–4
Prepare Balance sheet of Darshan Ltd., in the prescribed format as on
31st March 2015 from the following Trial Balance
Particulars Amount in Rs. Particulars Amount in Rs.
Leasehold Property 16,00,000 Share capital 20,65,000
Bank balance 1,05,000 Staff provident fund 8,00,000
Plant & Machinery 9,00,000
Capital redemption
reserve
2,20,000
Goodwill 3,00,000 General reserve 1,90,000
Investment in a
subsidiary Co.
11,50,000 Deposits from public 9,00,000
P & L Acc. 70,000 Accounts payable 2,10,000
Stock of finished goods 1,20,000 Short term loan from SBI 1,78,000
Accounts Receivable 2,40,000 Unclaimed dividends 6,000
Preliminary Expenses 39,000
Underwriting Commission 45,000
Total 45,69,000 Total 45,69,000

35. Illustration:5 - From the following Ledger balances of PREMIER CO.
LTD., prepare a Balance Sheet of the company as on 31st March
2015 as per Schedule III of the Companies Act, 2013:
Particulars Amount in Rs. Particulars Amount in Rs.
Plant & machinery 3,00,000 Premises 5,00,000
6% Debenture 4,00,000
Fixed Deposits with
Banks
2,50,000
Provision for workmen,
compensation
65,000
Discount on issue of
Debentures(unwritten off)
55,000
General Reserves 40,000 Provision for taxation 90,000
Cash in hand 17,000 Loan from Bank of India 2,50,000
Equity Share capital 6,00,000 Bills Receivable 1,20,000
Sundry creditors 58,000 Bank overdraft 75,000
Loan to staff 35,000 Security deposits 62,000
Shares of Reliance Co.
Ltd
99,000 Goodwill 90,000
Commission receivable 50,000

36. Balance sheet for Vishal Ltd., as on 31st March 2015
Asset Liabilities
 Non- current asset
 Current asset
 Share holder funds
 Non- current liabilities
 Current liabilities

37. COST ESTIMATION
 Acceptable plant design - capable of operating under
condition which will yield a profit.
 Net profit = Total income – All expenses
 Be aware of different types of cost involved in the
manufacturing process.
 Capital fund
Direct Plant Expenses
Indirect Plant Expenses

38. Total Capital
Investment
(TCI)
Fixed Capital
Investment
(FCI)
Working Capital
Investment
(WCI)

39. CASH FLOW FOR INDUSTRIAL
OPERATIONS

40. CUMULATIVE CASH POSITION