Session Agenda

I. Introduction to accounting world

II.

Introduction to four basic accounting terms & the financial statements

Asset Liability Revenue Expense Balance Sheet Profit and Loss Account

Dr. Abhishek Ranga MBA, AICWA, Ph.D. (Finance)

I. Introduction to accounting world

Dr. Abhishek Ranga MBA, AICWA, Ph.D. (Finance)

Financial Accounting

Financial

accounting

can

be

defined
that

as

an

INFORMATION

SYSTEM

provides

information about the result(s) of a business

performance and its economic position to its stakeholders.

Dr. Abhishek Ranga MBA, AICWA, Ph.D. (Finance)

CUSTOMER of Accounting Information

Customer Equity investors (existing and potential) Loan creditors i.e, existing and potential holders of debentures and loan stock, and providers of short-term loans Employees (existing, potential and past) Interest of the Customer They are interested whether buy, hold or sell the shares in hand and also enable them in payment of dividends. The amount will be paid when due and for continuation of the business.

Interested in stability and profitability for employment opportunities, remuneration and retirement benefits.

CUSTOMER of Accounting Information

Customer Interest of the Customer

Business contacts including customers, trade creditors, competitors and potential take-over bidders
Government, including tax authorities, government departments and local authorities

Whether the payment of loan will be made in due dates and enable sustainability of business for future business with the enterprise.
Interested in allocation of resources and also to regulate the activities of an enterprise and determining tax policies and as a basis for national income.

Public, including tax payers, Trends and recent development in the ratepayers and prosperity of the entity and range of its environmental groups activities.

II. Four Accounting Terms & the financial statements

i.
ii.

Asset
Liability

iii. Revenue iv. Expense Balance Sheet

Profit and Loss Account (P&L account)

Dr. Abhishek Ranga MBA, AICWA, Ph.D. (Finance)

Balance Sheet
Balance sheet is a statement of the total assets and liabilities of an organization at a particular date, usually the last day of the accounting period.

ASSET

LIABILITY

Dr. Abhishek Ranga MBA, AICWA, Ph.D. (Finance)

Profit and Loss Account

Profit and loss account summarizes a business's operations for a period of time.

It provides information about the company's revenues, its operating

expenses, finance costs, gains and losses, income taxes, net income and
the earnings per share (EPS).

INCOME

EXPENSE

Dr. Abhishek Ranga MBA, AICWA, Ph.D. (Finance)

Asset
In common terms any object, tangible or intangible, that is of value to its possessor.

Most accounting bodies throughout the world would now define an

asset as a source of future* economic benefits obtained or controlled as

a result of past transactions or events. Example:

Land and Building Plant and Machinery Cash Patents

* Beyond the balance sheet date

Dr. Abhishek Ranga MBA, AICWA, Ph.D. (Finance) 9

Liability
Australian Accounting Research Foundation definition:

Future sacrifice of economic benefits that the entity is presently obliged

to make to other entities as a result of past transactions and other past events.

International Accounting Standards Boards Definition: A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits.

Dr. Abhishek Ranga MBA, AICWA, Ph.D. (Finance)

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Revenue
Revenue is income that a company receives from its normal business

activities, usually from the sale of goods and services to customers.

Some

companies

receive

revenue

from

interest,

dividends

or royalties paid to them by other companies.

In accounting, revenue is often referred to as the "top line" due to its

position on the income statement at the very top. This is to be contrasted with the "bottom line" which denotes profit.

Dr. Abhishek Ranga MBA, AICWA, Ph.D. (Finance)

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Expenses
International Accounting Standards Boards Definition:

Decreases in economic benefits during the accounting period in the

form of outflows or depletions of assets.

Dr. Abhishek Ranga MBA, AICWA, Ph.D. (Finance)

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