Accounting Basics Final Accounts

8/4/2019 Accounting Basics Final Accounts

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Accounting For Managers

Dr.Padma Srinivasan


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Accounting

The

Languageof

Business


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What is Accounting?What is Accounting?

Accounting is an art of recording,

classifying, summarizin

g andreporting of transactionstransactions with theaim of showing the financial health

of an entity.


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What are Assets??What are Assets??y Everything that belongs to you is your

asset, whether the possession is withyou or not in the given date.

y Assets can be tangible or intangible innature.

y Assets always get depreciated except

for land.y Assets contribute towards companys

worth.


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What are liabilities??What are liabilities??yWhatever does not belong to you but

you are possessing it are your

liabilities.

y Shareholders fund i.e. Capital is your

liability.

y All Reserves and Provisions are

liabilities.

y All outstanding expenses, dividends,

interest, commission are liabilities.


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Classification of AccountingClassification of Accounting

Accounting

FinancialAccounting

CostAccounting

ManagementAccounting


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Golden Rules Of AccountingGolden Rules Of Accounting

yPersonal Account

Debit The Receiver, Credit The GiverDebit The Receiver, Credit The Giver

What is a Personal Account?

Eg: Customers, Suppliers, Money

Lenders, Bank, Owner etc.

Types ofAccounts-

Real, Nominal & Personal


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ContinuedContinuedyReal Account

Debit What Comes In, Credit what GoesDebit What Comes In, Credit what GoesOutOut

What is a Real Account?

Eg: Land, Building, Plant, Machinery,Investment andso on


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ContinuedContinuedyNominal Account

Debit The Expenses & Loses, Credit TheDebit The Expenses & Loses, Credit TheIncomes & GainsIncomes & Gains

What is a Nominal Account?

Eg:Wages, Discounts, Purchases, Sales

etc.


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What is Final Account?What is Final Account?

When books of accounts are closed at theend of the year and profits are to be assessed,

we make final adjustments andentries to our

books of accounts. This includes assessing the

Gross Profit in theTradingTrading accountaccount, assessingthe Net Profit in theP/L accountP/L account and

comparing the assets with liabilities to balance

them.Balance sheet gives the true and fair view of

the companys financial status.


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Difference Between Final A/cDifference Between Final A/c& Company Final A/c& Company Final A/c

Final Account CompanyFinal A/c

Prepared byeveryorg.

& individual doing

business

Generally Prepared by

Public Ltd. Co.

Balance sheet does not

have a format

Format oftheBalance

Sheet has to be

followed

In P/L A/c there is

nothing below the line

In P/L A/c weprepare

P/L Appro. A/c also

Net Profit/Loss gets +/-

to the Capital

Net Profit/Loss tr. to

ApproA/c


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Balance Sheet

Profit and loss Account

Statement on retained earnings

Cash-flow statement

Notes, schedules and

explanatory material

Financial Statements

FINANCIAL

STATEMENTS

are the basic and

formal means

through which thecorporate

communicate

financial

information to

various users


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Trading,

Manufacturing A/c,

P&L A/cBalance Sheet


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DETAILSDETAILS

Trading a/c for the period ending ..

DATEPARTICULARS

AMOUNT

Rs

DATEPARTICULARS AMOUNT

Rs

Dr Cr

To opening Stock

To Purchases

Less : Purchase

Returns

To cartage

To carriage

To Import Duty

To Clearing

charges To DockDues

To Excise Duty

To Wages

To Power

By Sales

Less : Sales

Returns

By Closing Stock

By Gross Loss


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DETAIL

S

DETAILS

Manufacturing a/c for the period ending ..

DATEPARTICULARS

AMOUNT

Rs

DATEPARTICULARS AMOUNT

Rs

Dr Cr

To

Manufacturing

Expenses A/c

Opening Stock

Purchases

Wages

Carriage

inwards

Production

Expenses

By Trading

A/c Transfer


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DETAILS DETAILS

Profit & Loss a/c for the period ending..

DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT

To Gross Loss

To Salaries

To Rent

To Office Lighting

To Insurance

To Printing &

Stationary

To Postage

To Telephone Rent

To Audit Fees

To Legal Expenses

By Gross Profit

By Rent received

By Commission

ReceivedByDiscount earned

By Bad Debts

Recovered

By Interest

Received

By Net Loss

Contd.


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DETAILS DETAILS


D

ATE PARTICULARS AMOUNTRs.

D

ATE PARTICULARS AMOUNTRs.

Dr Cr

To Bank Charges

To Repairs

To MaintenanceExpenses

ToDepreciation

To General

ChargesTo Advertisements

To Traveling

To Commission

paid to sales

agents Contd.


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DETAILS DETAILS


DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT

Dr Cr

To Cartage,

carriage, freight

outwards

To Bad debtsTo Provision for

bad & doubtful

debts

To Cash

Discountallowed

To Interest paid

To Net Profit


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Balance Sheet of a SoleTrader


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LIABILITIES ASSETS

Rs

Capital

1.Capital

2.Retained Profits-Reserves, Provisions

Liabilities

1.Mortgage onproperty

2.Long term loan

Current Liabilities

1.Bank Overdraft2. Bills Payable

3. Trade creditors

4.Creditors for

expenses

Fixed Assets

1. Goodwill

2. Land

3.Building

4.Plant & Machinery

5.Loose Tools

6.Furniture & Fixtures

Investments

1.Long term investments

2.Short term investments

Current Assets

1.Inventory

2.Debtors

3.Bills Receivables

4.Cash at bank5.Cash in hand

Rs


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Typical AdjustmentsTypical AdjustmentsyWhat to do with Provision for tax?

yWhat to do with Tax Paid?

yWhat treatment for Dividend Paid?

yWhat treatment for Proposed Dividend?

yWhat treatment Interim Dividend?

yWhat to do with Managers Remuneration

and fees?


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Particulars Amt. Particulars Amt

To Rent

To salaries

To Provision forTax

To Net Profit

1000

2000

1000

1000

By Gross Profit 5000

Provision forTaxProvision forTax


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Particulars Amt. Particulars Amt.

To Rent

To Salaries

To Net Profit

ToTaxPaid

To balance c/d

1000

2000

2000

1000

5000

By Gross Profit

By P/L (opn. Bal)

By Net Profit b/d

5000

4000

2000

TaxPaidTaxPaid


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Particulars Amt Particulars Amt

To Rent

To Salaries

To Net Profit

To Interim Dividend

To Dividend Paid

To Proposed Dividend

To balance c/d

1000

2000

4000

1000

1000

2000

4000

By Gross Profit

By P/L (opn. Bal)

By Net Profit b/d

7000

4000

4000

Dividends PaidDividends Paid


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Managers RemunerationManagers Remuneration

Net profit as per P/L A/c

Add back:

a. Capital Expenditure

b. Provision For taxation

c. Any Ex-gratia Payment made

d. Managers commission already paid

Less:

a. Profit on Sales of Investment

b. Capital Profit on sale of assets

c. Profit on re-issue of shares


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In theBooks OfDhara, Tarun & DeepakBros

Profit and Loss A/c

For theyearending 31.03.2006

By Gross Profit b/d

By Interest Received A/c

By P/L (Opn.Bal.)

By Net Profit B/d

To Rent &b Taxes

To Audit Fees

To Director's Fees

To M

D's Remuneration

To Sundry Expenses

To Depreciation

To Provision forTax

To Net Profit

To TaxPaid

To Interim Dividend

ToProposed Dividend

T

o General Reserve


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In the Books ofDhara, Tarun & Deepak Bros

Balance Sheet as on 31.03.2006

Liabilities Amt.(Rs.) Assets Amt.(Rs.)

Capital Plant & Machinery

Add/Less: Net Profit Furniture

Patents

Creditors Debtors

Less: Mutual Debts Less: Mutual DebtsLess: Cur. Yr. Bad Debt

Bills Payable Less: PVBD

Outstanding Rent

Accrued Expenses Bank

Bills Receivable

Preliminary Expense

Prepaid Expenses

Unexpired Insurance


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In the Books ofDhara, Tarun & Deepak Bros

Balance Sheet as on 31.03.2006

Liabilities Amt.(Rs.) Assets Amt.(Rs.)

Authorised Capital Fixed Assets

No. ofshares @ Rs. Furniture

Issued & Subscribed Investments

No. ofshares @ Rs. Shares ofother Cos.

Less: Calls in arrear

Reserves & SurplusCurrent Assets, Loans& Advances

General Reserve Debtors

Capital Redemption Reserve Bank

Secured Loan Bills Receivable

Secured Bank Loan Pr epaid Expenses

Unsecured Loan Unexpired Insurance

Bank Overdraft Tax Deducted at Source

Currrent Liabilities & Provisions Misc. Expenses

Proposed dividend Pr eliminary Expenses

Provision for tax

Accounting Basics Final Accounts

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