Fa Session 1 Changed

8/8/2019 Fa Session 1 Changed

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Course Content Course Content

Introduction Introduction toto Accounting Accounting: : Concept Concept and and necessity necessity of of Accounting Accounting; ; An An overview overview of of Income Income Statement Statement and and Balancesheet Balancesheet..

Introduction Introduction and and Meaning Meaning of of GAAP GAAP; ; Concepts Concepts of of Accounting Accounting; ; Impact Impact of of Accounting Accounting Concepts Concepts on on Income Income statement statement and and

Balancesheet Balancesheet.. Accounting Accounting Mechanics Mechanics: :Process Process leading leading toto preparation preparation of of Trial Trial

Balance Balance and and Financial Financial Statements Statements; ; Preparation Preparation of of Financial Financial Statements Statements with with Adjustment Adjustment entries entries..

Revenue Revenue Recognition Recognition and and Measurement Measurement ; ;Capital Capital and and Revenue Revenue Items Items: :Treatment Treatment of of R&DExpenses R&DExpenses, , Preproduction Preproduction cost,cost,Deferred Deferred Revenue Revenue Expenditure Expenditure etc etc..




Fixed Fixed Assets Assets and and Depreciation Depreciation Accounting Accounting.. Evaluation Evaluation and and Accounting Accounting of of Inventory Inventory..

Preparation Preparation and and complete complete Understanding Understanding of of Corporate Corporate Financial Financial Statements Statements; ;`T·form `T·form and and Vertical Vertical Form Form of of Financial Financial Statements Statements..

Important Important Accounting Accounting Standards Standards.. Corporate Corporate Financial Financial Reporting Reporting- -Analysis Analysis of of Interpretation Interpretation thereof thereof

with with reference reference toto RatioRatio Analysis, Analysis, Fund Fund Flow,Flow, Cash Cash Flow Flow..




Inflation Accounting Inflation Accounting

Ethical issue in Accounting Ethical issue in Accounting



R eference BooksR eference Books

Financial Financial Accounting Accounting for for Managers Managers- -T T..P P..Ghosh Ghosh..

Financial Financial Accounting Accounting- -Rerporting Rerporting & & Analysis Analysis- -Stice Stice

&Diamond &Diamond.. Financial Financial Accounting Accounting- -R R..Narayanaswamy Narayanaswamy..



Learning objectivesLearning objectives DefineDefine accounting,accounting, identify business goalsidentify business goals

and activities, and describe the role of and activities, and describe the role of accounting in making informed decisions.accounting in making informed decisions.

Identify the many users of accountingIdentify the many users of accountinginformation in society.information in society.

Explain the importance of businessExplain the importance of business

transactions, money measure, andtransactions, money measure, andseparate entity to accountingseparate entity to accountingmeasurement.measurement.





State the relationship of generallyState the relationship of generallyaccepted accounting principles (GAAP) toaccepted accounting principles (GAAP) to

financial statements and the independent financial statements and the independent CPAs report, and identify theCPAs report, and identify theorganizations that influence GAAP.organizations that influence GAAP.

DefineDefine ethicsethics and describe the ethicaland describe the ethical

responsibilities of accountantsresponsibilities of accountants

Prepare a trial balance and describe itsPrepare a trial balance and describe itsvalue and limitationsvalue and limitations





Accounting as an Information Accounting as an InformationSystemSystem Accounting Accounting provides a vital service byprovides a vital service by

supplying the information decision makerssupplying the information decision makersneed to makeneed to make reasoned choices amongreasoned choices among

alternative uses of scarce resources in thealternative uses of scarce resources in theconduct of business and economicconduct of business and economicactivities.activities.



Accounting is a link between business Accounting is a link between businessactivities and decision makersactivities and decision makers

Accounting measures business activities by Accounting measures business activities byrecording data about them for future use.recording data about them for future use.

The data are stored until needed and thenThe data are stored until needed and thenprocessed to become useful informationprocessed to become useful information



Business GoalsBusiness Goals

1. Profitability.1. Profitability. A business must take in enough money A business must take in enough moneyto pay all the costs of doing business, withto pay all the costs of doing business, with

enough left over as profit for the ownersenough left over as profit for the ownersto want to stay in business.to want to stay in business.

2. Liquidity.2. Liquidity. A business must have enough cash A business must have enough cash

available to pay debts when they are due.available to pay debts when they are due.



Business Goals and ActivitiesBusiness Goals and Activities



Business ActivitiesBusiness Activities

1.1. Financing Activities.Financing Activities.

Obtaining capital from owners andObtaining capital from owners andcreditors.creditors.

Repaying creditors and a ret urn to owners.Repaying creditors and a ret urn to owners.

2.2. Investing Activities.Investing Activities.

Spending the capital it receives in waysSpending the capital it receives in ways

that are productive and will help thethat are productive and will help thebusiness achieve its objectives.business achieve its objectives.

Buying and selling assets to be used in theBuying and selling assets to be used in thebusiness.business.



3.3. Operating Activities.Operating Activities.

Selling of goods and services to customers.Selling of goods and services to customers.

Employing managers and workers, buyingEmploying managers and workers, buyingand producing goods and services, andand producing goods and services, andpaying taxespaying taxes



nanc a an anagement nanc a an anagement Accounting Accounting

Accountings role of assisting decision Accountings role of assisting decisionmakers by measuring, processing, andmakers by measuring, processing, andcommunicating information is usuallycommunicating information is usuallydivided into two categories:divided into two categories:1.1. Management accounting.Management accounting.2.2. Financial accounting.Financial accounting.

The two may be distinguished by theThe two may be distinguished by theprincipal users of their informationprincipal users of their information



Management AccountingManagement Accounting

Is oriented toward the needs of internalIs oriented toward the needs of internaldecision makers.decision makers.

Provides managers and employees withProvides managers and employees withinformation regarding how they have doneinformation regarding how they have donein the past and what they can expect inin the past and what they can expect inthe f ut urethe f ut ure



Financial AccountingFinancial Accounting

Is oriented toward the needs of externalIs oriented toward the needs of externaldecision makers.decision makers.

Provides information in the form of Provides information in the form of financial statements so that externalfinancial statements so that externaldecision makers can evaluate how well thedecision makers can evaluate how well thebusiness has achieved its goals.business has achieved its goals.



Financial statements report directly on theFinancial statements report directly on thegoals of profitability and liquidity.goals of profitability and liquidity.

Financial statements areused extensivelyFinancial statements areused extensivelyboth inside and outside a business to evaluateboth inside and outside a business to evaluate

the businesss success.the businesss success.



Decision Makers: The Users of Decision Makers: The Users of

Accounting Information Accounting Information





Outside Users withOutside Users with

a Direct Financial Interest a Direct Financial Interest InvestorsInvestors

CreditorsCreditors







B alance sheet B alance sheet

Also called the statement of financial Also called the statement of financial

condition, it is a summary of a company'scondition, it is a summary of a company'sassets, liabilities, and owners' equity.assets, liabilities, and owners' equity.

The document distributed at the annualThe document distributed at the annualmeeting to shareholders of record whomeeting to shareholders of record who

wish to vote their shares in person.wish to vote their shares in person.



reparat on o ncomereparat on o ncomeStatementStatement

The Income Statement normally showsThe Income Statement normally showswhether the business is earning profits orwhether the business is earning profits orsustaining losses. It communicates thesustaining losses. It communicates the

financial performance of the bu

siness.financial performance of the bu

siness.The struct ure of the income statement The struct ure of the income statement differs with the nat ure of the business.differs with the nat ure of the business.The business can either be aThe business can either be a

manufact uring, merchandising/trading ormanufact uring, merchandising/trading orservice entity. Regardless of the struct ure,service entity. Regardless of the struct ure,they however, communicate the samethey however, communicate the same

information.information.



Factors to be considered in theFactors to be considered in thepreparation of income statements are:preparation of income statements are:

Revenues/Sales

Revenues/Sales This item carries the revenues/salesThis item carries the revenues/salesgenerations of the company. Sales consist generations of the company. Sales consist of Cash Sales (cash is paid at the time of of Cash Sales (cash is paid at the time of

sale) or Credit Sales (Cash paid later).sale) or Credit Sales (Cash paid later).



Fa Session 1 Changed

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