Professional Documents
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S FRA Session 1 2018
S FRA Session 1 2018
Control
Accounting, Markets and Governance
Session: 1
FINANCIAL REPORTING AND ANALYSIS
"If you can't count it,
you can't manage it.“
Financial Accounting
&
Management Accounting
COURSE DETAILS
• Course Outline – FRA
FORMS OF BUSINESS
ORGANIZATION
• Sole Proprietorship
• Partnership
– Indian Partnership Act
– Unlimited liability
– Limit of partners
• Company
– The Companies Act 2013
• Limited Liability Partnership
– Limited Liability Partnership Act 2008
– No Limit of partners
– Limited Liabilities
Source: Financial Accounting: A Managerial Perspective by Narayanaswamy. R, PHI
Learning (NS)
Accounting, Capital Market and
Corporate Governance
• The lemons principle and the problem of
adverse selection
• Signalling quality
Profits
Owners’ Equity Revenue- Expenses
?
One of the first
questions any business
wants to know is
whether they are
making money or are
profitable.
Source: Financial ACCT: A South-Asian Perspective with Course Mate (Edition: 2nd), Norman Godwin | Wayne Alderman |
Debashis Sanyal (GAS),Cengage Learning
Basic Structure of the Income
Statement
Source: Financial ACCT: A South-Asian Perspective with Course Mate (Edition: 2nd), Norman Godwin | Wayne Alderman |
Debashis Sanyal (GAS),Cengage Learning
Income before taxes,
The Multi-Step also called earnings
before income taxes
Operating Profit
Net Income
Source: Financial ACCT: A South-Asian Perspective with Course Mate (Edition: 2nd), Norman Godwin | Wayne Alderman |
Debashis Sanyal (GAS),Cengage Learning
Reporting Financial Position:
The Balance Sheet
?
An important issue for
any business is its
current financial
position. What does
the business own?
What does it owe?
ACCOUNTING EQUATION
Assets = Liabili5es + Equity
Reported at a given 5me or date
Source: Financial ACCT: A South-Asian Perspective with Course Mate (Edition: 2nd), Norman Godwin | Wayne Alderman |
Debashis Sanyal (GAS),Cengage Learning
Balance Sheet Example
Exhibit 1-2
Source: Financial ACCT: A South-Asian Perspective with Course Mate (Edition: 2nd), Norman Godwin | Wayne Alderman |
Debashis Sanyal (GAS),Cengage Learning
The Classified Balance Sheet
A Classified groups together accounts of
similar nature and reports
Balance them in a few major
Sheet classifica5ons.
Source: Financial ACCT: A South-Asian Perspective with Course Mate (Edition: 2nd), Norman Godwin | Wayne Alderman |
Debashis Sanyal (GAS),Cengage Learning
Balance Sheet Classifications
Items are grouped by category in the
balance sheet.
Current
Current Assets Liabilities (Paid
(Convert to Noncurrent Noncurrent
Assets with Cash in 1 Liabilities
Cash in 1 year year or less)
or less) (All other (All other
assets) liabilities)
ASSETS LIABILITIES
Source: Financial ACCT: A South-Asian Perspective with Course Mate (Edition: 2nd), Norman Godwin | Wayne Alderman |
Debashis Sanyal (GAS),Cengage Learning
Reporting Equity: The
Statement of Retained Earnings
A statement of retained earnings shows
the change in a company’s retained
earnings over a specific period of 9me.
Source: Financial ACCT: A South-Asian Perspective with Course Mate (Edition: 2nd), Norman Godwin | Wayne Alderman |
Debashis Sanyal (GAS),Cengage Learning
Basic Structure of the Statement of
Retained Earnings
Source: Financial ACCT: A South-Asian Perspective with Course Mate (Edition: 2nd), Norman Godwin | Wayne Alderman |
Debashis Sanyal (GAS),Cengage Learning
Statement of Retained
Earnings Example
Exhibit 1-3
Source: Financial ACCT: A South-Asian Perspective with Course Mate (Edition: 2nd), Norman Godwin | Wayne Alderman |
Debashis Sanyal (GAS),Cengage Learning
Linking the Income Statement and
the Balance Sheet
The
Statement of
Retained
Earnings links
the income
statement and
the balance
sheet.
Source: Financial ACCT: A South-Asian Perspective with Course Mate (Edition: 2nd), Norman Godwin | Wayne Alderman |
Debashis Sanyal (GAS),Cengage Learning
Problem: 1[2-1, AHM]
• If assets equal $95,000 and liabilities equal $40,000, then
owners’ equity equals
– Owners’ Equity= $ 55,000
• If assets equal $65,000 and owners’ equity $40,000, then
liabilities equal
– Liabilities = $ 65,000
• If current assets equal $25,000, liabilities equal $40,000,
and owners’ equity equals $55,000, the non-current assets
equal
– Non-current assets= $70,000
• If the current ratio is 2.2:1, current assets are $33,000, and
non-current assets equal $55,000, then owners’ equity is
– Current Liabilities= $15,000; Owners’ equity= $73,000
• What is the current ratio if non-current assets equal
$60,000, total assets equal $95,000, and owners’ equity
equals $70,000?
– Current assets = $35,000; Liabilities= $ 25,000; Current Ratio=7:5
or 1.4
Problem 2 [2-3, AHM]
• Capital Stock was issued for $100,000 cash
• Bonds Payable of $25,000 were refunded with
capital stock
• Depreciation on plant and equipment equaled $
8500 for the year
• Inventory Purchased for $15,900 cash
• $9,400 worth inventory was purchased on credit
• Inventory Costing $4,500 was sold for $7,200 on
credit
• $3,500 in cash was received for mechandise sold on
credit
• Dividends of $ 3,000 were declared
• The declared dividends of $3,000 were paid
Problem 3 [2-2, AHM]
Prepare a balance sheet as of June 30, for the J.L. Gregory Company, using the
following data: