Module 1 : Introduction to Business and Accounting

ACCOUNTING FOR MANAGERS

KIRAN KUMAR, Asst. Professor, VVCE

Business
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Manufacturing, Buying and Selling of Goods and Services For Monetary Benefits Forms of Business Organizations

Sole Proprietorship Partnership Company

Private Limited Public Limited

Listed Unlisted
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Business as a Cash Cycle

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Cash Payment to Inputs

Cash received from sales KIRAN Company Cash left for Capital

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Business as a Credit Cycle

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Cash received from current sales, future sales, past sales

Borrowing for Inputs KIRAN Company Lending to Customer s Cash Collection from Customer s Payment for Input Providers Cash left for Capital

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Business Activities
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Financing Activities Capital and Liabilities Investing Activities Assets Operating Activities Incomes and Expenses

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Accounting
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Account or Explanation

Transactions

Daily Transaction Record Profit or Loss Assets and Debt Positions Movement of Funds

Investment and Withdrawal

Purchase and Sales Income and Expenses

Any other transaction, which can be monetarily measured

Stakeholders

Owners Financiers Suppliers

Employees Government Society

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ACCOUNTING FOR MANAGERS

Monetary Transactions
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Inputs : Business Transactions (e.g., Purchases, Sales, Cash receipts, cash payments External Events Change in Law

Processing : Accounting Principles Accounting Standards Management Estimates Laws and Regulations Accounting Records

Users:

Shareholders Analysts, Banks Rating Agencies Managers, Employees Suppliers, Customers Government Regulators, Media
ACCOUNTING FOR MANAGERS

Outputs: P & L Account Balance Sheet Cash Flow Statement Notes, Management Commentary Reports 2/21/2013

Users of Accounting
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Owners Managers Lenders Employees Security Analysts

Banks Rating Agencies Suppliers Customers Government

Regulators Media Public

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History..
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Accounting practices started in Italy Luca Pacioli first wrote a book Accounting Terms from Latin Industrial Revolution of 18th Century

Separation of Ownership
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Accounting - Types
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Financial Accounting

Cost Accounting

Management Accounting
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Accounting Systems
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Systems of Book-Keeping

Single-Entry Double Entry

Systems of Accounting

Cash System of Accounting Mercantile System of Accounting

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Accounting Principles
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Uniform Scientifically laid down Practices Adopted universally by Accountants across Globe Three Categories

Accounting Concepts BASIC ASSUMPTIONS Accounting Conventions Accounting Standards

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Accounting Concepts
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Separate Entity Going Concern

Money Measurement

Cost

Dual Aspect Periodicity Matching Realization

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Accounting Conventions
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Conservatism

Full Disclosure
Consistency Materiality
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Accounting Standards
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IFRS International Financial Reporting Standards 8

IFRS3 Business Combinations

IFRS4 Insurance Contracts

International Accounting Standards 41

IAS1 Presentation of Financial Statements

IAS7 Cash Flow Statements

ICAI Accounting Standards 32

AS6 Depreciation AS14 Accounting for Amalgamations

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Accounting Systems
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Systems of Book-Keeping

Single-Entry Double Entry

Systems of Accounting

Cash System of Accounting Mercantile System of Accounting

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Accounting Equation
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SOLVE.!!!?
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Anna Bond Ltd has assets of Rs. 87000 and liabilities of 53000. How much is its Capital?

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SOLVE.!!!?
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James Bond Ltds Balance Sheet contains the following items:

Loan Payable 12000 Owners Capital 77300 Cash 5000 Debtors 17000 Stock of RM 9000 Equipment 19000 Building 21800 Land 21000 What is the amount of other liabilities?

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SOLVE.!!!?
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Nityananda Ltds Capital is twice its Liabilities. Its assets are Rs. 81000. how much are its liabilities?

ACCOUNTING FOR MANAGERS

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SOLVE.!!!?
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Give an example of a transaction for the below:

Increase in an Asset and Increase in a Liability Increase in an Asset and a Decrease in Another Asset Increase in an Asset and Increase in Capital Decrease in an Asset and Decrease in a Liability Decrease in an Asset and Decrease in Capital
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On Jan 2012, Katariveera started Surasundarangi Photo Studio Ltd. The following transactions took place during the Effect on Accounting first month: Equation invested Rs. 30000 cash in the company in exchange for 3000 shares of Rs. 10 Katariveera each in the share capital of the company Bought supplies of photographic materials on credit Rs. 9000 Bought photographic equipment for cash Rs. 12000 Received fees for photographic services Rs. 15000 Paid creditor for supplies, Rs. 5000 Took a loan Rs. 12000 Billed customers for services Rs. 19000 Paid office rent Rs. 2500; Electricity Rs. 1200 2/21/2013 Paid Dividends Rs. 4000

SOLVE.!!!?

ACCOUNTING FOR MANAGERS

SOLVE.!!!? Effect on Accounting Equation

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The transactions of Yamaloka Travels Ltd during this month are as follows: Bought a computer for cash Invoiced customers for services provided Bought office supplies on credit Owner invested in the business Collected amount due from a customer Received a Bank loan Paid amount due to a creditor Provided services for cash Repaid a part of the bank loan Paid salaries for the month Owner withdrew Cash for personal use
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END OF MODULE 1: INSERT DISC-2

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