Macro Economic System

Managing Resources, Activities, and People

An organization . . .

Directing

Acquires Resources

Organized set of activities

Decision Making

Controlling

Planning

Hires People

EXTERNAL FACTORS AND BUSINESS ENTERPRISE

Suppliers Behavior
Distribution Channels, Transportation, Warehousing, Infrastructure Capital markets, Labour markets, Goods & Services markets. Social & Political Climate Image, Ethics, Culture, Ethic & Religious factors, Ecology, Public relations. Government Activities Competitive Activities Prices, Markets, Products, Promotions Customer Characteristics Attitudes, Incomes, Ages, Location, Education. International Business Conditions Balance of payments, Exchange rates, Foreign competition. Domestic Business Conditions Investment, Mergers, Inflation, Share prices, Trade union actions. Business Enterprise Laws, Taxation, Lobbying, Pay & Price Policies. Technological Progress Patents, New products, New Process.

Accounting
Accounting is the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of information.
Business Accounting System

Financial Accounting

Cost Accounting

Management Accounting

Profit & Loss Account and Finance Topics

Net Sales Cost of goods sold Stocks

Revenue risk

Wages and salaries Other manufacturing expenses

Gross profit margin

Gross Profit Operating Expenses Selling and administration expenses Depreciation

Depreciation policy

Operating profit Non-operating surplus/deficit Earnings before income and tax Interest Profit before tax Tax Profit after tax Dividends Retained earnings Business risk Financial risk

Tax planning
Return on equity Dividend policy

Balance Sheet and Finance Topics

Share Capital Equity

Preference
Reserves and surplus Secured loans Debentures Loans and advances Unsecured loans Current liabilities and provisions Trade Creditors

Capital structure and cost of capital

Working Capital financing policy

Provisions Fixed assets (net)

Gross block Capital budgeting

Less: depreciation
Investments Current assets, loans and advances Cash and bank Receivables Inventories Miscellaneous expenditure and losses Portfolio management

Cash management Credit management Inventory management

The Accounting Cycle Consists of Seven Sequential Stages

1. 2. 3. Transaction analysis Recording transactions in journal books Posting them in ledger books

4.
5. 6. 7.

Preparation of trial balance

Recording adjustment entries in journal book Closing entries in respect of nominal accounts Preparation of financial statements, namely, Profit and loss account, Profit and loss appropriation account and Balance sheet.

In the case of existing firms, the accounting cycle starts with opening entries of all liabilities and asset account balances of the preceding period.

Accounting Cycle
Accounting cycle refers to the procedural aspects of accounting records.
(6) Preparation of Final Statements P&L A/c and B/s

(1) Transaction Analysis

(5) Closing entries

(2) Posting in ledger books

(4) Adjustment Entries

(3) Preparation of Trial Balance

Type of Accounts
Temporary Accounts Permanent Accounts

Nominal

Personal

Real

Natural Person

Notional Person

Tangible Assets

Intangible Assets

Generally Accepted Accounting Principles (GAAP)

Money Measurement Separate Entity Concept Duality Concept Conservative Principle Realisation Concept Accrual Concept

Going Concern Concept

Cost Concept

Matching Concept
Consistency Concept

Accounting Period Concept Materiality Concept

 Measurement of Business Income and Financial Position Trial Balance to Balance Sheet and Profit and Loss Account

 Need for adjustments

 Inventory valuation

 Construction of balance sheet and profit and

Loss account

Brief analysis of the financial statements of Bharat traders