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FINANCIAL ACCOUNTING

M.Chandra Shekar Assistant Professor [email protected]

Learning Objectives for Financial Accounting and Analysis

• Demonstrate knowledge of Accounting Terminology , Accounting Principles and Concepts
• Understand the framework of Financial Accounting
• Identify the Business Activities underlying the Financial Statements
• Prepare Basic Financial Statements
• Prepare and present the Financial Statements of Limited Companies
• Understand and interpret informational content of Corporate Financial Statements
• Analyze and interpret financial statements by using various Ratios
• Consider accounting from an international context ( US GAAP / Indian GAAP / IFRS )

Administrative Matters Prescribed Text Book:

• “ A Text Book Accounting for Management” Dr.S.N.Maheshwari, Dr.S.K.Maheshwari and Sharad Maheshwari
• 9 th Edition by Charles T.Horngren, Gart L.Sundem, John A.Elloitt. (IFA)…..Reference Book
• Accounting Text & Cases : 12 th Edition Robert Anthony, Hawkins, Merchant (AHM) , Tata McGraw hill publishers
• Accounting Standards issued by Institute of Chartered Accountants Of India www.icai.org

What is “Good” Participation?

• Quality, not quantity.
• Analyzing and discussing course material.
• Questioning the analysis of others.
• Seeking clarification.

Session 1

Accounting: The Language of Business

Introduction to Accounting

The Balance Sheet

Learning Objectives

• Discuss key features of financial reporting
• Reflect on who uses financial statements and why and how
• Identify elements of the financial reporting environment
• Become familiar with the Four Primary Financial Statements
• Describe components of the Balance Sheet: Assets , Liabilities , and Owner’s Equity ( Capital / Owners Capital / Partners Capital / Share Capital)
• Use the Balance Sheet Equation to analyze transactions
• Finally to become Intelligent users of accounting information

The Nature of Accounting

• What is accounting?

A formal system for communicating financial information

about economic entities to the interested users.

“The process of Recording, Classifying, Summarizing and

Interpreting business transactions in Financial or Monetary

terms”.

“Often called the language of business”.

“Sometimes mistakenly called bookkeeping”.

• What is the difference between financial accounting and

management accounting?

Formal system:

Generally Accepted Accounting Principles (GAAP)

• India: SEBI ICAI IGAAP
• US: SEC FASB US GAAP
• UK: IASB IFRS Convergence to IFRS by 2011

Glossary:

SEBI = S ecurities E xchange B oard of I ndia. ICAI = The I nstitute of C hartered A ccountants of I ndia. GAAP = G enerally A ccepted A ccounting P rinciples.

SEC = S ecurities and E xchange C ommission

FASB = F inancial A ccounting S tandards B oard IASB = I nternational A ccounting S tandards B oard (London) IFRS = I nternational F inancial R eporting S tandards

What Accounting Information

Company’s financial statements mention the following

information in an Annual Report.

• Balance Sheet – “Consolidated Balance Sheet”

Assets = Liabilities + Shareholders Equity or Share Capital

Assets = Liabilities + Capital

• Income Statement – “Consolidated Income Statements” –

“Consolidated Profit & Loss Account

Revenues – Expenses = Net Income

• “Consolidated Statements of Cash Flows”

Activities : Operating , Investing, Financing

• Auditor’s and Management’s reports
• Management Discussion and Analysis
• Footnotes

Balance Sheet – “Consolidated Balance Sheet”

• Refer ICICI Bank Ltd Balance Sheet Page C:\Users\Nani\Desktop\FAA 2017- 18 \ICICI Balance Sheet 2017.pdf
• Refer Infosys Ltd Balance Sheet Page
• C:\Users\Nani\Desktop\FAA 2017- 18 \Infosys Balance sheet 17.pdf
• Refer Dr.Reddys Ltd Balance Sheet Page C:\Users\Nani\Desktop\FAA 2017- 18 \DR Balance Sheet 16-17.pdf

Key Financial Statement Users