accounting basics final accounts
TRANSCRIPT
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Accounting For Managers
Dr.Padma Srinivasan
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Accounting
The
Languageof
Business
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What is Accounting?What is Accounting?
Accounting is an art of recording,
classifying, summarizin
g andreporting of transactionstransactions with theaim of showing the financial health
of an entity.
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What are Assets??What are Assets??y Everything that belongs to you is your
asset, whether the possession is withyou or not in the given date.
y Assets can be tangible or intangible innature.
y Assets always get depreciated except
for land.y Assets contribute towards companys
worth.
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What are liabilities??What are liabilities??yWhatever does not belong to you but
you are possessing it are your
liabilities.
y Shareholders fund i.e. Capital is your
liability.
y All Reserves and Provisions are
liabilities.
y All outstanding expenses, dividends,
interest, commission are liabilities.
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Classification of AccountingClassification of Accounting
Accounting
FinancialAccounting
CostAccounting
ManagementAccounting
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Golden Rules Of AccountingGolden Rules Of Accounting
yPersonal Account
Debit The Receiver, Credit The GiverDebit The Receiver, Credit The Giver
What is a Personal Account?
Eg: Customers, Suppliers, Money
Lenders, Bank, Owner etc.
Types ofAccounts-
Real, Nominal & Personal
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Golden Rules Of AccountingGolden Rules Of Accounting
ContinuedContinuedyReal Account
Debit What Comes In, Credit what GoesDebit What Comes In, Credit what GoesOutOut
What is a Real Account?
Eg: Land, Building, Plant, Machinery,Investment andso on
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Golden Rules Of AccountingGolden Rules Of Accounting
ContinuedContinuedyNominal Account
Debit The Expenses & Loses, Credit TheDebit The Expenses & Loses, Credit TheIncomes & GainsIncomes & Gains
What is a Nominal Account?
Eg:Wages, Discounts, Purchases, Sales
etc.
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What is Final Account?What is Final Account?
When books of accounts are closed at theend of the year and profits are to be assessed,
we make final adjustments andentries to our
books of accounts. This includes assessing the
Gross Profit in theTradingTrading accountaccount, assessingthe Net Profit in theP/L accountP/L account and
comparing the assets with liabilities to balance
them.Balance sheet gives the true and fair view of
the companys financial status.
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Difference Between Final A/cDifference Between Final A/c& Company Final A/c& Company Final A/c
Final Account CompanyFinal A/c
Prepared byeveryorg.
& individual doing
business
Generally Prepared by
Public Ltd. Co.
Balance sheet does not
have a format
Format oftheBalance
Sheet has to be
followed
In P/L A/c there is
nothing below the line
In P/L A/c weprepare
P/L Appro. A/c also
Net Profit/Loss gets +/-
to the Capital
Net Profit/Loss tr. to
ApproA/c
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Balance Sheet
Profit and loss Account
Statement on retained earnings
Cash-flow statement
Notes, schedules and
explanatory material
Financial Statements
FINANCIAL
STATEMENTS
are the basic and
formal means
through which thecorporate
communicate
financial
information to
various users
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Trading,
Manufacturing A/c,
P&L A/cBalance Sheet
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DETAILSDETAILS
Trading a/c for the period ending ..
DATEPARTICULARS
AMOUNT
Rs
DATEPARTICULARS AMOUNT
Rs
Dr Cr
To opening Stock
To Purchases
Less : Purchase
Returns
To cartage
To carriage
To Import Duty
To Clearing
charges To DockDues
To Excise Duty
To Wages
To Power
By Sales
Less : Sales
Returns
By Closing Stock
By Gross Loss
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DETAIL
S
DETAILS
Manufacturing a/c for the period ending ..
DATEPARTICULARS
AMOUNT
Rs
DATEPARTICULARS AMOUNT
Rs
Dr Cr
To
Manufacturing
Expenses A/c
Opening Stock
Purchases
Wages
Carriage
inwards
Production
Expenses
By Trading
A/c Transfer
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DETAILS DETAILS
Profit & Loss a/c for the period ending..
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
To Gross Loss
To Salaries
To Rent
To Office Lighting
To Insurance
To Printing &
Stationary
To Postage
To Telephone Rent
To Audit Fees
To Legal Expenses
By Gross Profit
By Rent received
By Commission
ReceivedByDiscount earned
By Bad Debts
Recovered
By Interest
Received
By Net Loss
Contd.
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DETAILS DETAILS
Profit & Loss a/c for the period ending..
D
ATE PARTICULARS AMOUNTRs.
D
ATE PARTICULARS AMOUNTRs.
Dr Cr
To Bank Charges
To Repairs
To MaintenanceExpenses
ToDepreciation
To General
ChargesTo Advertisements
To Traveling
To Commission
paid to sales
agents Contd.
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DETAILS DETAILS
Profit & Loss a/c for the period ending..
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
Dr Cr
To Cartage,
carriage, freight
outwards
To Bad debtsTo Provision for
bad & doubtful
debts
To Cash
Discountallowed
To Interest paid
To Net Profit
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Balance Sheet of a SoleTrader
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LIABILITIES ASSETS
Rs
Capital
1.Capital
2.Retained Profits-Reserves, Provisions
Liabilities
1.Mortgage onproperty
2.Long term loan
Current Liabilities
1.Bank Overdraft2. Bills Payable
3. Trade creditors
4.Creditors for
expenses
Fixed Assets
1. Goodwill
2. Land
3.Building
4.Plant & Machinery
5.Loose Tools
6.Furniture & Fixtures
Investments
1.Long term investments
2.Short term investments
Current Assets
1.Inventory
2.Debtors
3.Bills Receivables
4.Cash at bank5.Cash in hand
Rs
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Typical AdjustmentsTypical AdjustmentsyWhat to do with Provision for tax?
yWhat to do with Tax Paid?
yWhat treatment for Dividend Paid?
yWhat treatment for Proposed Dividend?
yWhat treatment Interim Dividend?
yWhat to do with Managers Remuneration
and fees?
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Particulars Amt. Particulars Amt
To Rent
To salaries
To Provision forTax
To Net Profit
1000
2000
1000
1000
By Gross Profit 5000
Provision forTaxProvision forTax
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Particulars Amt. Particulars Amt.
To Rent
To Salaries
To Net Profit
ToTaxPaid
To balance c/d
1000
2000
2000
1000
5000
By Gross Profit
By P/L (opn. Bal)
By Net Profit b/d
5000
4000
2000
TaxPaidTaxPaid
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Particulars Amt Particulars Amt
To Rent
To Salaries
To Net Profit
To Interim Dividend
To Dividend Paid
To Proposed Dividend
To balance c/d
1000
2000
4000
1000
1000
2000
4000
By Gross Profit
By P/L (opn. Bal)
By Net Profit b/d
7000
4000
4000
Dividends PaidDividends Paid
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Managers RemunerationManagers Remuneration
Net profit as per P/L A/c
Add back:
a. Capital Expenditure
b. Provision For taxation
c. Any Ex-gratia Payment made
d. Managers commission already paid
Less:
a. Profit on Sales of Investment
b. Capital Profit on sale of assets
c. Profit on re-issue of shares
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In theBooks OfDhara, Tarun & DeepakBros
Profit and Loss A/c
For theyearending 31.03.2006
By Gross Profit b/d
By Interest Received A/c
By P/L (Opn.Bal.)
By Net Profit B/d
To Rent &b Taxes
To Audit Fees
To Director's Fees
To M
D's Remuneration
To Sundry Expenses
To Depreciation
To Provision forTax
To Net Profit
To TaxPaid
To Interim Dividend
ToProposed Dividend
T
o General Reserve
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In the Books ofDhara, Tarun & Deepak Bros
Balance Sheet as on 31.03.2006
Liabilities Amt.(Rs.) Assets Amt.(Rs.)
Capital Plant & Machinery
Add/Less: Net Profit Furniture
Patents
Creditors Debtors
Less: Mutual Debts Less: Mutual DebtsLess: Cur. Yr. Bad Debt
Bills Payable Less: PVBD
Outstanding Rent
Accrued Expenses Bank
Bills Receivable
Preliminary Expense
Prepaid Expenses
Unexpired Insurance
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In the Books ofDhara, Tarun & Deepak Bros
Balance Sheet as on 31.03.2006
Liabilities Amt.(Rs.) Assets Amt.(Rs.)
Authorised Capital Fixed Assets
No. ofshares @ Rs. Furniture
Issued & Subscribed Investments
No. ofshares @ Rs. Shares ofother Cos.
Less: Calls in arrear
Reserves & SurplusCurrent Assets, Loans& Advances
General Reserve Debtors
Capital Redemption Reserve Bank
Secured Loan Bills Receivable
Secured Bank Loan Pr epaid Expenses
Unsecured Loan Unexpired Insurance
Bank Overdraft Tax Deducted at Source
Currrent Liabilities & Provisions Misc. Expenses
Proposed dividend Pr eliminary Expenses
Provision for tax