You are on page 1of 11

SIVA SIVANI INSTITUTE OF MANAGEMNT

Sub: Financial Accounting


Batch: PGDM-TPS SEC C
Term: I
Credits: 3
Prerequisite: Basic Understanding of business transactions and their impact on
business.
Facilitator: : Dr. K. SASI KUMAR
Email id: sasikumark@ssim.ac.in
Course Objective
The primary objective of this course is to analyze and interpret the financial information
for strategic decisions and to enable the young budding managers to formulate
business strategies for revenue enhancement, cost economies, efficiency
improvements, restructuring of operations and further expansion or diversification for
creating the shareholders value.
To understand and achieve the above said objective the course incorporated the
following minor objectives:
1. To make the students to understand and apply the basic theory, tools,
terminology, procedures and formats of financial accounting.
2. To familiarize the students with the real world situations by using analysis and
interpretation of financial statements of various companies.
Value Addition
At the end of this course students are expected to develop a fair understanding of
financial statements of companies. Ability to understand and critically evaluate the
financial disclosures made by corporations.
Text Book
Horngren.T.Charles, Sundem.L. Gart and Elliott A. John, Philbrick R.Donna,
Introduction to Financial Accounting, 9th edition, Pearson Education, New Delhi, 2013.

Supplementary Books
1. Godwin, Financial Accounting- Cengage Publications, Ltd, New Delhi, 2011.
2. R. Anthony, D.Hawkins and K. A. Merchant, Accounting : Text and Cases, 10 th
edition, Mc Graw Hill Eduction India, New Delhi.
3. Earl K.Stice & James D. Stice, Financial Accounting Reporting & Analysis, 7 th
edition, Cengage Publications, New Delhi, 2006.
4. Powers and Needles, Financial Accounting, 11th edition, Cengage Publications,
New Delhi, 2012.
Journals
1. Accountancy Age
2. Journal of Accountancy - American Institute of Certified Public Accountants.
3. Journal of Contemporary Accounting Research
Recommended Additional Readings
Students are expected to regularly follow the business related news either through
television (NDTV-Profit / CNBC-TV 18 / Z Business/ ET Now etc.,), or Internet or
through print media (like News Papers Business Line/Economic Times/Financial
Express/Business Standard, Journals like Journal of Accounting Research by University
of Chicago, The Accounting Review by American Accounting Association etc.,) to grasp
the business related terminologies. It is also recommended to read the various company
Quarterly Reports (QI/QII/QIII/QIV), half early reports, Annual reports on regular basis,
to understand the changes in the financial aspects of the business in line with the
changes in the business cycles in the market.
Course requirements

The students will be assigned readings from the textbook as well as reading material
and they will be expected to come to class prepared and also take part in class room
deliberations. Attendance is compulsory. In my experience, attendance is highly
correlated with the absorption of academic materials.
Pedagogy
The pedagogy to be followed will be completely based on the students follow up. It will
be mix of case based lecture, class discussion, and students presentation. Majority of
the learning will happen in the classroom by creating a virtual organization. Very heavy
importance will be given for students preparation for the sessions. Most of the sessions
will be based on concepts and a related case, which has to be first tried / discussed by
the students as a group on their own. Then Facilitators effort will be focused in
providing a learning environment for the student rather than spoon feeding, the student.
In addition to this students will be divided into groups for doing group exercises, case
presentations, role plays etc., In group exercises, evaluation will be done on group wise
as well as individual wise.
Continuous Internal Evaluation - Grading
The course contains the following components for evaluation:
Continuous Internal
Assessment (CIE)
Attendance
End Term Exam

45 Marks
5 Marks
50 Marks

Continuous Internal Evaluation (CIE)


This course consists of a thorough Continuous Internal Evaluation (CIE) system. Every
student performance will be evaluated based on various components viz., Quizs,
Exercises, Assignments, Case Analysis etc.,

The following are the marks allotted to various components in CIA:


Quiz
Project Work
Case Analysis
Exercises / Chapter end Exercises
Mid Term Exam
Total Internal Assessment
Attendance
Total Internal Marks
External Exam
Total Marks Awarded to this Course

5 Marks
5 Marks
10 Marks
5 Marks
20 Marks
45 Marks
5 Marks
50 Marks
50 Marks
100 Marks

Quizzes: 5 Marks
Quizzes will be given periodically throughout the course for the student to determine if
the theory presentations are fully comprehended and can be applied. Three to four
quizzes will be held in the regular classes during the course. The question pattern for
quizzes will be any or all of; multiple choice, fill in the blanks, true or false, very short
descriptive. There will be a penalty (negative mark) for wrong answers. All the quizzes
are closed book and it covers pre reads, self learning topics, case analysis. There may
not be more than 10 questions to be answered in 20 minutes. All the quizzes average
will be considered for evaluation.

Case Analysis and Presentation: 10 Marks


Objective:

To expose the students to various financial statements of companies like Income


Statement, Statement of Retained Earnings, Balance Sheet, and Cash Flow
Statements.

To test their problem solving skills

Each group consists of 5 students. Each individual person and a group shall go through
the case. (Anyone from the group shall be selected for case presentation) Case marks
are given based on case presentation and case participation. Each group has to submit
a three page case write up before any case presentation.

Case Analysis and Presentation


Understanding the case and Identification of key areas in
the case (Concepts to be discussed, financial
statements)
Preparation of Financial Statements
Analysis of Financial Statements
Impact on Business Decision

Marks
(10)
3

3
2
2

Exercises 5 Marks
Try yourself problems/Chapter End Exercises/Problems are to be practiced regularly.
The problems would be informed periodically depending on the class progress. All the
students need to submit solutions neatly handwritten with their own workings in excel
sheet (where ever necessary) which carry 5 marks.
Annual Report - Project Work 5 Marks
Every student is supposed to choose a company and obtain its most recent annual
report online. And also use the internet or library to collect two articles about the
company and the industry in which it operates. Read the articles as well as the annual
report and summarise your findings. Review the companys products and services and
its financial information. Summarise what you have learned. (Text Book Page Nos
Page No: 38 39-Model Exercise Numbers 1-48, 1-49, 1-50)
The following are the contents of your project report:
1. Introduction Company Details Stock Price Dividend per Share
2. Industry Situation and Company Plans
3. Financial Statements Income Statement Balance Sheet Cash Flow Statement.

4. Financial Analysis - Ratio Analysis Comparisons Inter Company vs Intra


Company Analysis Industry Benchmarks
5. Accounting Policies.

Session Plan
Date

Day

Topic

Chapter

Pre-read

Numbers

Requirements
Page Numbers/

Course Outline

Exercises
Page No : 2-15

- Introduction Chapter-1

Users of Accounting Information and

Unit-1 2

Financial Statements Accounting

Case

as an Information System Financial

Hernandez

&

and

Associates

Accounting Equation - Forms of

HBR

Business - Financial Statements and

2001

Their Elements
Types of Ownership - Generally Chapter -1

Page No: 16-30

Accepted

Chapter

Management

Accounting

Accounting

Principles

1:

Maria

Case

End

(GAAP) Organizations that issue

Exercises No :1-

accounting standards Chapter end

25 to 1-49 , page

exercises discussion.

no: 31- 38

How to Read an Annual Report Appendix

Page No: A1-A15

Components of an Annual Report At the end of


Letter

to

the

Breakshare

Stakeholders

Hathway

- the

Basic

BP Text Book

Companies Letters to Stakeholders Starbucks


Financial
4

Highlights

- Auditors -10-K Report

Report Directors Report.


Management
Discussion

and Appendix

: Page No: A15-

Analysis (MDA) Industry Structure Starbucks

- A30

and Development Opportunities 10-K Report


and Strengths Threats and Risks
Outlook Internal Control Systems
5

and Adequacy Quality Audit.


Recording Transactions - Analyzing Chapter -3

Page No: 86-102

Business

Case-2 Marion

Classification Double Entry System

Boat Inc., -HBR

Rules for Double Entry Accounting

Case -1995

Transactions

Normal Balance - Stockholders


Equity
6

Accounts

Business

Transaction Analysis.
Business Transaction Analysis Trial Chapter -3

Page No: 103-

Balance Capital versus Revenue.

116
Chapter

end

exercises : 3-17
to 3.30, 3.32- 344
Page
7

Measuring

Income

Chapter -2

117-

128
Page No : 42-55

Profitability Measurement Issues

Exercise

Accrual Accounting Recognizing

no: 72- 82

Revenues and Expenses Deferred

Exercise

Expenses vs Deferred Revenues

2.30 to 2.2.50

Accrued
Unit-2 8

Business

no:

Expenses

vs.

Characteristics

Qualitative

No:

Accrued

Revenues
Financial Reporting and Analysis Chapter-2
Objectives

Page

Accounting

Conventions Consistency Full


Disclosure Conservatism Cost-

Page No: 62-70

Benefit Classification of Balance


9

10

Sheet Assets and Liabilities


Stockholders Equity Management Chapter-10

Page

Issues Related to Contributes Capital

-438

Exercises : 10.41

Components

Equity
International

of

Stockholders

No:

430

to 10.48
Financial

Reporting

Standards (IFRS) Preparation and


Presentation of Financial Statements
11

/Reports as per IFR Standards


Analytical Understanding of Various

12

IFR Standards Selected Standards


Inter Corporate Investments and Chapter-11

Page No: 468

Consolidated Financial Statements

488

Consolidated

Balance

Sheet

Consolidated Income Statement


Restatement of Foreign Subsidiary
13

Unit-3 14

Financial Statements Issuance of Stock for Cash and Chapter-10

Page No: 439-

Other Assets Stock Dividends and

455

Stock

Exercises

Splits

Statement

of

No:

Stockholders Equity and Book Value

10.49

Per Share
Income Statement

10.60
Page No: 147 -

Different Chapter -4

Measures of Income Gross Profit,

-10.53,

158

Operating Income (EBIT), Income

15
16

from Continuing Operations Net

Exercises

Income - Forms of Income Statement

No: 4.36, 4.37,

Multistep Income Statement

4.40, 4.50 4.54

Single Step Income Statement


MID TERM EXAMINATION
Horizontal Analysis Common-Sized Chapter-12

Page No: 515-

Analysis (Vertical Analysis)

520
Exercises

Page

Page

17

Trend Analysis Analytical Balance

Chapter-12

Sheet

18

no: 12-31,
Page No:521
530

Income Statement Exercises

Chapter-4

Exercise

Page

No:
Exercises

Page

No: 228-233 (SE


3 to SE 12)
Page No: 230233
Exercises No: E3
Unit-4 19

Inventory Depreciation Provisions Chapter-7

to E11
Page Nos : 268 to

Deferred Tax Assets vs. Deferred

289

Tax Liabilities.

Exercise

Page

No: 305 to 310


Exercise no: 7.31
20

to 7.51
Long Lived Assets and Liabilities and Chapter 8 Page no: 324 to
Interest

&

340, 372 to 377,

Chapter -9

402-405
Exercise

Page

No: 356 to 359


Exercise No: 8.
27 to 8.43, 8.47 to
21

22

Using

Financial

Ratios

for Chapter -12

8.54
Page No: 531-535

Performance Evaluation Critical

Exercises

Financial

No:

Ratios

Return

on

12.32

Page
to

Investment (ROI) Solvency Ratios

12.40

Liquidity Ratios.
Turnover Ratios Profitability Ratios Chapter -12

Page No: 536-540

23

24

Du Pont Analysis (Net Profit Ratio x

Exercises

Capital Turnover Ratio) Economic

No:

Value Added (EVA) Net worth -

12.46

Book Value
Financial Statement

Page

Analysis

Chapter-12

Page

12.41

no:

Valuation or Capital Market Ratios - &

557

Price Earnings Ratio (PE Ratio) Chapter-4

Exercises

PBTPAT- PEG EBDTIA multiplies

No:

- P/BV P/ABV

12.12.58

to

550Page

12.50

to

PE Ratio Analysis - Positive PE Ratio Chapter-12


vs. Negative PE Ratio NO PE Ratio
Role of PE Ratio in Purchasing and

25

Selling Shares - Yield to Investors


Sales Growth vs Profit Growth vs Chapter-12
R&D Expenditure Growth - ROE
ROA Market Share Competitor

26

Unit-5 27

28

Analysis
Basic EPS

VS

Diluted

EPS

Chapter-12

Page

No:

541-

Compulsory Convertible Instruments

547

Market Capitalization - DPS


Foreign Currency Convertible Bonds

Hotel Industry

(FCCBs)

Companies

Foreign

Currency

Exchangeable Bonds (FCEBs)


The Statement of Cash Flows (CFS) Chapter-5

moving for ECBs


Page No: 175-

Overview Purposes and Uses

185

Classification of Cash Flows Cash

Exercise

Flow Ratios Free Cash Flow

No: 204 to 206

Page

Exercise no: 5.31


to 5.43
29

Cash Flow Statement Based Ratios Chapter- 5

30

and Interpretation - Analysis


Determination of Cash Flows
Operating

Activities

Chapter 5

Investing

Page No: 186 to


199

Activities Financing Activities

Exercise

Page

No: 207, 208, 209


Exercise
Numbers:
31

Cash Flow Statement Exercises

Chapter -5

5.45,

5.46, 5.475.48
Page No: 212 to
215
Exercise
Numbers : 5.59,
5.60, 5.61