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Cost Accounting
Cost Accounting
FA is the process of measuring and converting the business decisions into financial statements.
Business decisions:
• Financial decisions
• Investment decisions
• Operating decisions
• Income
• Expenses
• Assets
• Liabilities
• Equity
FINANCIAL STATEMENTS
• Balance sheet
o A= L +E
▪ Asset: anything which has the ability to generate future cash flows.
o E= A- L
▪ Equity is the residual claim of the owners.
▪ Equity = capital + reserves = shareholders fund.
o L= A-E
▪ Its an obligation of the firm arising out of some contract. Therefor contractual
obligation.
▪ Statutory obligation.
• Income statement
Cash in hand= opening + receipts – payments. (if openings then op. Cash in hand)
Payments:
May be an expense.
Acquisition of an asset.
Reduction of liability.
Reduction in equity (Cap+Reserves)- when u distribute dividends among shareholders, buyback of
shares.
Receipts
Income
Increase in liability
o CFO
o CFF
o CFI
CIH= opening
Receipts
• Issue of shares
• Issues of debentures/bonds
• Borrowing/loans
Less
Payments
Receipts
less
Payments
• Purchase of stock
• Payments to the creditors
• expenses