.

Project Management
Introduction:
A project is defined as a set of activities or jobs that are performed in a certain
sequence logically or technologically and it has to be completed within a specified
time, specified cost and meeting the performance standards.

Network analysis: It is one of the most popular techniques used for planning,
scheduling, monitoring and controlling large and complex projects comprising a
number of activities.
Objectives: Network analysis can be used to serve the following objectives.
✓ Minimization of total time.
✓ Minimization of total cost.
✓ Minimization of time for a given cost.
✓ Minimization of cost for a given total time.
Managerial Application: Network analysis can be applied to a very wide range of
situations involving is as follows:
Construction of a bridge, highway, Power plant.
Installation of complex new equipment.
Research and development.
Inventory planning and control.
Budget and audit procedures.

PERT and CPM: In 1956-58, two techniques were developed by two different
groups almost simultaneously and were later extended to a more advanced status by
M.R. Walker and J.E.Kelly. PERT was developed by a team of engineers working
on the polaris missile programme of US navy. This was a large project which they
had a very little information about the duration of the project.
Basic steps in PERT and CPM:
➢ Planning: It is started by splitting the total project into small projects. These
smaller projects in turn are divided into activities and are analyzed by the
department or section.
➢ Scheduling: The ultimate objective of the scheduling phase is to prepare a time
chart showing the start and finish times for each activities as well as its
relationship to other activities of the project. The schedule must how the amount
of slack or float times which can be used advantageously when such activities are
delayed or when limited resources are to be utilized effectively.
.

➢ Allocation of resources: It is performed to achieve the desired objective. A

resource is a physical variable such as lab our, finance-equipment and space which
will impose a limitation on time for the project.
➢ Controlling: The final step in project management is controlling critical path
methods facilitates the application to identifying areas that are critical to the
completion of the project.

PERT and Time estimates: Developing the arrow diagram is only a part of the
analysis. Once the arrow diagram is developed the next step is to furnish the schedule
of each activity with the time estimates. The time required for the performance of an
activity assuming infinite resources available at disposal is termed as the activity
time and is symbolized by the expression Te expressed in units such as hours, days,
weeks, months etc. the pert can be estimates mainly on the basis of times, there are
three times.
• Optimistic Time: This is the shortest time in which an activity can be completed
under optimum conditions better than normal conditions are assumed to exist at
the time of execution of the job. This is denoted by To time estimates is used on
the assumption that there is no more than one chance in a completing the activity.
• Pessimistic Time: It is denoted by Tp it is the longest time for the execution of an
activity under adverse conditions excluding the acts of nature. Such as lab our
strikes etc. this is based on the assumption that there is no more than one chance in
a hundred of completing the activity.
• Most likely time: It is denoted by Tm is the normal value of activity time
distribution and lies between the optimistic and pessimistic times. The three time
estimates are shown in relation to activity completion time distribution. These three
time estimates have to be reduced to single time estimate and this is accomplished
with the help of β distribution.

Difference between PERT and CPM: basically there is no difference in the CPM
and PERT networks both the approaches are equally applicable for the analysis of a
network of any project, the other main difference are
.

PERT
1. It is activity oriented.
2. It is deterministic approach which
means that the uncertainties
involved in the time estimates of
an activity
3. The execution times are directly
related to the costs
CPM
1. It is event based.
2.it adopts a probabilistic approach
towards the problem.(optimistic,
pessimistic, most likely)
3. There is no relation between the
cost and the execution time of an
activity.

The average time or the expected time, denoted by Te indirectly that there is a fifty
percent chance of completing the activity within this time. β distribution is given by
Similarly the variance denoted by which is the measure of uncertainty is calculates
by
Critical Path Method: It is a deterministic technique and no allowance for the
uncertainty is kept in the time estimate of the activities. This technique is useful in
project where considerable previous experience is available and time estimate can
be evolved.
The analysis of activities is done on the basis of their earliest start and finish times.
These are defined as follows.

Earliest start time: This is the earliest possible time relative to the project starting
time at which the activity can begin. It is very clear, that this is equal to the earliest
possible occurrence.

Objectives of CPM:
❖ To find the difficulties and obstacles in the course of production process
❖ To assign time for each operation.
❖ To ascertain the starting and finishing times of the work.
❖ To find the critical path and the minimum duration time for the project as a
whole.

Advantages of CPM:
o It provides an analytical approach to the achievement of project objectives.
o It identifies most critical elements and pays more attention to these activities.
o It assists avoiding waste of time, energy and money on un important activities.
o It provides a standard method for communicating project plans, schedules and
cost.
.

Advantages of PERT: It is very important of managerial planning and control at the

top level concerned with the overall responsibility of a project. PERT has the
following merits

o It Forces managers and subordinates, managers to make a plan for production

because time event analysis is quite impossible without planning.
o The network system with its sub system creates a pressure for action at the
right spot and level and at the right time.
o It can be effectively used for rescheduling the activities.

Limitations:

• It is a time consuming and expensive technique.

• It is based on beta distribution and the assumption of beta distribution may
not always be true.
• The expected time and the corresponding variance are only estimated values.

Concept of Network Diagram: A network is described as the pictorial

representation of the inter relationship of all the required events and the activities.
any project comprises of very large number of activities, many of which are complex
in mutual interactions and relationships.

The most important features of the network techniques is that the “work contents”
termed “activities”. As well as their inter-relationships are depicted by a network of
directed arrows. While construct the network some terms are commonly used they
are

Event: It is an inexplicitly identifiable point in time at which something has

happened or a situation has come into existence. These are circled numbers which
generally indicates the starting or ending of the activity.

Activity: It is a task to be done characterized by persons using resources for some

period of time in order to accomplish stated objectives. An activity is represented on
a network diagram by an arrow which links two successive events. An activity
normally time consuming, may simply represents a connection between two events
on the network. It is based on the assumption that an activity cannot be stated until
its preceding events have occurred. It represents basic logic arrow- diagramming.
.

Dummy Activity: Sometimes an event cannot occur unless the other event has
occurred, although no specific job occurs between them. Then, Dummy arrow is
inserted then the function of the event is completed. Dummy arrow indicates a
dotted line.

Network Construction: The network is a logical and organized planning system, it

is important that the physical layout of network reflects the same logical
organization. The network can be built up into two ways.

1. In the first approach one has to start with the initial event or the stating activity
and build up the network step by step until the last event or activity is
accomplished. The planner thinks of the activity i.e he keeps on thinking
“what would be the next event” and what are the events or activities that can
be taken up. This type of working is known as forward planning.
2. In the other approach a backward thinking is there. The planner works
backwards, thinking “if he wants to achieve this, what should be the activities,
which must be completed”. By working in this fashion he comes back to the
initial event. This approach is known as backward planning.

General rules of Network Construction:

An event is achieved when all the activities leading into it are complete.
No activity can begin till the preceding event of the activity is achieved.
All the restraints must be shown in the network.
When more than on event are dependent up on the completion of a single
activity, then a dummy activity should be used to indicate the multiple
dependency.
.

No more than n activity arrow should connect any two events.

Project cost Analysis and project Crashing:

Scheduling of project activities in a logical sequence makes use of probability to

arrive at the probability of completion of the project. The costs of resources
consumed by activities are not taken into consideration.

Project cost Analysis: It is a projection of cost associated with the purpose of

preparing the budgets. The costs associated with the projects are classified into direct
costs and Indirect costs.

Direct costs: These are the costs like man power, material etc incurred for project
execution. These costs are directly proportion to the quality of resources involved
during a period. If project normal time is one month and planned to complete within
twenty days, more people and machines have to work. It leads to more time. Direct
costs are more in crash time.

Indirect costs: These are like overheads, supervisor, and

salaries rent etc. these costs are directly proportionate to
the duration of the project. The total cost of a project is
the sum of direct and indirect cost is shown in the diagram
as below. These curves help the management to
determine following aspects for taking future decisions of
the project.

➢ Determine the projection duration for which the cost is least i.e optimum duration
of the project at which the cost is optimum.
➢ Determining the least cost of a reduction in project duration to a stipulated date.
.

➢ Determining the time cost risk relationship. Risk is involved in eliminating any
activity is calculated time-cost-risk helps the management to take a decision about
most economical solution.

Project Crashing: It is a methodology adopted to reduce the project completion time

by spending extra resources. There exists a direct relationship between the extra cost
and the project completion time i.e it can be reduce normal completion time of critical
activities.

Terms in Crashing:
Normal Costs: It is the cost of completing an activity in the normal time, employing
normal means not using over time or other special resources.
Normal time: It is the time required to complete the project at normal cost.
Crash costs: It is the cost incurred to complete an activity, in minimum time by
employing all possible means like overtime, additional machinery etc.
Crash time: It is absolute minimum time to which the duration of the project could
be reduced by using additional resources.
Crashing Procedures: The cost slope concept helps in finding lowest cost solution
by sequential compressing the activities having lowest incremental cost on critical
path. some times by crashing one activity, critical path is shifted therefore at each
shift of critical path, it will be necessary to calculate the cost slopes of the activities
on new critical path.
❖ The ratio of increase in cost to decrease in time for each activity that can be crashed
on the critical path is calculated and compared.
❖ The activity having the lowest ratio is reduced to the next lower time value.
❖ The critical path for the network is again calculated using the new time for the
crashed activity.
❖ Repeat step 2 and 3 until the critical path is equal to optimum project duration or
equal to prescribed project duration.

Financial Accounting
Accounting is commonly referred to as the “language of the business” as it is
effectively employed to communicate the financial performance of business to
.

various interested parties or stakeholders. It is concerned with the measurement and

communicating financial data.
Meaning: Accounting is an information system, is the process of identifying,
measuring and communicating the economic information of an organisation to its
users who need the information for decision making.
Definition of Accounting:
Accounting has been defined as “the art of recording, classifying, and summarizing
in a significant manner and in terms of money, transactions and events which are, in
part at least, of financial character, and interpreting the results thereof”.(AICPA)
According to American Accounting Association “accounting is the process of
identifying, measuring and communicating information to permit judgement and
decisions by the users of accounts”.
Objectives of Accounting:
The basic objectives of accounting are to provide financial information to the
managers, owners and the stakeholders i.e. the parties who are interested in an
organisation. To attain such objectives various financial statements are prepared.
The users of financial statements may be broadly classified in the following groups
–
(a) The investor: This group includes both existing and potential owners of shares
in companies. They are broadly interested in the performance of the entity and the
dividend declared by such entity. They also measure the social and economic
policies of the company to decide whether they will remain associated with such
entity.
(b) The lender: This group includes both secured and unsecured lenders. Such
creditors may be financing long term or short term loans. The financial statements
are analysed to determine an organisation’s ability as to
(i) Pay the interest on due date,
(ii) The growth and stability of the organisation,
(iii) Capability of repaying the loan as agreed upon, and.
(iv) The book value of assets offered as security by the organisation.
(c) The customers and suppliers – While customers are interested in the ability of
the organisation to provide goods/services, the suppliers are interested in the
capability of the organisation to pay their dues as and when due.
(d) The government – This group includes various taxation authorities viz. Income
tax, Excise department, Sales tax department etc. and also various other government
.

authorities for statistical purpose and for framing various economic and planning
policies.
(e) The employee group – The employees are concerned with the capability of an
organisation to pay their present emoluments and future retirement benefits.
Moreover, financial statements help them to assess job security.
(f) The analyst – Advisors to the management, investors, employees or public at
large collect various data from financial statements to advise their clients.
(g) The Management – Financial statements provide required information to
different levels of management to assist them in making decisions at each
appropriate level.
Users of Accounting Information:
Accounting information helps users to make better financial decisions. Users of
financial information may be both internal and external to the organization.
Internal users (Primary Users) of accounting information include the following:
Management: for analysing the organization's performance and position and taking
appropriate measures to improve the company results.
Employees: for assessing company's profitability and its consequence on their
future remuneration and job security.
Owners: for analysing the viability and profitability of their investment and
determining any future course of action.
Accounting information is presented to internal users usually in the form of
management accounts, budgets, forecasts and financial statements.
External users (Secondary Users) of accounting information include the
following:
Creditors, banks, financial institutions, debenture holders: for evaluating the risk of
lending money to a particular business organisation on the basis of accounting
information.
Government, Tax Authorities: for determining the credibility of the tax returns filed
on behalf of the company.
Investors: for analysing the feasibility of investing in the company. Investors want
to make sure they can earn a reasonable return on their investment before they
commit any financial resources to the company.
Customers: for assessing the financial position of its suppliers which is necessary
for them to maintain a stable source of supply in the long term.
.

Workers: for negotiating the payment of bonus and wages is correct or not on the
size of profit earned.
Researchers: for studying the efficiency of an organisation and find reasons for profit
or losses.
External users are communicated accounting information usually in the form of
financial statements. The purpose of financial statements is to cater for the needs of
such diverse users of accounting information in order to assist them in making sound
financial decisions.
Accounting Cycle:
.

GAAP (Generally Accepted Accounting Principles):

Accounting principles are the guidelines which provide a procedure to be followed
in the process of accounting. But it is very difficult to have principles which are
universally acceptable. so we have a set of principles which are general accepted by
the makers of financial statements. These principles are called as “Generally
Accepted Accounting Principles” (GAAP).
Accounting principles can be broadly divided into two categories
A. Accounting Concepts B. Accounting Conventions
1. Business Entity Concept 1. Full disclosure
2. Money Measurement Concept 2. Materiality
3. Cost Concept 3. Consistency
4. Going Concern Concept 4. Conservation
5. Dual-aspect Concept
6. Realisation Concept
7. Matching Concept
8. Accounting Period Concept
9. Objective Evident Concept
1. Business Entity Concept: business is treated separated from the proprietor. All
the transactions are recorded in the books of business and not in the books of the
proprietor. The proprietor is also treated as a creditor of business. When he
contributes capital, he is treated as person who has invested his amount in the
business.
2. Money Measurement Concept: only those transactions are recorded in
accounting which can be expressed in terms of money. Therefore, in the process of
accounting only events which can be expressed and measured in terms of money are
recorded.
3. Cost Concept: according to this, an asset is recorded its cost in the books of
account i.e., the price which is paid at the time of acquiring it. The market value or
any other value of an asset is not considered. It is therefore called as “historical cost
concept”.
4. Going Concern Concept: it is assume that a business organisation will continue
to operate for a considerably long period of time. This assumption is very important
because sometimes money is spent by the business for a future benefit.
.

5. Dual-aspect Concept: dual mean two. It implies that every transaction will have
two aspects. These aspects are giving and receiving.
6. Realisation Concept: Every business unit spends money to purchase goods or to
manufacture goods for sale. Profit cannot be made only by manufacture sales of
goods either for cash or on credit is essential to make earning. Without realisation of
sales proceeds, there can be no profit. Unearned/unrealised revenue should not be
taken into account.
7. Matching Concept: this concept tries to match the revenue and expenditure of an
organisation pertaining to a particular period of time i.e., is one year. This will help
the users of accounting to understand the functioning of the business in a clear
manner.
8. Accounting Period Concept: business organisations are believed to have
continued existence. But the performance of the organisation should be assessed
regularly over a period of time. Normally one year is taken to assess the financial
performance of the business.
9. Objective Evident Concept: This concept relates with the verification of
accounting record with the outside evidence. Outside evidence means study of those
documents and vouchers on the basis of which accounting record has been made.
Accounting equation
Cash (assets) =capital+liabilities
(Or)
Assets = liabilities+capital
(Or)
Liabilities = assets-capital
(Or)
Capital = assets-liabilities
(Or)
Assets-liabilities-capital = zero
Accounting conventions:-
Conventions of full disclosure: According to this convention, all accounting
statements should be honestly prepared to that and full disclosure of all significant
information to be made.
Convention of materiality: According to this convention, accounting should consist
of all the material facts. Material facts are one those which can have an impact on
.

the financial statements of the organisations. Immaterial and irrelevant items should
be excluded or merged with other items.
Convention of consistency: Accounting rules, practices and conventions should be
continuously observed and applied i.e. these should not change from one year to
another.
Convention of conservation: According to this convention all incomes or profits if
anticipated should not be taken into account. But any anticipated losses should be
considered while preparing the accounts of a business.
Double entry book keeping: -
This system of accounting was invented by ‘Lucas paciolio’ of Italy in 1494 in
Venice but developed in England. The object of book keeping is to keep a complete
record of all transactions that take place in business. The double entry book keeping
refers to a system of accounting in which every transaction effects at least two
accounts. In double entry book-keeping, the amount of every transaction is written
twice, once as debit and again as credit, leading to the conclusion that that in
mathematical terms the sum of all accounts will be zero and in terms of accounting
equation, the sum total of all assets must be equal to sum total of all liabilities and
the owners equity. This equity holds true up to the last stage of accounting process,
ending with the preparation of the balance sheet.
Every business transaction having two aspects, one will be treated as debit and
other will be treated as credit. This debit and credit will be decided on the basis of
nature of aspect. Each aspect comes under personal, real or nominal accounts.
Transaction

Aspect 1 Aspect 2

Dr Dr

Every business organisation deals with people, assets, pays expenses and receives
incomes. Therefore, it is necessary to keep the following accounts in order to keep a
complete record of all the transactions.
Personal accounts (PA)
.

Real accounts (RA)

Nominal accounts(NA)
Characteristics:
Every business transaction affects two or more accounts
Every account is divided in two parts
Division of amount column as debit and credit
Dual aspect of every transaction
Based upon accounting concepts and conventions
Preparing trial balance
Preparation final accounts
Advantages of double entry system:
Scientific system: It is scientific system compared to single entry system.
Full information
Assessment of profit and loss
Knowledge of creditors
Arithmetical accuracy
Assessment of financial position
Comparison of results
Maintenance according to incoming tax rules
9. Detection of frauds
Limitations:
Errors of omission: incase the entire transaction is not recorded in the books of
accounting.
Errors of principle: Debiting Ram’s a/c instead of Rao’s a/c
Compensating errors: If rahim’s a/c is by mistake debited with Rs. 15/- lesser and
mohan’s a/c is also by mistake credited with Rs 15/- lesser.

Single entry book keeping:

It is a crude and unscientific method of maintaining accounts. Under this system all
the transactions are not recorded. Similarly all the account books are not maintained.
Sometimes two aspects of a transaction are recorded and are not recorded
completely. Under this system it is incomplete and unsystematic. So, it is not
.

reliable. It is not possible to prepare proper trial balance and it is difficult to prepare
the correct P&L a/c to know the profit or loss.

Book keeping and accounting

Book keeping usually involves only the recording of economic events and is
therefore, just one part of accounting process.
Accounting involves the entire accounting process i.e. identification, measurement,
recording analysis and communication of financial information.
Now-a-days much of the book-keeping function is performed by computers.

Rules for debiting and crediting:-

The rules of debit and credit depend on the nature of an account. If aspect related to
persons, personal account rules, if assets real account rule and if expenses or incomes
nominal account rules are applicable.
Personal accounts: Personal accounts deal with persons. These include natural
persons such as Rama Rao, Latha etc., artificial persons or legal persons such as Tata
Company Ltd, Andhra Bank etc and representative personal accounts.
Rule: Debit ((Dr) → The receiver
Credit (Cr)→ the giver
E.g.: 1. Cash received from Raju is Rs 5000/- . Here raju is personal a/c and he is Cr
(giver).
2. Goods sold to Chandra is Rs 7000/- . Here Chandra is personal a/c and he is Dr
(receiver).
Real accounts: Real a/c deals with assets. These include tangible assets like land,
buildings, machinery etc which can be seen touched and intangible assets like
goodwill, trademarks etc which cannot be seen but can be measured.
Rule: Dr→ what comes in?
Cr→ what goes out?
E.g. goods purchased for cash RS 8000/-. Here goods and cash are
real a/c. Goods is Dr(coming) while cash is Cr(going).
Nominal accounts: Nominal accounts are deals with expenses like rent, wages,
salary, transport etc and incomes like discount received, rent received, commissions
received etc.
Rule: Dr→the expenses and losses
Cr→ the incomes and gains
.

E.g.1 Salary paid by cash Rs 5000/- . Salaryis nominal a/c and isDr (expenditure)
2. Interest received Rs 5000/- .interest is nominal a/c and is Dr (income)
Journal: The term journal means a daily record of eventsor transactions. Every
transaction relating to a business is recorded in chronological order as every
transactionis first recorded in a journal. It is also called as a book of original entry
or first entry or prime entry.
The process of entering the transactions in a journal is called as “JOURNALISING”.
So transactions which are recorded in a journal are called as a “JOURNAL ENTRY”.
Advantages of journal:
1. It shows all necessary information about transaction
2. It provides an explanation of the transaction.
3. It provides a data wise record of all the transactions.
4. It helps to locate and prevent errors.
(OR)
Advantages of Journal:
1. Chronological order.
2. Explanation of transaction.
3. Recording the both the aspects.
4. Location of errors easy.

Proforma of Journal
Date Particulars LF Debit credit

Ledger: Journal is the record of all the transactions that take place in organization,
in a chronological order. But, Ledger is the book which contains various accounts.
In other words ledger is a set of accounts. It contains all the accounts of business
whether real, nominal and personal thus, “a Ledger account may be defined as a
summary statement of all the transactions relating to a person, asset, expense or
income which have taken place during given period of time and shows their net
effect”.
Advantages or Features:-
➢ It provides complete information about all accounts in one book.
.

➢ It is permanent record of business transactions.

➢ It enables to ascertain what are the main items of revenue & Expenses
➢ It enables to ascertain what are the assets and amount & what are the
liabilities and amount.
➢ It facilitates the preparation of final accounts.
“Proforma of Ledger”
Name of the account
D parti J A D parti J A
a cula F mo a cula F mo
t rs unt t rs unt
e e

Difference between Journal & Ledger

S.no. Journal Ledger
1. It is a book of origin entry. It is a book of final entry.
2. Transactions recorded in Transactions recorded in
chronological order. particular order.
3. It is a subsidiary Book. It is a principal book.
4. The process of recording The process of recording
financial transaction in the transaction in the ledger is
journal is called called posting.
Journaling.
Trial Balance:-
After posting the journal entries into the respective ledger accounts and
balancing them, the next step is preparation of “trial balance”. It is a statement
prepared, after completion of ledger accounts to check the arithmetical
accuracy of the books of accounting.
According to double entry system every transaction should have debit and
credit effect therefore the total of debit balances of all the accounts should
equal to credit balances.
Format of Trial Balance
Trial Balance of ………. As on …………..
Name of the account Debit(Rs) Credit(Rs)
Capital A/c Xxx
Drawings A/c Xxx
Asset A/c Xxx
Liabilities A/c Xxx
Purchases A/c Xxx
.

Purchase returns A/c Xxx

Sales A/c Xxx
Sales returns A/c Xxx
Reserves and provisions A/c Xxx
Exp & Losses A/c Xxx
Outstanding Exp xxx
Incomes & gains A/c Xxx
Prepaid Expenses A/c (Un expired Xxx
expenses)
Income Receivable A/c (Accrued Xxx
Income A/c)
Income Received in advance Xxx
Total Xxx Xxx
Subsidiary books:-
Journal is called as the book of first entry, where all transaction recorded
before in the respective ledger. But in a big organization one journal and one
ledger for each transaction and may not be easy to prepare and update.
Therefore, in order to overcome this difficulty, a journal is sub divided into
different books.
These books are called as “subsidiary books”
The following are the various subsidiary books being
maintained by organization.
➢ Purchase book.
➢ Purchase returns book.
➢ Sales book.
➢ Sales returns book.
➢ Cash book. →Simple or single column cash book.
→ Two column cash book
→ Three column cash book
→ Petty cash book
➢ Bills receivable book
➢ Bills Payable book
➢ Journal Proper: The transaction which are not recorded in the above
seven books is recorded in this book.
Proforma of Purchase book
Date Particulars LF Inward Amount
invoice (Rs)
no
.

Proforma of purchase returns book

Date Particulars LF Debit Amount
note (Rs)
no

Proforma of sales book

Dat Particular L Outwar Amoun
e s F d invoice t (Rs)
no

Proforma of sales returns book

Date Particulars LF Credit Amount
note (Rs)
no

Proforma of simple cash book

D Particu Amo D Particu Amo
at lars unt at lars unt
e e

Proforma of two column book

D Pa D A D Pa D A
a rtic is m a rtic is m
t ula co o t ula co o
e rs u u e rs u u
nt n nt n
t t

Proforma of three column book

D P L D C B D P L D C B
a a F i a a a a F i a a
r s r s
 .

t t c s n t t c s n
e i . h k e i . h k
c c
u u
l l
a a
r r
s s

Proforma of petty cash book

R D Pa T Co C St P
e a rti o nve a ati o
c t cul t yan r on s
ei e ars a ce t ar t
p l a y a
ts g g
e e

Bills Receivable books

From Drawer Accepter Where Date Term Due
whom payable of date
received bill

Bill payable book

S D To Na Wh D T d L A R
. a wh me ere a e u F m e
n t om of pay t r e t m
o e give pay able e m d a
. g n ee o a r
.

i f t k
v b e s
e i
n l
l

Final Accounts:
Final accounts are prepared by an organization at end of the financial years to know
the operational efficiency and financial position of the business. Financial account
for a trading firm refers to
➢ Trading and profit loss A/c.
➢ Balance sheet.
Trading Account:
This account is prepared to ascertain the profit or loss earned by the
business from buying and selling of goods manufactured during a particular
period of time. Normally the period is financial year. The profit earned in this
account is called “GROSS PROFIT” and the profit or loss earned from this
account is transferred to profit or loss A/c.
Proforma
Trading Account of . . . . . . . . . For the year ended . . . . . .
Particul Am Am Partic Am Am
ars oun oun ulars oun oun
t t t t
(Rs) (Rs) (Rs) (Rs)
To Xxx By xxx
opening sales xxx
stock Loss:
To xxx Sales xx
purchas xx xxx return
es s
Less:
purchas
e returns
To xxx By xxx
carriage closin
inwards g
stock
.

To fuel xxx By xxx

and gross
power loss
c/d
To xxx
manufac
turing
exp
To coal, xxx
water
and gas
To xxx
motive
power
To xxx
octroi
To xxx
import
duty
To xxx
custom
duty
To xxx
consum
able
stores
To xxx
salary to
foreman
/ works
manager
To xxx
royally
on mfg
goods
To gross
profit xxx
c/d
.

XX XX
X X
Profit & Loss A/C:
It is an account meant for showing net financial result of the
business i.e., Net profit or Net loss.
The profit or loss is arrived at by carrying forward gross profit or gross
lossfrom trading account credit ordebit side respectively.
Apart from this all expenses, other than showing in trading account and
debited to profit or loss A/c. these expenses could be all office and
administration and selling or distribution etc. any income is credited to this
account like commissions received, rent received, dividends received,
discount receivedetc.
If the total of the credit side is greater than debit side, the difference is net
profit. This is written on debit side as “TO NET PROFIT transferred to capital
account”
If the total of debit side greater than credit side, the difference is net loss. This
is shown on credit side as “BY NET LOSS transferred to capital account”.

Proforma of Profit & Loss A/c

.

Balance sheet
After preparing the trading account and profit and loss A/c. a business
organization prepares a statement called “BALANCE SHEET” By the
preparation of this statement, the financial position of the business can be
derived.
This statement called balance sheet is in a tabular form. The left
side is called LIABILITIES and the right side is called ASSETS. It is known
fact that the assets of a business should be equal to the sum of capital and
liabilities
Capital + liabilities=Assets.
Thus the liabilities side and assets side of the balance sheet tally i.e., the total
of liabilities should be equal to the assets.
Proforma
.