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Financial Accounting & Reporting
To maintain the records of business

To find the financial Position
To ensure efficient use of available resources
To find the profit
To know inflow & outflow of cash
To analyse our business
To income tax
To do business
To measure business
To report business
Recording the Transaction of Business for
Finance
Recording & Reporting

of transactions
Financial Cost
Accounting Accounting
Record Financial Record Cost

Transactions Transaction
Decision based on Decision based on
Financial Transaction Cost
Financial Statements
1) Balance Sheet
2) Income Statement
3) Cash Flow Statement
4) Stmt of Changes in Equity Transaction in Busin
Liabilities Obligation to R
Loan Father's Money
Capital Own Money
Loan Bank's Money
Cash Inflow
Source of Mone
Balance Sheet
Liabilities
Father's Money
Own's Money
Bank's Money
Return to Liability
Cash Inflow
Liability to be repaid with Goo
Return should be comparativel
Financial accounting and reporting is the process of preparing and
presenting financial statements that provide information about a
business entity's financial performance and position.
The primary purpose of financial accounting and reporting is to

communicate financial information to various stakeholders,
ources including investors, creditors, regulators, and others interested in
the financial health of the organization.
of Business for future Decision Making
Risk Management Corporate Finance I & II

Risk - Happening of Unexpected Things
Interest Rate Risk
Exchange Rate Risk
Commodity Price Risk - Raw Material Price or Finished
Reduction in price of investment
ased on
saction in Business = Cash Inflow or Cash Outflow
Balance Sheet
Resource - Business Growth
Obligation to Repay Asset - Resource
er's Money Rented Place
Money Provisions + Vegetables + Cup + Stove
's Money Employees
Machineries
Cash Inflow Cash Outflow

Source of Money - No repayment
Balance Sheet on First Day of Business

Assets
Resource - to generate business
Stove + Provisions + Vegetable
Cash
Liability Reduction in Value of Asset
Cash Outflow
Control should exist on Asset
epaid with Good Return
be comparatively better than other alternative Investment
preparing and
tion about a
osition.
orting is to
eholders,
interested in
or Finished Goods Price

When money is repaid more to the lenders or Liability it is
The return will be the interest amount paid mo
Return from the business will be compared with availab

Balance Sheet for a Date
Liabilities
1,000,000 Loan from Father
100,000 + Return
1,100,000
Cost + Profit = Sales

To repay the return for liability, Profit is only
Income Statement
500 Sales or Revenue or Turnover
Less : Cost
200 Veg + Provision
Rent
Power + Fuel
200 Salary to employees
100 Profit
Whatever profit earned in business will be in

Above is an ideal situtation which ever
Why Contributed
Cost to Liab
Pay later for
Cash outflow
r Liability it is termed as "Return"
mount paid more than the received amount
with available alternate investment opportunities

eet for a Date and specific time
Asset
Soup Oven, Vehicle 1,000,000
Vegetables + Provisions
Cash + Cash in Hand of Profit
100,000
1,100,000
Profit is only considered and not the Sales
atement
e or Turnover Cash inflow generated because of Asset
Cash Outflow
vision
mployees
Cash Inflow > Cash Outflow = Cash in Hand
ess will be in cash

n which every business should try
Contributed Capital of owner is a Liability

Cost to Liability Relation
Pay later format how will equation tally
Cash outflow in Liability
Balance Sheet prepared for any date
Liabilities Assets
Owner's Capital Stove + Vessels +
+ Return Vehicle
Loan from Bank Govt Licence
Dues to Supplier (Direct Provisions - Not Used

Cost) Unsold Soup - Future Ben
Amount due from Custom
Indirect Cost Not Paid
Cash
Income Statement
Sales or Revenue or Turnover - Sold Finished Goods
Less: Cost
Direct Cost Main Raw Material Consumed - Cash Outflow
Indirect Cost Salary + rent - Supporting Cost - Cash Outflow
Usage of Asset Stove + Vessels
Depreciation on Usage or Wear & Te
Govt license - Expired
Capital Vs. Investment

Permanence Nature
Vessels + Asset
Cash Outflow in the first instance
Control
Generate present + future revenue
ns - Not Used Liability

oup - Future Benefit Cash inflow in the first instance
due from Customer Obligation to pay in future
Loan from Bank is not a Revenue
Loan should generate Asset for futu
Revenue
Cash Inflow from the Asset utilisati
Finished Goods
Cost
d - Cash Outflow Cash outflow towards revenue gene
t - Cash Outflow
ge or Wear & Tear of Asset

irst instance One of the primary benefits of asse
utilization. When businesses know wh
ture revenue they are being used, they can make b
use them and how to deploy them. Th
situations in which assets sit id
st instance
t a Revenue
Asset for future revenue
Asset utilisation
s revenue generation
efits of asset control is improved asset
es know where their assets are and how
can make better decisions about when to
oy them. This can help businesses avoid
assets sit idle or are underutilized.
Advertisement charges paid towards emotional custome
Balance Sheet :: Specific to Date & time
Income Statement :: Specific to Period - April - March :: Fi

Q1 :: Investment
Q2 :: Growth or Market Capture
Q3 :: Actual Sale because of Festive Season
Q4 :: Realisation of Investment & Planning for n
Operating Cycle :: Cash getting converted into Cash agai

In a Financial Year, Entire operation should get com
Then only, gain or loss on operation can be underst
Cash Outflow during entire process of Investm

1
Income Perform Work
Product manuf
Liability Cash inflow

Loan borrowed
Industry having lesser operating cycle (less tha

Financial Year from Apr to March in India for c
For them also predominant activities
Investment Q1
Growth Q2
Sales Q3
Realisation Q4
But such industries will have more operating

Operating Cycle - Cash getting converted into cash
Balance Sheet 01.08.2022 10 AM

Liabilities Asset
Capital Machineries
Loan from Bank Inventories

Dues from Customer
Dues to Supplier
Cash
emotional customers is an Asset
- April - March :: Financial year

Amazon US
CTS US
Festive Season Samsung Korea
ent & Planning for next year
rted into Cash again through the Main business operation

tion should get completed
tion can be understood
e process of Investment, Growth should be matched against Sales

2
Cash inflow Receiving money for comp
Sales happens required job
Perform work Receiving money for Job to

Repayment starts later
ating cycle (less than financial year) will also follow

March in India for comparison purpose
minant activities
ave more operating cycle within a Financial year

converted into cash again through operation
.2022 10 AM 01.08.2022 11 AM
Liabilities
hineries Capital
ntories Loan from Bank

from Customer
Dues to Supplier
100,000
Financial Posit
Q1 Q2 Q3 Q4
Indian operation
follows
Jan - Dec as Financial year
ration
against Sales
3
money for completing the
money for Job to be completed

Asset
Machineries
Inventories
Dues from Customer
Cash Nil
Financial Positions
Shorter the Operating Cycle is Good :: Cash can be qui
Once operating Cycle is completed, profit is earn

Profit will help for growth in business
Asset Cost
Cash Outflow Benefit received
Future Benefit Cash Outflow
benefit - revenue benefit - RM procurement
Vehicle purchased Rent paid

Home Delivery benefit Salary paid
Raw Material Consumed
Asset & Cost involves Cas

Liability & income involv
company's pov: Cost & Liability

company's pov: Income & Asset
Income & Cost
Asset & Liability

Income Statement is prepared for a Period
Period is Financial year
In a Financial year, four stages of busine
Investment, Growth, Sales & Real
Balance Sheet is prepared for specific Date &
Balance Sheet
Liabilities Assets
Capital Long Term Asset
Owner's Money Usage of Asset > Operating Cycle
Stove, Cylinder, Vessels
Loan from Others
Dues to Suppliers Short Term Asset

Usage of Asset < 1 Days
Rent not paid Vegetables + Provision
Taxes not paid
Business operation should be ref
Adv from Customer
od :: Cash can be quickly converted to cash
pleted, profit is earned

wth in business
Liability Income
Cash Inflow Benefit given to Customer
Obligation Cash Inflow
Benefit to be given
procurement benefit - interest benefit - product
Loan from Bank Sales
al Consumed
t & Cost involves Cash outflow

ility & income involves Cash Inflow
& Liability Benefit Received & Obligation in future

me & Asset Benefit Given & amount to be received in
me & Cost Income Statement

Cost > Income = Loss
Income > Cost = Profit
t & Liability Balance Sheet

Asset == Liability
epared for a Period
r, four stages of business happens

Growth, Sales & Realisation Happens
ed for specific Date & time
Income Statement
Income
Revenue from Main Operation
set > Operating Cycle
der, Vessels
Cost
Direct Cost : Main operation running
set < 1 Days Indirect Cost : Supporting running Co
+ Provision Usage of Asset : Wear & Tear of Asset
eration should be reflected in Financial Statement

n to Customer
ation in future Salary not paid

o be received in future Credit Sales
Operation
eration running Cost

ting running Cost
& Tear of Asset
Sequence of Events
6/28/2022 Patent Registered
6/30/2022 Received order from Ganesa Automo
6/30/2022 Bharath Went to Bengaluru
7/1/2022Legal Charges Rs. 8,000 - Central Gov
7/1/2022Soldering machiner orders
7/1/2022Advance for Space Rs. 30,000
7/1/2022Other Machine Rs. 80,000
7/4/20222 New Workers - Rs. 8,000
7/9/2022Freight Rs. 4,000 & Installation Charg
7/9/2022Machine received
7/12/2022 Machine Ready for Production & amo
7/13/2022 Purchased Kit Cost
7/13/2022 Production started
7/15/2022 Delivered BAT MON to Ganesa Auto
7/16/2022 received phone call from Bharath
7/16/2022 Donated to Orphanage
7/18/2022 LCD Kit - ??? Purchased @ Rs. 120
18 - 24 07 2022 Production happens
7/20/2022 Indus Display System - Advance Rs. 1
7/20/2022 Supervisor appointed - Rs. 12,000 Adv
7/24/2022 Advertisement Rs. 5,000
7/26/2022 No Cash is available
Friday 7/29/2022 Paying Salary (2 Workers + 1 Superv
7/30/2022 Received 200 Kits from Indus
8/2/2022Rs. 40,000 received from Ganesa Auto
Friday 8/5/20221 Week Interest
8/6/2022
Asset Patent can be registered for single person or for
Ganesa Automobile
Rs.40,000 Indirect Cost
00 - Central Government - Company Registration - Company Secreta
Rs 2,40,000 Asset
Rs. 30,000 Asset
Rs. 80,000 Asset
Indirect Cost Vs. Liability
stallation Charges Rs. 6,000 Asset Benefit from Machi
oduction & amount paid
to Ganesa Automobile Sales

om Bharath
Rs 6000 Tax Saving - Asset Asset Vs. Cost
ed @ Rs. 120 Asset Vs. Cost
n happens
- Advance Rs. 10,000 Asset
- Rs. 12,000 Advance Asset
Rs. 5,000 Liability
kers + 1 Supervisor) + Rent + ??? Days of Operation = Borrow from

m Indus Asset
om Ganesa Automobile 40 X Sale price Rs. 1,000
e person or for the company
mpany Secretary - Cost
fit from Machine
= Borrow from Mani

Sequence of Events
Person in the Case
Raman
Bharath
Lakshman
Mani
Ganesa Automobile
Supervisor
2 Workers
Mahindra E Vehicle - Purchase Manager
Indus Display System - Marketing Manager
Problem - First Para - How to Finance or How much to Pay

Solutions
Date
6/28/2022Opening
6/28/2022Patent
6/30/2022Bharath to BGLR
7/1/2022Legal Charges
7/1/2022Adv Rent
7/1/2022Other Machines
7/9/2022Freight & Installation
7/12/2022Machine payment
7/13/2022Kit purchase
7/16/2022Donation
7/20/2022Supervisor Advance
7/20/2022Indus Display
7/22/2022Borrow Money from Mani
7/23/2022
7/24/2022
7/29/2022Wages
Salary
Rent
7/30/2022Freight for Kit from Bangalore
8/1/2022
8/2/2022Received Cheque
8/3/2022
8/4/2022
To Get order
To produce
Money Lender
Use new product
Joined by getting adv
rchase Manager
Marketing Manager
e or How much to Pay
Cash Inflow Cash Outflow Balance

500,000 500,000
20,000 480,000
40,000 440,000
8,000 432,000
30,000 402,000
80,000 322,000
10,000 312,000
240,000 72,000
6,000 66,000 50 X 120
6,000 60,000
6,000 54,000
6,000 48,000
6,000 42,000
6,000 36,000
12,000 24,000
10,000 14,000
6,000 8,000
6,000 2,000
75,000 77,000
6,000 71,000
71,000
71,000
6,000 65,000
6,000 59,000
6,000 53,000
6,000 47,000
6,000 41,000
16,000 25,000
12,000 13,000
10,000 3,000
3,000
3,000
3,000
40,000 43,000
43,000
6,000 37,000 14
37,000 11
Cash Outflow Production Increases Direct Cost

Cash Outflow No Change in production Indirect Cost
Lender 7 Days + Interest
w product Rs.200 for Rs. 1,000
y getting advance
Existing Rs. 500; New Supplier @ Rs. 1,000

New Customer selection
Tuesday
Wednesday
Thursday
Friday
Saturday
Sunday
Monday
Tuesday
Wednesday
Thursday
Friday
Rs. 1,000
Sequence of
Events
6/28/2022
6/30/2022
6/30/2022
7/1/2022
7/1/2022
7/1/2022
7/1/2022
7/1/2022
7/4/2022
7/9/2022
7/9/2022
7/12/2022
7/13/2022
7/13/2022
7/15/2022
7/15/2022
7/16/2022
7/16/2022
7/18/2022
18 - 24 07 2022
7/20/2022
7/20/2022
7/24/2022
7/26/2022
7/29/2022
Friday
7/30/2022
8/2/2022
Friday 8/5/2022
8/6/2022
Amount
Transaction
in Rs
Patent Registered 20,000
Received order from Ganesa
100,000
Automobile - 100 Bat Mon
Bharath Went to Bengaluru with
40,000
money
Legal charges paid to Company
8,000
Secretary
Investment made in Business 480,000
Soldering machine ordered 240,000
Advance for Space - 3 month Rent 30,000
Other Machine 80,000
16,000
2 New Workers appointed - Rs. 8,000
Freight Rs. 4,000 & Installation
10,000
Charges Rs. 6,000
Machine received
Machine Ready for Production &
amount paid
Purchased Kit
Production started
Delivered BAT MON to Ganesa
Automobile
Paid the due amount to supplier of
240,000
machine
Received phone call from Bharath for
Mahindra Order
Donated to Orphan School 6,000
LCD Kit - ??? Purchased @ Rs. 120
Production happens
Indus Display System - Advance Rs.
10,000
10,000
Supervisor appointed - Rs. 12,000
12,000
Advance
Advertisement amount to be paid 5,000
No Cash is available
Borrowing from Mani
Paying Salary (2 Workers + 1
Supervisor) + Rent + ??? Days of
Operation
Received 200 Kits from Indus Display
20,000
System
Rs. 40,000 received from Ganesa
40,000
Automobile
1 Week Interest
Inflow /
Cash Flow Benefits Category
outflow
Yes Cash Outflow Future Benefit Asset
No
Yes Cash Outflow Benefit Received Indirect Cost

YEs Cash inflow Obligation Liability
No
No

Yes Cash Inflow Benefit Given Income

Financial Statement
Balance Sheet
Income Statement
Cash Flow Statement
Statement of Changes in Equity
Accounting
1 Recording of Transaction :: Journal
2 Classification of Transaction :: Ledger
3 Summarisation of Transaction ::
4 Financial Statements :: BS, IS, CFS
Capital
Loan
Due to Suppl
# Transaction 1: Patent purchase

6/28/2022 Option 1 Raman's Nam
Option 2 Bat Mon Ltd
Capital
Loan
Due to Suppl
# Transaction 2: Amount paid to Bharath

6/30/2022
Capital
Loan
Due to Suppl
# Transaction 3: Legal Charges
7/1/2022
Income stmt Amount

Sales
Less: Direct Cost Share Capita
Profit / (Loss
Indirect Cost
Legal Charges 8,000 Loan
Usage of Asset Due to Suppl
Profit / (Loss) (8,000)

Profit or loss is for Shareholder
When shares
Profit or Los
# Transaction 4: Advance rent

7/1/2022
Income stmt Amount

Sales
Profit / (Loss
Indirect Cost
# Transaction 5: Other Assets

7/1/2022
Income stmt Amount

Sales
Profit / (Loss
Indirect Cost

# Transaction 6: Freight & Installation + Soldering Machin

7/9/2022 7/12/2022
Income stmt Amount

Sales
Profit / (Loss
Indirect Cost
Legal Charges 8,000
Loan
Usage of Asset
Due to Suppl
# Transaction 7: Purchase of Kit & Manufacture of BAT M

7/13/2022
Income stmt Amount

Sales
Profit / (Loss
Indirect Cost
Legal Charges 8,000
Loan
Usage of Asset
Due to Suppl
# Transaction 8: Purchase of Kit & Manufacture of BAT M

7/14/2022
Income stmt Amount

Sales
Profit / (Loss
Indirect Cost
Legal Charges 8,000
Loan
Usage of Asset
Due to Suppl
# Transaction 9: Delivered BAT MON to Ganesa 100

7/15/2022 100 X 1,000 = 1,00,000
Income stmt Amount

Sales 100,000
Cost of Kit 12,000 Profit / (Loss
Indirect Cost
Legal Charges 8,000
Loan
Usage of Asset
Due to Suppl
Profit / (Loss) 80,000

800 X 100 Units = 80,000
On Sale, Cost of Sale to be compared
# Transaction 10: 3 Days of Production + Donation to Orph

16 - 19 07 2022 100 X 1,000 = 1,00,000
Income stmt Amount
Sales 100,000
Indirect Cost
Legal Charges 8,000
Donation 6,000 Loan
Usage of Asset
Due to Suppl
# Transaction 11: Advance to Supervisor & Advance to Su

7/20/2022
Income stmt Amount

Sales 100,000
Indirect Cost
Legal Charges 8,000
Donation 6,000 Loan
Usage of Asset
Due to Suppl
# Transaction 12: Loan from Mani

7/20/2022
Income stmt Amount

Sales 100,000
Indirect Cost
Legal Charges 8,000
Donation 6,000 Loan from M
Usage of Asset
Due to Suppl

# Transaction 13: Purchased Kit for 6 Days & Wages Paid &
7/29/2022 Workers 2 X 8,000
Supervisor 12,000
Income stmt Amount
Sales 100,000
Wages to Worker 16,000
Indirect Cost
Legal Charges 8,000
Supervisor Sal 12,000
Rent 10,000 Due to Suppl
Usage of Asset
# Transaction 14: Receipt of Material from Indus

7/29/2022 200 X 100 = 20,000
20,000 - Adv 10,000 = 10,0
Income stmt Amount
Sales 100,000
Indirect Cost
Legal Charges 8,000
Rent 10,000 Due to Indus
Usage of Asset
# Transaction 15: Production of Raw Material into Finished

8/4/2022 200 X 100 = 20,000
Income stmt Amount

Sales 100,000
Indirect Cost
Legal Charges 8,000
Usage of Asset
# Transaction 16: Receipt of Money from Customer (Ganes

8/4/2022 40,000
Income stmt Amount

Sales 100,000
Indirect Cost
Legal Charges 8,000
Usage of Asset

:: Journal
ion :: Ledger
ction :: Trial Balance
S, IS, CFS
Balance Sheet
Liabilities Asset
Capital Long Term Asset
Machines, Vessels, Build
Short Term Asset
Due from Customers
Due to Suppliers Cash
Inventory
Cash Outflow
Raman's Name Reduce cash balance
Bat Mon Ltd DUAL ASPECT C
Balance Sheet
Liabilities Amount Asset
Capital 500,000 Long Term Asset
Patent
Short Term Asset
Due to Suppliers
Cash
500,000
Cash Outflow
Reduce cash balance
DUAL ASPECT C
Balance Sheet
Capital 500,000 Long Term Asset
Patent
Short Term Asset

Adv to Bharath
Due to Suppliers
Cash
500,000
Cash Outflow
Reduce cash balance
DUAL ASPECT C
Balance Sheet
Share Capital 500,000 Long Term Asset
Profit / (Loss) (8,000) Patent
Short Term Asset

Adv to Bharath
Due to Suppliers
Cash
492,000
When shares are issued, capital of the business will be Share Cap
Profit or Loss adjusted with Share Capital will be called Equity
Cash Outflow
Reduce cash balance
DUAL ASPECT C
Balance Sheet
Advance Rent
Short Term Asset

Adv to Bharath
Due to Suppliers
Cash
492,000
Cash Outflow
Reduce cash balance
DUAL ASPECT C
Balance Sheet
Advance Rent
Others Machines
Short Term Asset
Adv to Bharath
Due to Suppliers
Cash
492,000
dering Machine Cash Outflow

Reduce cash balance
DUAL ASPECT C
Balance Sheet
Advance Rent
Others Machines
Soldering Machine
Short Term Asset
Adv to Bharath
Due to Suppliers
Cash
492,000
ure of BAT Monitor Cash Outflow

Reduce cash balance
DUAL ASPECT C
Balance Sheet
Advance Rent
Others Machines
Soldering Machine
Short Term Asset
Adv to Bharath
Due to Suppliers Finished Goods
Cash
492,000
ure of BAT Monitor Cash Outflow

Reduce cash balance
DUAL ASPECT C
Balance Sheet
Advance Rent
Others Machines
Soldering Machine
Short Term Asset
Adv to Bharath
Cash
492,000
nesa 100 Future Benefit

= 1,00,000 Due from Customer
Asset
Balance Sheet DUAL ASPECT C
Profit / (Loss) 80,000 Patent
Advance Rent
Others Machines
Soldering Machine
Short Term Asset
Adv to Bharath
Due to Suppliers
Due from Customer
Cash
580,000
nation to Orphan School Cash Outflow

= 1,00,000
Asset
Balance Sheet DUAL ASPECT C
Advance Rent
Others Machines
Soldering Machine
Short Term Asset
Adv to Bharath
Due from Customer
Cash
574,000
Advance to Supplier Cash Outflow
Asset
Balance Sheet 21-Jul-22 DUAL ASPECT C
Advance Rent
Others Machines
Soldering Machine
Short Term Asset
Adv to Bharath
Due from Customer
Adv to Supplier
Adv to Supervisor
Cash
574,000
Cash Inflow
Cash Bal Increase
Asset
Advance Rent
Others Machines
Soldering Machine
Loan from Mani 75,000 Short Term Asset
Adv to Bharath
Due from Customer
Adv to Supplier
Adv to Supervisor
Cash
649,000
& Wages Paid & Rent Paid Cash Outflow
Cash Bal Decrease

Advance Rent
Others Machines
Soldering Machine
Adv to Bharath
Due from Customer
Adv to Indus
Adv to Supervisor
Cash
611,000
Obligation
Due to Supplier
10,000 = 10,000 [Due]
Advance Rent
Others Machines
Soldering Machine
Adv to Bharath
Due to Indus 10,000 Finished Goods
Due from Customer
Raw Material
Adv to Supervisor
Cash
621,000
l into Finished Goods Future Benefit

Finished Goods

Advance Rent
Others Machines
Soldering Machine
Adv to Bharath
Due from Customer
Adv to Supervisor
Cash
621,000
stomer (Ganesa) Cash Inflow

Add Cash

Advance Rent
Others Machines
Soldering Machine
Adv to Bharath
Due from Customer
Adv to Supervisor
Cash
621,000
Income Statement
Sales or Revenue
Less: Cost
Vessels, Building Direct Cost :: Related to Production
Customers Indirect Cost :: Supports to Production
Usage of Asset :: Others
Profit / (Loss)
Future Benefit
sh balance Patent
AL ASPECT CONCEPT
Amount
20,000
480,000
500,000
Future Benefit
sh balance Adv to Bharath
AL ASPECT CONCEPT
Amount
20,000
40,000
440,000
500,000
Benefit received
sh balance Ownership
AL ASPECT CONCEPT
Amount
20,000
40,000
432,000
492,000
be Share Capital
lled Equity
Future Benefit
sh balance Advance Rent
AL ASPECT CONCEPT
Amount
20,000
30,000
40,000
402,000
492,000
Future Benefit
sh balance Other Assets
AL ASPECT CONCEPT
Amount
20,000
30,000
chines 80,000
40,000
322,000
492,000
Future Benefit
sh balance Soldering Machine
AL ASPECT CONCEPT
Amount
20,000
30,000
chines 80,000
Machine 250,000
40,000
72,000
492,000
Future Benefit
sh balance Finished Goods
AL ASPECT CONCEPT
Amount
20,000
30,000
chines 80,000
Machine 250,000
40,000
6,000 50 products
66,000
492,000
Future Benefit
sh balance Finished Goods
AL ASPECT CONCEPT
Amount
20,000
30,000
chines 80,000
Machine 250,000
40,000
12,000
60,000
492,000
Benefit Given
Customer
Revenue
AL ASPECT CONCEPT
Amount
20,000
30,000
chines 80,000
Machine 250,000
40,000
Customer 100,000
60,000
580,000
Benefit Received
Revenue
AL ASPECT CONCEPT
Amount
20,000
30,000
chines 80,000
Machine 250,000
40,000
18,000 150 X 120
Customer 100,000
36,000
574,000
Future Benefit
Asset
AL ASPECT CONCEPT
Amount
20,000
30,000
chines 80,000
Machine 250,000
40,000
30,000 250 X 120
Customer 100,000
10,000
pervisor 12,000
2,000
574,000
Obligation
ncrease Due to Mani
Liability
AL ASPECT CONCEPT
Amount
20,000
30,000
chines 80,000
Machine 250,000
40,000
30,000 250 X 120
Customer 100,000
10,000
pervisor 12,000
77,000
649,000
Benefit Received
Decrease Wages & Salary
AL ASPECT CONCEPT
Amount
20,000
30,000
chines 80,000
Machine 250,000
40,000
66,000 550 X 120
Customer 100,000
10,000
pervisor 12,000
3,000
611,000
Future Benefit
Raw Material - Incompleted
AL ASPECT CONCEPT
Amount
20,000
30,000
chines 80,000
Machine 250,000
40,000
66,000 550 X 120
Customer 100,000
20,000 200 X 100
pervisor 12,000
3,000
621,000
Future Benefit
Raw Material - Incompleted
AL ASPECT CONCEPT
Amount
20,000
30,000
chines 80,000
Machine 250,000
40,000
86,000 550 X 120 + 200 X 100
Customer 100,000
pervisor 12,000
3,000
621,000
Future Benefit
Decrease Dues from Customer
AL ASPECT CONCEPT
Amount
20,000
30,000
chines 80,000
Machine 250,000
40,000
86,000 550 X 120 + 200 X 100
Customer 60,000
pervisor 12,000
43,000
621,000
duction
Production
Date
6/28/2022Opening
6/28/2022Patent
6/30/2022Bharath to BGLR
7/1/2022Legal Charges
7/1/2022Adv Rent
7/1/2022Other Machines
7/9/2022Freight & Installation
7/12/2022Machine payment
7/16/2022Donation
7/20/2022Supervisor Advance
7/20/2022Indus Display
7/22/2022Borrow Money from Mani
7/23/2022
7/24/2022
7/29/2022Wages
Salary
Rent
7/30/2022Freight for Kit from Bangalore
8/1/2022
8/2/2022Received Cheque
8/3/2022
8/4/2022
Cash Flow Statement
Cash Inflow Cash Outflow Balance
500,000 500,000
20,000 480,000
40,000 440,000
8,000 432,000
30,000 402,000
80,000 322,000
10,000 312,000
240,000 72,000
6,000 66,000 50 X 120
6,000 60,000
6,000 54,000
6,000 48,000
6,000 42,000
6,000 36,000
12,000 24,000
10,000 14,000
6,000 8,000
6,000 2,000
75,000 77,000
6,000 71,000
71,000
71,000
6,000 65,000
6,000 59,000
6,000 53,000
6,000 47,000
6,000 41,000
16,000 25,000
12,000 13,000
10,000 3,000
3,000
3,000
3,000
40,000 43,000
43,000
6,000 37,000 14
37,000 11
Cash Outflow Production Increases Direct Cost

Cash Outflow No Change in production Indirect Cost
Tuesday
Wednesday
Thursday
Friday
Saturday
Sunday
Monday
Tuesday
Wednesday
Thursday
Friday
Sequence of
Events
6/28/2022
6/30/2022
6/30/2022
7/1/2022
7/1/2022
7/1/2022
7/1/2022
7/1/2022
7/4/2022
7/9/2022
7/9/2022
7/12/2022
7/13/2022
7/13/2022
7/15/2022
7/15/2022
7/16/2022
7/16/2022
7/18/2022
18 - 24 07 2022
7/20/2022
7/20/2022
7/24/2022
7/26/2022
7/29/2022
Friday
7/30/2022
8/2/2022
Friday 8/5/2022
8/6/2022
Amount
Transaction
in Rs
Patent Registered 20,000
Received order from Ganesa
100,000
Automobile - 100 Bat Mon
Bharath Went to Bengaluru with
40,000
money
Legal charges paid to Company
8,000
Secretary
Investment made in Business 480,000
Soldering machine ordered 240,000
Advance for Space - 3 month Rent 30,000
Other Machine 80,000
16,000
2 New Workers appointed - Rs. 8,000
Freight Rs. 4,000 & Installation
10,000
Charges Rs. 6,000
Machine received
Machine Ready for Production &
amount paid
Purchased Kit
Production started
Delivered BAT MON to Ganesa
Automobile
Paid the due amount to supplier of
240,000
machine
Received phone call from Bharath for
Mahindra Order
Donated to Orphan School 6,000
LCD Kit - ??? Purchased @ Rs. 120
Production happens
Indus Display System - Advance Rs.
10,000
10,000
Supervisor appointed - Rs. 12,000
12,000
Advance
Advertisement amount to be paid 5,000
No Cash is available
Borrowing from Mani
Paying Salary (2 Workers + 1
Supervisor) + Rent + ??? Days of
Operation
Received 200 Kits from Indus Display
20,000
System
Rs. 40,000 received from Ganesa
40,000
Automobile
1 Week Interest
Inflow /
Cash Flow Benefits Category
outflow
No

YEs Cash inflow Obligation Liability
No
No

Yes Cash Inflow Benefit Given Income

On Receiving Money due from Customer ________
Asset is increased
Asset is Decreased
Directors are entitled to Salary Indirect Cost
Managers are entitled to Salary Indirect Cost
Executives are entitled to Salary Direct Cost
Lenders of business are entitled to interest

Sharehoders of business are entitled to Profit
Dividend is only from profit
Profit will be realised in the form of Cash
Cost of Sales should be compared with Sale to arr

Cost of Sold Units should be compared with
Cost of Sold Units = Cost of Purchased Unit
Cost of Sold Units = Unsold of Last day + Cost of P

Opening Inventory
Cost of Units Sold = Opening Inventory + cost of
Cost Direct Cost
Indirect Cost
Raw Material Customer Expects Quality
Supplies Customer does not expect Quality
Direct Cost
Indirect Cost
Revenue
Direct Cost
Gross profit
Indirect Cost
Net Profit
GP Percentage
Increase in Direct Cost = Increase Sale
Increase in Indirect Cost = Decrease th
Higher the Gross Profit good for
Gross Profit is measured as a Percentag

mer ________
Indirect Cost
Indirect Cost
Direct Cost
Profit
m of Cash
ed with Sale to arrive at the profit

be compared with Sale Value of Sold Units
of Purchased Units - Cost of Unsold Unit
ast day + Cost of Purchase of Today - Unsold of today

nventory Closing Invento
nventory + cost of Purchase for the year - Closing Inventory
Cash Outflow + Increase in Production
Cash Outflow + Support of Production

ts Quality Direct Cost
not expect Quality Indirect Cost
Ordinary Paper Stamp Paper

Salary Salary + Supplies
Supplies
Stamp Paper
4,000 4,000 4,800
1,500 1,750 1,700
2,500 2,250 3,100
250 50
2,250 - 2,250 3,050

63% 56% 65%
st = Increase Sale Price
Cost = Decrease the Quality of Indirect Cost
ss Profit good for the Organisation
red as a Percentage on Sales Gross Profit Percentage = Gross Pr

Closing Inventory
nventory
ntage = Gross Profit / Sales
Question No. 31
Balance Sheet Ocean Tour Business
Liabilities Amount Assets
Equity Long Term Assets
Owner's Capital 60,000
Long Term Liabilities

Loan from Parents 60,000
Short Term Assets
Due from Customer
Short Term Liabilities
Cash in Hand
635,500
Question 32
Balance Sheet Art Seminar
Liabilities Amount Assets
Equity Long Term Assets

Long Term Liabilities
Short Term Assets
Due from Customer
Short Term Liabilities 4 X 2,000
Unused Supplies
Cash in Hand
165,000
Retained Earning
Equity = Capital + Profit
Equity increase with increas
Equity decrease with losses
Equity = Capital - Loss
Owner can take home mone
Money given to owner from
Equity = Capital + Profit - D
Equity = Capital + [Revenue

Asset = Liabilities
Asset = Equity + Liability
Asset = Owner's Capital + O
Income Statement
Amount Liabilities Amount
Revenue
Tour Charges 600,000
240 X 2,500
Direct Cost
Rent of Boat 48,000
Gasoline 33,500
22,500
Indirect Cost
Advertisement 2,500
613,000 Interest 500
Usage of Asset
635,500
-
515,500
Income Statement
Amount Liabilities Amount
Revenue
Art Seminar Charges 160,000
80 X 2,000
Direct Cost
Supplies 37,000
8,000
Indirect Cost
3,000 Advertisement 5,000
154,000 Rent 2,500
Interest Paid 500
165,000
-
115,000
tal + Profit
se with increase in profit
se with losses
ital - Loss
ke home money only if there if Profit
to owner from the profit is called Dividend
ital + Profit - Dividend
tal + [Revenue - Expense] - Dividend

Profit = Revenue - Expense
y + Liability
er's Capital + Outsider Liability
Liability
Capital or Equity + outsiders Liability

Equity Liability
Cash Flow Statement
Transaction Cash Inflow Cash outflow
Capital Contribution 60,000

Rent of Boat 48,000
Advertisement 2,500
Gasoline [13,500 + 20,000] 33,500
Collection from Customer
6,00,000 - 22,500 577,500
Interest paid 500
Cash Flow Statement

Transaction Cash Inflow Cash outflow

Supplies 40,000
Advertisement 5,000
Rent 2,500
Collection from Customer
76 X 2,000 152,000
Interest Paid 500
Balance
60,000
120,000
72,000
69,500
36,000
36,000
613,500
613,000
613,000
613,000
613,000
613,000
Balance
-
50,000
10,000
5,000
2,500
2,500
154,500
154,000
154,000
154,000
154,000
154,000

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Financial Accounting & Reporting

To maintain the records of business

Recording the Transaction of Business for

Recording & Reporting

Record Financial Record Cost

The primary purpose of financial accounting and reporting is to

of Business for future Decision Making

Risk Management Corporate Finance I & II

saction in Business = Cash Inflow or Cash Outflow

Cash Inflow Cash Outflow

Balance Sheet on First Day of Business

or Finished Goods Price

Return from the business will be compared with availab

Cost + Profit = Sales

Whatever profit earned in business will be in

with available alternate investment opportunities

Profit is only considered and not the Sales

ess will be in cash

Contributed Capital of owner is a Liability

Loan from Bank Govt Licence

Dues to Supplier (Direct Provisions - Not Used

Capital Vs. Investment

ns - Not Used Liability

ge or Wear & Tear of Asset

Balance Sheet :: Specific to Date & time

Income Statement :: Specific to Period - April - March :: Fi

Operating Cycle :: Cash getting converted into Cash agai

Cash Outflow during entire process of Investm

Liability Cash inflow

Industry having lesser operating cycle (less tha

But such industries will have more operating

Balance Sheet 01.08.2022 10 AM

Loan from Bank Inventories

- April - March :: Financial year

rted into Cash again through the Main business operation

e process of Investment, Growth should be matched against Sales

Perform work Receiving money for Job to

ating cycle (less than financial year) will also follow

ave more operating cycle within a Financial year

ntories Loan from Bank

money for Job to be completed

Once operating Cycle is completed, profit is earn

benefit - revenue benefit - RM procurement

Vehicle purchased Rent paid

Asset & Cost involves Cas

company's pov: Cost & Liability

Income & Cost

Asset & Liability

Dues to Suppliers Short Term Asset

pleted, profit is earned

Loan from Bank Sales

t & Cost involves Cash outflow

& Liability Benefit Received & Obligation in future

me & Cost Income Statement

t & Liability Balance Sheet

r, four stages of business happens

eration should be reflected in Financial Statement

ation in future Salary not paid

eration running Cost

oduction & amount paid

to Ganesa Automobile Sales

kers + 1 Supervisor) + Rent + ??? Days of Operation = Borrow from

mpany Secretary - Cost