CORPORATE FINANCE INTERNAL ASSIGNMENT

REPORT ON INTRODUCTION TO
FINANCIAL ACCOUNTING

Submitted to:
DR. M. PURUSHOTTAM NAIDU
Corporate Finance Faculty

Submitted by:
Murala Jessica
23WU0202030
MBA Business Analytics
 2023-25 Batch
Model 1: Fundamentals of Financial Accounting

Introduction

A crucial component of business operations, financial accounting helps companies monitor

and report on their financial activity to many stakeholders, including creditors, investors, and
government agencies. To provide a thorough grasp of this important field, we shall examine
the main models and subtopics of financial accounting in this essay.

Accounting Reporting

The core of financial accounting is financial reporting, which provides an extensive overview
of an organization's financial performance and state. These reports are prepared in
accordance with International Financial Reporting Standards (IFRS) or Generally Accepted
Accounting Principles (GAAP).

Balance Sheet Formula

The balance sheet equation, also referred to as the accounting equation, states that Assets =
Liabilities + Owner's Equity. Double-entry accounting is based on this equation, which
guarantees that there is always balance in the books.

Liabilities and Assets

What a business possesses is its assets; its liabilities are its debts. Comprehending the
classification of assets and liabilities is essential for financial accounting.

Credit and Debit

The basis of double-entry accounting is credit and debit. Debits increase expenditures and
assets while decreasing equity and liabilities. Conversely, credits have the opposite outcome.

Three M’s.

In financial accounting, money measurement, matching, and materiality are known as the "3
M’s". These guidelines govern how financial transactions are recorded and reported in order
to ensure relevance and correctness.
Model 2: Accounts Payable

Income and Outlays

A corporation's income is the total amount of money it makes, and its expenses are the costs
incurred to produce that income. Recognizing revenue and Key concepts are matching costs.

Modifying Entries

To ensure that financial statements accurately depict the organization's financial status at
the end of an accounting period, adjusting entries are necessary. They maintain records of
things like accumulated revenue and pre-paid expenses.

Income Statement and Balance Sheet

Sales, expenses, and net income are shown on the income statement, also called the profit
and loss statement, which provides an overview of a business's profitability. A company's
assets, liabilities, and equity are shown as of a particular date on the balance sheet.

Model 3: EBITDA and Cash Flow Statement

Fund Flow Statement

A company's cash inflows and expenditures are documented in the cash flow statement. To
give stakeholders information about operating, investing, and financing activities, it is
divided into three segments cash handling.

Earnings Before Taxes, Amortization, Depreciation, and Interest (EBITDA)

After non-operating expenses are subtracted, a company's operational success is evaluated

using the financial metric known as EBITDA. It is a measurement of a business's ability to
turn a profit before non-cash expenses, taxes, and interest are subtracted.
Model 4: Analysis of Ratios

Ratio Evaluation

Ratio analysis evaluates a company's performance, efficiency, and financial health by

computing and interpreting a variety of financial ratios.

Financial Ratios

Accounting ratios include, among other things, leverage ratios (like the debt-to-equity ratio),
profitability ratios (like the return on equity), and liquidity ratios (like the current ratio).
These ratios offer insightful information on the soundness of a company's finances.

Conclusion:

In conclusion, financial accounting is an essential component of company operations that

aids in the management of financial matters and inform interested parties of their financial
situation. For people and companies wanting to navigate the complicated world of finance
and accounting, understanding the models and subtopics covered in this paper is crucial.
Organizations can evaluate their financial performance, make well-informed decisions, and
show transparency to investors and other interested parties by following these guidelines.