Comparison of Financial & Managerial Accounting Financial Accounting Accounting is an information system that identifies records and ‘Accounting system by which information are presented and supplied Definition cam ios ee atl events fe biog dobar eriner of an organization to interested user ‘9 OP erate ne lina Extemal persons who makes financial | Managers who plan for and control an Emphasis on verifiability Emphasis on relevance for planning and con Primary focus is on the whole Focuses on segments of an organization organization Must follow GAAP and prescribed Need not follow GAAP and prescribed formats: formats, Requirement Mandatory for external reportsChart of Accounts Equity Capital Drawings Current Year Earnings Retained Earnings Cost of Goods Sold Expenses: Advertising Payroll Expenses Bank Fees Professional Fees Consultancy Rent Depreciation Subsrictions Entertainment Travel Insurance Utilities Office Expenses Vehicle ExpensesACCOUNTING BASICS THAT EVERYBODY NEEDS TO KNOW ASSETS LIABILITIES | EQUITY REVENUE Resources owned by Obligations or debts | The ownerssinterest_| Income earned from normal abusiness that have | owed bya business. in the business business operations. ‘economic value, EXPENSES — PROFIT ‘Loss CASH FLOW Costs incurred inthe | Financial gain after | Occurs when. The movement of money in process of earning deducting expenses __| expenses exceed ‘and out of a business. revenue. from revenue. revenue. GROSS NET "BALANCE INCOME MARGIN INCOME | SHEET STATEMENT Revenue minus the Total revenue minus | Financial statement | Financial statement showing. cost of goods sold. | total expenses. showing assets, revenue, expenses, and profit liabilities, and equity. | over time. CASHFLOW DEBITS AND JOURNAL GENERAL STATEMENTS CREDITS ENTRIES LEDGER Financial statement Entries used torecord | Records of all Comprehensive record of all showing cash inflows | transactions in double- | transactions financial transactions. and outflows. entry accounting. TRIAL ACCRUAL ——CASH COST OF GOODS BALANCE ACCOUNTING ACCOUNTING | SOLD Report ensuring Recording revenues | Recording revenues | Direct costs attributable to debitsand credits andexpenseswhen | and expenses when | the production of goods are balanced theyareearned or | cashis exchanged. | sold. incurred. ce Lbs | L = INVENTORY COMPLIANCE BUDGETING | FORECASTING Goods available for Adherence to financial | Planning future Predicting future financiat sale or used in regulations and business finances. | performance. production. standards.ACCOUNTING RATIOS BY BRIAN FEROLDI N RETURNON _ _NETINCOME EQUITY ere GROSS _ _ GROSS PROFIT MARGIN ~ SALES EBITDA RETURN ON EBIT ORIN ee © CAPITAL = ‘SALES EMPLOYED CORR ASE TIES) OPERATING __ OPERATING PROFIT RETURNON SEUNG ° MARGIN ~ ———SArES ASSET = JOTALASSEIS @ NETPROFIT _ « RETURN ON NOPAT waren CAPITAL INVESTEDCAPITAL, LIQUIDITY RATIOS FINANCIAL LEVERAGE RATIOS CURRENT — CURRENT ASSETS TOTALDEBT ae DEBT _ e RATIO. = ° RATIO = CURRENT LIABILITIES CASH _ CASH +EQUIVALENTS = TOTALLIABILITIES * RATIO asd ‘TOTALEQUITY DIVIDEND POLICY RATIOS © PAYOUT _ DIVIDENDSPERSHARE DIVIDEND ~ DIVIDENDS PERSHARE ~ EARNINGS PERSHARE YIELD ‘SHARE PRICE HARE RATIO ~ EARNINGS!Finance Toric: Page 1 of 2 RULES OF DEBIT & CREDIT Classification ‘of Accounts | Accounts Involved | Increase(+) Cash, Furniture, Supplies, Accote Drawings, Land, AM, oa Building, Equipment Debit Credit Merchandise, Bank. Purchase, Salary, Sales Return, Gnarity, Postages, Expenses _| Stationary, Rent, Electricity Debit Credit charges, Discount Allowed, Wages, Interest Liabitities | A/, Capital, Bank loan Credit Debit Income. Commission, Purchase Credit Debit Return, Services, Sales, Discount Received e more details] hp:wualena bogepet oom mai walisha@gmalcom Alisha Naz Today PakistanT-Account Debit Side ‘Credit Side Accounts with Accounts with Debit Normal. Credit Normal Balance: Balance: * Assets » Liabilities + Expenses and J+ Capital or Equity Losses + Revenue and Gains