Accounting &

Financial Statements
Prepared by: Md Sazzad Hossain
FEO, Jamuna Bank Limited
What is Accounting?
The system of recording and summarizing business
and financial transactions and also analyzing,
verifying, and reporting the results.

Accounting is the language of Business

Data is interpreted in such way that all the

stakeholders of the business understand the situation
of the business
Accounting vs Mathematics
Accounting Mathematics

Numbers are used to interpret and Numbers are used to come at a

present business data conclusion

Accounting is like a novel of a Not like a novel at all. Only concern

business. Having all the smallest of is to get the solution as quickly as
details written possible.
Financial Accounting

Focuses on the Three most important

financial statements:
reporting of an • 1) Balance Sheet
organization's • 2) Income Statement
financial information • 3) Cash Flow Statement
Core Equation of Accounting

Assets = Liabilities + Equity

Why do we need Equity?
The concept of equity confuses many people,
specially when thinking about proprietorship.

Asset is asset. Why do we need to bring in the

“equity” concept?

We need “equity” concept, because in accounting

a business is a separate identity from an individual
Why do we need Equity?
Mr. Kashem has opened a coffee
shop. He has named it “Koffee
with Kashem”

Now Mr. Kashem has invested

Tk. 5000 in “Koffee with
Kashem”
Why do we need Equity?
This Tk. 5000 is now asset of
“Koffee with Kashem”. This is Mr.
Kashem’s money, that’s true. But
he cannot use it for his personal
expenses. That’s why “Koffee
with Kashem” will treat this
money is owner’s equity.
Definition of Equity
From core equation we get,
Equity = Assets – Liabilities
Equity represents the net funds
invested into a business by its
owners
3 Components of Equity
Capital Contributions : The first thing that makes up
equity. Money that the owner invests into the
business out of his own pockets.

Retained Earnings: Accumulated profit held for

future use. Profit = Revenues - Expenses

Withdrawals: Owner of the business withdraws

money for personal use. Thus decreasing retained
earnings and equity.
Equity Components in
Different Types of Business
Entities
Detailed Core Equation of Accounting
Assets = Liabilities + Equity
Assets = Liabilities + (Capital Contribution + Retained
Earnings)
Assets = Liabilities + (Capital Contribution + Accrued
Profit –Withdrawals)
Assets = Liabilities + {Capital Contribution + (Revenue –
Expenses) – Withdrawals}
Financial Statements
 Start of the Business
“Koffee with Kashem”

Mr. Kashem comes up with the idea of the company.

But he won’t contribute from his own sources at first. He will

raise money through an investor and give the investor one
third (1/3) of the company’s equity.
Mr. Kashem convinces Mr. Boshir to invest Tk. 50,000/-in the
company. Mr. Boshir gets 1/3(33%) share of “Koffee with
Kashem”
 Start of the Business
“Koffee with Kashem”

Mr. Kashem has 67% of the company’s share despite not

investing anything. Thus his equity is valued at Tk. 100,000/-

Mr. Kashem borrows Tk. 25,000/- from Brac Bank to raise

more cash
 Balance Sheet
“Koffee with Kashem”
As on 01/01/2021
Asset
Cash Tk. 75,000/-
Fixed Asset -
Inventory -
Goodwill Tk. 100,000/-
Total Asset Tk. 175,000/-
Liabilities & Owners’ Equity
Debt Tk. 25,000/-
Owners’ Equity Tk. 150,000/-
Total Liabilities & Owners’ Tk. 175,000/-
Equity
 Lecture 2
Accounting & Financial Statements
Prepared by: Md Sazzad Hossain
FEO, Jamuna Bank Limited
Recap
 Recap of 1 Class st

Definition of Accounting

Accounting vs Mathematics

Core Accounting Equation: Assets = Liabilities + Equity

Concept of Equity
Recap of 1st Class: Detailed Core Equation
Assets = Liabilities + Equity
Assets = Liabilities + (Capital Contribution + Retained
Earnings)
Assets = Liabilities + (Capital Contribution + Accrued
Profit –Withdrawals)
Assets = Liabilities + {Capital Contribution + (Revenue –
Expenses) – Withdrawals}
Recap of 1st Class : Balance Sheet
As on 01/01/2021
Starting the Business
Initial Purchases

Cash in Hand : Tk. 75,000/-

Advance Rent : Tk. 20,000/-

Furniture & Fixture : Tk. 10,000/-

Inventory : Tk. 20,000/-

 Balance Sheet
“Koffee with Kashem”
As on 07/01/2021
Asset
Cash Tk. 25,000/-
Advance Rent Tk. 20,000/-
Fixed Asset : Furniture & Fixture Tk. 10,000/-
Inventory Tk. 20,000/-
Goodwill Tk. 100,000/-
Total Asset Tk. 175,000/-
Liabilities & Owners’ Equity
Debt Tk. 25,000/-
Owners’ Equity Tk. 150,000/-
Total Liabilities & Owners’ Tk. 175,000/-
Equity
 Business Operations
• Sales : (6*20*50) = 6,000 Cups
• Cost Per Cup = Tk. 50
• Revenue = Tk. 300,000/-
• Yearly Rent = (12*10,000) = Tk. 120,000/-
• Salaries Expenses = (12*10,000) = Tk. 120,000/-
• Cost Per Cup of Coffee = 20
• Total Cost on Coffee Cups = (15*6000) = Tk. 90,000/-
• Depreciation : Tk. 2,000/-
• Interest : Tk. 2,250/-
 Income Statement
Koffee with Kashem
for the Financial Year 01.01.21 to 31.12.21

Revenue Tk. 300,000/-

Less: Yearly Rent (Tk. 120,000/-)

Less: Salary Expenses (Tk. 120,000/-)

Less : COGS (Tk. 90,000/-)

Less : Depreciation (Tk. 2,000/-)

EBIT (Tk. 32,000/-)

Less : Bank Interest (Tk. 2,250/-)

Net Income (Tk. 34,250/-)