1 1.

Subject Overview

2 2. Basic Concepts

3 3. Accounting

4 4. Financial Accounting

ACCOUNTING FOR MANAGERS

Prof. Avanti Sathe
Subject Overview

Prof. Avanti Sathe

 Subject Overview

o Introduction to Financial Accounting

o Understanding Financial Statement
o Financial Reporting and Regulations
o Financial Statements of Limited Companies
o Cash Flow
o Annual Reports
o Limitations of Financial Statements and Window Dressing
o Financial Statement Analysis

Prof. Avanti Sathe

Basic Concepts

Prof. Avanti Sathe

 Basic Concepts

BOOK KEEPING:

Meaning: Book-keeping is a systematic manner of recording transactions related to

business in the books of accounts. In book-keeping transactions are recorded in
chronological order. Book-keeping is an art as well as science. It is an art of
recording day to day business transactions in the books of accounts in a scientific
and systematic manner.

Definition: According to Spicer and Pegler, “Book‐Keeping is a systematic

recording of all the transactions in a manner enabling the relationship of business
with other persons to be clearly disclosed and the cumulative effect of transactions
on the financial position of the business itself can be correctly ascertained.”

Prof. Avanti Sathe

 Basic Concepts

ACCOUNTANCY :

Meaning: Accountancy is a broad concept and Book‐Keeping is the recording

branch of Accounting. Accounting includes recording of transactions, classifying
them in different books of accounts, summarising the transactions in the form of
reports and interpreting them in financial statements. Accountancy helps
management in decision making. Accountancy starts when Book‐Keeping ends.

Definition: An act of recording, classifying and summarising the business

transactions, balancing of accounts, drawing conclusions and interpreting the results
thereof.

Prof. Avanti Sathe

 Basic Concepts
Bookkeeping vs Accounting
Book keeping Accounting
Meaning Bookkeeping is mainly related to identifying, Accounting is the process of summarizing,
measuring, and recording, financial transactions interpreting, and communicating financial
transactions which were classified in the ledger
account
Decision Making Management can't take a decision based on the Depending on the data provided by the
data provided by bookkeeping accountants, the management can take critical
business decisions
Objective The objective of bookkeeping is to keep the The objective of accounting is to gauge the
records of all financial transactions proper and financial situation and further communicate the
systematic information to the relevant authorities
Preparation of Financial statements are not prepared as a part Financial statements are prepared during the
Financial Statements of this process accounting process
Analysis The process of bookkeeping does not require Accounting uses bookkeeping information to
any analysis analyze and interpret the data and then compiles it
into reports

Prof. Avanti Sathe

Accounting

Prof. Avanti Sathe

 Accounting

Systematic Book keeping :

recording of Journal, Ledger
transactions and Trial Balance

Manufacturing,
Ascertainment of
Trading, Profit
results
and Loss Account
Objectives of
Accounting
Ascertainment of
Balance Sheet
Financial Position

Communicating
Information to Financial Reports
users

Prof. Avanti Sathe

 Branches of Accounting

Financial Cost Management

Accounting Accounting Accounting

Prof. Avanti Sathe

Financial Accounting

Prof. Avanti Sathe

 Financial Accounting

Financial Accounting is the process of identifying, recording, measuring,

classifying, summarising, interpreting, analysing and communicating the accounting
transactions of business organizations. It is the original form of accounting. The
main objective of Financial Accounting is to make the financial information of the
business available to outsiders like Creditors, Customers, Banks, Financial
Institutions, Investors etc.

The purpose of Financial Accounting is to maintain systematic records for the

ascertainment of the financial performance and the financial position of a business
and communicate the same to the various interested parties. This information is
presented in the form of Profit and Loss Account and Balance sheet which show the
performance of the business during the specified period.

Prof. Avanti Sathe