ACCOUNTING FOR MANAGEMENT.

PRESENTED BY:

Team A.B.L.A.Z.E.- Burning Bright,

Bringing Light to our Generation.

Come, Let’s together take a tour on the 3 companies

of our choice.

Let us now have a Glance at the Annual

Financial Statements of these Companies.

Confused???

Allow me to Help You.

WHAT IS A BALANCE SHEET?

A Statement showing the ‘Assets’ and ‘Liabilities’ of a business at a certain date.

AND,WHY DOES LIABILITIES HAVE TO BE EQUAL TO

ASSETS??

What assets do you have?

Cash, a car, computer, stereo, ipod?

Let’s say all the above is valued at 7,00,000

Does that mean you are worth 7,00,000? 

NO. Because you owe money to:

Let’ say you owe me 1,00,000 and you owe the bank 3,00,000 for a personal car loan.

That means you owe 4,00,000.

So you own 7,00,000 in assets but owe 4,00,000 (liabilities).

Therefore, you are only really worth (7,00,000-4,00,000) 3,00,000 (owner’s equity).

Therefore, we can say that:

Assets – Liabilities = Owner’s Equity

Or we can re-write that to read:

Assets = Liabilities + Owner’s Equity.

BACK TO BALANCE SHEETS.

Here’s an Exhaustive List of the Items in a Balance Sheet.

BALANCE SHEET AS ON ……

Sources Of Fund:Share Holder’s Fund-

Share Capital. xxx

Reserve and Surplus. xxx

Non- Current Liabilities-

Long Term Borrowings. xxx

Deferred Tax Liabilities. xxx

Secured Loans. xxx

Unsecured Loans. xxx

Long Term Provisions. xxx

Current Liabilities-

Short Term Borrowings. xxx

Trade Payables. xxx

Short Term Provisions. xxx

Other Current Liabilities. xxx

Total-

Application Of Fund:Fixed Assets-

Tangible Assets. xxx

Intangible Assets. xxx

Capital Work-in-progress. xxx

Intangible Assets under development.xxx

Non Current Investments. xxx

Long Term Loans and Advances. xxx

Other Non Current Assets. xxx

Current Assets-

Current Investments. xxx

Inventories. xxx

Trade Receivables. xxx

Cash and Cash Equivalents. xxx

Short Term Loans and Advances. xxx

Other Current Assets. xxx

Total-

AND FINALLY:GLOSSARY-

Share Capital- The amount of share capital a company reports on its balance sheet only accounts for the initial amount for which the original shareholders purchased the shares from the issuing company. Any price differences arising from price appreciation/depreciation as a result of transactions in the secondary market are not included. 

For example, suppose ABC Inc. raised $2 billion from its initial public offering. Over the next year, the total value of its shares increases to $5 billion. In this case, the value of the share capital is still only $2 billion because ABC Inc. had received only $2 billion from the sale of its securities to the investing public.

Reserves and surplus- At the end of an accounting period the company may decide to transfer part of the profits to a reserve and retain the balance in the profit and loss account. The reserve created out of profits transferred from profit and loss account is called general reserve. The balance in the profit and loss account is called a surplus and will be shown under this head in the balance sheet.The company can use the general reserve for various purposes including issue of bonus shares to shareholders and payment of dividend when profits are insufficient.The premium received when shares are issued at a premium to the face value is shown under the head reserves and surplus.

Deferred Tax Liabilities- Because there are differences between what a company can deduct for tax and accounting purposes, there will be a difference between a company's taxable income and income before tax. A deferred tax liability records the fact that the company will, in the future, pay more income tax because of a transaction that took place during the current period, such as an installment sale receivable.

Secured Loans and Unsecured Loans- If a loan is ‘secured’, it means it is secured against something you own (an ‘asset’) – and failing to repay the loan could result in the lender taking possession of that asset, and selling it to cover their losses. An unsecured loan does not require you to secure anything against the loan – the lender relies on your contractual obligation to pay it back. 

Because there is no security and the risk they are taking is therefore greater, the amount you can borrow tends to be less, and the repayment period is usually shorter. 

Provisions- Money earmarked for potential future expenses. A sum set aside in the accounts of an organization in anticipation of a future expense, often for doubtful debts is called Provisions. Could be Long Term as well as Short Term.

Trade Payables- Liabilities owed to suppliers for purchases or services rendered. More commonly referred to as Accounts Payable.

Intangible Assets- An asset that is not physical in nature. Corporate intellectual property (items such as patents, trademarks, copyrights, business methodologies), goodwill and brand recognition are all common intangible assets in today's marketplace.

Work-in-Progress- Material that has entered the production process but is not yet a finished product. Work in progress (WIP) therefore refers to all materials and partly finished products that are at various stages of the production process.

Non-current Investments- A Company’s long term investments.

Trade Receivables- Accounts receivable also known as Debtors, is money owed to a business by its clients (customers) and shown on its balance sheet as an asset. It is one of a series of accounting transactions dealing with the billing of a customer for goods and services that the customer has ordered.

HOPE WE COULD HELP YOU UNDERSTAND THE BALANCE SHEET.

Thank You.