) fral Acouts

Tnrodulion:
Up tfM ,
have leant abont

enties Sowinal and

Yecovdiug and

Ledgen . But Menely veoding aud posttng does

hot

Mosheatical
He entriey
way Rt is împortaut ko verúty

at Qud peiods.
A rial Bolae prpud ponidially
tuis bosis
t for ose
fdoniAed and veclificalfous
prapanalion
done
Tt determines (fnalalL posi
rRon of

te butvess. Unden ts Compulsoy to Make

oss account
tvading aont , pofit

avel balane shaet he tenm Rnal oulots'

includes accownt the Ppotit
tvading
loss and the blance sheet

and profit and oss AcCDut

The tradung
tinal Sueh oe cownts

tteet the pofit e loss positfon

posi of the ustnes.

The ccot popud pouts

i)trading AcLownt

ii)poit and oss Actount

bBSECTIVES :

pescyibe pupoalfon of tbil tolame

Discuss preparatfon ot 4inalou ownts
me beatment
ccounding
oS aund ee tieication

Ekamine fcatfon
ctouci ot Coptfal and
yeveue

Discuss towept dapveciation

cowndiug

pruparaion ot Tial baloue:.

Case Voio do bit balance and

bolaes e diteret acconts

taken down toteeut te
Stutement So temed rial
prepaed
balame
Tial balace
Voulous ledger
balame
Sttenent contaiing

poticula date.
Cbjeats paepaiing
a tialBalhee
) cheking ob tae
cúthnetRal Accwtaey ot

teaoundi g
euties:
As fndeate above Balane helps
 the AtthNetical

ou louning entire
becase ateovdivg to
to he dual
spect Concept tor eveny cdobit taere mst be

equivale ut (vedt

Tial alae vepejents Summay ot

alltedgen bolanes nd tienefore ,it

two shdes ot the ial baloee tally it s

Hot the books

ndicaton
elot aithmeliually ecwate

2) Basis tor tivancial Stakemonts:

Balaee torws Itae bis toY

Sueh s tte
fnaueial Statemeuts
paepwing
Balone Shaet.
atement and
all
The trial bolanee represewts
Cueownts
trasaelions 7ulatng dittenuut

ed korm for panticulat

Summais

pondod

3) Summaised lodgen;

Tt bos been Stated taat a

arady
te tedqen balanees
fial Paloee Contoüns

ladgen
Poticubu data eutive

Summanised the fom hial ooane.

preparal?on of Hnal

tt has alrudy been exploined tat

ocks ot aeCownts s dotermind

Ne
pepaig Balanee

Havig detenine the

book busfnesswan in
s
aecants eveuy
fuberested about tuo MOYe fouts
in kuowing

i)nheathen ppofit ov suttoud

a Covered by tte Tial

toss dung
Balae
Ri) nhee doe he sand

dokewination Pofit LOsS s

done pepaing ioding and prreit and

L0SS AcCownt tncome stutemeut)

vile fEnanil Rou

posi judgod by

Balance
pepoivg
ausiness

Chanateústics of pinal Accounts:

process ot aLcoutng
pruparud to show e ial esult

ompy in speeific peicd.

 he aLcount wich prepaud
prepard out Bae

tae to See
qiven yoa

he
Poit and less
tess rosition Well Ee

finanial poition of a goivg

oen for te
peniod given.
also kuown as tinanial statement
Tt tonsists ot tiodiug a count profit and

oss aeeot balaee shaot

objezttves o tinal Mceonts.

TD doteswine qYoss pro fit and het profft ot

tho iness
dusig
preeut true 4ivancial positfon
business dota.
given
Nake ettetive Control Dn tinanelo
aetiities te puiuess
Make presentotion
summary

the 4ivoial transaeHows

commicate oporotivg 7e3uts and

{inancial postfiou

to help in uating diftereut fivanial

deisiou to the o countig igovmatiou.
 2) Patio Auralysis

Tutoduction::

about yalio

analysis,úch quauitotfve avalysisot

fntovmatíou toubcind tompany's 4inancial
stokemets
Pato avalyis to evaluake Volou
aspeets o a tompzyy epenatig aud 4fnanlal
peyormance Sueh
cieney,tiauidihy
eti
poftailtyand solvemey
Dt fvvolves evaluatig petovan
and fivaneial of a Com pauy
wing dok the Cuet and bistoical

tinonciad Stakeets

Erploin ie classificaticn
of atfos

pvotitabilityafos
Desvibe diteunt nOver Vatlo

EXomine the Vauiants

yatios

piseuss tre Wses avd (iuitaios

classifiatfou Ralios

Rolfos Can be classi

fied futo diftoeut

cakegoies depevdig upon tEe pasis tlassifiafin

::
Tvadioal clasiicalfon
This clasificatiou
ttie inaneial Stateme nts to hhieh the
dotetminauts Vaio belcug

) pofit and loss aecouts vatfos , i

yalios caleated bosis ftoms

ound {oss tecot

gYoss Profit yatfo anet stok tunoveiratio

2) Bolonce shoct Vaios i.e, votlos

Caleuahed ouis of te tigunes ot

bolanee shect
ouly ,eg Cuet vatio

bt - eauuby youio
cund da

2) composihe vallos utes- StatewetVkos,

bosed profit and loss

aecounts wel a the kalance Shaet

2g kixed Overall

pofttaity volfo.
punefoval classifitotHou:

The hlovalclasiticalfou found

too (ude uultade

halane shodt and fncome
aualyais et
tomeut Cauvot be doe in fsolatfou

skudied ovden
Tey have too he

debennihe te ant
pofitability
wy
solve

e buiness.

) proftaiyRfos
Fatos
2) Tuneen Ratios

3) inanialRtios
profitabitiy Raios
These Vafos a
assess Lompamy's abil'hy

to elaive bo ts Yevee,
genathe eaing.
assets eqyualzky iuancialMetics

iniglts
inko etieleney
Tay proide

its cperatfon futo

tompay kuuing
Poit.
Common Ratlos
proftabihy
tyoss proft Nongin

Measves peeentage at ne
yeve

vano vág yter daducttug (ost t quds suld.

 ormua
tsvoss Poit
woss Xlo0
Rove ne

operatug poit Nougiu::

te poetage YQVee trot
Endicokes ot

atton for Vouiale Costs (Pke

pouylng

Wages and Yaw Mateias ex cluding ntoest

leues
Forwa
operottg profft X LOo
cpenaliig pot agius
Reveue

protit NOqin:
shows te percentage os 70Vewwe tiat
poit aten ol eApenses (Reest
taues have beon daduched.

Pormua?

Net net proit

poit Nagi n
ReVee
Rekun A ssests (RoA) :

Neoswes bouw eii

etly Com (po wy wes

to geuanale prot
 posmua

RoA
Net

Totul Asse ts

Rekwn Es,walityteoe):

Tudicates potitabiiky ot a toMpany

Yolalive shore hdden's eoyuaty

torwwai
RoE vet tneoWe
X Loo
eoyuihy

2)Tuunoven poRos:

Tunnoven Rotos (alsocallaol etiy

) Neasdre

vouw ettectively a comfauy wses ?ts osets to

gevenabe Soles yeVee Tese rafos

to asses ciceny oud

productiiby a

Compony's openafou

Commo tunover Roio

TUventorS Raio'.

how of fen Cmpruy sell!

and
uplaees Rts
Over

A igen Youio
Suggests etiieutSentory
Nanagemet
Tovmua'
tost ot oats sod
fnDVe
Average Puveuty
Receivales tunoven
Shows how etiiety Compau ollects
ts ereivalbles votlo Gudcates

quicken
ion
ollee Cyedit Sales

Poma vet odit Sales

ReReivables twnoVeN
Accouts Re cevable
Avetage

Assek twnoVe
ey
eHii with wich a
assets Sales
Com pa
generate
FOYma vet Sales
Asset Tunoven
Avenage total As sets

ACCounts yable
tunOvei Ro:.
Tudicates bow quickly a Cowpauy py ott
ts sufpliens
(owen vato suggests tthe

(omgruy tokug fonger Tts supplens

FoYMua:
Cost of bcos sod
Accouts payae
Avenage Ac couuts payable
3)pivancial Ratos
tunoven yolios,
Tu addiiou to pofitabilhy aud
o asSess itforet
othen key iua ucial Yatios halp
eolkta.
upects Lompay's 4inanetal
Commou aeial Roios:.

LiaidihyRalos: eet
These Measwe tompa uy's abilry to o

Shoyt -tem cligatfow

EXomples incude tae cueut Rofo and te
Quick Roio
Roios:.
ot dobt
These Compay 's
Sueh tne Debt - to
{ivawe ts eperatfous,

Camiby fafo.
Ralios:

Keese tocus Vow eteetively com pauy

utilizes assets and Nanages operatfous.

 )Cash pton Avalyzis

Thtroducion:

Eveny tom pauy to ho ve ou OVeal

udeustandig ot fts cas poitfon wainly com pyisug
ot inmaiou nelated to Where cash s
gevenated and where
boivg Company
boivg speut .

Botr ok this intormation llowstEe Company

to ascertn not cy toir tla,uid hy positon but
also tcirlong-tum solvemy vg.
Staudi

objetives?
> Desibe the Meaning aud mportanc e
flow avalyis
>oiscuss tre Mavagerial ok cash tlow
statereut
ooteauttate betwecn und Aow ad tow
Cash
analyis

ÞExplain Wses and itatfon

ftow statements
pesie peparatfou Cash ttow statemeut

prepratlon flow stakemant

A tashflow Slakement Can be
prepaned
Seme patten Wiich a tund pouw
Slatemeut is
ropod
 ttie Cosh positfo tom
poriod to anoe tomputed oy takivg fu

aLcount ant applicatfows ' ot cash.

Te Dave beeu discus
sed

Pu qken below .

Cash Cn be iutenyal u well a

exronal

Puennal Sowee

lash operatfos fntenal

Sowe hot proit shown by te profft

and oss accout will have

we to adjusted for

ot fom

opanatfws
Depre cialiou
ot
osets
intanqible
11)A wmovlization
fixed assets
) LosS

Sele ot 4ired acets

Iv) ain from

v) <rootfou

plow Aualyis
stakomet wetul foY
A Cash flow

ehoyt torm paning buthess entonpise nds

SuiietLash fo meot Tts Vouo cllgatfous
 tutune Sweh
Paymeut for

puuhase ot ixed CU
3 sets , payent ot dolts
wakunug fute erpense

the uslnes
Cash 4low Aralysis importaut
{inaneiltool tor ie Maage neut
) Helps
1) n eti
cient (ash Manag
Managemout i
Cash tlouw Aalyis alps fu evalatfug
4iuaneial poticies and tash posifou Cash s
l and henee a
oporatfow

Cash Stateeut ehable tre

projechad o

eut to plun Qnd Coovhate

Mahage

finaneial operatos popenly.

2) telps n Futenal inanial anagement

Cash 4louw Aualys

Pvalysis poides Putorm atfou
about funds Wich wil be aveilable fvom

peration
Tis wil atp tie Managonent

dotorni ng policies vag andiug fnhenal flnaneiol

Manaqe maut

3) iscoses the NOvements of

Cash flow statenent isclose tthe Canplete

inereaue
Story o Moveeut

docvease Cash the therufoe

oun e kuDWn

4) isc
lose Suecess or tai lwe of planing::
The pxhent Sue eS faflune Cash

kuow by Comping
pauning
Ppjected Cash flow sttemet wita ttre

utual Shateme t vecessay

remedil eoSes be faleen

tinitatows (ash ptow Aualysis::

Cunot Oauaked wia
) Cash plow stakement
. Au Rucome tateeut
the Bucome Satemeut
borh
takes nto
lash does ot
trenetore net
(ash tems
ness.
lowsi
?ncome

the Cash
2) The Cash bulanee as disclosed by

stake met ay vot vepvesent tiuid

{louw

posilion buiuess sine eouily

ittuened postpouing puches

paywents.
3) Cas touw Statement lonnot yeploce the

Pucome Statomet tunds tlow stutemeut

en has a
sefarate fnetfo
paryorn
Sope

Au euntenpise chould (ash low

slatewet should peset
for whck fivaia tfataneuts

Benegits (ash plow Tu fovwatfen:

) Histoyi
cal Cesh tlow futovnatfon fs

often wwed PudicatoY ot tthe amount timiug

Cud contnty lows

alo wetu the

tlows eund
post oUssesweut tutue Cash

velaliouiep betueen

poitali
lihy ad et Rlow aud

Dt chang?ng ices.
2) tt olo enhres Cewpouabi lity t
the vepRug pertormane by diffeut
ot openating

enterpises because t eliuinates etets

hectmouts
ot wing dittereut acoutivg
Same trasaetfos aud events.
°.
3) (ash How futovatfon wseful

the eukenpise to
ausesiug
qeuenate Cash aud Cash
enabe Wses to davclop Models
 4) Margival costivng

Iuroducion:.
olements o (ost lobown
(Mateals, ad
fnto two ories;
tateg
expeses) Can bveadly be put

Costs. pixed losts arre

Costs Valabke
tixed
but vemain
do Vot
those costs ky
Hme and
Cowstout wirain given pueicd
fu
Ya nge Spite tluctuatfons

production
Losts
Te examples of tired
end
Salaies
.
iwsname changes Nanagement
tae Diren haud,
hand voniable o tput.The
etc
Costs diveet Mateial diveet wages

Can be Put cakegory 1he Lost ot a

be ascentined uiug
produet ProLcss

he direneut eleneuts Cost

tollouig buo techuiq,ues

i)Absorpton costtug

i)Maginal Losig

The Najor Ppose o oginal tosthg

not poide loet
iwOme inventoy but Yattrer ko claity
lots voume
ulalonipbetwecu
pofits,pticwlary in the ot on
doeisi
 we daling
Nakiug Proseut
wira specitie openafug deistows
be
the deision
dat he witl
whicu Cost
Selaelive decidi
wg
But elove
how he

the toyoak- even avalysis,

tit he vin leoun about
Coutibufou key tu tovs ,eteI
objeetfves:
bsovption aud Nonginal
cwsS the
bis coMept ot a

costiug

bDescibe Coutibution Plt Vatio

factov

Cost - Volune - Profit analysis

broak point oualysis

Distuss daeision Na kiug unden ogival

Costfug

Absorpiou tostiug aud Nangival

tenmed
Absovpin eostfug
.
tvadonal Cost Method Aeodig
ttisMeod Lost o a product
datermined ayten cowioleing both tixed
Variae Costs .

The voable Costs , Sueh those

divect Mateiay diveet lolsow divecty

changed roducts ) ile tixed (osts

 appovtouat Suitnsle ute
Aiffeneut poduets Auning a pid
akovpou tolfug all

Costs tdaukied

Pudu cts.

Jollowing tlstfcn
lustvaiu:
uotetuingthvee Procts A

A
Cmpay
and Tae Costs of taair

4ollows.

Divet Natenial pen nit 4

pivect laon 2 4

sellivg pice 20

Output 1,000
tooo,wbs ,o00
wits wits

The totl Overhaads cue booo

3000 fixed and Yest Vovúable

detidod apportion trese Costs iefereut

products in vatio output.

are ko
pane state
we nt
eost ot prodnct pofit aeodlig
to absovpiow tocttug

Solulon!
would be aUcertoined
The cost product

to
abiovption coting i as :
follows

Cost avd potY

Statemeut showig
obsovpion Cotivg
)
teeigua
(aucovding to

A
Panlfcuas
Per vit total Total it

inet Mateials 2
2000 3000
Diect 1aloun

werheods:

tooo
Vauialle
1000 aooo
Cost

3 3000 booo qoo0

Profit

pice
setting (SD0D 2 20 OoO

Total pofit 3000 + booo t qooo

Wden ab sorplou Cosing ce uitot

Product hes to bo theiv tul share
cost but be true thot Some
May poducts
May not
not be able to bocul <hoe ot
tost be olblo Coutyibuto to the

Oveall poftabilPky 4ivm era mple

puet be Sold at a
piee
sutticiet
to yecov1 thou its Vouiablo Cost

Tunuived produce it, Mouy

not Suticieut
2COVei More tiat VoUiable Cost

to but hot
yeqived pyoduce May

Sutticieut to its tul shared

fxed ost
hnd these May prducts

ich Contibute mueh oYe than 4heir Shae

ot Vaaa ble and fixed costs. absorpion

costing Managemant is fntereshed

hhethen product produce

adeqate yotun Dn Ruvestmeut otter absonig

its shae Oveal Cost whetthen fixeel

Vaia e divected indiveet is

bease tong all Costs

mst Wore
LOveud to asswne

sai
sfocty yetwn învestov
s

taiv Rnvestnent.
 5)Budqetivg
TuhoductRon:
becowe he
pivany
louniug has
tiese Aays Nost fouug
Niavagemaut
elates nidal sibatiows nd vdiidual
Poposal Howeven tis Supplomeutesl

ae veintovced by perlodic ploniug

tollowed towfuous
actual potonane ita plauued petormae
Budqets ae victhing
at Cxpessiows,

inanial tenms Nanagemeut 's

langaly m

the
plans tor openalng ad 4inaneivg Quterpise

peiod Rme
duing specifie

Budgetay Control has taeretore ,become

esseial tool
Mavag eme ut tor

coutvollivg tosts ad Maiiivg porfits

objectives.

Coept and ned toY

Discws tov budgetug

Desee the ficaion

e lassi at hdgets

Erplain Coutrol System

wdgelay
Mechaisn
Cowept ad vaed Bud geling

AA dotcaled ofenatfow
budget

te poiod. ats sa
buiness banometen Cowplete pvogmne

auliities uiuess fov periccl

Coveud.
to b1oYdon
Acevdiing
budgt way be Aatiuad pre dekeN ined
dotoiled Plan ation davelopd distiltad
quide Cuet peratfos and

basis evaluatfon
Ptial tov

pertormane
The chantorud Tustude Manage meut

Accoutauts Londou, deli

uad a budget os'a
Statemeut
4ivaneial ond lo oyMautitative
a datinad peniod t ime
peped piov to

be that
the
pulicy psued dug
potod pnpose ot at ng a guen

follouiug
ae esseuials

of a budgot

a) t popud fu advowe d is
based On a tutue plan ot utiew.
 Telates o a futune ponfod aud is bosed

cjeelives atteiued

statemeut xprossel MOhetay

and lov
ound puytcal uits popaned for te impleweutatfn

fovmudated Ma vageme ut.

Moaing o Coutrl::

Coutrol Some Sovt ot systematic

ettovt Ce ut pertovanee
prcdetewined plon oetive pesumably
to take awy Umedial
Tis veny gevenal dakiuiiou
te term
HDweven s a
Haaggemeut tuetou t
the Proess Dvich
as peen dafined
thot obtainl
se oteetively oul kiceutlyin te
of
CLCoMplishment Ovgauizaon's goals

ot Budgokovuy
Coutrol::

Te chonketed tusiute Manaqe went

Ac cowntcnts CeIMA, London debiues hudgotany
Contol establishment

velalivy to ot exetutives
to ttie veqive mcuts and the Coutiuows

Compausow budgeted
veslts
eithen to seewne by Tudiical aetiou tre

obecive that policy provide

bouis Jov s vevisiou

a) estalishuewt kudgets
ContinOs Compai sou

budqets tor oeievemeut tongets placig

te lby
vespowitbi tor to outiee
budqet iqwes
peisio the

clavgal civcumstanes
Monacqmeut bool :
Budgetawy coutro

Budgetay
coutol hos becone esseutial

bool ot Mavagement for cotbolling Costs ad

Narinåing Profits

May be Coneived

Supveme QNamples ationali

ty fn wanagemet

wetl Hanagemmeut tool for

Compouivg
Cwet petormounee wira
Pre -

planned witta view to

pengormone
attaig euilbviun betweu Qnds
output aud eHovt Tt CovetS tae deuiatfouy

trom pe -plauned pottn ttivough te Nedia

neenvatfon
plauning
Coutro |
doeisiou Pn
Nakivg anl tus helps

peyormaue e tutune cfiies

velenly
ovdanly vy
)Bings econouy n norig
2) Buek-puing avoided

3) establishes Ccovdination
) iuads agounst twdue eptimism
9) Acts fafcty stgual
6) Adepfiou i fonm polcy
DeeYease poducton cocts

3) pdoRou standond costing pineiples

Liviaiow at Budgetany coutyol:

) oppoion ogiwtte vey spivitot

budgotig
2)Budgeting ad changiug ctonny
3) ime foukor

foY Nanogemaut

s)toopeakou roaived.