3 LEARNING OBJECTIVES Need to Know About Accounting Managerial AccountingFinancial Statements - Balance Sheet, Income Statement
4 Need to Know About Accounting Need to Know About Accounting and Finance
5 How would you react to the above statement? “Why do I need to learn about finance … I am very good in my own area of specialization”How would you react to the above statement?
6 The job content Management & Finance Expertise As you move up .. FunctionalExpertise
7 About Managerial Accounting What is Accounting?Financial Accounting, Cost Accounting and Management AccountingFinancial Accounting and Financial ManagementFinance and complexity of organisation
8 Accounting Language of Business Performance is reported and evaluated in financial termsKnowledge is useful for personal investment and tax planning as well
9 Accounting It is not necessary to become accountant But its very useful if every one understands the accounting and financial concepts and terminology properly
10 Need to Learn Accounting It assists in managementWill help in planning, organisation and control of businessLeads to increase in efficiency of businessProfit maximization
11 Streams of AccountingFinancial Accounting, Cost Accounting and Management AccountingLet us understand the similarities and difference in these three streams of accounting
12 Financial Accounting Recording of Financial Transactions Reporting of Financial ResultsPreparation of Financial StatementsTargeted to External Users
13 Cost Accounting Recording of Costs Analysis of Costs Preparation of Cost StatementsTargeted to Internal Users
14 Management Accounting Recording of Financial & other dataAnalysis of Financial and other informationPreparation of Statements for Managerial Decisions
15 Management Accounting Targeted to Internal Users - All levels of ManagementThis is a broader concept encompasses Financial and Cost Accounting
16 Meaning of Management Accounting Any form of accounting which enables a business to be conducted more efficiently can be regarded as Management Accounting. (Institute of Chartered Accountants of India- ICAI)Management Accounting is the
17 application of professional knowledge and skill in the preparation of accounting information in such a way as to assist management in the formation of policies and in the planning and control of operations of undertaking. (International Capital Market Association, London- ICMA)
18 Financial ManagementFinancial Accounting, Managerial Accounting and Financial Management: RelationshipFinancial Management deals with raising and utilization of fundsRaising of funds may include Cost of Capital, Capital Structure
19 Financial Management decisions, Capital Markets, IPOs and so on Financial Management deals with raising and utilization of fundsUtilization of funds may include Capital Budgeting, Portfolio Management, Working Capital Management and so on
20 Managerial V/s Financial Accounting Accounting System(accumulates allaccounting data)Managerial AccountingInformation for decisionmaking, and controlof an organization’soperations.Financial AccountingPublished financialstatements and otherfinancial reports.InternalUsersExternalUsers
21 Complexity of Organisation Finance and complexity of organisationAs the organizations grow, they become complexOwnership and Management are separated
22 Complexity of Organisation Ownership is widespreadThis increases the importance of Finance function
23 About this course Managerial Accounting Course The course will cover Financial Accounting, Cost Accounting and Management AccountingFinancial Management is dealt in a different course
24 Financial Statements What are they? Which are important Financial Statements?What purposes do they serve?
25 Company or Organisation PROVIDERS OF MONEYRESOURCES FOR BUSINESSThese two are always equal
26 The Basic Business Model InfrastructureThe Money CycleBillingMoneyProcurementConsumptionDeliveryCollectionValue Addition CyclePeople
27 Infrastructure Revenue Costs Money Collection Procurement Billing ConsumptionDeliveryCollectionRevenueCostsTo be profitable, our revenue should be more than our cost ! This would make the organisation stronger, healthy and long-lasting.
28 Borrowings from Banks / FIs Balance SheetProfit & Loss AccountLiabilitiesCapitalBorrowings from Banks / FIsCurrent LiabilitiesAssetsFixed AssetsCurrent Assets or Working CapitalHuman AssetsOutstandingInfrastructurePeopleProcurement & InventoryConsumption & WIPDelivery & BillingCollectionMoneyRevenueCostsProfit/ LossBalance Sheet shows the financial position of organisation, while Profit & loss Account shows the profitability of organisation.
29 Balance Sheet shows the cumulative position of resources (assets) and sources of funds (liabilities) at the end of the year. Profit & Loss Account shows ‘Revenue & Cost’ performance during a quarter/ year.
30 Borrowings (eg.from Banks) Balance SheetProfit & Loss AccountLiabilitiesCapitalBorrowings (eg.from Banks)Current LiabilitiesAssetsFixed AssetsCurrent Assets or Working CapitalHuman AssetsOutstandingInfrastructurePeopleProcurement & InventoryConsumption & WIPDelivery & BillingCollectionMoneyRevenueCostsReservesProfitProfits build up reserves & enable an enterprise to acquire new assets without borrowing money. Exactly the way we can acquire assets for our use without borrowing.
31 Borrowings (eg.from Banks) Balance SheetProfit & Loss AccountAssetsFixed AssetsCurrent Assets or Working CapitalHuman AssetsLiabilitiesCapitalBorrowings (eg.from Banks)Current LiabilitiesOutstandingInfrastructurePeopleProcurement & InventoryConsumption & WIPDelivery & BillingCollectionMoneyRevenueCostsReservesProfitProfits build up reserves & enable an enterprise to acquire new assets without borrowing money. Exactly the way we can acquire assets for our use without borrowing.
32 Balance sheet may be prepared at any time showing the position as on that date. Profit and loss account may be prepared for any particular period.
33 Balance Sheet Owners Funds Non Current liabilities Current liabilities Fixed AssetsNon Current InvestmentsOther non current assetsCurrent Assets
34 The Annual Report Usually Contains ... financial statements which consist ofBalance sheet, Profit & Loss A/cCash Flow Statementsnotes to the financial statementsdisclosure of accounting policies
35 The Annual Report Usually Contains ... Chairman’s StatementBoard of Directors & CommitteesDirectors ReportDirectors Responsibility StatementAuditors ReportReport on Corporate Governance
36 The Annual Report Usually Contains ... Disclosure regarding Employee Stock options SchemesList of employees receiving remuneration exceeding Rs. 60 LakhsConservation of Energy Reports
37 The Annual Report Usually Contains ... Consolidated Financial StatementsSubsidiaries Financial StatementsManagement Discussion and AnalysisAnnual General Meeting Notice