Accounting For Managers Unit 2 Ratio Analysis- M.Com Sem - 1 HNGU

 

Management Accounting -1 B.Com Sem - 5 Unit -1 HNGU

 

Accounting For Managers M.Com Sem -1 (HNGU) Unit - 1 ACCOUNTING – AN OVERVIEW:

UNIT - 1 ACCOUNTING – AN OVERVIEW:

1. INTRODUCTION:

For a good accountant and a financial analyst, it is necessary to have understanding of conceptual basis of the corporate financial statement and corporate financial reporting system. Even more preparation and presentation of financial statement is also necessary in this case. They need to consider conceptual issues, major aspects of financial statements and theory of disclosure. In other words, they need to be careful for issue relating to the quality of financial statement and mode of financial reporting.

1.1NATURE OF FINANCIAL STATEMENT (MEANING):

Financial Statements are the records of the financial position of a company. It is prepared by the management of the company with a view to present the financial performance of the business conducted by them to the owners and the external parties. The external parties are the parties who are either interested in the performance of the company e.g. investors, government, tax authorities, employees etc.

The financial statement includes:

(1) Balance Sheet, (2) Profit & Loss Statement, (3) Cash Flow Statement, (4) Changes in stock holder’s equity, (5) The notes to financial statement, (6) Quarterly and Annual Reports (in case of listed companies),  (7) Prospectus (in case of companies going for IPOs), (8) Management discussion and Analysis (in case of public companies)

The Government and the Institute of Chartered Accounts of India (ICAI) have issued various accounting standards & guidance notes which are applied for the purpose of financial statement reporting. This ensures uniformity across various diversified industries when they prepare and present their financial statement.

Characteristics (Features) of Financial Statements:

• 1)      Main two statements
• 2)      Accounting Principles and Conventions
• 3)      Based on recorded facts
• 4)      Personal Judgments
• 5)      Compliance of Law
• 6)      Fair Accuracy
• 7)      Different Objectives
• 8)      Accuracy in presentation
• 9)      Comparison with previous year figures
• 10Fair calculation of profit in profit and loss account

Qualitative features of Financial Statement:

• 1)      Relevance
• 2)      Reliability
• 3)      Understandability
• 4)      Consistency
• 5)      Comparability
• 6)      Materiality
• 7)      Timeliness
• 8)      Completeness
• 9)       Neutrality

1.3 OBJECTIVES OF CORPORATE FINANCIAL STATEMENTS:

• 1)      Particular Objective
• 2)      General Objectives
• 3)      Qualitative Objectives

1.4 TYPES OF CORPORATE FINANCIAL STATEMENTS:

• 1)      Balance Sheet
• 2)      Profit and Loss Statement
• 3)      Cash flow Statement

 2.  USES AND USERS OF ACCOUNTING INFORMATION: