Broad Areas under FINANCE

Financial Accounting
Cost Accounting
Management Accounting
Financial Management
Auditing
Taxation
Capital Markets:
NSE, BSE, NYSE, ASX, TSX.
Commodity Markets:
CBOT, MCX, NCDEX.
Security Analysis and Portfolio Management
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Prepared by Dr. Ashutosh Kolte,
Assistant Professor, PUMBA
Wealth Management
Risk Management and Financial Securitization
Credit Risk Management
Treasury Management
Banking
Insurance:
Life and General Insurance
Private and Public Companies.
Merchant Banking
Investment Banking
Mutual Funds
Credit Rating: ICRA, CRISIL
Project Financing
Non Banking Finance Companies (NBFCs)
Venture Capital.


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Prepared by Dr. Ashutosh Kolte,
Assistant Professor, PUMBA
Accounting
Accounting is a subject of immense importance
to the business world. It is considered as the
language of business. Recording of activities
were known to have existed at four or five
thousand years ago amongst the Egyptians, the
Greeks and the Romans. During the industrial
revolution it was felt that the activities in
business should be recorded.

The most important event in the history of
accounting was the development of double entry
book keeping system. Luca Pacioli wrote treatise
on double entry book keeping system in the year
1949. This system gradually helped in keeping
records of business activities.
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Prepared by Dr. Ashutosh Kolte,
Assistant Professor, PUMBA

Accounting is a systematic recording of
transactions in Books of Accounts and involves
preparation of Financial Statements.



The American Accounting Association defines
accounting as, the process of identifying,
measuring and communicating economic
information to permit informed judgments and
decisions by users of the information.
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Prepared by Dr. Ashutosh Kolte,
Assistant Professor, PUMBA
Branches of Accounting

Following are the main branches of accounting:
Financial Accounting: It is prepared to
determine the profitability and financial position
of a concern.
Cost Accounting: It is the formal accounting
system for recording costs. It is a procedure
for determining cost of the output produced
Management Accounting : It is concerned
with presentation of the accounting information
to the management for decision Making.
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Prepared by Dr. Ashutosh Kolte,
Assistant Professor, PUMBA
Objectives of Financial Accounting

To Protect Assets of Business.
To provide suitable information to all
parties interested in Business.
To ascertain profits and losses.
To know financial position of the
business on any particular day.
To comply with legal requirements.
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Prepared by Dr. Ashutosh Kolte,
Assistant Professor, PUMBA


Who are the users of Accounting Information?

Owner / Management
Investors
Lenders
Security analysts and advisors
Employees and Trade Unions
Suppliers and other trade creditors
Customers
Public
Government and other Regulatory Agencies like:
SEBI, IRDA, Stock Exchanges,
Various Tax Authorities, Ministry of
Finance and Department of
Company affairs etc

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Prepared by Dr. Ashutosh Kolte,
Assistant Professor, PUMBA
Systems of Accounting

Double Entry System: Entry is made in two
ledgers. All transactions will have two
effects (One debit and another credit).

Single Entry System: Entry is made either
in cash book or personal ledgers
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Prepared by Dr. Ashutosh Kolte,
Assistant Professor, PUMBA
Steps in Accounting
Recording: Recording all transactions in subsidiary
books for the purpose of future reference. It is referred to
as journal.

Classifying: All recorded transactions in subsidiary
books are classified and posted to the main book of
accounts. It is known as ledger.

Summarizing: All recorded transactions in main books
will be summarized for the preparation of Trial Balance,
Profit and loss account and Balance Sheet.

Interpreting: It refers to the explanation of the meaning
and significance of the results of the financial accounts
so that the concerned parties can take decisions.
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Prepared by Dr. Ashutosh Kolte,
Assistant Professor, PUMBA
Which Transaction is to be Recorded?

Any activity which can be measured in
money is Business Transaction.
All such transactions are recorded in a set
of books.
An account is a record of an amount or
money owned or owed to a particular
person or entity or for a particular purpose
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Prepared by Dr. Ashutosh Kolte,
Assistant Professor, PUMBA
There are three types of accounts

Real Account: cash a/c, plant and machinery A/c, land and building a/c
Personal Account: Shamlals A/c, Ramlals A/c, Reliance Industries
Ltd a/c
Nominal Account: salary a/c, rent A/c




Account Explanation Debit Credit
Real A/c Assets,
Liabilities
What comes in What goes out
Nominal A/c Expenses,
Incomes
All expenses
and losses
All incomes
and gains
Personal A/c Persons The receiver The giver
The above rules are based on double entry book keeping system.
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Prepared by Dr. Ashutosh Kolte,
Assistant Professor, PUMBA
Steps in recording of transactions
Journalizing:
Transactions are recorded in the book of primary entry it is known as
journalizing. The procedure is known as journal entry, the book is known as
journal. There are special journals known as subsidiary books. These are
1 Sales Book
2 Purchase Book
3. Purchase Return Book
4. Sales Return Book
5. Cash book
Using the basic rules of accounting transactions are recorded in the
journal.
Ledger Posting: from the journal the transactions are entered in the
ledgers. This process is known as ledger postings and balances in the
ledger accounts are calculated.
Trial Balance: it is the list of all accounts and their respective amounts.
The arithmetical accuracy of the accounts is verified if the debit and the
credit side of the trial balance tallies or agrees.
Final Accounts: on the basis of the trial balance the final accounts are made
The financial statements prepared are:
Trading account
Profit and loss account
Balance Sheet
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Prepared by Dr. Ashutosh Kolte,
Assistant Professor, PUMBA
The Trading and Profit and Loss Account are prepared
to find out the result of the business i.e. whether the
business has made a profit or loss
The trading and profit and loss account shows the
incomes and the expenditure through out the year. The
debit side or the left hand side of the profit and loss and
trading account has all expenses whereas the credit side
or the right hand side has all the incomes. When credit
side of the P&L account is larger there is a profit, and
when the debit side is larger there is a loss.

The Balance Sheet is made to find out the financial
position of the business. The balance sheet shows the
assets and the liabilities on the last day of the financial
year.
Both the asset and liability sides of the balance sheet
must agree or tally.
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Prepared by Dr. Ashutosh Kolte,
Assistant Professor, PUMBA

Accounting Equation:
Assets = Liabilities + Equity
Uses of funds = Sources of funds

Assets are listed in order of liquidity
Current and non-current

Liabilities are listed in order of maturity

Equity consists of Contributed Capital and
Retained Earnings
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Prepared by Dr. Ashutosh Kolte,
Assistant Professor, PUMBA
Concepts of Accounting

1. Money Measurement Concept: All Transactions are
recorded in monetary terms.
2. Business Entity Concept: Business is regarded as a
separate entity.
3. Going concern Concept: Business entity has no anticipated
termination date.
4. Historical Cost concept: Actual amount involved in the
acquisition of assets is considered. Probable market values
are to be ignored.
5. Dual Concept: the dual aspect is symbolized by Debit and
Credit
6. Accounting Period Concept: accounting is a continuous
process. The continuity is spilt into specific periods in order
to ascertain the result i.e. profit or loss.
7. Objectivity: Accounting data should stand the test of
verification.
8. Realization: Revenue is recognized only if sale has taken
place.
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Prepared by Dr. Ashutosh Kolte,
Assistant Professor, PUMBA
Conventions of Accounting

1. Consistency: The accounting information
should be uniform and comparable.
2. Materiality: There has to be materiality of
information and amount.
3. Disclosure: The accounting information should
disclose all necessary facts.
4. Conservatism: Anticipate no profit but provide
for all losses.
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Prepared by Dr. Ashutosh Kolte,
Assistant Professor, PUMBA