Professional Documents
Culture Documents
2
Fundamentals of
Managerial Accounting
Example2
employees
are
the
valuable
resources of the organisation but
their measurement in monetary
terms is not possible therefore, not
recorded in books.
Double Entry
significant
details
for
regular
maintenance of books and not
always easy to use.
It
generally needs a qualified
accountant to run it.
Every transaction has two aspects:
i) it increases one asset and
decreases other asset
ii) it increases an asset and
increases other liability
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Single Entry
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Example
Goods sold on one months credit are
not be recorded in the system at the
time of sale of goods. This will create
a situation where a businessman can
not anticipate exact cash position of
the particular month and therefore
wrong planning.
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Forms of
Business Organization
Sole Proprietorship
Hindu Undivided
Family
Partnership
Company
Co-operative Society
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Sole Proprietorship
it is a business owned and
usually carried on by a
single person known as
proprietor.
When the ownership and
management of business
are in control of one
individual, it is known as
sole proprietorship.
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Advantages:
Ease of formation
Better Control
Prompt Decision Making
Retention of Business Secrets
Personal Attention to Consumer Needs
Disadvantages:
Limited life
Unlimited liability
Limited Financial Resources
Limited Capacity of Individual
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Partnership
A partnership is a relationship
between the persons who have
agreed to share the profits. It is a
business owned and carried on by a
group of people.
Each member of such a group is
individually known as partner and
collectively the members are known
as a partnership firm.
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Advantages:
Ease of formation
Less regulations
Sharing of Risk
No corporate income tax
Disadvantages:
Unlimited liability
Difficult to raise capital
Lack of Harmony
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Company
Unlimited
Limited
Private
Public
Unlisted
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Listed
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Company / Corporation
Company
form
of
business
organisation
is
a
voluntary
association of persons to carry on
business. Normally, it is given a legal
status and is subject to certain legal
regulations. It is an association of
persons who generally contribute
money for some common purpose.
The money so contributed is the
capital of the company.
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Advantages:
Unlimited life
Professional Management
Limited liability
Ease of raising capital
High possibility of wealth
maximization
Disadvantages:
Dividend Tax burden
High cost of set-up and report filing
More regulation
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Co-operative Society
Any ten persons can form a cooperative society. It functions under
the Co-operative Societies Act, 1912
and
other
State
Co-operative
Societies Acts. A co-operative society
is entirely different from all other
forms of organisation discussed above
in terms of its objective. The cooperatives are formed primarily to
render services to its members.
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Advantages :
Democratic management
Assistance from the government
Elimination of middlemens profit
Fairly stable life
Disadvantages :
Limited capital
Lack of managerial talent
Lack of motivation
Lack of secrecy
Dependence on the government
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Stakeholder
Stakeholder is a person who has a
legitimate interest in an entity.
Investors
Management of enterprise
Creditors / Lenders
Government
Employees
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Investor
Investor study the Financial
Statement of the company before
deciding upon whether to buy or
not a business or shares.
If they intend to buy, then the
fair value of business or shares is
also determined on the basis
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Management
Managers are the main users of
the Financial Statement. They use
the financial statement
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statement
To know movement of funds
through Fund Flow Analysis
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Creditors/ Lenders
Creditor or Lender study the
Financial
statement
of
the
borrower before advancing credit
or loan. Thereafter also the
creditors and lenders analysis the
Financial statement to find out
whether the business is solvent
(in position to repay the loan).
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Government
The amounts payable by concern
by way of taxes levied by
Government such as Income Tax,
Sales Tax, Excise etc. are
examined on the basis of the data
in Financial Statement.
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Employees
Employees also use Financial
Statements in making collective
bargaining agreements with the
management, in the case of
labour union or for individuals in
discussing their compensation,
promotion and rankings.
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