1. Subject:- Financial Accounting 1Presented By.Pallabi Goswami MCI14028Padum Chetry MCI14026Indrani Talukdar MCI14011Kamal K. Saharia MCI14027Tonmoyee Talukdar MCI14013Nandit N.P Gayan MCI14021Aklanta Madhav Kalita MCI14030Jahnu Borah MCI14023Tezpur University

2. IntroductionFinancial statements are the end products ofthe accounting process, which reveals thefinancial results of the specified period andfinancial position as on particular date. It isthe basic and formal annual report throughwhich a business communicates financialinformation to its various user groups. 3. Nature of Financial Statement1. Recorded facts2. Accounting conventions3. Postulates(Assumptions)4. Personal Judgements 4. Frameworkfor preparing FinancialStatementQualitative characteristicsoffinancial statementsObjectives of financialstatemjentsComponents offinancial statementskl 5. Objectives1. To provide reliable financial informationabout economic resources(assets) andobligations(liabilities) of a business firm2.To provide information about the earningcapacity of the business firm 6. 3. To provide reliable information about the changesin resources and obligations arising out of businessactivities.4.To disclose , the various accounting policiesfollowed in preparing the financial statement to itsvarious user groups.5.To disclose, to the extent possible, other relatedinformation to financial statement that is relevantto the needs of the users. 7. Characteristics of Ideal financial statement1.Relevency2.Reliability3.Understandibility4.Comparability 8. Importance of financial statement1. Importance to management2. Importance to Creditors3 Importance to Bankers4. Importance to Investors5. Importance to Government 9. Limitation of financial statement1.Provide only interim reports2.Aggregate information3.No qualitative information4.Personal biasness5.Historical cost 10. Components of Financial Statement1. Income Statement(a)Manufacturing Account(b)Trading account(c)Profit and loss account2. Statement of Financial Position*Balance sheet 11. Manufacturing Account Meaning : Those Concerns which convert the raw materials into finishgoods are required to find out the cost of goods manufactured besidesgross and net profit of the concern. These are manufacturing cumtrading concerns. In order to have full information about the cost ofgoods manufactured, the concerns firstly prepare ManufacturingAccount & then prepare the Trading & Profit & Loss Account. Object of Manufacturing Account :1. Cost of finished goods produced and2. Constituent items thereof such as cost of material consumed,productive wages , direct & Indirect expenses. 12. Manufacturing Accountfor the year ended.Particulars Amount Particulars AmountTo Raw Materials Consumed:(Opening Stock Of raw Material +Purchases During The Year ClosingStock Of Raw Materials)To Direct WagesTo Direct Expenses(as carriage onpurchases)Prime CostFactory Expenses:To Factory LightingFactory RentIndirect ExpensesSupervisors SalaryStores Consumed etc.To Work In ProgressBeginningLess: Closing Work In ProgressSale of ScrapBy Cost of Goods Manufacturedtransferred to Trading A/c 13. 1.Trading account:(a) Purpose(b)Types** Horizontal form** Vertical form 14. Horizontal form Horizontal form is called T form under which the Tradingaccount is prepared in the Format of Ledger account havingtwo sides i.e. debit side and credit side 15. Trading AccountDr for the year ended on.. CrParticulars Amount() Particulars Amount()To Opening StockTo PurchasesLess: Purchase ReturnOrReturns OutwardTo WagesTo Wages and SalariesTo Direct ExpensesTo Carriage ,Carriage Inward orCarriage on PurchaseTo Duty On PurchaseTo Gas ,Fuel And PowerTo Freight/CartageTo OctroiTo Dock ChargesTo Excise DutyTo Import Duty on custom dutyTo Profit And Loss A/C(GROSS PROFIT TRANSFER)By SalesLess: Sales Return or ReturnInwardBy Closing StockBy Profit & Loss A/CTo Gross Loss Transferred 16. Vertical Form Vertical form is a form under which the tradingaccount is prepared in vertical order i.e. in the form of astatement. These are shown below 17. Particulars Amount()DrAmount()CrSalesLess: Sales ReturnLess: Cost of Good Sold:Opening stockPurchases less ReturnsWagesCarriageLess: Closing StockGross Profit...............____________________Trading AccountFor the Year ended 18. Profit and loss Account Meaning:According to R. N. Carter : A profit and lossaccount is an account into which all gains and lossesare collected, in order to ascertain the excess of gainsover the losses or vice-versa.Net Profit=Operating Profit Non operating expenses +Non operating Income 19. Profit and Loss AccountDr For the year ended on.. CrParticulars Amount() Particulars Amount()To Trading A/c(Gross Loss transferred)Office & AdministrationExpenses:To SalariesTo Salaries and WagesTo Rent, Rates & WagesTo Printing & StationaryTo Postage & TelegramTo LightingTo InsurancePremium(Office)To Telephone ChargesTo Legal ChargesTo Audit FeesTo travelling expensesTo Establishment ExpensesTo Trade ExpensesTo General ExpensesTo Royalty on salesBy Trading Account(GROSS ProfitTransferred)By RentBy DISCOUNT ReceivedBy Commission ReceivedBy Interest on investmentBy Sundry ReceiptsBY Bad Debt RecoveredBy Sale of scrapesBy Interest on DrawingsBy Capital a/c(net loss transferred) 20. MEANING and FEATURES of Profit and LossAppropriation AccountMeaning:Profit and Loss Appropriation Account is an account which is preparedwith an objective of appropriating or distributing the net profits amongthe partners.Features:It is prepared after the Preparation of Profit & Loss A/CIt is an extension of Profit & Loss A/C.It is Prepared by partnership firm ( and Companies) for appropriations( distribution) of profits among partners. It discloses how the net profit for an accounting period has beenappropriated.It is prepared in terms of the partnership Deed or the Partnership Act. 21. Profit and Loss Appropriation AccountFor the year ended ..Particulars Amount(Rs)Particulars Amount(Rs)To Interest on PartnersCapital A/cTo Partners Salary a/cTo Commission topartners a/cTo General Reserve a/cTo Partners Capital a/c*( share of profits )By Net Profit b/d(Net Profit transferred)By Interest on Drawingsa/cBy Balance ofUndistributed Profit(brought forward fromprevious year)By Partners Capitala/c*( share of loss ) 22. Balance SheetAccording to J.R. Batliboi , A balance sheet is astatement prepared with a view to measure the exactfinancial position of a business on a certain fixed date. Importance of Balance Sheet :1. To Ascertain the financial position2. To Ascertain the Information about the exactamount of capital3. Helpful in the preparation of books of account in thenext year 23. Characteristics of Balance Sheet The balance sheet is a statement not an account. The word to and By are not used before the names ofthe accounts shown in the balance sheet. The total of the two sides of the balance sheet must beequal. It Shows the financial position of the businessaccording to the going concern concept. The balance sheet does not have Debit or Credit Side.The two sides of the balance sheet are called AssetsAnd Liability 24. Marshalling of Assets & Liabilities Marshalling can be made in one of the following twomethods(a)Liquidity; or(b)PermanenceGenerally , sole proprietors and partnership firmsprepare their Balance Sheet in the order of Liquidity. 25. Formats of Balance Sheet Horizontal Form and Vertical Form 26. Horizontal Form:-Under this form of presentation of BalanceSheet the Assets are shown on the right hand side. Andthe Liabilities are shown on the Left Hand Side . Thisform is also called T form. This shown below 27. Balance Sheetas on Liabilities Amount(Rs) Assets Amount(Rs)Current LiabilitiesBank OverdraftSundry CreditorsBills PayableOutstandingExpensesUnearnedIncomeFixed LiabilitiesLong term LoansReservesCapitalAdd- Net ProfitLess-Net LossLess-DrawingsCurrent AssetsCash in HandCash at BankBills ReceivableShort termInvestmentsSundry DebtorsClosing StockPrepaidExpensesAccrued IncomeFixed AssetsLoose ToolsMotor VehicleFurnitureLong termInvestmentsPlant andMachineryPatent 28. Vertical Form:-Under vertical form of preparing abalance sheet, the liabilities and assetsare shown one after another in verticalorder i.e. in the form of a statement. 29. Figures as at theend of currentfinancial yearFigures as at theend of previousfinancial yearAssetsCurrent Assets:CashSundry DebtorsLess: Provision for Doubtful DebtsStockPrepaid ExpensesFixed Assets:Furniture and FixturesLand and BuildingsPlant and MachineryLess: DeprieciationGoodwillTotal AssetsLiabilities and Capital:Current Liabilities:Sundry CreditorsOutstanding ExpensesTotal Current Liabilities 30. Prepare Trading account form the given information forX LTD. For the year 31st December 2006 Opening stock- 40,000 Purchases- 1,75,000 Sales- 3,03,000 Return Inwards- 3,000 Return Outwards- 5,000 Wages 30,000 Carriage Inwards 5,000 Closing Stock- 65,000 31. Trading Accountof X ltd. For the Year 31st Dec. 2006Particulars Rs. Rs. Rs.Sales3,03,000Less Sales return3,000 3,00,000Opening stockPurchasesLess purchase returnCarriage InwardWagesLess Closing StockCost of Good soldGross profit1,75,0005,0005,00030,00040,0001,70,00035,0002,45,00065,0001,80,0001,20,000 32. Prepare Profit and loss account for X Ltd. For the year 31st Dec.2006 Discount Recd.- 12,000 Dividend Recd.- 16,000 Profit on Sale of an asset- 16,000 Salaries to sales people- 15,000 Salaries to Administrative- 25,000 Telephone Charges- 1,500 Audit Fees 1,000 Depreciation on Furniture- 200 Bad Debts 200 Interest paid on loans- 200 Loss by Fire- 3,000 33. Profit and loss account for X Ltd. For the year 31st Dec. 2006Particulars Rs Rs. RsGross ProfitAdd: Other Income( Dis. Recd.)Non Trading income (Div. Recd.Abnormal gains ( Profit on asset sale)Less:Mgt. Expenses ( Admin. Salary)Telephone Charges and Audit FeesLess: Maintenance Expenses( Dep.)Less: Selling &Dist.Exp(sales Salary)Bad debtsLess: Financial expenses ( Interest)Less: Abnormal Losses ( Fire loss)Net profit Transferred to capital account25,0002,50015,00020012,00016,00016,00027,50020015,2002003,0001,20,00044,0001,64,00046,1001,17,900 34. Balance SheetA business firm has following Assets and Liabilities . From thefollowing information prepare a balance sheetMachinery Rs 100000Furniture -Rs 30000 Depreciation on machinery-10000Prepaid expences-2000 Profit of the year-90000Outstanding income-1000 cash in hand-3000Long term loan-1000Closing stock 5000Outstanding expences-100Income received in advance-500Capital of the partners-A-400000B-400000 35. Balance sheetas onLiabilities Amount Assets AmountLong term loan 100000 Machinery 100000Income received in Less : DepreciationAdvance 200 10000 90000Furniture : 169000Outstanding expenses 100 Closing Stock 5000Capital :: Cash in Hand 3300A: 40000 Prepaid expenses 2000Add : profit 45000 Outstanding income 1000B: 40000Add : Profit 45000 170000270300 270300 36. Treatment of AdjustmentsClosing Stock: If this item is given inside the trial balancethen only mention as Current assets in Balance Sheet.But if given in adjustments then show the same in tradingaccount as well as in Current Asset side of Balance Sheet. Outstanding Expenses : ( due for accounting period butnot paid) Add this amount in the particular expense either intrading or P&L A/c and show as Current Liabilities in BalanceSheet.Prepaid Expenses: (Expenses paid in advance) Deduct thisamount in the particular expense either in trading or P&LA/c and show as Current Assets in Balance Sheet. 37. Outstanding Income: (Income due in accountingperiod but still not received) Add this amount in theparticular income in P&L A/c and show as CurrentAssets in Balance Sheet. Income Received in advance: (Income received inadvance by business before it being earned by thebusiness.) Deduct this amount in the particular incomein P&L A/c and show as Current Liabilities in BalanceSheet. Depreciation: Show this amount in the P&L A/c anddeduct form that particular fixed asset in the BalanceSheet. Interest on Capital: Show this amount as Financialexpense P&L A/c and added in capital in Balance Sheet. 38. THANK YOU39