Accounting and Financial Management
Dr S. Velavan, B.E., M.B.A., PhD.,
DoMS, NIT Trichy
Book references
 Financial Accounting:
 Financial Accounting: A Managerial Perspective (6th Edition), by R Narayanaswamy
(RNS)
 An Introduction to Accountancy (13th Edition), by SN Maheshwari, Suneel K Maheswari,
Sharad K Maheshwari (SNM)
 Cost and Management Accounting:
 Managerial Accounting, 16th Edition, by Ray H. Garrison, Eric W. Noreen, Peter C.
Brewer (GNB)
Learning Objectives
 Stakeholders in a Business
 Accounting definition
 Objectives of the course
 Difference between Financial Accounting and Management Accounting
 Basic Accounting Terms in Profit & Loss statement and Balance Sheet
Stakeholders
 Customers
 Vendors
 Suppliers of raw materials
 Other vendors
 Competitors
 New entrants
 Capital providers
 Own, Family, Friends
 Lenders
 Capital Market
 Government
 Society
Accounting
Input
Process
Business Transactions
(monetary value)
Identifying
Recording
Classifying
Summarizing
Analyzing &
Interpreting
Communicating
Output
Information to Users
Objectives of the course
 Financial Accounting
 Process of creation of financial statements
 Understanding the terms and concepts underlying published financial statements
 Begin to read, analyze, and evaluate published financial statements
 Management Accounting
 Explain the concept of management accounting in making financial decisions
 Understand different costing methods
Financial Accounting
Management Accounting
Provide information about the performance of the
company as a whole in the form
• Profit and Loss Statement
• Balance Sheet Statement
• Cashflow Statement
Provide information about the individual departments
within the company
For use by the external parties like shareholders,
creditors, banks, investors, and Government
For internal use by Management
Record of past events
Data of the present, and future
Mostly – Yearly, sometimes half-yearly
Mostly - monthly
More precise
Less precise
Basic Accounting Terms:
Profit & Loss Statement
 Revenue
 Operating Income (Income from the core business operations)
 Revenue from Sales of Goods, performance of Services for a customer or a client
 Other operating Income
 Non-Operating Income (Income from non-core business operations)
 Interest Income
 Dividend Income
 Gain on sale of assets
Basic Accounting Terms:
Profit & Loss Statement
 Expenses
 Operating Expenses (Cost of services and things used for generating revenue)
 Cost of raw materials consumed
 Purchase of Stock-In-Trade
 Employee Benefit Expenses
 Rent, Electricity, Power, Fuel, Transportation, Repairs to Building, Machinery
 Depreciation expenses
 Non-Operating Expenses
 Finance cost (Interest expenses)
 Payment to auditors
 Consultancy charges paid
 Tax paid
Basic Accounting Terms:
Balance Sheet
 Equity: It is the owners’ equity in the business. It is a residual claim against the assets
of the business after the total liabilities are deducted. Also known as Net-worth.
 Equity Share capital (Amount contributed by the shareholders towards a company’s
capital)
 Reserves and Surplus
 Share premium (is the excess of shareholders’ contribution over share capital)
 Retained Earnings (Profit kept in the business after paying dividends)
Basic Accounting Terms:
Balance Sheet
 Liabilities (present obligation of the entity, the settlement of which is expected to
result in an outflow of the entity's resources. Obligation must be reliably measurable)
 Non-current liabilities (more than one year)
 Bank borrowings
 Other long-term liabilities
 Current liabilities (less than one year)
 Bank borrowings
 Trade payables (Amount payable to the vendors)
 Salary payable
 Other expense payable (Rent, insurance, etc)
Basic Accounting Terms:
Balance Sheet
 Assets (A resource that gives benefits to its owners; Tangible or intangible rights
owned by an enterprise and carrying probable future benefits)
 Non-current assets
 Land
 Building
 Plant & Machinery
 Intangible Assets (Patents, Trademarks, etc)
 Current assets
 Cash & Bank Balances
 Inventory
 Trade receivables (Amount to be received from the customers)
 Office supplies