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Financial Accounting and Analysis

   
  

Y ankar Jaganat an

Marc 6, 2011
Jour Familiarity wit
Financial Accounting
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¦ Ytate your familiarity wit Financial Accounting

 
     

¦ Jour Objective in t is course

 
     

 
  

 
  


Financial Accountancy:
T e Ytructure
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Analysis & Interpretation

Financial Ytatements

Bookkeeping


Our Focus in t is Course |
Knowledge Used in
Classified
Y       Level of Knowledge


  
    1. Awareness

Analyzing Yituation 2. Familiarity


3. Working knowledge
Applying Principles 4. Expert knowledge

Understanding Concepts
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åept of Coverage |
Working Expert

Yl no Topics Awareness Familiarity knowledge Knowledge


      

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Financial Accounting & Analysis
-Topics |
1. Introduction
¦ Course content, met odology and evaluation met od
¦ Bookkeeping, Accountancy and Financial Analysis defined
2. Accounting concepts, conventions & åouble entry
¦ Accounting concepts, Conventions, åouble entry accounting
& Accounting equations
3. Financial Ytatements
¦ Balance Y eet, Profit and Loss Account & Cas Flow
Ytatements
4. Accounting Ytandards
¦ Rationale, Ypecific Ytandards, IFRY-Concept &
Implementation
5. Ratio Analysis or Comparative view
¦ åupont Analysis, Altman Ycore, Valuation Based Ratios
6. Accounting for Internal decision making
¦ Cost accounting and management accounting systems
7. Ypecific Purpose Analysis
¦ W at to analyze and w en, Consolidation of Accounts
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Our Course Objectives |
¦ At t e end of t e course, you would be

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Reading for t e Course |
¦ Must Read during t e course -
1. One Annual Report of
 '  Y  %  $
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2. Important Accounting Ytandards


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Reading for t e Course |
Basic Book:
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Reference Book
1. Corporate åisclosures 1553 ± 2007, T e Origin
of Financial and Business Reporting !
Y  4  %    Î
2. Financial Accounting ! 
    
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5 # 
3. Financial Y enanigans !  Y

4. T e Number ! 
  
5. Art asastra ! Y 
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Met odology |
Met odology
X Eac one to identify one company from t e
Yensex companies and get t eir annual report
w ic will be used as reference in t e class
X     
     

Class plan
X 3 topics covered eac day
X Eac topic for 75 minutes
X A presentation on an identified topic from eac
of you in teams of 2 eac (10-15 minutes)
X Presentation, åiscussion and Conclusion
3
Evaluation |
Ycoring pattern
X Individual project 20
X Class presentations /Participation 10
Group Project ± in groups of 3 eac 20
X Written test ±s ort answers 25
X Written test ±long answers 25
Total 100


Class projects |
¦ Individual project
4 
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åue date: April 9t 2011


¦ Team project ±team of 3 members

                   
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åue date: Last Class 


Any Questions / Clarifications |

¦ Can we start?


Accounting as it Evolved |
¦ P ase 1: Recording events ±track performance, avoid disputes

¦ P ase 2:From Bookkeeping to Accounting -Yummarization

¦ P ase 3:åouble Entry Yystem of Accounting

¦ P ase 4: GAAP & Accounting Ytandards

¦ P ase 5: IFRY or A Global Accounting Ytandard

P ase 1 and P ase 2 we will cover Today ÿ


P ase 1: T e Birt :
Accounting
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¦ 30,000 years old bone found wit 55 notc es in
batc es of 5
////
¦ Found by år.Karl Absolon in 1937 in Czec oslovakia
µPeople using t ese bones were fearsome unters, and
for eac kill, t ey would score anot er mark onto
t eir tally stick« T ey ad also invented t e first
elements of accounting, since w at t ey were
actually doing was writing numbers in t e simplest
notation know.¶
Georges Ifra , in è      

Record Transactions ± To Track Performance Î


P ase I: Early Accounting Yystems |
Mesopotamian period ±(Code of Hammurabi)
Use of  to record transactions between t e
s ep erds and t e flock owner
¦ Ycribe ±to write transaction and ensure t ey complied
wit t e code
¦ Parties signed by using µYeals¶ t eir personal signature
¦ Used primarily in temples (for commercial transactions)
and in markets
¦ Primarily used for recording Yale and Loan

Record Transactions to Avoid åisputes +


Early Accounting Yystem: Greece |
Ancient Greece
¦ Used public accountants to manage Public
Finance.
¦ Accountants selected t roug lots
¦ Used primarily by t e Government and Banks
(run in temples by t e temple aut orities)
¦ Concept of Budget and time period (an year as a
measurement concept)

Concept of Money Measure, Budget and Time Period ,


Early Accounting Yystem: Roman |
Ancient Rome

¦ Accounting Records kept by eads of families

¦ a  day book &      t e


ledger

¦ åistinction between records for daily updating and


periodic summarization

Bookkeeping and Accounting Yeparated -


Early Accounting Yystem: India |
Ancient India (a  )
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¦ Refined summarization( ,         
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¦ Period and Entity recognized( '  
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Accountancy Refined wit Yummarization /
Accounting before åouble entry accounting |
Ancient India (Art as astra)
¦ Format for maintaining Accounts prescribed
¦ Format for Accounts covering åate, Narration,
relevance of Accounting period and Classification
in place
¦ Qualities of Accountant and Auditor defined
¦ Yystem of Audit in Place wit penalty for default
¦ Yystem of Annual Budget
¦ 40 ways of embezzlement identified

A Yystem of Accountancy åefined 3


Yingle Entry accounting:
C arge ±åisc arge met od
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¦ Used in Royal / Feudal Yystems of Europe
¦ T e superior c arged t e subordinate wit a responsibility
7 

  
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¦ T e subordinate disc arges is responsibility by
% 
   6!
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¦ In early companies at eac Annual General Meeting after
t e åirectors presented t e accounts t e s are olders
gave a disc arge

T is system was called t e C arge-disc arge system of accounting 


Accounting Today |
Accounting: Financial Management
Mat : P ysics

Accounting defined as ³T e art of recording,


classifying and summarizing in a significant manner
and in terms of money transactions and events w ic
are in part at least, of a financial c aracter and
interpreting t e results t ereof.´ American Institute of
Certified Public Accountants

Like Mat , Accounting Is Used in Multiple åomains 


Accounting ±T e åifferent Flavors |
   


  

 
 

?   

We will cover some of t is in t e next 8 weeks 


Financial Accounting & Analysis
-Topics |
1. Introduction (Marc 6)
¦ Course structure, met odology and evaluation
¦ A brief istory of accountancy
2. Accounting concepts, conventions & åouble entry (Marc 12)
¦ Accounting concepts, conventions, åouble entry accounting
& Accounting equations
3. Financial Ytatements (Marc 19)
¦ Balance Y eet, Profit and Loss Account & Cas Flow
Ytatements
4. Important Accounting Ytandards (Marc 26)
¦ Need for Accounting Ytandards and key standards
5. Ratio Analysis or Comparative view (April 2)
¦ Intra-industry, Inter-industry and Ypecific purpose analysis
6. Accounting for Internal decision making (April 9)
¦ Cost accounting and management accounting systems
7. Accounting for Equity Markets (April 13)
¦ Y are premium, EPY, Book value, Bonus issue, Ytock split, UY
GAAP and IFRY
8. Project Presentation (April 24) ÿ
T e Next Class |
1. Eac one select one Yensex company

         
 
!  

2. Two members in t e class: To go t oug t eir


annual report and s are its different sections:
Explain t e relevance of t e different sections
for a banker

Ot ers: Please Identify Questions t at you want answered in Î


t e next class
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