What is accounting

Why accounts required for construction

Accounting principles
o Double entry book keeping
Every financial transaction has two entries
o Why we need credit and debit
Every transaction should be balance at the end of the
accounting period
Debit transaction should match with the credit
transactions
o What is trial balance
Trial balance is the test of make sure the all debit and
credit entries are in balance
What are the accounting standards
o GAAP generally accepted accounting principle
o IFRS international financial reporting standards
o IAS - international Accounting Standards
What are the accounting principles
o Accrual concept
Relevant transactions to be posted in the relevant period.
Accounting equation = Capital= Assets liabilities
Working capital
= current assets current liabilities
o Accounting procedures
Receivables - Received amount of cash
Payables - payable money
Accruals - are the adjustment for the revenues that have
been earned, but nor been reported or expences that
have been occurred but not posted.
Pre payments paid in advance, relevant delivery not
been done
Trial balance all the credit and debit in individual
accounts to be match and balance
Ratio analysis - in order to check whether the
organization is performing by the figures and indicators
derive from the accounting statements
Management account - for the managers purpose of the
accounts
Financial Accounts for the external and purposes of the
external professionals to study, so the standards to be
followed. These standards are to be audited and published
their annul reports.
Construction work in Progress ( CWIP) Contract value,
work done, variation, claims, amount to be pay.
Impairment - abortive works the current value of the
work done in the past.

Financial Accounts
Gathers financial informations for the preparation of
financial statement such and P/L, Balance sheets
Financial statement is to be audited and these are to be
published
Based on the financial standards
Ratio Analysis
o Liquidity
Current ration Current assets/ current liabilities ( Same
as working capital ratio)
Quick ratio = (current assets stocks)/current liabilities
o Profitability
ROCE = Profit/ capital
Gross profit ratio = Gross profit/ sales revenue
Mark up ratio = Gross profit/cost of goods sold
Net profit ratio = net profit/ cost of goods sold
o Efficiency
Stock Turnover ratio = cost of goods sold/average stocks
Fixed asset turnover ratio = Total sales revenue/fixed
assets as per books
o Investment
Capital Gearing ratio = Loans/share holders funds
Dividend yield = dividend per share/market price per
share
Earnings per share = net profit/equity
Profit and loss account
o Considers the revenue and expense
o Generates the profit
Balance sheet
o Considers the assets and liability
o Short terms and long term
o Generates a balance of assets and liabilities
o Clearly shows working capital
o Owners equity will be include to balance the accounting
equation
https://www.nibusinessinfo.co.uk/content/interpreting-balance-sheetfigures
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