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Introduction

Lecturer:
Faraz Ahmed Quddusi

S
Syllabus
S no Course Outline Number
of
Sessions
1 Introduction to Financial Accounting 2
2 Accruals, Prepaid & Provisions 3
3 Accounting for Long Term Assets 4
4 Principles of Accounting in Partnerships 6
5 Accounting for Capital Stocks 2
6 Corporate Taxes 3
7 Raising Capital via Debt 2
8 Cash Flow Statements 2
9 Analysis of Financial Statements 4
10 Accounting for Services Business 2
What is Accounting
The Accounting System

Source Double Entry Financial


Business Accounting Statements
Transactions System
The Accounting Equation
The Accounting Equation
Types of Accounts
S No Account Type Increase Decrease

1 Assets Debit Credit

2 Liabilities Credit Debit

3 Capital / Equity Credit Debit

4 Revenues Credit Debit

5 Expenses Debit Credit


Definition of Each Account Type

Assets

• A Resource
• Controlled by the entity
• As a result of Past Events
• From which Economic Benefits are expected
to flow to the Entity
Definition of Each Account Type

Liability

• A Present Obligation
• As a result of Past Events
• Requires a Settlement
• Resulting in Outflow of Economic Benefits
From the Entity
Definition of Each Account Type

Capital / Equity

• Residual Interest
• In the Assets of the Company
• After Deducting all Liabilities
Definition of Each Account Type

Income

• Increase in Economic Benefits


• During the Accounting Period
• In the form of increase / enhancements to
Assets
• Or in the form of decrease / reduction of
liabilities
Definition of Each Account Type

Expenses

• Decreases in Economic Benefits


• During the Accounting Period
• In the form of Decreases / outflow of assets
• Or in the form of incurrence of liabilities
Test your understanding

Determine if the following is an Expenditure


on Asset or Expense

Purchase of a Motor Car


Test your understanding

Determine if the following is an Expenditure


on Asset or Expense

Claim for a Meal


Test your understanding

Determine if the following is an Expenditure


on Asset or Expense

Purchase of Shares in a Supplier


Test your understanding

Determine if the following is an Expenditure


on Asset or Expense

Purchase of a new Computer


Test your understanding

Determine if the following is an Expenditure


on Asset or Expense

Payment for Hotel Accommodation


Test your understanding

Determine if the following is an Expenditure


on Asset or Expense

Payment for Petrol


Test your understanding

Determine if the following is an Expenditure


on Asset or Expense

Purchase of Raw Materials


Test your understanding

Determine if the following is an Expenditure


on Asset or Expense

Purchase of Grease for Car


Test your understanding

Determine if the following is an Expenditure


on Asset or Expense

Purchase of a set of tools


Test your understanding

Determine if the following is an Expenditure


on Asset or Expense

Payment of an Insurance Premium


Test your understanding

Determine if the following is an Expenditure


on Asset or Expense

Payment of Wages
Test your understanding

Determine if the following is an Expenditure


on Asset or Expense

Payment of Rent
Test your understanding

Determine if the following is an Expenditure


on Asset or Expense

Payment for the purchase of a plot of Land


Qualitative Characteristics of
Financial Accounting System

Fundamental Qualitative Characteristics

1. Relevance
• Materiality
• Accruals

2. Faithful Representation
Enhancing the Qualitative
Characteristics

1. Comparability

2. Verifiability

3. Timeliness

4. Understandability
Principles of Accounting

1. Accruals

2. Prudence

3. Economic Entity

4. Cost Principle

5. Consistency Principle

6. Substance over Form

7. Matching Principle

8. Materiality Principle

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