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Income Statement Balance Sheet Cash Flow Statement Notes to Accounts and Accounting Policies
Introduction
Annual Report Financial Statement
Balance Sheet Profit & Loss Account
Balance Sheet is a position statement. P&L A/c is a flow statement. Companies Act:
A Balance Sheet as on the last day of the financial year A Profit & Loss Account for the financial year.
Linkage Between Trial Balance, Profit & Loss Account and Balance Sheet
Trial Balance
Adjustments
Balance Sheet
P&L A/c is also called Income Statement. Income is calculated as the difference between revenues and expenses.
Accountants have agreed to use the accrual basis of accounting rather than the cash basis.
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Revenues - gross increases in owners equity arising from business operations/delivery of goods-services to customers Expenses - decreases in owners equity that arise because goods or services are delivered to customers
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TRANSACTION
INCOME EXPENDITURE
Revenue Income
Capital Income
Revenue Income
Capital Income
SOURCES OF FUNDS (Liabilities) (Capital Income) APPLICATION OF FUNDS (Assets) (Capital Expenditure)
EXPENDITURE
Revenue Income
Capital Income
TRANSACTION
INCOME EXPENDITURE
Revenue Income
Capital Income
BALANCE SHEET
P & L A/C
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BS provides a snapshot of an entitys financial position at an instant in time. The P&L A/c provides a moving picture of events over a span of time and explains the changes that have taken place between BS dates.
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Assets --- Assets are the resources controlled by an enterprise as a result of past events, from which future economic benefits are expected to flow to the enterprise. Liabilities Liabilities are the present obligations of the enterprise ,arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits. Equity Equity is the residual interest in the assets of the enterprise after deducting all its liabilities.
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the financial position of assets & liabilities of the firm as on a particular date
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DEFINITION: BS
Balance
a
Sheet is defined as
statement of the financial position of an enterprise as at a given date, which exhibits assets, liabilities, capital, etc.
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DEFINITION: BS
Balance
a
Sheet is defined as
statement of the financial position of an enterprise as at a given date, which exhibits assets, liabilities, capital, etc.
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WHY BS ?
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LOOKS/FORM OF BS
1. HORIZONTAL 2. VERTICAL Except in the first BS, it is required to give the corresponding amounts for the preceding financial year (Comparatives) for all the items shown in the BS.
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Balance Sheet
Asset side Items under Fixed Asset 1. Land 2. Building 3. Plant and Machinery 4. Furniture and Fixture 5. Vehicles
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Balance Sheet
1.
2.
3. 4.
Investment Investment in govt. securities Investment in shares ,debentures and bonds Investment in immovable properties Investment in the capital of partnership firms
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Balance Sheet
Current Assets, Loans, and Advances Current Assets --- Inventories --- Sundry debtors --- Cash and bank balances Loans and Advances --- Advances recoverable in cash or in kind or for value to be received ---Advance income tax --- Advance deposit of sales tax and excise --- Inter-corporate deposits
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BALANCE SHEET
Miscellaneous Expenditure Debit balance in Profit and Los account
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Balance Sheet
Liabilities side Share Capital --- Equity Share Capital --- Preference Share Capital Reserves and Surplus --- Capital reserves --- General reserve --- Capital redemption reserve --- Debenture redemption reserve
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Balance Sheet
Loan Funds Secured Loans -- Term Loans -- Debentures --Working capital loans Unsecured Loans -- Fixed deposits --Debentures --Security deposits
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Balance Sheet
Current Liabilities and Provisions Current Liabilities --- Sundry Creditors --- Expenses Payable --- Advances from customers --- Unclaimed dividends --- Interest accrued but not due Provisions --- Provision for taxation --- proposed dividend --- provision for contingencies
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Balance Sheet is considered to be a static document and it reflects the position of the concern at a moment of time. Balance Sheet is not a valuation statement. The values shown in it are not real values of assets.
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Window-dressing of the Balance Sheets gives a better picture to the share holders, bankers and financial institutions.
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Additional Adjustments
Outstanding expenses Outstanding (accrued) Incomes Bad debts and provisions Depreciation Goods withdrawn for personal use Goods distributed as free sample Expenses paid in advance Incomes received in advance
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Additional Adjustments
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