Scribd
Upload
50 views

CFPM Lecture 3,4 - Accounting Principals & Financial Statements

The document outlines a course on accounting principles and financial statements. It discusses key accounting concepts like basic account types, the accounting equation, and how to prepare key financial statements including the profit and loss statement, balance sheet, and cash flow statement. Example statements are provided for each to illustrate their structure and components.

Uploaded by

Hassaan Ahmed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
50 views

CFPM Lecture 3,4 - Accounting Principals & Financial Statements

The document outlines a course on accounting principles and financial statements. It discusses key accounting concepts like basic account types, the accounting equation, and how to prepare key financial statements including the profit and loss statement, balance sheet, and cash flow statement. Example statements are provided for each to illustrate their structure and components.

Uploaded by

Hassaan Ahmed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 24

Accounting principals

and Financial statements


COURSE OUTLINE
 Lecture 01 - Introduction to FM o Lecture 16 – Cost Management plan
 Lecture 02 – Basic Concepts o Lecture 17 – Estimating Project Costs
 Lecture 03 – Accounting principles o Lecture 18 –Cost estimation Techniques
 Lecture 04 – Financial statements o Lecture 19 – Activity Cost Estimates
o Lecture 05 – Ratio Analysis o Lecture 20 – Determining a Project Budget
o Lecture 06 – Cost benefit Analysis o Lecture 21 – Project Budgeting Techniques
o Lecture 07 – Time Value for Money concept o Lecture 22 – Cost Baseline
o Lecture 08 – Net Present Value o Lecture 23 – Project Funding
o Lecture 09 – Internal rate of return o Lecture 24 – Controlling Project Costs
o Lecture 10 – Payback period o Lecture 25 – Project Control techniques
o Lecture 11 – TVM techniques o Lecture 26 – Earned Value Management
o Lecture 12 – Making a business case o Lecture 27 – Schedule & Cost Variances
o Lecture 13 – Introduction to PCM o Lecture 28 – Schedule and Cost Indices
o Lecture 14 – Planning Project Costs o Lecture 29 – Forecasting techniques
o Lecture 15 – Planning techniques o Lecture 30 – To Complete Performance Index
LECTURE OUTLINE
• What is Accounting ?

• Basic Account Types

• The Accounting Equation

• Financial Statements
WHAT IS ACCOUNTING ?
• The systematic and comprehensive
recording of financial transactions
pertaining to a business

• The process of summarizing, analyzing


and reporting financial transactions

• Accounting is one of the key functions


for almost any business handled by an
accountant
BASIC ACCOUNT TYPES

• Assets

• Liabilities

• Capital

• Revenue

• Expense

• Cost of goods sold


Assets

Resources owned by a
business broadly classified as:

• Fixed Assets

• Current Assets

• Intangible Assets
Fixed assets

long-term piece of property that a


firm owns and uses in the
production of its income and is not
expected to be consumed or
converted into cash, example
include:

• Land
• Buildings
• Vehicles
• Machinery
• Tools & equipment
Current assets

Assets that are reasonably expected


to be converted into cash in the
normal course of business, They
include:

• Cash at bank
• Receivables
• Inventory
Intangibale assets
long-term assets of a company
having no physical existence.
Examples include:

• Goodwill
• Patents
• Copyrights
Liabilities

Company's legal debts or obligations that


arise during the course of business
operations. Broadly classified as:

• Current liabilities where obligations


are due within one year like short-term
loan, payables etc.

• Long term Liabilities where obligations


are due in more than one year like long-
term loans, deferred tax liabilities and
pension obligations etc.
Capital

The amount invested in an


enterprise. It is a reflection of the
capital left in the business after
assets of the entity are used to pay
off any outstanding liabilities in
form of:

• Retained profits
• Company shares
Income

Revenue that a company receives from


its normal business activities, usually
from the sale of goods and services to
customers over a period of time
Cost of sales

The direct costs attributable to the


production of the goods sold by a
company excluding indirect
expenses such as distribution &
administrative costs etc.
Expenses

The indirect costs that a business


incurs through its operations to earn
revenue like administrative,
distribution costs etc.
The accounting equation

Capital = Assets - Liabilities

The inter-relationship between Assets, Capital & Liabilities


expressed in form of an equation
Profit & Loss Statement
• A statement that summarizes the
revenues, costs and expenses incurred
during a specific period of time

• It shows the ability of a company to


generate profit by increasing revenue
and reducing costs
Profit & Loss Statement (example)

ABC (Plc) Ltd Profit & Loss statement


for the year ending 30th June 2018

$m
Sales (cash & credit) 500
Less : Cost of sales (300)
Gross Profit 200
Administrative expense 10
Financing expenses 25
Other expenses 15
Net Profit 150
Balance Sheet
A summary of company's assets, liabilities and capital at a specific
point in time giving an idea as to what the company owns and
owes, as well as the amount invested by the shareholders
Balance Sheet (example)
ABC (Plc) Ltd Balance Sheet
as at 30th June 2018

$m
Fixed Assets
Intangible Assets (goodwill, patents, copyrights etc.) 200
Tangible Assets (land, buildings, vehicles etc.) 400
Total fixed assets 600
Current Assets (Inventory, receivables, cash etc.) 100
Current Liabilities (payables) (50)
Net current assets 650
Long-term Liabilities (Loan) (200)
Net assets 450
Share Capital
Ordinary Shares $1 each 300
Retained earnings 150
Total capital employed 450
Cash Flow Statement
• A summary of the actual or
anticipated inflow and outflow of
cash in a company over an
accounting period

• Lenders and potential investors


closely examine the cash flow
resulting from the operating
activities to assess the ability of
the company to service its debt
and pay dividends
Cash Flow Statement (example)
ABC (Plc) Ltd Cash flow statement
ending 30th June 2015

$m
Operating Activities
Cash from sales/revenue 400
Cash expenses (350)
Cash flow from operating activities 50
Investing activities
Sale of equipment 100
Purchase of vehicles (125)
Cash flow from investing activities (25)
Financing activities
Issuance of new shares 75
Payment of loan (90)
Cash flow from financing activities (15)

Total cash flow from all activities 10


Cash at beginning of the year 35
Cash at the end of year 45
Learning outcomes

• Accounting

• Basic Account Types

• The Accounting Equation & its implications

• How to prepare Financial Statements

You might also like