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Financial Accounting MGT101 Power Point Slides Lecture 30

This document discusses the classification of investments and provides an overview of balance sheet items including assets, liabilities, capital, reserves, and other accounts. Long term investments are meant to be held long term, while current investments are those that an entity has decided to dispose of. The balance sheet section outlines key liability accounts like capital, reserves, retained earnings, long and short term loans, other long term liabilities, and current liabilities.

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Waqar Ahmed
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20 views

Financial Accounting MGT101 Power Point Slides Lecture 30

This document discusses the classification of investments and provides an overview of balance sheet items including assets, liabilities, capital, reserves, and other accounts. Long term investments are meant to be held long term, while current investments are those that an entity has decided to dispose of. The balance sheet section outlines key liability accounts like capital, reserves, retained earnings, long and short term loans, other long term liabilities, and current liabilities.

Uploaded by

Waqar Ahmed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Financial Accounting Lecture – 30

Classification of Investments
• Long term investments are those investments that are
meant to be held for a long term period.
• If it is decided to dispose off a long term investment, then its
classification is changed to current investment from long
term.

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Financial Accounting Lecture – 30
Balance Sheet (Liabilities)
Particulars Amount Rs. Amount Rs.
ASSETS
Non Current Assets
Fixed Assets X
Capital Work In Progress X
Deferred Costs X
Long Term Investments X
Current Assets X
TOTAL X
LIABILITIES
Capital and Reserves
Capital X
Reserves X
Profit and Loss Account X X
Long Term and Deferred Liabilities
Long Term Loans X
Liability Against Lease Finance X
Other Long Term Liabilities X
Deferred Tax X X
Current Liabilities
Trade Creditors X
Short Term Borrowings X
Other Payables X
Current Portion of Long Term Borrowings X X
TOTAL 2 X
Financial Accounting Lecture – 30

LIABILITIES
Capital and Reserves
Capital X
Reserves X
Profit and Loss Account X X

Long Term and Deferred Liabilities


Long Term Loans X
Liability Against Lease Finance X
Other Long Term Liabilities X
Deferred Tax X X

Current Liabilities
Trade Creditors X
Short Term Borrowings X
Other Payables X
Current Portion of Long Term Borrowings X X

TOTAL X
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Financial Accounting Lecture – 30

• Capital
 It is the total of resources supplied to a business by its
owners.
 Capital is termed as “Share Capital” in case of Limited
Companies.

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Financial Accounting Lecture – 30

• Capital Introduced By Owner In form of Assets

Debit Fixed Assets Account


Credit Capital Account

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Financial Accounting Lecture – 30

• Reserves
 Reserve is the portion of profit set aside for use in future
years for a specific purpose.

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Financial Accounting Lecture – 30

• Profit and Loss / Accumulated Profit and Loss Account


 It is that portion of the profit that is reemployed in the
business.
OR
 This is the accumulated balance of undistributed profit.

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Financial Accounting Lecture – 30

• Accumulated Profit and Loss Account


 In the first year of business this account shows following
figure:
Profit for the year X
Less: Transferred to Reserve X
Less: Profit distributed X
Balance carried to Balance Sheet X

 In Subsequent years balance brought forward from


previous years and profit for the year is added and
distributed as above and the balance is carried to next
year.

8
Financial Accounting Lecture – 30

• Long Term Loans


 Loans that are payable later than a period of more than
twelve months from the balance sheet date.

• Short Term Loans


 Loans that are payable within twelve months of the
balance sheet date.

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Financial Accounting Lecture – 30

• Current Portion of Long Term Loans


 It is that portion / installment of the long term loan that is
payable with in next twelve months.

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Financial Accounting Lecture – 30

• Other Long Term Liabilities


 These include all other liabilities that are payable after a
period of one year of balance sheet date.
 For example staff gratuity and other benefits, liability
against lease finance and other liabilities that become
payable after a period of one year.

11
Financial Accounting Lecture – 30

• Provision
 Provision is charge created for an expected expense or
loss whose actual amount is not known.
 It is usually shown as a reduction in the asset to which it
relates

• Reserves
 Reserve is the portion of profit set aside for use in future
years for a specific purpose.
 It is usually created at the discretion of the owners an is
shown as a liability.

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Financial Accounting Lecture – 30

• Current Liabilities
 Trade Creditors
 Short Term Borrowings
 Other Short Term Liabilities
o Salaries Payable
o Accrued Expenses
o Bills payable
o Advances From Customers
 Current Portion of Long Term Liabilities

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