ACCOUNTING AND FINANCIAL STATEMENTS

Accountancy and related professions accountants Accounts Department, Accounting Department bookkeeping - bookkeeper accounting - accountant auditing - auditor MK, p.95

Accountants may have a specific focus Management/managerial accounting Tax accounting Cost accounting Historical cost accounting Replacement cost accounting MK:pp.95, 96, 98

Vital questions for any business How much do we make? Do we make losses? How much do we own? How much do we owe to others? Where do we find cash if necessary? What do we use cash for?

Which financial statements answer the previous questions? The Profit and Loss Account -P&L (The Income Statement) The Balance Sheet The Cashflow Statement

Opposites? 1. Credit 2. Revenue 3. Profit 4. Appreciation 5. Fixed (assets, liabilities) Long-term (assets, liabilities) 6. Tangible 7. Accounts receivable Debtors

Opposites? 1.Debit 2.Expenditure 3.Loss 4.Depreciation 5.Current assets/liab. Short-term 6.Intangible 7.Accounts payable Creditors

Opposites Credit Revenue Profit Appreciation Fixed assets/liabilities Long-term a./l. Tangible Accounts receivable Debtors Debit Expenditure Loss Depreciation Current assets/liab. Short-term a./l. Intangible Accounts payable Creditors

Financial statements -revision 1 Where can the following information be found? How much does a company owe? What does it own? What are its sales and related costs and expenditure? Where does cash come from? What is it spent on? What does equity include?

Financial statements (RB p.70-75) Balance Sheet: 3 parts? Adjectives used to describe them? What does each part include? What is the basic accounting equation? Adjectives? Synonyms? Profit & Loss Account(Income Statement:What does it show? What do revenues include? What do expenditures include? What happens with profits? Totals vs. expenses/deductions? Synonyms? Cashflow Statement: What does it consist of? Where does cash come from and go to?

net profit, loss, revenues, sales, cash flow, gross profit ………………… profit which remains after all costs, expenses and taxes have been taken away …………………amount of money coming into and going out of a company …………………spending more money than it is received …………………total number of products that a company sells over a period of time …………………money received from selling goods and services …………………profit before taking away expenses and taxes

Put the following amounts in the correct order by their size. Net profit Earnings Before Interest and Tax (EBIT) Reserves EBITDA (Operating profit) Gross profit Total sales revenue (turnover, top line) Slide: Courtesy of Boglarka Kiss-Kulenović

Key: Total sales revenue (turnover, top line) Gross profit EBITDA EBIT Net profit (bottom line) Reserves

Cashflow Statement : Inflows or Outflows Cashflow Statement : Inflows or Outflows? Operations -Investments- Financing? Dividends paid Sales of property, plant and equipment Income taxes paid Proceeds from issuing shares Purchases of property, plant and equipment Receipts from the sale of goods and services Repayment of debt

A few more terms used in accounting (MK, p A few more terms used in accounting (MK, p.97): goodwill, share premium, common stock, pre-paid expenses, proceeds Source: Investopedia costs such as rent, interest or insurance premium that are paid in advance an intangible asset such as a strong brand name, good customer relations, good employee relations and any patents or proprietary technology cash realized from a sale or received as a loan, after all commissions, expenses, fees, and taxes are deducted the account to which the amount of money paid (or promised to be paid) by a shareholder for a share is credited to, only if the shareholder paid more than the cost of the share a security that represents ownership in a corporation and gives rights to a company's assets only after creditors and preferred shareholders have been paid in full

Find the accounting terms that have the same meaning (AE & BE) AGM Balance Sheet Accounts Receivable P&L Account Common Stock Creditors Statement of Financial Position Additional Paid-In Capital Income Statement Net Income Profit AMS (ASM) Ordinary Shares Debtors Share Premium Accounts Payable

How many accounting terms can you identify in the next slide? Source: MacKenzie, I. (1995) Financial English. LTP

Translate the following: Dobit nakon oporezivanja Zalihe Dugotrajna imovina Dobit od redovitog poslovanja Ukupne kratkoročne obveze Zadržana dobit Materijalna imovina Prekoračenje računa Sumnjiva i sporna potraživanja Troškovi redovnog poslovanja Nematerijalna imovina Potraživanja Amortizacija Obračunato, neplaćeno

Accounting in real life ...

Identify some of Agrokor’s stakeholders in the pictures below Identify some of Agrokor’s stakeholders in the pictures below. Who are they and what is at stake?

Study the following financial statements (follow the links below): Compare the main elements (e.g. total assets, total revenue) of Google’s three main financial statements for 2008 (MK: p.97 & 99) and b) for 2016 (see the link which follows): https://www.google.com/finance?fstype=ii&q=NASDAQ:GOOG 2. Study Agrokor’s annual report for 2015 and find summarised financial statements for its four subsidiaries in 2015 (pp.81-83 of the computer page numbering) http://www.agrokor.hr/en/investors/financial-statements/yearly/ Assignment: Be ready to answer a few simple questions in class using the above financial statements on your smartphones or as printout.

Assignment (Part 1) Google’s financial statements 1.The Income Statement (P&L) a) types of costs and expenses b) 08 vs. 16: tot. revenue, tot. operating expenses, net income 2. The Balance Sheet: Show the basic accounting equation using the example of Google’s figures for 2016. 3. The Cashflow Statement: a) Three types of cashflow? b) Which of the three was on the increase in 2016?

Assignment (Part 2) Agrokor’s financial statements for 2015 (pp.81-83) 4. What synonym is used for ‘fixed’ assets? 5. What is meant by ‘net result’? 6. Which subsidiary had positive cashflow in 2015?