Javid Iqbal Assistant Professor Department of Management Sciences COMSATS Institute of Information Technology, Islamabad

Education M.Sc in Accounting (Pass with Distinctions, August 2007-June 2009) Graduate School, School of Business, Economics and Law, Gothenburg University, Sweden Master of Business Administration in Finance ( ) Department of Business Administration University of Sargodha, Pakistan Master of Commerce in Accounting ( ) Hailey College of Commerce University of the Punjab, Pakistan Bachelor of Commerce ( ) Hailey College of Commerce University of the Punjab, Pakistan

DISTINCTIONS & AWARDS Rotary International Student House (RISH) has selected one of the top five international students from Gothenburg University, Sweden. Awarded distinction on master project (Thesis) presented to fulfill the requirement of Master of Science in Accounting degree. Awarded cash prize and certificate on project of European financial crises

EXPERIENCE Assistant Professor – COMSATS Institute of Information Technology, Islamabad – (2009 to till date) Research Fellowship – School of Business, Economics and Law, Gothenburg University, Sweden – 2009 Lecturer – University of Education, Lahore, Pakistan – 2006 to 2007 Lecturer – Hi-Aims College of Commerce, Jauharabad – 2004 to 2005

RESEARCH INTERESTS Financial Disclosure, Financial Regulations, Financial Statements Analysis, Accounting Practices, Management Accounting

End of Profile

Accounting 1 Course Contents MGT 130

Business Organizations Proprietorships, partnerships corporations.

Business types Manufacturing Merchandizing Services business.

Accounting Information for Decision Making Financial Accounting Management Accounting, Objectives with regards to the information

GAAP and Accounting Standards Generally Accepted Accounting principles, IAS and IFRS – Basis for business entities for Preparing Financial Statements for the external users

Economic Transactions Double entry system Transactions Principles of Debit and Credit

Accounting Equation Rules of Accounting equation Techniques of calculating – Assets, – Liabilities and – Owner’s equity Transactions in Accounting Equation

Financial Statements Financial Accounting – Income Statement, – Balance Sheet, – Cash flow statement and – Statement of changes in Owner`s equity

The Accounting Cycle Preparing Journals Preparing Ledgers; the main book of original entries Preparing Trial Balance, Adjusting entries and adjusted Trial Balance Preparing Financial Reports Closing entries and completion of Accounting cycle

Special Journals Receivable Inventories Control over cash – Bank Reconciliation Statement

End of Course Outline

Recommended Book Meigs, Williams, Haka and Bettner: Accounting: The Basis for Business Decisions. Ed(11th) Warren Reeve Fess: Accounting, 21 st Edition

Chapter 1 Accounting 1 MGT 130

1.Describe the nature of a business. 2.Describe the role of accounting in business. 3.Describe the profession of accounting. 4. Summarize the development of accounting principles 5. State the accounting equation and define each element of the equation. Objectives

6.Explain how business transactions can be stated in terms of the resulting change in the basic elements of the accounting equation. 7.Describe the financial statements of a proprietorship and explain how they interrelate. Objectives

Types of Businesses Manufacturing Merchandizing Services business.

Toyota MotorsCars, vans IntelComputer chips NishatTextile NikeAthletic shoes Coca-ColaBeverages SonyStereos and television Types of Businesses Manufacturing Business

Metro Cash & Carry General merchandise D.WatsonMedicine United MobilesMobile Phones Amazon.com Internet books, music, Types of Businesses Merchandizing Business

PIATransportation Marriott HotelsHospitality and lodging HBLFinancial Services PTCLTelecommunication PIATransportation Marriott HotelsHospitality and lodging HBLFinancial Services PTCLTelecommunication Types of Businesses Services Business

There are three types of business organizations Proprietorship Partnership Corporation

A proprietorship is owned by one individual. Advantages Ease in organizing Low cost of organizing Disadvantage Limited source of financial resources Unlimited liability

A partnership is owned by two or more individuals. Advantages More financial resources than a proprietorship. Additional management skills. Disadvantage Unlimited liability.

A corporation is organized under state or federal statutes as a separate legal entity. Advantage The ability to obtain large amounts of resources by issuing stocks. Limited liability Disadvantage Double taxation. Difficult process to establish

A business strategy is an integrated set of plans and actions designed to enable the business to gain an advantage over its competitors, and in doing so, to maximize its profits.

Under a low-cost strategy, a business designs and produces products or services of acceptable quality at a cost lower than that of its competitors.

Business Strategies Under a differential strategy, a business designs and produces products or services that possess unique attributes or characteristics which customers are willing to pay a premium price.

A business stakeholder is a person or entity having an interest in the economic performance of the business.

Owners Banks Customers Government Agencies etc

Common Things – Organizational Goals – Need Information

Organizational Goals Profit Making Welfare Work

2 Assess stakeholders’ informational needs. The Process of Providing Information STAKEHOLDERS Internal: Owners, managers, employees External: Customers, creditors, government 1 Identify stake- holders.

Design the accounting information system to meet stakeholders’ needs. 3 4 Record economic data about business activities and events. The Process of Providing Information

5 Prepare accounting reports for stakeholders. Accounting Information System The Process of Providing Information STAKEHOLDERS Internal: Owners, managers, employees External: Customers, creditors, government

Purpose of Information Investors want to know if a company is a good investment. Creditors want to know if they should extend credit, how much to extend, and for how long. Managers want to know if a new product will be profitable. Owners want to know which employees are productive. Government regulators want to know if financial statements conform to requirements.

The Purpose of Accounting The basic purpose of Accounting is to provide information to decision makers that is useful in making economic decisions.

Accounting System The accounting system is a series of steps performed to – Analyze, – Record, – Quantify, – Accumulate, – Summarize, – Classify, – Interpret – Report economic events and their effects on an organization and to prepare the financial statements.

Accounting Accounting is a process of – Identifying, – Recording, – Summarizing, and – Reporting economic information to decision makers

Accounting System Accumulates data for use in both financial and managerial accounting Accounting System Accumulates cost information Managerial Accounting Financial Accounting

Financial accounting - focuses on the specific needs of decision makers external to the organization, such as stockholders, suppliers, banks, and government agencies i.e. annual reports, quarterly reports, semi annual reports.

Financial Statements Balance Sheet Income Statement Cash Flow Statement Statement of Changes in Owner’s Equity – Notes

Financial Statements  Balance Sheet ◦ Shows financial position of the company for a specific point in time/date i.e. 31 st December 2010, 30 th June 2010 etc.  Income Statement ◦ Shows net results of business operations for a specific period of time i.e. a week, month, semi-annual, Annual  Cash Flow Statement ◦ Shows inflow-outflow of funds for a specific period of time.  Statement of Changes in Owner’s Equity ◦ Shows changes incurred in the total equity for a specific period of time

The Balance Sheet Sections of the balance sheet:  Assets - resources of the firm that are expected to increase or cause future cash flows (everything the firm owns)  Liabilities - obligations of the firm to outsiders or claims against its assets by outsiders (debts of the firm)  Owners’ Equity - the residual interest in, or remaining claims against, the firm’s assets after deducting liabilities (rights of the owners)

Income Statement Sales Revenuexxxx - Less Expenses xxxx = Gross profitxxxx - Operating Cost: Selling General Administration Expensesxxxx = Net Incomexxxx

Managerial Accounting It is a science of Identify information, Measure information, Analyze information, Interpret information, and Communicate information Focus of managerial accounting is on the needs of managers within the organization rather than interested parties outside the organization.

Costing Accounting Accumulate cost data for use in both managerial and financial accounting i.e. production cost data (MA), value inventory for balance sheet (FA)

Accounting System Accumulates data for use in both financial and managerial accounting Accounting System Managerial Accounting Information for decision making, planning, directing, and controlling an organization's operations and assessing its competitive position Financial Accounting Published financial statements and other financial reports

Managerial Accounting Financial Accounting Users of informationManagers within organizations Interested parties outside organizations RegulationsNot required and unregulated Must confirm to GAAP/IFRS/IAS/SECP Source of DataOrganizations basic accounting system plus other sources Almost exclusive drawn from the org`s basic accounting system which accumulate financial info Nature of Reports and procedures Focus on subunits within org (Dept, divisions, region etc), historical as well as projection of future events Focus on entire enterprise based on Historical Data

Accountants employed by a business firm or a not-for-profit organization are said to be engaged in private accounting. Accountants and their staff who provide services on a fee basis are said to be employed in public accounting.

Assets = Liabilities + Owner’s Equity

What is a business transaction? A business transaction is an economic event or condition that directly changes an entity’s financial condition or directly affects its results of operations.

On November 1, 2010, Javid Iqbal begins a business that will be known as Opportunities Incorporation.

Javid, Capital 25,000Investment by Javid Iqbal Cash 25,000 a. Assets Owner’s Equity = =

Javid Iqbal, Capital 25,000 Cash + Land 25,000 Bal. Assets Owner’s Equity = = b. –20,000+20,000 Bal. 5,00020,00025,000

Accounts Javid Iqbal, Cash + Supplies + Land Payable Capital Assets Owner’s Liabilities + Equity = Bal.5,00020,00025,000 c. + 1,350+ 1,350 Bal.5,0001,35020,0001,35025,000 =

Bal.12,5001,35020,0001,35032,500 d. + 7,500+ 7,500 Accounts Javid Iqbal, Cash + Supplies + Land Payable Capital Assets Owner’s Liabilities + Equity Bal.5,0001,35020,0001,35025,000 Fees earned = =

e. – 3,650–2,125 – 800 – 450 – 275 Wages Rent Util. Misc. Accounts Javid Iqbal, Cash + Supplies + Land Payable Capital Assets Owner’s Liabilities + Equity = Bal.12,5001,35020,0001,35032,500 = Bal.8,8501,35020,0001,35028,850

Accounts Javid Iqbal, Cash + Supplies + Land Payable Capital Assets Owner’s Liabilities + Equity = Bal.8,8501,35020,0001,35028,850 f. – 950– 950 = Bal.7,9001,35020, ,850

Accounts Javid Iqbal, Cash + Supplies + Land Payable Capital Assets Owner’s Liabilities + Equity = Bal.7,9001,35020, ,850 g. – 800– 800 = Bal.7, , ,050 Supplies expense

Accounts Javid Iqbal, Cash + Supplies + Land Payable Capital Assets Owner’s Liabilities + Equity Bal.7, , ,050 h. –2,000–2,000 Bal.5, , ,050 With- drawal = =

Owner’s Equity Net income

Financial Statements Balance sheet—A list of the assets, liabilities, and owner’s equity as of a specific date. Statement of cash flows—A summary of the cash receipts and disbursements for a specific period of time.

Financial Statements Income statement—A summary of the revenue and expenses for a specific period of time. Statement of owner’s equity—A summary of the changes in the owner’s equity that have occurred during a specific period of time.

Fees earnedRs Operating expenses: Rent expense Rs Wages expense Supplies expense Utilities expense Miscellaneous expense Total operating expenses Opportunities Inc. Income Statement For the Month Ended November 30, Net incomeRs

Javid Iqbal, capital, November 1, 2010Rs. 0 Opportunities Inc. Statement of Owner’s Equity For the Month Ended November 30, 2010 Investment on November 1Rs Net income for November Rs Less withdrawals Increase in owner’s equity Javid Iqbal, capital, November 30, 2010Rs

Javid Iqbal, capital, November 1, 2010Rs. 0 Opportunities Inc. Statement of Owner’s Equity For the Month Ended November 30, 2010 Investment on November 1Rs Net income for November Rs Less withdrawals Increase in owner’s equity Javid Iqbal, capital, November 30, 2010Rs

Javid Iqbal, capital, November 1, 2010Rs. 0 Opportunities Inc. Statement of Owner’s Equity For the Month Ended November 30, 2010 Investment on November 1Rs Net income for November Rs Less withdrawals Increase in owner’s equity Javid Iqbal, capital, November 30, 2010Rs

Assets Liabilities Opportunities Inc. Balance Sheet November 30, 2010 CashRs, Accounts PayableRs Supplies Owner’s Equity Land Javid Iqbal, cap Total liabilities and Total assetsRs owner’s equityRs This balance sheet presented using the account form

Assets Liabilities Opportunities Inc. Balance Sheet November 30, 2010 CashRs, Accounts PayableRs Supplies Owner’s Equity Land Javid Iqbal, cap Total liabilities and Total assetsRs owner’s equityRs This balance sheet presented using the account form

Cash flows from operating activities: Cash received from customersRs Deduct cash payments for expenses and payments to creditors Net cash flow from operating activities Cash flows from investing activities: Cash payment for acquisition of land( Cash flows from financing activities: Cash received as owner’s investmentRs Deduct cash withdrawal by owner Net cash flow from financing activities Net cash flow and Nov. 30, 2005 cash bal.Rs Opportunities Inc. Statement of Cash Flows For the Month Ended November 30, 2010 )

Assets Liabilities Opportunities Inc. Balance Sheet November 30, 2010 CashRs, Accounts PayableRs Supplies Owner’s Equity Land Javid Iqbal, cap Total liabilities and Total assetsRs owner’s equityRs This balance sheet presented using the account form

Cash Flows from Operating Activities—This section reports a summary of cash receipts and cash payments from operations. Cash Flows from Investing Activities—This section reports the cash transactions for the acquisition and sale of relatively permanent assets. Cash Flows from Financing Activities—This section reports the cash transactions related to cash investments by the owner, borrowings, and cash withdrawals by the owner.

Ratio of liabilities to owner’s equity = Total Liabilities Total owner’s equity (or total stockholders’ equity) The ratio of liabilities to owner’s equity allows owners like Javid Iqbal to analyze the firm’s ability to withstand poor business conditions.

Ratio of liabilities to owner’s equity = Rs.400 Rs.26,050 = / 15% Ratio of liabilities to owner’s equity

Chapter 1