1. Financial Accounting
(MBA 1)

2. My Contact Details:
AJ Ramgoon [B.Comm, UHDE, MBA, Pastel (Advanced), MYOB,
ADR (SA),
PG Dip (Advanced Taxation)
Contact Number : (Mobile)
address :

3. Chapter 1: The Purpose of Financial Statements
To provide users with a snapshot of the businesses performance for a specific period.
An expression of financial health
To determine whether the business has achieved its objectives.

4. Assets Classification of Accounts
Balance Sheet Accounts “B” (Statement of Financial Position)
Assets
Tangible Assets (Types, lifespan, examples)
Financial Assets (Types, lifespan, examples)
Current Assets (Types, lifespan, examples)

5. Classification of Accounts
Balance Sheet Accounts “B” (Statement of Financial Position)
Equity
Capital accounts: Capital and Drawings
Share premium
Retained income

6. Classification of Accounts
Balance Sheet Accounts “B” (Statement of Financial Position)
Liabilities
Current (Lifespan, examples)
Non current (Lifespan, examples)

7. Classification of Accounts
Nominal Accounts “N” (Statement of Comprehensive Income)
Income (profits increase; examples)
Expenses(profits decrease; examples)

8. Classification of Accounts
Final Accounts “F”
F1: Trading account (GP)
F2: Profit and loss account (NP)
F3: Appropriation (Tax, dividends, Share of profits)

9. Income Statement Concepts
Turnover
Cost of Sales
Gross Profit
Depreciation/Asset impairment
Credit Losses/Write offs/Bad Debts
Net Profit before Tax

10. Ordinary share dividends Preference share dividends Retained income
Income Statement Concepts
Taxation
Net Profit after Tax
Dividends
Ordinary share dividends
Preference share dividends
Retained income

11. Tangible Assets (vs Intangible Assets) Accumulated depreciation
Balance Sheet Concepts
Tangible Assets (vs Intangible Assets)
Accumulated depreciation
Financial Assets
Investments
Current Assets
Inventory
Trade and other Receivables
Cash (and Cash equivalents)

12. Share capital: Authorised and Issued Share Premium Retained Income
Balance Sheet Concepts
Shareholders’ Equity
Share capital: Authorised and Issued
Share Premium
Retained Income
Non Current Liabilities
Mortgage Loan
Current Liabilities
Trade and other Payables
SARS Accounts
Shareholders for Dividends

13. Debtors collection period Creditors payment period Debt ratio
Key Ratios
The current ratio
Acid Test ratio
Stock turnover ratio
Debtors collection period
Creditors payment period
Debt ratio
Debt equity ratio
Interest cover

14. The Accounting Equation
A = O + L

15. CASH FLOW STATEMENTS
A cash flow statement reveals from where the business has received its cash (funds) and the way the cash (funds) was used within a financial period.
The changes in cash flow are determined by comparing one year’s figures with another years figures.

16. CASH FLOW STATEMENTS
The cash flow statement essentially accounts for the change in the bank/cash balance from one year to another as a result of the following activities:

17. Financing Activities: Information obtained from the
CASH FLOW STATEMENTS
Operating Activities: Information is obtained from the current income statement and the working capital section of the balance sheet.
Investing Activities: Information is obtained from the fixed assets and investment sections of the balance sheet.
Financing Activities: Information obtained from the
capital employed section (own capital and borrowed
capital) of the balance sheet.

18. WHO ARE THE PRIMARY USERS OF FINANCIAL STATEMENTS
Shareholders and potential shareholders
The suppliers of short term credit (Creditors)
The suppliers of long term credit (Financial Institutions)
Management
Unions/Staff
Auditors
SARS

19. Demystifying Key Ratios
Liquidity Ratios
The Current ratio
Current ratio = Current Assets
Current Liabilities
Acid Test Ratio = Current assets – Inventory
Current liabilities

20. Efficiency Ratios
Rate of stock turnover = Cost of goods sold Average stock Average Collection period = Accounts Receivable X 365 Credit sales 1 Average Payment Period = Accounts Payable X 365 Credit Purchases 1

21. Interest Cover Ratio

22. The Debt Equity Ratio

23. End of Chapter 1