1. Grand Finale

2. Financial Statements RAHUL JAIN (Striving for excellence) BCOM (H), MBA, FCS

3. Learning Objective To prepare Financial Statements

4. The Financial Statements are designed to measure different aspects of the business The Balance Sheet The Balance Sheet Is a picture of the tree (fruit, branches, trunk & roots) at a certain point in time. It includes assets (inventory of goods and producing assets) and financing sources (equity, debt and reinvestments from net income) of the business. The Income Statement The Income Statement Accounts for all activities involved in the operation of the business (growing and selling the fruit) over a period of time. It contains a list of all operating expenses and revenues of the business.

5. 5 Usefulness of Income Statement 1.Evaluate the past performance of the enterprise. 2.Provide a basis for predicting future performance. 3.Help assess the risk or uncertainty of achieving future cash flows.

6. 6 Limitations of the Income Statement 1.Items that cannot be measured reliably are not reported in the income statement. 2.Income numbers are affected by the accounting methods employed. 3.Income measurement involves judgment.

7. Diamond Rules Credit The nature of an action to an account to indicate an increase (liabilities, equity, and revenue) or decrease (assets, expenses, and dividends); Remember the CLIC rule –Credit all Increase in Liabilities, Income and Capital Debit The nature of an action to an account to indicate an increase (assets, expenses, and dividends) or decrease (liabilities, equity, and revenue); Remember the DEAD rule- Debit All Increase in Expenses, Assets and Dividend

8. Name of Reporting Entity Income Statement For the Year Ended December 31, 2007

9. Name of Reporting Entity Income Statement For the Year Ended December 31, 2007 Salesxxxx Less Cost of goods soldxxxx Gross profitxxxx

10. Direct Costs These are costs which are directly related to the manufacturing or operations of the organization. For example: –Wages, Royalty, Gas, Electricity, Packing –Carriage inwards, Water, Fuel –Custom duty (Import/Export duty) –Factory overheads –Job work charges

11. Name of Reporting Entity Income Statement For the Year Ended December 31, 2007 Salesxxxx Cost of goods soldxxxx Gross profitxxxx Less Other Operating expenses: Selling expensesxxxx Administrative expensesxxxxxxxx Income from operationsxxxx

12. Indirect Costs This will include following: –Salary, Interest –Trade expenses, Printing –Advertising, Depreciation –Bad debts –Discount, Insurance –General Expenses –Repairing, Travel Expenses

13. Name of Reporting Entity Income Statement For the Year Ended December 31, 2007 Salesxxxx Cost of goods soldxxxx Gross profitxxxx Operating expenses: Selling expensesxxxx Administrative expensesxxxxxxxx Income from operationsxxxx Add Other revenues and gainsxxxx Less Other expenses and losses (xxxx)xxxx

14. Name of Reporting Entity Income Statement For the Year Ended December 31, 2007 Salesxxxx Cost of goods soldxxxx Gross profitxxxx Operating expenses: Selling expensesxxxx Administrative expensesxxxxxxxx Income from operationsxxxx Other revenues and gainsxxxx Other expenses and losses (xxxx)xxxx Income before income taxesxxxx

15. Name of Reporting Entity Income Statement For the Year Ended December 31, 2007 Salesxxxx Less Cost of goods soldxxxx Gross profitxxxx Less Operating expenses: Selling expensesxxxx Administrative expensesxxxxxxxx Income from operationsxxxx Add Other revenues and gainsxxxx Less Other expenses and losses (xxxx)xxxx Income before income taxesxxxx Less Income taxesxxxx Income after taxes (Net Income)xxxx

16. BALANCE SHEET AS ON 31 ST DECEMBER 1995 LIABILITIESAMOUNTASSETSAMOUNT CAPITAL 119990 -Drawings 19170 +Net Profit 37510 CREDITORS BILLS PAYABLE LOAN1383301950705409075000500000 BILLS RECEIVABLE DEBTORSCASH Fixed Assets STOCK1301402615809605221055110500000

17. Submission Individual- Assignment Q. Make a 1 page summary of the key learnings from the class. Q.Page 1.204 onwards Q2 to Q6 From Book- Accounting for Management