Javid Iqbal

transcript

Javid Iqbal

Assistant ProfessorDepartment of Management SciencesCOMSATS 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 (2004-2006)

Department of Business Administration University of Sargodha, Pakistan

• Master of Commerce in Accounting (2001-2003)

Hailey College of Commerce University of the Punjab, Pakistan

• Bachelor of Commerce (1999-2001) 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 1Course 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, 21st Edition

Chapter Chapter 11

Accounting 1Accounting 1MGT 130MGT 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 Motors Cars, vansIntel Computer chipsNishat TextileNike Athletic shoesCoca-Cola BeveragesSony Stereos and television

Types of BusinessesManufacturing Business

Metro Cash & Carry General merchandiseD.Watson MedicineUnited Mobiles Mobile PhonesAmazon.com Internet books, music,

Types of BusinessesMerchandizing Business

PIA TransportationMarriott Hotels Hospitality and lodgingHBL Financial ServicesPTCL Telecommunication

Types of BusinessesServices 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 StrategiesBusiness 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 ThingsCommon Things

–Organizational Goals–Need Information

Organizational Goals

• Profit Making

• Welfare Work

2Assess stakeholders’ informational needs.

The Process of Providing InformationThe Process of Providing InformationThe Process of Providing InformationThe Process of Providing Information

STAKEHOLDERS

Internal: Owners, managers, employees

External: Customers, creditors, government

1Identify stake-holders.

Design the accounting information system to meet stakeholders’ needs.

34Record economic data about business activities and events.

The Process of Providing InformationThe Process of Providing InformationThe Process of Providing InformationThe Process of Providing Information

5Prepare accounting reports for stakeholders.

Accounting Information

System

The Process of Providing InformationThe Process of Providing Information

STAKEHOLDERS

Internal: Owners, managers, employees

External: Customers, creditors, government

Purpose of Information

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 SystemAccumulates data for use in both financial and managerial accounting

Accounting System

Accumulates cost information

Managerial AccountingFinancial 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 StatementsBalance Sheet◦ Shows financial position of the company for a specific point in

time/date i.e. 31st December 2010, 30th 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 SheetSections 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 Revenue xxxx- Less Expenses xxxx= Gross profit xxxx - Operating Cost: Selling General Administration Expenses xxxx= Net Income xxxx

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 SystemAccumulates data for use in both financial and managerial accounting

Accounting System

Information for decision making, planning, directing,

and controlling an organization's operations and

assessing its competitive position

Published financial statements and other

financial reports

Users of information Managers within organizations

Interested parties outside organizations

Regulations Not required and unregulated

Must confirm to GAAP/IFRS/IAS/SECP

Source of Data Organizations 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.

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 , Capital25,000 Investment by

Javid Iqbal

Cash25,000 a.

Assets Owner’s Equity=

Javid Iqbal, Capital25,000

Cash + Land 25,000 Bal.

Assets Owner’s Equity=

=b. –20,000 +20,000Bal. 5,000 20,000 25,000

Accounts Javid Iqbal,Cash + Supplies + Land Payable Capital

Assets Owner’s Liabilities + Equity=

Bal. 5,000 20,000 25,000c. + 1,350 + 1,350

Bal. 5,000 1,350 20,000 1,350 25,000

Bal. 12,500 1,350 20,000 1,350 32,500d. + 7,500 + 7,500

Assets Owner’s Liabilities + Equity

Bal. 5,000 1,350 20,000 1,350 25,000Fees earned

e. – 3,650 –2,125– 800– 450

– 275

Bal. 12,500 1,350 20,000 1,350 32,500

Bal. 8,850 1,350 20,000 1,35028,850

Bal. 8,850 1,350 20,000 1,350 28,850f. – 950 – 950

Bal. 7,900 1,350 20,000 400 28,850

Bal. 7,900 1,350 20,000 400 28,850g. – 800 – 800

Bal. 7,900 550 20,000 400 28,050

Supplies expense

Assets Owner’s Liabilities + Equity

Bal. 7,900 550 20,000 400 28,050h. –2,000 –2,000Bal. 5,900 550 20,000 400 26,050

With-drawal

Owner’s Equity

Financial StatementsFinancial StatementsFinancial StatementsFinancial 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 StatementsFinancial StatementsFinancial StatementsFinancial 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 earned Rs. 750 000

Operating expenses:

Rent expense

Rs. 212500Wages expense

800 00

Supplies expense

450 00Utilities expense

275 00Miscellaneous expense

Total operating expenses 1 135 00

Opportunities Inc.Income Statement

For the Month Ended November 30, 2010

800 00

Net income Rs.3 050 00

Javid Iqbal, capital, November 1, 2010 Rs. 0

Opportunities Inc.Statement of Owner’s Equity

Investment on November 1 Rs.25 000 00Net income for November 3 050 00

Rs.28 050 00Less withdrawals 2 000 00Increase in owner’s equity 26 050 00Javid Iqbal, capital, November 30, 2010 Rs.26 050 00

Assets Liabilities

Opportunities Inc.Balance Sheet

November 30, 2010

Cash Rs, 5 900 00 Accounts Payable Rs. 400 00

Supplies 550 00 Owner’s Equity

Land 20 000 00 Javid Iqbal, cap. 26 050 00

Total liabilities and

Total assets Rs.26 450 00 owner’s equity Rs.26 450 00

This balance sheet presented using the account form

Assets Liabilities

November 30, 2010

Cash flows from operating activities:Cash received from customers Rs. 7 500 00Deduct cash payments for expenses and payments to creditors 4 600 00Net cash flow from operating activities 2 900 00

Cash flows from investing activities:Cash payment for acquisition of land (20 000 00

Cash flows from financing activities:

Cash received as owner’s investment Rs.25 000 00

Deduct cash withdrawal by owner 2 000 00Net cash flow from financing activities 23 000 00

Net cash flow and Nov. 30, 2005 cash bal. Rs. 5 900 00

Opportunities Inc.Statement of Cash Flows

Assets Liabilities

November 30, 2010

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

= 0.015 / 15%Ratio of

liabilities to owner’s equity

Chapter 1Chapter 1

Javid Iqbal

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