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Financial Accounting &Analysis

Introduction

Suggested Readings

Chapter 1 : Text Book

Introduction to Accounting

Case: Bharti Airtel Limited

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Why Accounting

Informational requirement of a number of stakeholders inthe business Internal Stakeholder

Owners

Management Employees

External Stakeholders Government/ Tax department

Investors

Banks/Lenders

Suppliers/

Creditors

NGOs/ Industry associations

Researchers

Accounting is the tool for providing financial information tovarious stakeholders

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Financial Accounting vs. Management Accounting External Users

To communicateresults/ financialhealth

Standard Formats Accounting Rules

rigid

AggregatedInformation

Historical Less frequent

More precise

Internal Users To help in decision

making/ internalcontrols

Flexible formats Flexible rules

Product-wise/ RegionWise

Forward Looking More Frequent

More use ofapproximation

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Types of InformationInformation

Qualitative Information Quantitative Information

Accounting Information Non-Accounting Information

Management

Accounting

Financial

Accounting

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Financial Accounting Information Predominately used by external stakeholders

though managers also use it for decisionmaking

To ensure that the accounting information is `true& fair

Generally Accepted Accounting Principles (GAAP)

Accounting Standards

Unification of Accounting Standards (IFRS)

Accounting principles are not `exact

Some latitude with the management

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GAAP GAAP

Good accounting practices evolved by the professionover a period of time

Most of these practices have been adopted explicitlyin the Accounting Standards

Accounting Standards Mandatory accounting/ disclosure principles

prescribed by an authority

In India Accounting Standards are prescribed by theInstitute ofChartered Accountants of India

So far 32 accounting standards have been issued bythe ICAI

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Please note Financial Statement are prepared in accordance

with the applicable GAAP/ Accounting Standards The format is prescribed by the Companies Act

1956

They are audited by the `external auditors The audit report is addressed to the shareholders

Clean Report Qualified Report Disclaimer

In case of listed companies periodic disclosure(quarterly basis) is required to be made as perlisting agreement

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Next Session.. Understanding Income Statement

Ch 3 Text Book

Profit and Loss A/c of ACC Limited/ TataConsultancy Services Limited