FINANCIAL REPORTING AND

ANALYSIS
Session 5& 6
Financial Reporting and Analysis
Financial
Statements
Income
Statement
(Session
3 & 4)
Balance
Sheet
(Sessio
n 2)
Financial
Statements-
integrated
exercise
( session 9)
Cash flow
Statement
(Session 7
& 8)
Accounting
The
Mechanics
of financial
Accounting
(Session 5
& 6)
1. Revenue
Recognition
(Session 10)
2. Accounting for
- Inventory (Session
(Session 11)
- Long Lived Assets
(Session 12)
- Liability and Equity
Financing (Session 13)
- Off Balance sheet
items (Session 14)
- Income Tax (Session
15)
- Consolidated
Financial Statements
(Session 16)
Financial
Analysis
- Annual
Report
(Session 17)
- Financial
Statement
Analysis
(Session 18 &
19)
Scope Of Financial Reporting
3
Financial reporting concepts and standards
Company
Transactions
Recording system
Report
preparation
Users of entitys
Financial
Statement
- Operating
- Investing
- Financing
Tracking and
recording
transaction
Financial
Statements
- Managers
- Investors
- Analysts
- Lenders
- Customers
- Suppliers
- Unions/
employee
- regulators
- Journal
- Ledger
- Closing and
Adjusting
entries
- Balance sheet
- Income
statement
- Statement of
cash flows
Auditors
Users business decision
Case 4-1: PC Depot
Sr No. Particulars Dr Cr
9 Cash a/c Dr 38000
To Sales a/c 38000
10 Accounts Receivable a/c Dr 14850
To Sales a/c 14850
11 Cash a/c Dr 3614
To Accounts Receivable a/c 3614
Case 4-1: PC Depot
Sr No. Particulars Dr Cr
12 Accounts Payable a/c Dr 96195
To Cash a/c 96195
13 Merchandise Inventory a/c Dr 49940
To Accounts Payable a/c 49940
14 Cost of Sales a/c Dr 38140
To Merchandise Inventory a/c 38140
Case 4-1: PC Depot
Sr No. Particulars Dr Cr
15 Wages Expense a/c Dr 688
To Cash a/c 688
16 Wages Expense a/c Dr 440
To Accrued Wages a/c 440
17 Prepaid Rent a/c Dr 1485
To Cash a/c 1485
Case 4-1: PC Depot
Sr No. Particulars Dr Cr
18 Prepaid Insurance a/c Dr 2310
To Cash a/c 2310
19 Utilities Expense a/c Dr 226
To Accounts Payable a/c 226
20 Furniture and Fixtures a/c Dr 1760
To Cash a/c 660
To Accounts Payable a/c 1100
Case 4-1: PC Depot
Sr No. Particulars Dr. Cr.
21
Depreciation Expense a/c [($15,500 +
$1,760) / 10] / 12 Dr
144
To Accumulated Depreciation a/c 144
22
Interest Expense a/c ($100,000 x
15%) / 12) Dr
1250
To Interest Payable a/c 1250
23
Insurance Expense a/c($ 2,310 / 12)
a/c Dr
193
To Prepaid Insurance a/c 193
Ledger
1 1,65,000 2 1,485 3 1,37,500 14 38,140
9 38,000 4 15,500 13 49,940
11 3,614 5 1,320
6 935
7 1,100
8 275 12 96,195 3 1,37,500
12 96,195 13 49,940
15 688 19 226
17 1,485 20 1,100
18 2,310
20 660
Cash Merchandise Inventory
Accounts Payable
Ledger
18 2,310 -23 193 16 440
4 15,500 1 1,00,000
20 1,760
1 65,000
10 14,850 -11 3,614
2 1,485 17 1,485
24 52,850 9 38,000
10 14,850
Sales
Prepaid Insurance
Furniture and Fixtures
Accounts Receivable
Rent Expenses
Accrued Wages
Bank Loan Payable
Proprietors Capital
Prepaid Rent
Ledger
14 38,140
6 935
15 688
16 440 21 144
7 1,100 21 144
8 275 22 1,250
19 226
Cost of Sales
Wages Expense
Depreciation Expense
Office Supplies Expense Accumulated Depreciation
Utilities Expense Interest Payable
Ledger
23 193
22 1,250
25 6,654
25 6,654 24 52,850
Insurance Expense
Interest Expense
Retained Earnings
Income Summary
(other closing
entries not
shown here)
PC DEPOT: Income Statement for
September
Revenue Rs
Sales 52850
Cash sales 38000
Credit sales 14850
COGS 38140
Gross Profit 14710
Expenses
Rent 1485
Advertising exp 1320
wages (935+688+ 440) 2063
office suppl exp 1100
Utilities exp 275
insurance bill 2310/12 192.5
electricity bill 226
Depreciation ((15500+1760)/10)/12 143.8333333
Interest (100000*0.15)/12 1250
8055
Net Profit 6654.666667
PC DEPOT
Balance Sheet as of September 30
Assets Liabilities
Cash 84661 Accounts payable 92571
prepaid rent 1485
prepaid insurance 2310*11/12 2118
Debtor 14850-3614 11236 Accrued wages 440
inventory 149300 Interest payable 1250
Bank loan Payable 100000
Furniture 15500 Proprietor capital 65000
Add: purchases 1760 Net Profit 6655 71655
Less:Dep 144 17116
Total 265916 265916.0