MGT101 - Financial Accounting- Lecture 30
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The document outlines key concepts of financial accounting, focusing on classifications of investments, liabilities, capital, reserves, and profit/loss accounts. It defines long-term and short-term loans, the portion of loans payable within a year, and provisions as anticipated expenses. Additionally, it explains the use of reserves for future purposes and details the various types of current liabilities.
MGT101 - Financial Accounting- Lecture 30
- 1. Financial Accounting 1 Lecture – 30 Classification of Investments • Long term investments are those investments that are meant to be held for a long term period. • If it is decided to dispose off a long term investment, then its classification is changed to current investment from long term.
- 2. Financial Accounting 2 Lecture – 30 Balance Sheet (Liabilities) Particulars Amount Rs. Amount Rs. ASSETS Non Current Assets Fixed Assets Capital Work In Progress Deferred Costs Long Term Investments Current Assets X X X X X TOTAL X LIABILITIES Capital and Reserves Capital Reserves Profit and Loss Account X X X X Long Term and Deferred Liabilities Long Term Loans Liability Against Lease Finance Other Long Term Liabilities Deferred Tax X X X X X Current Liabilities Trade Creditors Short Term Borrowings Other Payables Current Portion of Long Term Borrowings X X X X X TOTAL X
- 3. Financial Accounting 3 Lecture – 30 LIABILITIES Capital and Reserves Capital Reserves Profit and Loss Account X X X X Long Term and Deferred Liabilities Long Term Loans Liability Against Lease Finance Other Long Term Liabilities Deferred Tax X X X X X Current Liabilities Trade Creditors Short Term Borrowings Other Payables Current Portion of Long Term Borrowings X X X X X TOTAL X
- 4. Financial Accounting 4 Lecture – 30 • Capital It is the total of resources supplied to a business by its owners. Capital is termed as “Share Capital” in case of Limited Companies.
- 5. Financial Accounting 5 Lecture – 30 • Capital Introduced By Owner In form of Assets Debit Fixed Assets Account Credit Capital Account
- 6. Financial Accounting 6 Lecture – 30 • Reserves Reserve is the portion of profit set aside for use in future years for a specific purpose.
- 7. Financial Accounting 7 Lecture – 30 • Profit and Loss / Accumulated Profit and Loss Account It is that portion of the profit that is reemployed in the business. OR This is the accumulated balance of undistributed profit.
- 8. Financial Accounting 8 Lecture – 30 • Accumulated Profit and Loss Account In the first year of business this account shows following figure: Profit for the year X Less: Transferred to Reserve X Less: Profit distributed X Balance carried to Balance Sheet X In Subsequent years balance brought forward from previous years and profit for the year is added and distributed as above and the balance is carried to next year.
- 9. Financial Accounting 9 Lecture – 30 • Long Term Loans Loans that are payable later than a period of more than twelve months from the balance sheet date. • Short Term Loans Loans that are payable within twelve months of the balance sheet date.
- 10. Financial Accounting 10 Lecture – 30 • Current Portion of Long Term Loans It is that portion / installment of the long term loan that is payable with in next twelve months.
- 11. Financial Accounting 11 Lecture – 30 • Other Long Term Liabilities These include all other liabilities that are payable after a period of one year of balance sheet date. For example staff gratuity and other benefits, liability against lease finance and other liabilities that become payable after a period of one year.
- 12. Financial Accounting 12 Lecture – 30 • Provision Provision is charge created for an expected expense or loss whose actual amount is not known. It is usually shown as a reduction in the asset to which it relates • Reserves Reserve is the portion of profit set aside for use in future years for a specific purpose. It is usually created at the discretion of the owners an is shown as a liability.
- 13. Financial Accounting 13 Lecture – 30 • Current Liabilities Trade Creditors Short Term Borrowings Other Short Term Liabilities o Salaries Payable o Accrued Expenses o Bills payable o Advances From Customers Current Portion of Long Term Liabilities