Introduction to Accounting&

Financial Statements (Balance sheet, Profit and Loss Statement)

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What is Accounting?

Accouting is the systematic recording, reporting and analysis of financial statements of a

business.

“Accounting is the language of Business”

Aspects of Accounting

Ingredients of Corporate :1)PEOPLE 2)SYSTEM 3)CAPITALAll these three ingredients rotates around the business/project.

As the law construction industry comes within the ambit of service sector but from the accounting it still comes under the category of manufacturing sector because construction industry is also engaged in changing the shape of raw material and convert them into finished product.

At construction industry most of the work performed at project site, so the whole economic activities in construction industry can be categorized in to the following:

1)Procurement of resources2)Mobilization of all resources3)Managing all the resources at the site4)Demobilization of resources after completion of the work.

Branches of accounting

1)Financial accounting2)Cost accounting3)Management accounting4)Financial management

Advantages of Accounting

• Accounting replaces human memory

• Facilitates to comply with Legal Requirements

• Accounting helps in knowing financial position of organisation

• Accounting helps in knowing list of creditors and debtors

• Facilitates raising loans

• Accounting helps in raising more funds by supplying information to investors and creditors

• Accounting helps to facilitate efficient control of transactions in large work

• Facilitates the settlement of Tax Liability

Financial Statements

A formal record of the financial activities of a business, person, or other entity.

• Balance Sheet• Profit and Loss Statement• Cash Flow statement

Balance Sheet

• A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point of time.

“Snapshot of a company's financial condition"

• A standard company balance sheet has three parts:

- Assets - Liabilities- Capital

• Fundamental Accounting Equation

Assets = Liabilities + Capital

Fixed assets

What Is A Balance Sheet?

Current assets

Current liabilities

Long term liabilities

Capital

Reading a Balance Sheet

• Part 1 to Schedule VI of the Indian Companies Act, 1956 gives the format in which the balance sheet is to be prepared.