Balance Sheet And Funds Flow
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Balance sheet Dr. T.K. Jain. AFTERSCHOOOL M: 9414430763 [email protected] www.afterschool.tk www.afterschoool.tk
www.afterschoool.tk social entrepreneurship for better society
www.afterschoool.tk
What is balance sheet? • It is a statement showing assets and liabilities. • Assets help us in earning profit over a long period of time and include all the payments – which will enable us to earn revenues over longer period of time (longer then one year). • Liabilities are our dues - we have to make their payments – in the years to come. www.afterschoool.tk
Classify assets and liabiilties • First classify assets and liabilities • Put them in two categories – short term and long term. • Short term – means upto one year. • Long term – beyond one year.
www.afterschoool.tk
Why is it called balance sheet? • It will always balance – so it is called balance sheet.
www.afterschoool.tk
Hypothetical example : these are balances of various accounts at the end of year. 2007
2006
share
50
40
building
40
30
plant
100
50
loans
80
20
sales
300
200
purchase
200
150
Depreciation on plant (accumulated)
30
20
other expenses
20
10
inventory
40
20
debtors
30
30
creditors
20
20
bad debt
10
dividend etc. recd.
www.afterschoool.tk
30
30
Other information: • Take bank / overdraft as balancing figure.
www.afterschoool.tk
Analysis • Share capital
50
40
• This is the first item. It will go into liabilities side of balance sheet. • Since shares have increased from 40 to 50, it means, we have added more capital – thus it is source of funds. • It has increased our funds by 10.
www.afterschoool.tk
• building 40 30 • Building is a part of long term assets. Since it has increased from 30 to 40, it means that we have applied our funds by 10. our application of funds will increase by 10 and funds will decrease by 10.
www.afterschoool.tk
Analysis condinued • Plants have increased from 50 to 100 that means we have applied our funds in these. Our plans have increased from 50 to 100, so our application of funds have increased by this amount. We also have to keep in mind depreciation. Net purchase of plant is (100+10-50) = 60. • Other expenses are part of P&L account and if they have increased they will reduce our profits. • Inventory is current assets. Change in these will reflect increase in working capital. It will be showen in trading account, balance sheet and also in statement on changes in working capital. www.afterschoool.tk
Analysis continued • Debtors and creditors are short term assets and liabiities respectively. They will come in balance sheet and in stattement of changes in working capital. • When debtors increase they will increase there will be increase in working capital • When creditors increase, there will be decrease in working capital and vice versa www.afterschoool.tk
Analysis continued: • Bad debt is part of P&L account. If it has increased, our expenses have increased. • Dividend and oher income are nonoperating income. They will come in P&L account – but while calculating funds flow statement, they will be deducted from profit as calculated from P&L account. They will be part of source of funds. www.afterschoool.tk
P&L Account 2007
inventory
20 Sale
bad debt
10 other income
purchase
200 inventory
other exp.
20
accumulated dep. (plants)
10
profit
110
total
370 www.afterschoool.tk
300 30 40
370
Balance sheet 2007
share capital
50 building
loan
80 plant
profit
110 debtors
40 100 30
creditors
20 inventory
40
depreciation
30 debtors
30
Bank
290 www.afterschoool.tk
50
240
Thanks Afterschoool conducts three year integrated PGPSE (after class 12 along with CA & CS) and 18 month PGPSE (Post Graduate Programme in Social Entrepreneurship) along with preparation for CS / CFP / CFA /CMA / FRM. This course is also available online also. It also conducts workshops on social entrepreneurship in schools and colleges all over India – start social entrepreneurship club in your institution today with the help from afterschoool and help us in developing society.
www.afterschoool.tk
www.afterschoool.tk social entrepreneurship for better society
www.afterschoool.tk
www.afterschoool.tk social entrepreneurship for better society
www.afterschoool.tk
What is balance sheet? • It is a statement showing assets and liabilities. • Assets help us in earning profit over a long period of time and include all the payments – which will enable us to earn revenues over longer period of time (longer then one year). • Liabilities are our dues - we have to make their payments – in the years to come. www.afterschoool.tk
Classify assets and liabiilties • First classify assets and liabilities • Put them in two categories – short term and long term. • Short term – means upto one year. • Long term – beyond one year.
www.afterschoool.tk
Why is it called balance sheet? • It will always balance – so it is called balance sheet.
www.afterschoool.tk
Hypothetical example : these are balances of various accounts at the end of year. 2007
2006
share
50
40
building
40
30
plant
100
50
loans
80
20
sales
300
200
purchase
200
150
Depreciation on plant (accumulated)
30
20
other expenses
20
10
inventory
40
20
debtors
30
30
creditors
20
20
bad debt
10
dividend etc. recd.
www.afterschoool.tk
30
30
Other information: • Take bank / overdraft as balancing figure.
www.afterschoool.tk
Analysis • Share capital
50
40
• This is the first item. It will go into liabilities side of balance sheet. • Since shares have increased from 40 to 50, it means, we have added more capital – thus it is source of funds. • It has increased our funds by 10.
www.afterschoool.tk
• building 40 30 • Building is a part of long term assets. Since it has increased from 30 to 40, it means that we have applied our funds by 10. our application of funds will increase by 10 and funds will decrease by 10.
www.afterschoool.tk
Analysis condinued • Plants have increased from 50 to 100 that means we have applied our funds in these. Our plans have increased from 50 to 100, so our application of funds have increased by this amount. We also have to keep in mind depreciation. Net purchase of plant is (100+10-50) = 60. • Other expenses are part of P&L account and if they have increased they will reduce our profits. • Inventory is current assets. Change in these will reflect increase in working capital. It will be showen in trading account, balance sheet and also in statement on changes in working capital. www.afterschoool.tk
Analysis continued • Debtors and creditors are short term assets and liabiities respectively. They will come in balance sheet and in stattement of changes in working capital. • When debtors increase they will increase there will be increase in working capital • When creditors increase, there will be decrease in working capital and vice versa www.afterschoool.tk
Analysis continued: • Bad debt is part of P&L account. If it has increased, our expenses have increased. • Dividend and oher income are nonoperating income. They will come in P&L account – but while calculating funds flow statement, they will be deducted from profit as calculated from P&L account. They will be part of source of funds. www.afterschoool.tk
P&L Account 2007
inventory
20 Sale
bad debt
10 other income
purchase
200 inventory
other exp.
20
accumulated dep. (plants)
10
profit
110
total
370 www.afterschoool.tk
300 30 40
370
Balance sheet 2007
share capital
50 building
loan
80 plant
profit
110 debtors
40 100 30
creditors
20 inventory
40
depreciation
30 debtors
30
Bank
290 www.afterschoool.tk
50
240
Thanks Afterschoool conducts three year integrated PGPSE (after class 12 along with CA & CS) and 18 month PGPSE (Post Graduate Programme in Social Entrepreneurship) along with preparation for CS / CFP / CFA /CMA / FRM. This course is also available online also. It also conducts workshops on social entrepreneurship in schools and colleges all over India – start social entrepreneurship club in your institution today with the help from afterschoool and help us in developing society.
www.afterschoool.tk
www.afterschoool.tk social entrepreneurship for better society
www.afterschoool.tk
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