Financial Accounting

Agenda:-

 1. What is Financial Accounting? 

2. Balance Sheet 

3. Income Statement 

4. Cashflow Statement 

5. Financial Ratios

What is Financial Accounting?

Financial Accounting

 • It is the process of Summarising business transactions through financial statements. 

• The three main statements are – Balance sheet, Income statement, and cash flow statement. 

• These statements can determine the financial health of a company.

Basic Accounting Terminologies

• Assets • Liability • Revenue • Equity • Expenses

1. ASSETS

• An asset is a resource that has some future economic value to a company. Examples of assets are -  

 1. Cash 

 2. Real estate 

 3. Investments 

 4. Machinery 

 5. Office equipment

2. LIABILITY 

• A liability is anything that a company or an individual owes( to someone or organization), usually a sum of money. Examples of liabilities are - 

• Bank debt 

• Wages owed 

• Mortgage 

• Taxes owed (GST) 

• Money owed to suppliers

3. EQUITY 

• Equity is the amount of capital owned or invested by the company's promoter. 

• Equity is the difference between the liabilities and assets recorded on the company's balance sheet. 

• Equity = Assets – Liabilities

REVENUE 

• Revenue is the intrinsic value of all sales of goods, commodities, and services recognized by a company in a period. 

• Revenue forms the beginning of a company’s income statement.

EXPENSES 

• An expense is a depreciation in the value of an asset as it gives rise to revenue. 

• Revenue- Expense = Net Income