This is the basic course that a student takes to qualify for the higher level courses and graduate studies. The basic concepts, practices and skills required for the accounting purposes are dealt with in this course along with the generally accepted accounting principles, and applications. Topics include the Income Statement, the Statement of Cash Flows and the Balance Sheet, Time Value of Money, Current and Non-Current Liabilities, Leases, Deferred Taxes, Retirement Benefits, Stockholders’ Equity, Earning per Share, Accounting Changes and Errors, and Statement of Cash Flows
Generally Accepted Accounting Principles or the GAAP are those rules that are used for the preparation of financial statements in any business, organisation or for an individual. These rules specify the methods to be used for the reporting of business transactions.
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Income Statement: is one of the important statements to be prepared by the accountant to report in what manner the revenue or the money received from the sales, without subtracting the expenses, is converted into the net income or net profit that includes all revenues and expenses.Income statements are useful to find out if the company is running at a profit or loss during the period reported.
Statement of Cash Flows: Cash Flow Statements reveal information about the nature of cash flows in a company from its operating, investing and financing activities and is used by investors to evaluate the company’s capability to generatecash or its equivalents and by the company management to utilise the cash flow for its needs.
Balance Sheet: A balance sheet displays four main components: thefixed assets or the long-term possessions, the current assets or the short-term possessions, the current liabilities that includes the obligations that the company must repay in the short term, and long-term liabilities that comprises of the capital provided by the ownerand the shareholders. As the name implies the balance sheet displays the debit and credit entries for the assets and liabilities so that the total value of the assets is always the same value as the total of the liabilities.
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Time Value of Money:can be defined as the value of money figuring in a given amount of interest that is earned over a particular period of time. It is the principal concept in finance theoryand explainshow to the time value of moneyis calculated using the concepts of compound interest and discounting.
Current and Non-Current Liabilities:Current liabilities refer to the duespayable during the present accounting yearlike accounts payable, customer advances, taxes payable and the payments due that year on a long-term loan. The payments not due within that year are the noncurrent liabilities like long-term borrowing, bonds payable and long-term lease obligations.
Leases:Capital leasesrefer to the leases of business equipment and areshown as an as set on the company's balance sheet.
Deferred Taxes: refer to an asset that may be employedto reduce the income tax expense on any ensuing periodon a company's balance sheet.
Retirement Benefits: are of different types like the defined benefit plan and defined contribution plan. The former is paid wholly by the employer from funds while the latter is a combinationof contributions by both the employer and the employee.
Stockholders’ Equity:embodies the equity investmentcurrently carried on the books by a company’s equity investors.It is can be calculated in two ways: as a firm's total assets excludingits total liabilities, preferred stock, and intangible assets such as goodwill or as the share capital combined withretained earnings but not the treasury shares.This is also called as the ‘book value’ of the company.
Earnings per Share: This is the percentage of a company's profit that is allocated to each outstanding share of common stock. It is calculated by dividing the net income by the number of shares outstanding, both of which may vary over time. It functions as an indicator of a company's profitability.
Accounting Changes and Errors: comprises of: the changes in accounting principles, changes in the accounting estimate, and changes in the reporting entity and the correction of an errors.