Self-Learning Manag

ement Series 4e
INCLUDES
Chapter
Summary
&
FINANCIAL Practice Ex
ercise
Solutions

ACCOUNTING
ESSENTIALS YOU ALWAYS WANTED TO KNOW
FOURTH EDITION

Long-term
Current
EBIT Depreciation Assets
Assets
Transaction
Analysis
PBT
Gross
Profit Income Stockholders'
Statement Balance Equity
PAT Sheet
Revenue
Current
FINANCIAL Liabilities

ACCOUNTING
Standards Accounting
equation
Accounting
Systems
Decision
Makers
Assets
Need
Dividends
Purpose
Net Income Cash
Flows

Materiality

KALPESH ASHAR
3VGMSMOK"OIU"QIRPTQGIR"JPQ"QIEHIQR.""
2@8FCgQGMg>GJg8FgGN=JO@=DEAF?gJ=KHGFK=gLGg$.0)0*.)/7"**1403.0-7
#22,03.)/27(147"/5)627')03,+7&17%015]gg5=g8J=g;GEEALL=<gLGg
HM9DAK@AF?g9GGCKgL@8Lg8J=g;GFL=FLfJA;@^g;GF;AK=g8F<g8HHJG8;@89D=g
=F89DAF?gEGJ=gJ=8<=JKgLGgJ=8<g8F<gE8C=gL@=g>MDD=KLgMK=gG>gL@=E]g
5=g8J=g=P;AL=<gLGg8FFGMF;=gLOGgE8BGJg8<<fGFKgAFgL@AKgF=Og=<ALAGFg
G>gL@=g9GGC"
" "g$@8HL=Jg1MEE8JQgAKg8<<=<g8LgL@=g=F<gG>g=N=JQg;@8HL=J]g
2@AKgOADDg@=DHgLGg?=Lg8gIMA;Cg8;;=KKgHGAFLgG>gO@8LgO8Kg
;GN=J=<gAFgL@=g;@8HL=J]g)Lg8DKGg8KKAKLKgAFgA<=FLA>QAF?gL@=g
AEHGJL8FLgAF>GJE8LAGFg8>L=JJ=8<AF?gL@JGM?@gL@=g=FLAJ=g
;@8HL=J]
" 2@AKgMH<8L=<g=<ALAGFgAF;DM<=Kg<=L8AD=<g8F<gK=D>f=PHD8F8LGJQg
KGDMLAGFKgLGgMFKGDN=<g=P8EHD=KgAFg/J8;LA;=g&P=J;AK=K]g7GMg
E8Qg<GOFDG8<gL@=gKGDMLAGFKg8Lg
OOO]NA9J8FLHM9DAK@=JKeGFDAF=J=KGMJ;=K
1@GMD<gQGMg@8N=g8FQgIM=KLAGFKgGJgKM??=KLAGFK^g>==Dg>J==gLGg=E8ADgMKg
8LgJ=8;@MKcNA9J8FLHM9DAK@=JK];GE
5=g@GH=gL@AKg9GGCgHJGNA<=KgQGMgL@=gEGKLg=FJA;@AF?gD=8JFAF?g
=PH=JA=F;=]

A67@"0==8"7@"/C/79/093"7<"3&0==8%">/>3?0/18#0(D$"
/<2">/>3?0/18"#1=9=?$"4=?;/A'
 ""'IIEM"CH"
5?F@$/?;LHCHA"0;H;A?G?HN"5?LC?M

(IMN"&==IOHNCHA";H>"0;H;A?G?HN +CH;H=C;F"&==IOHNCHA"
"*MM?HNC;FM"9IO"&FQ;RM" *MM?HNC;FM"9IO"&FQ;RM"
8;HN?>"6I".HIQ 8;HN?>"6I".HIQ
13/2."-+,#%#-(*','#*&#( 13/2."-+,#%#-(*','#**#&

3LID?=N"0;H;A?G?HN" +CH;H=C;F"0;H;A?G?HN
*MM?HNC;FM"9IO"&FQ;RM "*MM?HNC;FM"9IO"&FQ;RM"
"8;HN?>"6I".HIQ 8;HN?>"6I".HIQ
13/2."-+,#%#-(*','#*$#$ 13/2."-+,#%#-(*','#*(#,

3LCH=CJF?M"I@"0;H;A?G?HN 'OMCH?MM"5NL;N?AR
"*MM?HNC;FM"9IO"&FQ;RM" "*MM?HNC;FM"9IO"&FQ;RM"
8;HN?>"6I".HIQ 8;HN?>"6I".HIQ
13/2."-+,#%#-(*','#-'#, 13/2."-+,#%#-(*','#-,#'

0;LE?NCHA"0;H;A?G?HN
"*MM?HNC;FM"9IO"&FQ;RM"
8;HN?>"6I".HIQ
13/2."-+,#%#-(-'-)#$(#(

0BD"F<8"@BEF"GC75F87"?=EF"B9"6BB>E"H=E=F"
QQQ%PC<L;HNJO<FCMB?LM%=IG

($&'%//+"&/-#5*%1$.304%,*2)'12
47</<17/9
/11=B<A7<5
4@@4<A709@"D=B"09C0D@"C0<A43"A="8<=C

/IHA$N?LG"
*'-6 )?JL?=C;NCIH (OLL?HN"
&MM?NM
"&MM?NM
6L;HM;=NCIH
"&H;FRMCM
3'6
,LIMM
"3LI@CN -H=IG?" 5NI=EBIF>?LM#"
5N;N?G?HN ';F;H=?" *KOCNR
3&6 5B??N
4?P?HO?
(OLL?HN"
+-1&1(-&/ /C;<CFCNC?M

"&((2716-1,
5N;H>;L>M &==IOHNCHA"
?KO;NCIH
&==IOHNCHA"
5RMN?GM
)?=CMCIH
"0;E?LM
&MM?NM
1??>
)CPC>?H>M
3OLJIM?
1?N"-H=IG? (;MB"
+FIQM

0;N?LC;FCNR
4MOEOGMEN"
/GGPTOSMOK"
4VVIQWMEOV"DRX"0OZE\V"CEQWIH"AR"8QRZ

dgUST\^g#Qg4A9J8FLg/M9DAK@=JK^g31"]g"DDgJA?@LKgJ=K=JN=<]g.GgH8JLgG>gL@AKgHM9DA;8LAGFg
E8Qg9=gJ=HJG<M;=<gGJg<AKLJA9ML=<gAFg8FQg>GJEgGJg9Qg8FQgE=8FK^gGJgKLGJ=<gAFg8g
<8L898K=gGJgJ=LJA=N8DgKQKL=E^gOAL@GMLgL@=gHJAGJgH=JEAKKAGFgG>gL@=gHM9DAK@=J]

(8J<98;Cg)1#.fTS_gTf\W\V\XfS\f6
(8J<98;Cg)1#.fTV_g\Z[fTf\W\V\XfS\f\

/8H=J98;Cg)1#.fTS_gTf\WYV[VfYYf6
/8H=J98;Cg)1#.fTV_g\Z[fTf\WYV[VfYYfU

,A9J8JQgG>g$GF?J=KKg$GFLJGDg.ME9=J_gUSTT\UZSZX

2@AKgHM9DA;8LAGFgAKg<=KA?F=<gLGgHJGNA<=g8;;MJ8L=g8F<g8ML@GJAL8LAN=gAF>GJE8LAGFgAFg
J=?8J<gLGgL@=gKM9B=;LgE8LL=Jg;GN=J=<]g2@=g"ML@GJg@8KgE8<=g=N=JQg=>>GJLgAFgL@=g
HJ=H8J8LAGFgG>gL@AKg9GGCgLGg=FKMJ=gL@=g8;;MJ8;QgG>gL@=gAF>GJE8LAGF]g(GO=N=J^g
AF>GJE8LAGFgAFgL@AKg9GGCgAKgKGD<gOAL@GMLgO8JJ8FLQg=AL@=Jg=PHJ=KK=<gGJgAEHDA=<]g2@=g
"ML@GJgGJgL@=g/M9DAK@=JgOADDgFGLg9=gDA89D=g>GJg8FQg<8E8?=Kg;8MK=<gGJg8DD=?=<gLGg9=g
;8MK=<g=AL@=Jg<AJ=;LDQgGJgAF<AJ=;LDQg9QgL@AKg9GGC]g

4A9J8FLg/M9DAK@=JKg9GGCKg8J=g8N8AD89D=g8LgKH=;A8DgIM8FLALQg<AK;GMFLg>GJgK8D=Kg
HJGEGLAGFK^gGJg>GJgMK=gAFg;GJHGJ8L=gLJ8AFAF?gHJG?J8EK]g'GJgEGJ=gAF>GJE8LAGFgHD=8K=g
OJAL=gLG7#2*)-/%&/063(#/",1.2#*(0'&/05$-+

/D=8K=g=E8ADg>==<98;Cgeg;GJJ=;LAGFKg`L=;@FA;8D^g?J8EE8LA;8DgGJgKH=DDAF?agLGg
0.&**&//-/063(#/",1.2#*(0'&/05$-+

2Gg8;;=KKgL@=g;GEHD=L=g;8L8DG?M=gG>g4A9J8FLg/M9DAK@=JK^gNAKAL7
44453(#/",1.2#*(0'&/05$-+7
 AEFNI"PJ"1POSIOSR

2LESWIU 7
7) 0GGRXQWMQK"@\VWIPV" " " " /
" " " 5MQEQGMEO"0GGRXQWMQK"@\VWIPV" " " '&
" " " <IIH"JRU"5MQEQGMEO"0GGRXQWMQK"@\VWIPV" " ''
" " " 5MQEQGMEO"@WEWIPIQWV" " " " ''
" " " >XUSRVI"RJ"5MQEQGMEO"@WEWIPIQWV" " " '*
" " " 5MQEQGMEO"0GGRXQWMQK"@WEQHEUHV" " " ',
" " " @ROYIH"4[EPSOIV" " " " " '.
" " " >UEGWMGI"4[IUGMVI" " " " " (&

2LESWIU "
"* =YIUYMIZ"RJ"5MQEQGMEO"@WEWIPIQWV" " ()
" " " 1EOEQGI"@LIIW" " " " " ()
" " " 7QGRPI"@WEWIPIQW" " " " " )(
" " " @WEWIPIQW"RJ"2EVL"5ORZV" " " " )+
" " " <RWIV"WR"WLI"5MQEQGMEO"@WEWIPIQWV" " " )-
" " " ;MVGIOOEQIRXV"0GGRXQWMQK"2RQGISWV"EQH"
" " " 2RQYIQWMRQV" " " " " ).
" " " @ROYIH"4[EPSOIV" " " " " *'
" " " >UEGWMGI"4[IUGMVI" " " " " *,

2LESWIU "
"+ ALI"1EOEQGI"@LIIW" " " " +)
" " " 2XUUIQW"0VVIWV" " " " " ++
" " " 2XUUIQW"9MEFMOMWMIV" " " " " +.
" " " @WRGNLROHIUV#"4TXMW\" " " " ,&
" " " AUEQVEGWMRQ"0QEO\VMV"EQH"1EOEQGI"@LIIW"2UIEWMRQ" ,'
" " " @ROYIH"4[EPSOIV" " " " " ,+
" " " >UEGWMGI"4[IUGMVI" " " " " -&

2LESWIU "," ALI"7QGRPI"@WEWIPIQW" " " " -+

" " " ;IEVXUIV"RJ"7QGRPI" " " " -,
" " " A\SIV"RJ"?IYIQXIV" " " " -.
" " " A\SIV"RJ"4[SIQVIV" " " " -/
" " " 4EUQMQKV"SIU"@LEUI"$4>@%EQH"3MOXWIH"4>@" " .(
" " " ?IYIQXI"?IGRKQMWMRQ" " " " .(
" " " 4[SIQVI"?IGRKQMWMRQ" " " " .)
" " " 4[SEQHIH"0GGRXQWMQK"4TXEWMRQ" " " .*
" " " AUEQVEGWMRQ"0QEO\VMV"EQH"7QGRPI"@WEWIPIQW"
" " " 2UIEWMRQ" " " " " " .+
" " " @ROYIH"4[EPSOIV" " " " " ..
" " " >UEGWMGI"4[IUGMVI" " " " " /,

2LESWIU "-" ALI"@WEWIPIQW"RJ"2EVL"5ORZV" " " '&'

" " " 2EWIKRUMIV"RJ"2EVL"5ORZ"0GWMYMWMIV" " " '&'
" " " 2EVL"5ORZ">EWWIUQ"" " " " '&*
" " " 2EVL"5ORZ"@WEWIPIQW">UISEUEWMRQ" " " '&,
" " " @ROYIH"4[EPSOIV" " " " " ''-
" " " >UEGWMGI"4[IUGMVI" " " " " '('

" " 6ORVVEU\" " " " " " '(+

" "
 /FPTS"SLI"/TSLPQ
+8DH=K@g"K@8JgAKg8gE8F8?=E=FLg
;GFKMDL8FLg8F<g;GJHGJ8L=gLJ8AF=Jg
@GD<AF?g8Fg-#"g`%=8FbKg"O8J<g
5AFF=Jag>JGEg1/*)-0^gGF=gG>g"KA8bKg
LGHg9MKAF=KKgK;@GGDK^g8F<g8Fg
&F?AF==JAF?g<=?J==gOAL@g@GFGJKgAFg
&D=;LJGFA;K]g(=g@8KgGN=JgUTgQ=8JKgG>g
=PH=JA=F;=gAFgD8J?=gGJ?8FAR8LAGFKg8F<g
KL8JLfMHKgAFg"KA8^g31"^g8F<g&MJGH=]

+8DH=K@g@8KgOGJC=<gAFgK=N=J8DgHJGB=;LgE8F8?=E=FLgJGD=K^gDAC=g
1=FAGJg/JGB=;Lg-8F8?=J^g%=DAN=JQg-8F8?=J^g8F<g/JG?J8Eg-8F8?=J]g
(=gAKgH8KKAGF8L=g89GMLgOJALAF?gGFgE8F8?=E=FLgKM9B=;LK]g(AKg
L=;@FGf9MKAF=KKg98;C?JGMF<g?AN=Kg@AEg8gMFAIM=gHGKALAGFgLGgOJAL=g
GFgE8F8?=E=FLgLGHA;KgL@8Lg8J=g=8KQgLGgMF<=JKL8F<g>GJgFGFf-#"g
?J8<M8L=K]g(AKg9GGCKg8J=g8ML@GJ=<gAFg8gKAEHD=gLGgMF<=JKL8F<g
E8FF=JgOAL@GMLgMFF=;=KK8JQgMK=gG>gE8F8?=E=FLgB8J?GFK]
g
 2

Cp!ceeqwpvkpi!u{uvgo!jgnru!ecrvwtg!cpf!qticpk|g!kphqtocvkqp!
tgncvgf!vq!dwukpguu!vtcpucevkqpu/!Fgrgpfkpi!wrqp!vjg!hqewu!kv!ecp!
dg!fkxkfgf!kpvq!vyq!v{rgu<!
c* Hkpcpekcn!Ceeqwpvkpi!cpf!
d* Ocpcigtkcn!Ceeqwpvkpi/!

yyy/xkdtcpvrwdnkujgtu/eqo!
21 Hkpcpekcn!Ceeqwpvkpi!Guugpvkcnu![qw!Cnyc{u!Ycpvgf!Vq!Mpqy!

C!Hkpcpekcn!Ceeqwpvkpi!u{uvgo!eqpvckpu!hkpcpekcn!uvcvgogpvu!cpf!
fkuenquwtgu!ogcpv!hqt!fgekukqp!ocmgtu!gzvgtpcn!vq!vjg!eqorcp{/!C!
Ocpcigtkcn!Ceeqwpvkpi!u{uvgo!eqpvckpu!fgvckngf!rncpu!cpf!
rgthqtocpeg!tgrqtvu!ogcpv!hqt!fgekukqp!ocmgtu!ykvjkp!vjg!
eqorcp{/!

Jmrergmep#Eggsyrxmrk#W}wxiqw#
C!hkpcpekcn!ceeqwpvkpi!u{uvgo!ku!c!u{uvgo!vjcv!ugtxgu!vjg!fwcn!
rwtrqug!qh!mggrkpi!vtcem!qh!vtcpucevkqp!kphqtocvkqp!cpf!jgnrkpi!
qticpk|g!cpf!gxcnwcvg!vjku!kphqtocvkqp!rtkoctkn{!ogcpv!hqt!
gzvgtpcn!fgekukqp!ocmgtu/!Vjg!rctv!tgncvgf!vq!mggrkpi!vtcem!qh!
kphqtocvkqp!ku!vgtogf!cu!• Dqqmmggrkpi– -!yjkej!ku!tgncvgf!vq!
tgeqtfkpi!cp!cevkxkv{-!nkmg!vcmkpi!c!nqcp-!rc{kpi!c!uwrrnkgt-!qt!
tgegkxkpi!c!rc{ogpv/!Vjg!qvjgt!rctv!tgncvgf!vq!qticpk|kpi!
kphqtocvkqp!hqt!gxcnwcvkqp!ku!vgtogf!cu!• Hkpcpekcn!Uvcvgogpv– -!
yjkej!eqpukuvu!qh!uwooctkugf!kphqtocvkqp!qp!vjg!dwukpguu!
cevkxkvkgu!vjcv!jgnr!gxcnwcvkpi!vjg!jgcnvj!qh!vjg!dwukpguu/!
Dqqmmggrkpi!ku!fqpg!hktuv!cpf!vjgp!vjg!ecrvwtgf!fcvc!ku!qticpk|gf!
cpf!gxcnwcvgf!cu!rctv!qh!Cpcn{uku!uvcig/!

hcegdqqm/eqo0xkdtcpvrwdnkujgtu!
Ceeqwpvkpi!U{uvgou 22

Riih#jsv#Jmrergmep#Eggsyrxmrk#W}wxiqw#
Eqpukfgt!cp!gzcorng!vjcv!uqog!eqorcp{!dw{u!gswkrogpv!htqo!
cpqvjgt!eqorcp{!cpf!rc{u!hqt!kv!chvgt!21!fc{u/!Kv!cnuq!rtqfwegu!
egtvckp!iqqfu!cpf!ugnnu!211!wpkvu!vq!kvu!ewuvqogtu!cpf!tgegkxgu!
rc{ogpv!chvgt!41!fc{u/!Cuuwog!vjcv!kv!cnuq!jcf!vq!tckug!ecrkvcn!
vjtqwij!c!dcpm!nqcp!vq!dw{!vjg!gswkrogpv!cpf!rtqfweg!vjg!iqqfu/!
Kh!pqpg!qh!vjgug!vtcpucevkqpu!ygtg!tgeqtfgf!cp{yjgtg!vjgp!kv!
yqwnf!dg!korquukdng!vq!mpqy!jqy!owej!vjg!eqorcp{!ewttgpvn{!
qygu!qt!pggfu!vq!tgegkxg!cpf!jgpeg!vjg!jgcnvj!qh!vjg!eqorcp{!
ecppqv!dg!fgvgtokpgf/!Jgpeg-!dqqmmggrkpi!)qt!tgeqtfkpi!qh!vjgug!
vtcpucevkqpu*!ku!tgswktgf!d{!cnn!eqorcpkgu/!
Pqy!cuuwog!vjcv!cnn!vtcpucevkqpu!ctg!tgeqtfgf!vjtqwij!c!
dqqmmggrkpi!u{uvgo!cpf!vjg{!ctg!cnn!rtgugpvgf!vq!vjg!gzvgtpcn!
fgekukqp!ocmgtu-!nkmg!dcpmgt!cpf!kpxguvqt/!Kv!yqwnf!ocmg!kv!vqq!
fkhhkewnv!hqt!vjgo!vq!ycfg!vjtqwij!uq!ocp{!fkhhgtgpv!vtcpucevkqpu!
vq!hkiwtg!qwv!jqy!vjg!eqorcp{!ycu!fqkpi/!Jgpeg-!hkpcpekcn!
uvcvgogpvu!ctg!etgcvgf!htqo!vjg!tgeqtfgf!vtcpucevkqpu!uq!cu!vq!
uwooctk|g!cnn!vtcpucevkqpu!kp!c!hgy!ygnn.mpqyp!jgcfu!qh!ceeqwpvu!
vq!gcukn{!tgcf!vjg!kphqtocvkqp!cpf!ocmg!fgekukqpu/!

Jmrergmep#Wxexiqirxw#
Vjgtg!ctg!vjtgg!ockp!eqorqpgpvu!vq!c!eqorcp{”u!hkpcpekcn!
uvcvgogpvu<!!
c* Dcncpeg!Ujggv-!!
d* Kpeqog!uvcvgogpv!)gxgp!ecnngf!Rtqhkv!cpf!Nquu!uvcvgogpv*!!
e* Uvcvgogpv!qh!Ecuj!Hnqyu/!!
Vjgug!fc{u-!hkpcpekcn!uvcvgogpvu!cnuq!eqpvckp!ugxgtcn!ocpfcvqt{!
cpf!xqnwpvct{!fkuenquwtgu/!

yyy/xkdtcpvrwdnkujgtu/eqo!
23 Hkpcpekcn!Ceeqwpvkpi!Guugpvkcnu![qw!Cnyc{u!Ycpvgf!Vq!Mpqy!

Dgnqy!ctg!ukorng!gzcorngu!qh!vjg!vjtgg!ockp!eqorqpgpvu/!

Fepergi#Wliix#

Ewwixw# Pmefmpmxmiw
Gewl# '833133 Psrk0xivq#pserw# '</333133#
Perh# '7/333133 Wlsvx0xivq#pmefmpmxmiw# '5/333133#
Iuymtqirx# '45/333133
Sxliv#ewwixw# '6/833133 Iuymx}#
S{riv*w#mrziwxqirx# '43/333133#
Xsxep# '53/333133 Xsxep# '53/333133#

C!Dcncpeg!Ujggv!ujqyu!c!upcrujqv!qh!jqy!ocp{!tguqwtegu!)cuugvu*!
c!eqorcp{!qypu-!vjg!eqorcp{”u!qdnkicvkqpu!)nkcdknkvkgu*!cpf!vjg!
oqpg{!kpxguvgf!d{!vjg!qypgtu!)gswkv{*/!Cu!uggp!vjku!ku!c!
uwooctk|gf!xkgy!vjcv!ocmgu!kv!gcu{!vq!tgcf!cu!cickpuv!tgcfkpi!
gcej!cpf!gxgt{!vtcpucevkqp!qh!vjg!eqorcp{/!Kv!oc{!cnuq!dg!pqvgf!
vjcv!vjg!vqvcn!xcnwg!qh!cuugvu!ku!gzcevn{!gswcn!vq!vjg!vqvcn!xcnwg!qh!
nkcdknkvkgu!cpf!gswkv{/!Kv!ku!cnyc{u!uq!cpf!jgpeg!vjg!pcog-!Dcncpeg!
Ujggv/!

Mrgsqi#Wxexiqirx#

Viziryiw# '48/333#
I|tirwiw>#
# Gswx#sj#ve{#qexivmepw# '8/333#
# Wepevmiw# '5/833#
# Mrxiviwx# '833#
# Mrgsqi#xe|# '<33#
# Sxliv#i|tirwiw# '4/333#
Xsxep#i|tirwiw# '=/<33#
Rix#Mrgsqi# '8/533#

hcegdqqm/eqo0xkdtcpvrwdnkujgtu!
Ceeqwpvkpi!U{uvgou 24

Cp!Kpeqog!Uvcvgogpv!)cnuq!mpqyp!cu!Rtqhkv!cpf!Nquu!Uvcvgogpv*!
tgrqtvu!vjg!tgxgpwg!gctpgf!d{!vjg!eqorcp{!qxgt!c!rgtkqf!qh!vkog!
cpf!vjg!gzrgpugu!kpewttgf/!Vjku!ikxgu!qpg!qh!vjg!oquv!korqtvcpv!
ogcuwtgu!qh!c!eqorcp{”u!jgcnvj-!ecnngf!Pgv!Kpeqog!)cnuq!ecnngf!
Pgv!Rtqhkv*/!Kh!vjg!gzrgpugu!ctg!oqtg!vjcp!tgxgpwg-!vjgp!kv!tguwnvu!
kp!c!nquu!cpf!vjg!Pgv!Kpeqog!yknn!dg!pgicvkxg!)ujqyp!kp!dtcemgvu!
cu!)%6-311**!cu!dgnqy/!

Viziryiw# '48/333#
I|tirwiw>#
# Gswx#sj#ve{#qexivmepw# '43/333#
# Wepevmiw# '8/333#
# Mrxiviwx# '5/333#
# Mrgsqi#xe|# '4/833#
# Sxliv#i|tirwiw# '4/;33#
Xsxep#i|tirwiw# '53/533#
Rix#Mrgsqi# +'8/533,#

Wxexiqirx#sj#Gewl#Jps{w#

Gewl#jvsq#Stivexmrk#egxmzmxmiw># '8/333133#
Gewl#ywih#jsv#Mrziwxmrk#egxmzmxmiw>#
# Tyvglewi#sj#tvstivx}#erh#iuymtqirx# +'6/833133,#
# Sxliv#mrziwxqirxw# +'833133,#
+'7/333133,#
Gewl#jvsq#Jmrergmrk#egxmzmxmiw>#
# Ri{#fero#pserw# '4/833133#
# Vite}qirx#sj#sph#pserw# +'833133,#
# Te}qirx#sj#gewl#hmzmhirhw# +'633133,#
';33133#
Rix#mrgviewi#mr#gewl#hyvmrk#xli#}iev# '4/;33133#

Vjg!Uvcvgogpv!qh!Ecuj!Hnqyu!tgrqtvu!vjcv!coqwpv!qh!ecuj!eqnngevgf!
cpf!rckf!d{!c!eqorcp{!kp!vjg!ikxgp!rgtkqf/!Gcej!ecuj!vtcpucevkqp!

yyy/xkdtcpvrwdnkujgtu/eqo!
25 Hkpcpekcn!Ceeqwpvkpi!Guugpvkcnu![qw!Cnyc{u!Ycpvgf!Vq!Mpqy!

ku!fkxkfgf!kpvq!vjtgg!v{rgu!qh!cevkxkvkgu!˜ !qrgtcvkpi-!kpxguvkpi-!cpf!
hkpcpekpi/!Kv!ujqyu!vjg!pgv!kpetgcug!)qt!pgv!fgetgcug*!qh!ecuj!ykvj!
vjg!eqorcp{!cv!vjg!gpf!qh!vjg!rgtkqf/!

Tyvtswi#sj#Jmrergmep#Wxexiqirxw#
Gzvgtpcn!rctvkgu!yjq!pggf!vq!ocmg!fgekukqpu!cdqwv!kpxguvkpi!kp!c!
eqorcp{-!gzvgpfkpi!c!nqcp!vq!vjg!eqorcp{!qt!gxgp!gzvgpfkpi!c!
etgfkv!rgtkqf!vq!vjg!eqorcp{-!fq!uq!qp!vjg!dcuku!qh!hkpcpekcn!
uvcvgogpvu/!Dgnqy!fkcitco!ujqyu!jqy!hkpcpekcn!uvcvgogpvu!ctg!
wugf/!

Dgnqy!ctg!vjg!ockp!wugtu!qh!hkpcpekcn!uvcvgogpvu/!
c* Ngpfgtu!
Ngpfgtu!ycpv!vq!gpuwtg!vjcv!vjg!eqorcp{!yqwnf!dg!kp!c!!

hcegdqqm/eqo0xkdtcpvrwdnkujgtu!
Ceeqwpvkpi!U{uvgou 26

rqukvkqp!vq!rc{!kpvgtguv!qp!c!tgiwnct!dcuku!cpf!vjg!rtkpekrng!cv!
ocvwtkv{/!Vjgug!ctg!igpgtcnn{!dcpmu-!kpfkxkfwcnu-!hkpcpekcn!
kpuvkvwvkqpu!cpf!gxgp!qvjgt!eqorcpkgu/!
d* Kpxguvqtu!
Kpfkxkfwcn!cu!ygnn!cu!eqtrqtcvg!kpxguvqtu!kpxguv!kp!c!!
eqorcp{!kh!vjg{!hggn!vjcv!vjg!eqorcp{!ecp!rtqxkfg!cvvtcevkxg!
tgvwtpu!dcugf!qp!vjg!tkum!rtqhkng!qh!vjg!eqorcp{/!Vjg{!ecp!
cuegtvckp!vjku!d{!nqqmkpi!cv!vjg!eqorcp{”u!hkpcpekcn!
uvcvgogpvu!cpf!cuuwog!vjcv!vjg!rcuv!rgthqtocpeg!ku!cnuq!
tgrtgugpvcvkxg!qh!vjg!hwvwtg/!
e* Ocpcigogpv!
Cnvjqwij!vjg!ocpcigogpv!jcu!c!oqtg!fgvckngf!xkgy!d{!yc{!
qh!ocpcigtkcn!ceeqwpvkpi-!vjgtg!ctg!uvknn!vjkpiu!kp!vjg!hkpcpekcn!
uvcvgogpv!vjcv!vjg!ocpcigogpv!wugu-!nkmg!ucngu!itqyvj-!rtqhkv!
octikpu-!ecuj!cxckncdng!gve/!
f* Uwrrnkgtu!
Gzvgpfkpi!uwrrnkgt!etgfkv!ku!c!pqto!kp!oquv!kpfwuvtkgu!dwv!
uwrrnkgtu!ctg!igpgtcnn{!oqtg!eqohqtvcdng!gzvgpfkpi!itgcvgt!
etgfkv!rgtkqfu!qt!itgcvgt!etgfkv!coqwpvu!vq!vjqug!eqorcpkgu!
yjq!vjg{!hggn!yqwnf!dg!kp!c!dgvvgt!rqukvkqp!vq!ocmg!vjg!
rc{ogpv!qp!vjg!citggf!fcvg/!Vjg{!fq!uq!d{!nqqmkpi!cv!vjg!
eqorcp{”u!hkpcpekcn!uvcvgogpv!vjcv!rtqxkfgu!kphqtocvkqp!
cdqwv!vjg!hkpcpekcn!uvtgpivj!cpf!ecuj!cxckncdng!ykvj!vjg!
eqorcp{/!Vjg{!yqwnf!cnuq!nqqm!cv!vjg!eqorcp{”u!rcuv!
rc{ogpv!tgeqtf!vq!ocmg!c!fgekukqp/!
g* Ewuvqogtu!
Vjgtg!ctg!uqog!iqqfu!yjkej!tgswktg!c!iqqf!fgcn!qh!chvgt.
ucngu!uwrrqtv-!nkmg!cgtqrncpgu/!Ewuvqogtu!yqwnf!ycpv!vq!
mpqy!vjcv!vjg!cgtqrncpg!ocpwhcevwtgt!yknn!pqv!iq!qwv!qh!
dwukpguu!chvgt!vjg{!dw{!vjg!rncpg!htqo!vjgo/!Hkpcpekcn!

yyy/xkdtcpvrwdnkujgtu/eqo!
27 Hkpcpekcn!Ceeqwpvkpi!Guugpvkcnu![qw!Cnyc{u!Ycpvgf!Vq!Mpqy!

uvcvgogpvu!jgnr!vjgo!icwig!vjg!eqorcp{”u!hkpcpekcn!
uvtgpivj/!
h* Gornq{ggu!
Hkpcpekcn!uvcvgogpvu!qhvgp!fgvgtokpg!gornq{ggu”!dqpwu-!
rgpukqp-!jgcnvj!ectg!dgpghkvu!gve/!C!hkpcpekcnn{!uvtqpi!
eqorcp{!ku!cnuq!rtghgttgf!d{!gornq{ggu!nqqmkpi!hqt!c!ugewtg!
lqd/!
i* Eqorgvkvqtu!
Eqorcpkgu!qhvgp!nqqm!cv!vjg!eqorgvkvqt”u!hkpcpekcn!uvcvgogpvu!
vq!eqorctg!vjgkt!tgncvkxg!rgthqtocpeg!kp!vgtou!qh!tgxgpwg-!
rtqhkv-!octikpu!gve/!Vjku!kphqtocvkqp!jgnru!eqorcpkgu!vq!
dgpejoctm!vjg!dguv!kp!vjg!kpfwuvt{!cpf!fgxkug!rncpu!vq!ocvej!
qt!dgvvgt!vjgo/!
j* Iqxgtpogpv!Cigpekgu!
Hgfgtcn!cpf!uvcvg!iqxgtpogpvu-!KTU-!UGE!cpf!qvjgt!cigpekgu!
htgswgpvn{!tghgt!vq!vjg!hkpcpekcn!uvcvgogpvu!qh!eqorcpkgu!vq!
gpuwtg!kpxguvqtu”!uchgv{!cpf!vq!ocmg!rqnke{!fgekukqpu/!
k* Rtguu0Ogfkc!
Yjgpgxgt!vjg!rtguu!ycpvu!vq!tgrqtv!cdqwv!c!eqorcp{!kv!ecp!
hkpf!c!iqqf!coqwpv!qh!kphqtocvkqp!kp!vjg!eqorcp{”u!hkpcpekcn!
uvcvgogpvu/!Ukipkhkecpv!gxgpvu!nkmg!nctig!ftqr!kp!rtqhkvu-!jwig!
nquugu-!cpf!swguvkqpcdng!rtcevkegu!ctg!cnn!igpgtcnn{!dcugf!qp!
vjg!fcvc!rtgugpv!kp!vjg!hkpcpekcn!uvcvgogpvu/!

Jmrergmep#Eggsyrxmrk#Wxerhevhw#
Kp!vjg!Wpkvgf!Uvcvgu-!HCUD!)Hkpcpekcn!Ceeqwpvkpi!Uvcpfctfu!
Dqctf*!ugvu!uvcpfctfu!hqt!hkpcpekcn!ceeqwpvkpi-!kpenwfkpi!hkpcpekcn!
uvcvgogpvu/!Vjg!ceeqwpvkpi!twngu!ctg!fguetkdgf!cu!ICCR
)Igpgtcnn{!Ceegrvgf!Ceeqwpvkpi!Rtkpekrngu*/!

hcegdqqm/eqo0xkdtcpvrwdnkujgtu!
Ceeqwpvkpi!U{uvgou 28

Crctv!htqo!HCUD-!vjgtg!ctg!qvjgt!cigpekgu!vjcv!korcev!ceeqwpvkpi!
uvcpfctfu!cpf!rtcevkeg!cu!dgnqy<!
c* UGE!)Ugewtkvkgu!cpf!Gzejcpig!Eqookuukqp*!tgiwncvgu!WU!
uvqem!gzejcpigu!cpf!uggmu!vq!etgcvg!c!hckt!kphqtocvkqp!
gpxktqpogpv!kp!yjkej!kpxguvqtu!ecp!dw{!cpf!ugnn!uvqemu!
ykvjqwv!hgct!vjcv!eqorcpkgu!ctg!jkfkpi!qt!ocpkrwncvkpi!
hkpcpekcn!fcvc/!
d* CKERC!)Cogtkecp!Kpuvkvwvg!qh!Egtvkhkgf!Rwdnke!Ceeqwpvcpvu*!
ku!c!rtqhguukqpcn!qticpk|cvkqp!qh!egtvkhkgf!rwdnke!ceeqwpvcpvu!
)ERCu*!kp!vjg!WU/!Vjg!ERCu!rtqxkfg!dwukpguu!cfxkeg!vq!
eqorcpkgu!tgncvgf!vq!ceeqwpvkpi!kuuwgu/!
e* RECQD!)Rwdnke!eqorcp{!Ceeqwpvkpi!Qxgtukijv!Dqctf*!
kpurgevu!vjg!cwfkv!rtcevkegu!qh!tgikuvgtgf!cwfkv!hktou/!
f* KTU!)Kpvgtpcn!Tgxgpwg!Ugtxkeg*!guvcdnkujgu!twngu!tgncvgf!vq!
jqy!kpeqog!ku!vq!dg!vczgf/!
g* KCUD!)Kpvgtpcvkqpcn!Ceeqwpvkpi!Uvcpfctfu!Dqctf*!fgxgnqru!
eqooqp!ugv!qh!yqtnfykfg!ceeqwpvkpi!uvcpfctfu/!

yyy/xkdtcpvrwdnkujgtu/eqo!
29 Hkpcpekcn!Ceeqwpvkpi!Guugpvkcnu![qw!Cnyc{u!Ycpvgf!Vq!Mpqy!

Wspzih#I|eqtpiw#
2/2!Yj{!yqwnf!vjg!hqnnqykpi!kpfkxkfwcnu!qt!itqwru!dg!
kpvgtguvgf!kp!c!hkto”u!hkpcpekcn!uvcvgogpvuA!
c* Ewttgpv!ujctgjqnfgtu!qh!vjg!hkto!
d* Etgfkvqtu!qh!vjg!hkto!
e* Ocpcigogpv!qh!vjg!hkto!
Uqnwvkqp<!
c* Ewttgpv!ujctgjqnfgtu!qh!vjg!hkto!
Vjg!ewttgpv!ujctgjqnfgtu!qh!vjg!hkto!yqwnf!nqqm!cv!vjg!hkpcpekcn!
uvcvgogpvu!hqt!4!tgcuqpu!˜ !vq!fgekfg!kh!vjg!uvqem!ku!yqtvj!
jqnfkpi!qt!ugnnkpi-!yjgvjgt!cffkvkqpcn!kpxguvogpv!ecp!dg!ocfg!
kp!vjg!eqorcp{!cpf!vq!gpuwtg!vjcv!vjg!ocpcigogpv!ku!mggrkpi!
ujctgjqnfgt!kpvgtguvu!kp!okpf!yjkng!ocmkpi!fgekukqpu/!Vjg!ncuv!
rctv!jcu!dgeqog!gzeggfkpin{!korqtvcpv!pqy!ykvj!ugxgtcn!
kpfkxkfwcnu!cpf!itqwru!hknkpi!encuu!cevkqp!ncyuwkvu!qp!hktou/!
d* Etgfkvqtu!qh!vjg!hkto!
Kpfkxkfwcnu!qt!itqwru!yqwnf!gzvgpf!etgfkv!vq!c!hkto!dcugf!qp!
vjgkt!hkpcpekcn!uvtgpivj!yjkej!ku!vjgtg!kp!vjg!hkpcpekcn!
uvcvgogpvu/!Vjku!yknn!jgnr!vjgo!fgekfg!qp!vjg!coqwpv!qh!tkum!
kpxqnxgf!kp!gzvgpfkpi!etgfkv!cpf!ceeqtfkpin{!fgekfg!qp!vjg!
swcpvwo!cpf!rgtkqf!qh!vjg!etgfkv/!
e* Ocpcigogpv!qh!vjg!hkto!
Vjg!ocpcigogpv!okijv!fgekfg!vctigvu!dcugf!qp!vjg!eqorcp{”u!
hkpcpekcn!uvcvgogpvu/!Vjgug!eqwnf!dg!kp!vjg!hqto!qh!rtqhkv!
itqyvj!rgtegpvcig-!ucngu!itqyvj!rgtegpvcig-!fgetgcug!kp!vjg!
qxgtjgcf!equvu!gve/!

hcegdqqm/eqo0xkdtcpvrwdnkujgtu!
Ceeqwpvkpi!U{uvgou 2;

2/3!Eqoogpv!qp!vjg!dgnqy!Dcncpeg!Ujggv!qh!c!hkto/!

Ewwixw# # # Pmefmpmxmiw#
Gewl# '8/333133# # # Psrk0xivq#pserw# '48/333133#
Perh# '53/333133# # # Wlsvx0xivq#pmefmpmxmiw# '43/333133#
Iuymtqirx# '43/333133# # #
Sxliv#ewwixw# '4/333133# # # Iuymx}#
# # S{riv*w#mrziwxqirx# '43/333133#
Xsxep# '69/333133# # # Xsxep# '68/333133#

Uqnwvkqp<!
Vjg!cdqxg!Dcncpeg!Ujggv!ku!kpeqttgev!cu!vjg!Vqvcn!Cuugvu!ctg!pqv!vjg!
ucog!cu!Vqvcn!Nkcdknkvkgu!cpf!Gswkv{/!C!Dcncpeg!Ujggv!ujqwnf!jcxg!
cp!gzcev!ocvej!dgvyggp!vjgug!vyq!vqvcnu/!

yyy/xkdtcpvrwdnkujgtu/eqo!
31 Hkpcpekcn!Ceeqwpvkpi!Guugpvkcnu![qw!Cnyc{u!Ycpvgf!Vq!Mpqy!

Tvegxmgi#I|ivgmwi#
2/2!Eqoogpv!qp!vjg!dgnqy!Kpeqog!Uvcvgogpv/!

Viziryiw# '8/333133#
I|tirwiw>#
# Gswx#sj#ve{#qexivmepw '6/333133#
# Wepevmiw# '5/333133#
# Mrxiviwx# '4/333133#
# Mrgsqi#xe|# '#0#
Xsxep#i|tirwiw# '9/333133#
Rix#Mrgsqi# +'4/333133,#

2/3!Yj{!yqwnf!vjg!hqnnqykpi!kpfkxkfwcnu!qt!itqwru!dg!
kpvgtguvgf!kp!c!hkto”u!hkpcpekcn!uvcvgogpvuA!
c* Rtqurgevkxg!ujctgjqnfgtu!qh!vjg!hkto!
d* UGE!)Ugewtkvkgu!cpf!Gzejcpig!Eqookuukqp*!
e* Hkto”u!oclqt!ncdqt!wpkqp!

Uqnwvkqpu!vq!vjg!cdqxg!swguvkqpu!ecp!dg!fqypnqcfgf!htqo!
vjg Srpmri#Viwsyvgiw ugevkqp!qh!vjku!dqqm!qp
{{{1zmfverxtyfpmwlivw1gsq

hcegdqqm/eqo0xkdtcpvrwdnkujgtu!
Self-Learning Manag
ement Series 4e
FINANCIAL
ACCOUNTING
ESSENTIALS YOU ALWAYS WANTED TO KNOW: FOURTH EDITION
Financial Accounting Essentials You Always Wanted To Know prepares new managers
and leaders with the foundation to understand financial accounting, a critical tool to
document finances to shareholders, government tax authorities and other critical
parts of the business ecosystem. The chapters follow in a logical flow to describe the
key components of financial accounting, including:
• Why are financial accounting systems necessary
• Financial accounting systems and terms
• The Balance Sheet
• The Income Statement
• The Statement of Cash Flows
Each chapter provides clear examples of the financial accounting tools and includes
practice examples to help train the reader in the usage of these critical tools.
Financial Accounting Essentials is part of the Self-Learning Management Essentials
series that helps working professionals moving into management roles.

About the Author

Kalpesh Ashar is a management consultant and corporate trainer holding an MBA
(Dean's Award Winner) from SPJIMR and an Engineering degree with honors in
Electronics. He has over 21 years of experience in large organizations and start-ups in
Asia, USA, and Europe. Kalpesh has worked in several project management roles like
Senior Project Manager, Delivery Manager, and Program Manager. He is passionate
about writing on management subjects. His techno-business background gives him a
unique position to write on management topics that are easy to understand for non-
MBA graduates.
ISBN 978-1-949395-32-7
5 2 4 9 5>

9 781949 395327
www.vibrantpublishers.com