IBS,IFHE, HYDERABAD

MBA Class of 2025

Accounting For Managers

Session -01

Dr. Srikanth Potharla

 "The Tale of the Flourishing Lemonade Stand"

• "The Lemonade Venture Begins"

• Once upon a time, in a bustling neighborhood, two young entrepreneurs, Mia and
Max, started a small business: a lemonade stand. They used their pocket money to
buy lemons, sugar, cups, and a small table with a bright yellow umbrella. With their
parents' guidance, they began to record their earnings and expenses in a simple
notebook, their first venture into the world of accounting.
• "Accounting Roots: An Objective Perspective"
• The notebook filled with entries signified the financial data of their lemonade
stand. Mia and Max noted the cost of their raw materials, the amount they spent
on advertising (printing flyers), and the money they earned from selling lemonade.
All these transactions were recorded in a structured, numeric format. Their notes
were objective, based on actual purchases and sales.
• "Unraveling the Purpose: The Power of Numbers"
• After a few weeks, they realized their notebook held valuable information. They
could calculate how much profit they made each day (Decision Making), and they
could even tell which days were more profitable than others (Performance
Evaluation). They started to observe patterns - on hot days, sales were higher. So,
they planned to make more lemonade on forecasted hot days (Financial Planning).
Additionally, they noticed that when they handed out flyers, they attracted more
customers. Their notebook became more than just a record of transactions, it
became a strategic tool for their small business.

MBA-Accounting for Managers- Dr. Srikanth Potharla

 • "The Lemonade Report: Sharing the Fruits of Labor"
• Mia and Max shared their financial success with their parents (the investors) by
showing them their detailed records. Their parents were delighted to see the
children’s venture prosper and decided to invest further, allowing them to buy more
lemons and sugar. They felt confident in this decision because of the accounting
information Mia and Max provided.
"The Tale of the • "A Sweet Success: The Importance of Accounting"
Flourishing • As the lemonade stand flourished, Mia and Max learned valuable lessons about the
nature and purpose of accounting. They understood how objective, structured, and
Lemonade quantitative financial data, recorded periodically, could inform their decision-
making, planning, and evaluation of their lemonade stand’s performance. The
Stand"….................. notebook, once just a collection of numbers, became the backbone of their
successful enterprise.
• This tale of the lemonade stand encapsulates the fundamental principles of
accounting. Though their business was small, Mia and Max experienced firsthand
how essential accounting is to the operation and growth of a business, no matter its
size.
•

MBA-Accounting for Managers- Dr. Srikanth Potharla

 Nature of Accounting Information
• Financial Data: Accounting information primarily
consists of financial data about transactions and
events.
• Quantitative: Accounting information is numeric. It
reflects the financial resources, obligations, and
activities of a business in numerical form.
• Structured: Accounting information follows a
structured format, typically in accordance with the
Generally Accepted Accounting Principles (GAAP) or
International Financial Reporting Standards (IFRS).
• Objective: Accounting information is factual and
verifiable, meaning it's based on evidence such as
invoices, receipts, and contracts.
• Periodic: Accounting information is usually generated
at regular intervals, such as quarterly or annually, to
facilitate comparison and evaluation.
MBA-Accounting for Managers- Dr. Srikanth Potharla
Purpose of Accounting
Information
Decision Making: Accounting information aids internal and external
stakeholders in making informed decisions, such as whether to invest in a
company, extend credit, or determine the company's operational efficiency.

Performance Evaluation: Accounting information provides data for

evaluating the performance of the business and its management. It enables
the comparison of planned performance with actual performance.

Financial Planning: Accounting information is crucial for financial planning,

budgeting, and forecasting.

Statutory Compliance: Accounting information ensures compliance with

statutory requirements, such as taxation and corporate laws.

Record Keeping: Accounting information serves as a record of the financial

transactions of a business.

MBA-Accounting for Managers- Dr. Srikanth Potharla

 1. Facilitates Decision Making
Accounting provides relevant financial information, enabling stakeholders to make
informed decisions. Management uses accounting data to set goals, develop policies,
and make crucial decisions. Investors and creditors use it to evaluate the worth and
creditworthiness of a business.
2. Aids in Financial Planning
The Accounting assists in financial planning by providing historical data that can be used to
forecast future trends. It helps in preparing budgets and in planning for future

Importance expenditures and revenues.

3. Measures Business Performance

of Through profit and loss accounts and balance sheets, accounting provides a clear
picture of the business's financial health and performance. These reports show how
well a business has performed over a particular period, indicating the profitability and
Accounting growth of the business.
4. Ensures Legal Compliance
Accounting ensures that businesses comply with tax laws and other regulations.
Accurate accounting helps businesses calculate their tax liabilities correctly and pay
their taxes on time. It also helps in filing financial statements and other reports as
required by regulators.

MBA-Accounting for Managers- Dr. Srikanth Potharla

The Importance of
Accounting.....................
5. Assists in Auditing
Auditing is a process that examines the accuracy and authenticity of the company's financial records. Without
accurate accounting, the auditing process would be challenging, potentially resulting in penalties for non-
compliance.
6. Attracts Investors
Investors need to know the financial health of a company before they invest. Accounting provides them with
this information, helping to attract investment.
7. Enhances Control
Accounting enables businesses to keep track of their assets and prevent misuse or theft. By keeping accurate
records of all assets, liabilities, and transactions, businesses can detect and address any discrepancies
or fraudulent activities quickly.
8. Facilitates Performance Comparison
Accounting allows a company to compare its current performance with past performance and with the
performance of other similar companies. Such comparisons can identify strengths, weaknesses, and areas
for improvement.
In conclusion, accounting plays a crucial role in managing a business effectively. Its importance cannot be
overstated, as it provides an accurate and complete financial picture of a company, allowing for better
decision-making, planning, compliance, and overall control.

MBA-Accounting for Managers- Dr. Srikanth Potharla

"The Flourishing Bakery
and Its Many Observers"
• Once upon a time, in a lively city filled with delicious aromas,
stood a successful bakery known as "The Sweet Loaf". The
bakery was the talk of the town, famous for its heavenly
pastries and delightful bread. But what made "The Sweet
Loaf" successful was not just the products it baked; it was
also its meticulous accounting, which served a variety of
users.
• "The Master Chef's Guidebook: Management's Accounting
Tool"
• The owner and head chef, Bella, relied heavily on accounting
information to run the bakery. With the help of accounting,
she could determine the cost of ingredients, track daily sales,
and monitor overhead expenses. The financial reports helped
her make strategic decisions, like when to introduce a new
pastry or how to price a loaf of bread, keeping the bakery
profitable.

MBA-Accounting for Managers- Dr. Srikanth Potharla

"The Flourishing Bakery and Its Many
Observers"…...........
"Investors' Assurance: The Flavorful Profit"
Bella's brother, Antonio, an investor in "The Sweet Loaf", lived in a different city. He relied on the financial statements Bella sent him quarterly to track the bakery's performance. He
was especially interested in the income statement and balance sheet. With these, he could evaluate the profitability and overall financial health of the bakery, ensuring his investment
was yielding sweet returns.
"The Lending Baker's Secret: Creditors' Trust"
"The Sweet Loaf" had built a strong relationship with a local flour mill, the bakery's primary creditor. The mill's owner, Mrs. Miller, periodically reviewed "The Sweet Loaf's" financial
statements to ensure that the bakery could pay for the flour supplies on credit. By studying the cash flow statement and accounts payable, she could trust that Bella's bakery would
meet its obligations.
"Staff of The Sweet Loaf: Employee's Paycheck"
The bakery staff also benefitted from the accounting information. Every year during wage negotiations, Bella shared relevant financial information to show the bakery's ability to
increase wages while maintaining financial stability. This transparency ensured fair negotiations and contributed to high staff morale.
"Serving the Tax Slice: Upholding Legal Obligations"
"The Sweet Loaf" was also accountable to government regulatory agencies. Bella diligently prepared tax returns using accounting information, ensuring that the bakery was compliant
with all tax obligations. This not only kept the bakery in good standing with the authorities but also saved Bella from potential legal complications.
Through this tale of "The Sweet Loaf," we see how accounting information is a valuable asset, not just for the management but also for investors, creditors, employees, and
government agencies. In different ways, they all rely on the numbers that tell the bakery's financial story, making accounting a key ingredient in the recipe for a successful business.

MBA-Accounting for Managers- Dr. Srikanth Potharla

 1. Management: The management team uses accounting
information to make strategic decisions, plan and control
activities within the organization. It helps them analyze the
performance of the business and make future projections.
2. Investors and Shareholders: Investors use accounting
users of information to assess the financial health and profitability of a
company, and to decide whether to buy, hold, or sell stock.
Shareholders use it to assess the risk and return of their
accounting investment.
3. Creditors and Lenders: Creditors and lenders use accounting
information information to assess a company's ability to repay its debts.
They scrutinize financial statements to ensure that loans and
credit extended to the company will be repaid.
4. Employees and Labor Unions: Employees use accounting
information to negotiate compensation and other benefits.
Labor unions may use this information during collective
bargaining negotiations.

MBA-Accounting for Managers- Dr. Srikanth Potharla


users of accounting
information....................
MBA-Accounting for Managers- Dr. Srikanth Potharla
5. Suppliers and Trade Creditors: Suppliers use accounting information
to assess whether a company will be able to pay for goods and services
purchased on credit.
6. Customers: Customers use accounting information to assess the
financial health of a supplier. If the supplier is financially stable, they can
rely on it for the continuous supply of goods or services.
7. Government and Regulatory Agencies: Government agencies use
accounting information to ensure that companies are compliant with
various regulations, including tax laws. Regulatory agencies such as the
Securities and Exchange Commission (SEC) require public companies to
disclose financial information to protect investors and the public.
8. Researchers and Analysts: Researchers and financial analysts use
accounting information to assess economic trends and conduct industry
comparisons.
9. Non-profit organizations: Non-profit organizations use accounting
information for budgeting, controlling costs, and financial reporting.
Importance of Accounting Standards in
Financial Reporting.
• The Pillars of Transparency
• Accounting Standards, formulated by authoritative bodies, lay the groundwork for uniformity and transparency in financial
reporting. They provide a set of principles that businesses and organizations follow in preparing and presenting their financial
statements.
• Uniformity in Reporting: A Common Financial Language
• Accounting standards ensure uniformity in financial reporting across businesses. This consistency makes financial statements
comparable across different companies, sectors, and even countries. This uniform language of financial reporting is crucial for
investors, lenders, and other stakeholders who make decisions based on these financial statements.
• Enhancing Credibility: Building Stakeholder Trust
• Accounting standards enhance the credibility of financial statements. When stakeholders know that a company follows certain
prescribed standards in preparing its financial statements, it enhances their trust in the company's reporting. This increased
credibility is vital in attracting investors and securing credit.
• Guidance for Accountants: A Reliable Roadmap
• Accounting standards provide a clear guide for accountants in the preparation and presentation of financial statements. They offer
solutions to various accounting problems that accountants may face in their day-to-day work. These standards also serve as a
reference in case of disputes or controversies related to accounting treatments.

MBA-Accounting for Managers- Dr. Srikanth Potharla

importance of Accounting Standards in
Financial Reporting.................
• Compliance with Regulations: Fulfilling Legal Obligations
• Accounting standards are often incorporated into laws and regulations by government and regulatory
bodies. Compliance with these standards becomes a legal obligation for companies. It helps avoid penalties
and legal issues related to non-compliance with financial reporting requirements.
• Facilitating Audits: Smooth Evaluation Process
• Accounting standards make the audit process smoother and more effective. Auditors use these standards as
a benchmark to evaluate a company's financial statements. Compliance with accounting standards ensures
that auditors can rely on the financial statements and give a fair opinion on a company's financial health.
• The Lifeline of Financial Reporting
• In conclusion, accounting standards are crucial in financial reporting. They ensure uniformity, enhance
credibility, provide guidance to accountants, ensure compliance with regulations, and facilitate audits.
Accounting standards are, therefore, not just important, but indispensable for accurate, reliable, and
transparent financial reporting.

MBA-Accounting for Managers- Dr. Srikanth Potharla

 Understanding IND AS
Indian Accounting Standards (IND AS) are essentially a part of the
comprehensive accounting reform in India. Aligned with International
Financial Reporting Standards (IFRS), IND AS is a significant step toward
integrating Indian financial reporting with global practices.
The Framework of IND AS: Composition and Structure
Indian IND AS comprises multiple individual standards, each addressing a particular
area of accounting. These range from the recognition of revenue and

Accounting financial instruments to the allocation of employee benefits, thereby

providing a well-rounded structure for financial reporting.

Standards (IND The Rollout Plan: Staged Adoption of IND AS

The transition to IND AS is implemented in a phased manner, with priority

AS) given to large and publicly listed companies. This approach enables a
systematic transition to new accounting practices, easing the strain on
resources and minimizing disruption.
Aiming High: The Objective Behind IND AS
IND AS is designed to align Indian accounting policies with international
norms. The convergence allows for global comparability of Indian company
financial statements, enhancing understanding among foreign investors and
multinational corporations.

MBA-Accounting for Managers- Dr. Srikanth Potharla

 Indian Accounting Standards (IND AS)…......................
Signature Traits: The Distinct Features of IND AS
Notable features of IND AS include the adoption of a 'fair value'
approach for assets and liabilities, providing a more realistic
picture of a company's worth. Furthermore, IND AS provides
detailed treatment of financial instruments and includes a single
comprehensive income statement.
Shifting Landscape: The Impact of IND AS on Financial Reporting
Adopting IND AS significantly influences a company's financial
reporting. It can alter reported income, the size of the balance
sheet, and crucial financial ratios. Enhanced disclosure
requirements under IND AS also enhance transparency for all
stakeholders.
Potential Hurdles: Challenges in Transitioning to IND AS
The shift to IND AS isn't without challenges, including the need for
staff training, system modifications, and handling tax implications.
Companies must be well-prepared to navigate these obstacles.
MBA-Accounting for Managers- Dr. Srikanth Potharla
Indian Accounting Standards (IND AS)…......................

• Overcoming Difficulties: Navigating the IND AS Transition

• Although challenges exist, they can be overcome with targeted efforts such as dedicated
training programs, technological upgrades, and modifications to tax laws to align with the
new standards.
• Looking Ahead: The Promising Future of IND AS
• Despite initial hurdles, the future trajectory of IND AS is promising. The standards are set
to enhance the credibility and recognition of Indian businesses on a global scale.
• Conclusion: IND AS – The Path to Global Financial Alignment
• The introduction of IND AS marks a critical evolution in Indian financial reporting. As we
embrace these standards, we move closer to global financial alignment, bolstering the
comparability, transparency, and trust in India's financial reports.

MBA-Accounting for Managers- Dr. Srikanth Potharla