Accounting & Income Statement

Presented By:
Omais Qayyum
BS(BA)-SP13-ATK/004

What is Accounting?
Accounting refers to the process of summarizing, analyzing and reporting
these transactions.

The financial statements that summarize a large company's operations,

financial position and cash flows over a particular period are a concise
summary of hundreds of thousands of financial transactions it may have
entered into over this period.

Accounting is one of the key functions for almost any business; it may be
handled by a bookkeeper and accountant at small firms or by sizable
finance departments with dozens of employees at larger companies.

Basic Functions of an Accounting System

Interpret
and record
business
transaction
s.

Classify
similar
transaction
s into useful
reports.

Summarize
and
communicate
information
to decision
makers.

Why Entrepreneurs Need Accounting?

1. To

make

predictions

about

the

future.

2. To help you make more effective commitments of time,

energy and money to attract customers and deliver goods
and services at a larger and more efficient scale.

3. To measure and reassess progress, so reward and encourage

profitable behaviors, report progress to third parties, and
change directions when necessary.

Financial Statements
Balance Sheet
Income Statement
Statement of Cash Flows

Depicts the
revenue and
expenses for a
designated
period of time.

The Big Three

Cash Flow Statements
These answer the important managerial question do I
have enough cash to run my business

Income Statements
This is the financial sheet that tells you if your company
is profitable or not.

Balance Sheets
How much debt do I have? How large are my assets?
This sheet tells you the answer to these questions.

What are Expenses?

There are two types of expenses:

FIXED COSTS
and
VARIABLE COSTS

Fixed Cost

Variable Cost

Rent payments

Materials Cost

Salaried employees

Supplies

Capital Investments and

(some) maintenance

Equipment Maintenance

Insurance

Outside / Contracted labor

Taxes (on property, plant,

and equipment)

Sales Commissions /
Distribution Costs