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Financial and Management Accounting

MB 0025

Contents

Unit 1

Financial Accounting An Introduction 1

Unit 2

Accounting Concepts, Principles, Bases and Policies 14

Unit 3

Double Entry Accounting 29

Unit 4

Primary Books 48

Unit 5

Secondary Books 71

Unit 6

Trial Balance 86

Unit 7

Final Accounts 105

Unit 8

Introduction to Management Accounting 140

Unit 9

Financial Statement Analysis 149

Edition: Fall 2008

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Contents

Unit 10

Funds Flow Analysis 184

Unit 11

Cash Flow Analysis 229

Unit 12

Understanding Cost 243

Unit 13

Marginal Costing and Break Even Analysis 264

Unit 14

Budgetary Control 281

Unit 15

Standard Costing 300

Edition: Fall 2008

BKID B0668

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Dr. K. Jayakumar

Vice Chancellor

Sikkim Manipal University of Health, Medical, and Technological studies

Prof. Nandagopal V. B.Director and Dean

Sikkim Manipal University of Health, Medical, and Technological studies.

Board of Studies

Dr. T. V. Narasimha Rao

Professor, Manipal Universal Learning

Prof. K. V. Varambally

Director, Manipal Institute of Management, Manipal

Ms. Vimala Parthasarathy

Asst. Professor, Sikkim Manipal University of

Health, Medical and Technological studies.

Mr. Shankar Jagannathan

Former Group Treasurer

Wipro Technologies Limited, Bangalore

Ms. Sadhana Dash

Senor Manager HR

Microsoft India corporation ( Pvt) limited

Mr. Abraham Mathews

Chief Financial Officer

Infosys BPO, Bangalore

Mr. Pankaj Khanna

Director, HR, Fidelity Mutual Fund

Content Preparation Team Peer Review By

1. Dr. Y. Rajaram Dr. Nagesh Malavalli

Adjunct Faculty, Manipal Universal Learning Principal & Professor of Finance & AccountingM.P. Birla Institute of Management, Bangalore

2. Mr. S. N. Dorai Raj

Retd Principal & Professor of commerce,

Seshadripuram College, Bangalore.

Edition: Fall 2008

This book is a distance education module comprising of collection of learning material for our students.

All rights reserved. No part of this work may be reproduced in any form by any means without permission in

writing from Sikkim Manipal University of Health, Medical and Technological Sciences, Gangtok, Sikkim.

Printed and Published on behalf of Sikkim Manipal University of Health, Medical and Technological Sciences,

Gangtok, Sikkim by Mr. Rajkumar Mascreen, GM, Manipal Universal Learning Pvt. Ltd., Manipal 576 104.

Printed at Manipal Press Limited, Manipal.

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INTRODUCTION

Accounting is a systematic effect of collecting. Classifying and analyzing financial information for

effective use in decision making activities. There are two facts of accounting namely Financial

Accounting and Management Accounting. While financial accounting is concerned with recording and

preparation of financial statements, management accounting focuses on using the information for

planning, decision making and controlling the financial activities of business enterprise. In view of the

fast changing scenario world over, MBA students should acquaint themselves with rudiments of the

subject. This book contains 15 Units.

Unit 1: Financial Accounting An Introduction

Presents an overview of meaning, purpose and evolution of accounting and introduces

basic terminology.

Unit 2: Accounting Concepts, Principles, Bases and Policies

Briefly describes the accounting concepts and assumption in financial accounting.

Unit 3: Double Entry Accounting

Deals with basic accounting principles of Double entry system.

Unit 4: Primary Books

Contains details of primary books- General journal and subsidiary books.

Unit 5: Secondary Books

Covers the process of posting from primary books to ledger, which is called secondary

book.

Unit 6: Trial Balance

Deals with the process of preparing trial balance, errors and rectification.

Unit 7: Final Accounts

Describes the Preparation of final accounts Trading A/c, P & L A/c and Balance sheet.

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Unit 8: Introduction to Management Accounting

Presents the meaning and scope of Management Accounting.

Unit 9: Financial Statement Analysis

Deals with ratio analysis as a part of analysis of financial statements.

Unit 10: Funds Flow Analysis

Focuses on fund flow analysis.

Unit 11: Cash Flow Analysis

Gives a brief sketch of cash analysis.

Unit 12: Understanding Cost

Throws light on meaning and role of cost accounting.

Unit 13: Marginal Costing and Break Even Analysis

Introduces the tool of marginal costing and its usage.

Unit 14: Budgetary Control

Provides an insight of budgets as a means of control.

Unit 15: Standard Costing

Introduces the technique of standard costing as an effective controlling system.