This document discusses the use of accounting as a decision making tool for quantity surveyors. It outlines objectives like using financial statement factors and management accounting factors to make decisions. It provides examples of income statements for Company A and B for the year ending 2011. It also discusses ratio analysis, liquidity ratios, activity ratios, financial leverage ratios, profitability ratios, and per share ratios as accounting tools. Budgeting, capital budgeting, cash flow statements, break-even analysis, economic order quantity, and stock ledgers are also covered.

1. ACCOUNTING AS A DECESSION MAKING TOOL FOR
QUANTITY SURVEYORS

2. AIM
TO GIVE AN BREIF IDEA HOW TO USE ACCOUNTING
AS A DECESSION MAKING TOOL FOR
OUR CAREER

3. OBJECTIVES
• The Account Factors
• Take Decision Using Financial Statement
Factors
• Take Decision Using Management Account
Factors

4. INTRODUCTION

5. CONSTRUCTION PROCESS

7. THE ACCOUNT FACTORS AFFECT THE
QS JOB
Financial Statement Factors
• Income Statement
• Balance Sheet
• Ratio Analyze
Management Account Factors

8. COMPANY A
Income statement
For the year ended December 31st
2011
2011(Rs)
Net sales 64,824,364
Cost of goods sold (48,099,046)
Gross profit 16,725,318
Distribution and selling expenses (6,862,113)
Administration expenses (1,405,298)
Operating profit 8,457,907
Finance cost (1,050,355)
Other operating expenses (1,064,233)
(2,114,588)
Other operating income 159,545
Profit before taxation 6,502,864
Taxation (1,834,507)
Profit after taxation 4,668,357
Earnings per share (Basic and dilute) 102.94
COMPANY B
Income Statement
As at December 31st
2011
2011(Rs)
Net sales 29,859,226
Cost of goods sold (23,230,445)
Gross profit 6,628,781
Less operating expenses
Distribution and marketing expenses (3,716,489)
Administrative expenses (504,722)
Other operating expenses (208,902)
Other operating income 213,133
Operating profit 2,411,801
Finance costs (1,049,141)
Profit before taxation 1,362,660
Taxation (471,687)
Profit for the year 890,973
Earnings per share (Basic and dilute) 1.22
INCOME STATEMENT

9. COMPANY A
Income statement
For the year ended December 31st
2011
2011(Rs)
Net sales 64,824,364
Cost of goods sold (48,099,046)
Gross profit 16,725,318
Distribution and selling expenses (6,862,113)
Administration expenses (1,405,298)
Operating profit 8,457,907
Finance cost (1,050,355)
Other operating expenses (1,064,233)
(2,114,588)
Other operating income 159,545
Profit before taxation 6,502,864
Taxation (1,834,507)
Profit after taxation 4,668,357
Earnings per share (Basic and dilute) 102.94
COMPANY B
Income Statement
As at December 31st
2011
2011(Rs)
Net sales 29,859,226
Cost of goods sold (23,230,445)
Gross profit 6,628,781
Less operating expenses
Distribution and marketing expenses (3,716,489)
Administrative expenses (504,722)
Other operating expenses (208,902)
Other operating income 213,133
Operating profit 2,411,801
Finance costs (1,049,141)
Profit before taxation 1,362,660
Taxation (471,687)
Profit for the year 890,973
Earnings per share (Basic and dilute) 1.22
INCOME STATEMENT

10. COMPANY A
Income statement
For the year ended December 31st
2011
2011(Rs)
Net sales 64,824,364
Cost of goods sold (48,099,046)
Gross profit 16,725,318
Distribution and selling expenses (6,862,113)
Administration expenses (1,405,298)
Operating profit 8,457,907
Finance cost (1,050,355)
Other operating expenses (1,064,233)
(2,114,588)
Other operating income 159,545
Profit before taxation 6,502,864
Taxation (1,834,507)
Profit after taxation 4,668,357
Earnings per share (Basic and dilute) 102.94
COMPANY B
Income Statement
As at December 31st
2011
2011(Rs)
Net sales 29,859,226
Cost of goods sold (23,230,445)
Gross profit 6,628,781
Less operating expenses
Distribution and marketing expenses (3,716,489)
Administrative expenses (504,722)
Other operating expenses (208,902)
Other operating income 213,133
Operating profit 2,411,801
Finance costs (1,049,141)
Profit before taxation 1,362,660
Taxation (471,687)
Profit for the year 890,973
Earnings per share (Basic and dilute) 1.22
INCOME STATEMENT

11. COMPANY A
Income statement
For the year ended December 31st
2011
2011(Rs)
Net sales 64,824,364
Cost of goods sold (48,099,046)
Gross profit 16,725,318
Distribution and selling expenses (6,862,113)
Administration expenses (1,405,298)
Operating profit 8,457,907
Finance cost (1,050,355)
Other operating expenses (1,064,233)
(2,114,588)
Other operating income 159,545
Profit before taxation 6,502,864
Taxation (1,834,507)
Profit after taxation 4,668,357
Earnings per share (Basic and dilute) 102.94
COMPANY B
Income Statement
As at December 31st
2011
2011(Rs)
Net sales 29,859,226
Cost of goods sold (23,230,445)
Gross profit 6,628,781
Less operating expenses
Distribution and marketing expenses (3,716,489)
Administrative expenses (504,722)
Other operating expenses (208,902)
Other operating income 213,133
Operating profit 2,411,801
Finance costs (1,049,141)
Profit before taxation 1,362,660
Taxation (471,687)
Profit for the year 890,973
Earnings per share (Basic and dilute) 1.22
INCOME STATEMENT

12. Assets: 2011(Rs)
Tangiblefixed assets
Property, plant and equipment 16,230,528
Capital work in progress 5,370,561
Total tangible assets 21,601,089
Intangible assets 11,954
Longterm loan and advances 161,982
Longterm securitydeposits 9,817
Total intangible assets 183,753
Current assets
Stores and spares 1,278,416
Stock in trade 7,064,170
Trade debts 276,858
Current portion of longterm loans and advances 30,914
Advances, deposits, prepayments and other receivables 4,042,634
Cash and bank balances 702,025
Total current assets 13,395,017
Total assets 35,179,859
Assets 2011(Rs)
Non-CurrentAssets
Property,plantandequipment 9,615,426
BiologicalAssets 496,809
IntangibleAssets 133,598
Longtermadvances,depositsandpayments 24,212
Totalnon-currentassets 10,270,045
CurrentAssets
Stores,sparesandloosetools 571,812
Stockintrade 2,637,816
Tradedebts 87,121
Advances,depositsandprepayments 266,093
Otherreceivables 1,160,126
Taxesrecoverable 1,443
Derivativefinancialinstrument ---
Shortterminvestments 1,294,000
Cashandbankbalance 350,728
Totalcurrentassets 6,369,139
TotalAssets 16,639,184
BALANCE SHEET

13. RATIO ANALYSIS
Current ratio
Company/Years 2007 2008 2009 2010 2011 Average
A 2.51 1.42 1.71 1.84 2.66 2.03
B 3.12 4.96 6.11 2.87 2.09 3.83
C 7.18 7.01 1.62 1.56 4.65 4.40
Quick Ratio
Company/Years 2007 2008 2009 2010 2011 Average
A 1.97 1.37 0.81 1.22 2.20 1.51
B 3.12 4.96 6.11 2.87 2.09 3.83
C 6.06 5.76 1.37 1.30 4.22 3.74

14. RATIO ANALYSIS
• Ratio analysis is a form of financial
statement analysis that is used to
obtain a quick indication of a firm’s
financial performance in several key
areas.

15. • Liquidity ratio
• Activity ratio
• Financial leverarge ratio
• Profitability ratio
• Per share ratio

16. LIQUIDITY RATIO
• There are two types of liquidty
ratio.
Current ratio
Quick ratio

17. ACTIVITY RATIO

18. • Activity ratios measures company
sales per another asset account.
• The most asset accounts used are
accounts receivable, inventory, and
total assets.
• Activity ratios measure the
efficiency of the company ing it’s
resources.

19. MOST POPULAR ACTIVITY RATIOS
• Inventory turnover ratio
• Inventory holding period
• Debtors turnover ratios
• debtors collection period
• Fixed asset turnover
• Asset turnover ratio

20. INVENTORY TURNOVER RATIO
• A higher inventory turnover ratio indicates
more effective cash management and
reduces the incidence of inventory
absolescene.
INVENTORY HOLDING PERIOD
• The inventory holding period shows the
number of days on average that a business
holds inventory.

21. FIXED ASSET TURNOVER
• Fixed asset turnover is the ratio of
sales to the value of fixed assets.
ASSET TURNOVER RATIO
• This ratio often can be used as an
indicator of the efficiency with
which a company is deploying its
assets in generating revenue.

22. FINANCIAL LEVERAGE RATIOS
• Debt equity ratio
• The coverage ratio

23. DEBT EQUITY RATIO
• Used to measure a company’s
financial leverage calculated by
deviding a company’s total liabilities
by its stockholders equity.
COVERAGE RATIO
• A measure of a Company’s ability
to meet it’s obligations.

24. PROFITABILITY RATIOS
• Gross profit ratio
• Net profit ratio
• Return on asset
• Return on equity

25. GROSS PROFIT RATIO
• This ratio looks at how well a company controls
the cost of its inventory and the manufacturing
of its products and subsequently passes on the
costs to its costumers.
RETURN ON ASSETS
• This is an important profitability ratio because it
measures the efficiency with which the
company is managing its investments in assets
and using them to generate profit.

26. RETURN ON EQUITY
• This is the most important ratio of
all the financial ratios to investors in
the company.

27. PER SHARE RATIOS
• Earnings per share
• Devidend per share

28. PER SHARE RATIO
• This is the portion of a Company’s profits that is
allocated to each outstanding share of common
stock serving as an indicator of the company’s
profitability.
DEVIDEND PER SHARE
• It represents the company’s net income allotted
to each share of it’s common stock.

29. 1.BUDGETING
2.CAPITAL BUDGETING
3.CASH FLOW STATEMENT

30. BUDGETING
• A statement
• Include amount of money that is
available to spend.

31. BUDGET CAN ESTABLISH BY,
• Assessment of projected income
and expenses.
• Comparison with similar projects.
• Assessment of the funds available.
• Pre-design analysis of requirements.

32. CONTENT OF CLIENT’S BUDGET

33. TOTAL PROJECT COST ESTIMATE
• Soft Cost
• Construction Cost
• Equipments

34. IMPORTANCE OF BUDGETING
• Identify wasteful expenditures
• Adapt quickly as our financial
situation changes
• Mortivate the employees

35. CAPITAL BUDGETING
The process in which a business
determines and evaluates potential
expenses or investments.

36. EXAMPLES FOR CAPITAL
BUDGETING
•Buy new office equipment
• Add to or renovate existing facilities
• Expand plant or process

37. CAPITAL BUDGETING PROCESS
• Develop and formulate long-term
strategic goals
• Seek out new investment projects
• Estimate and future cash flows

38. • Facilitate the transfer of information
• Monitoring and Control of
Expenditure
• Creation of Decision

39. CASH FLOW STATEMENT
• The cash flow sets out when costs
will be incurred and how much they
will amount to during the life of the
project.

40. HOW CONSTRUCTION COMPANY
CAN IMPROVE CASH FLOW
• Project future cash flow
• Approach payroll correctly
• Process change orders quickly
• Avoid over-billings and under-
billings

41. Break-even analysis entails the
calculation and examination of
the margin of safety for an entity
based on the revenues collected and
associated costs.

43. The economic order quantity (EOQ) is a
model that is used to calculate the optimal
quantity that can be purchased or
produced to minimize the cost of both the
carrying inventory and the processing of
purchase orders or production set-ups.

45. The stock ledger is where the
corporation keeps an accurate record
of all stock transactions and is usually
part of a corporate records book or kit.
Stock Ledger ?

46. Types of Stock ledgers
- FIFO
- LIFO
- Weighted Average

47. FIFO
FIFO is an acronym which most commonly stands for "first in, first out" and means
that the goods first added to inventory are assumed to be the first goods removed
from inventory for sale.
The first in, first out (FIFO) method of inventory valuation is a cost flow assumption
that the first goods purchased are also the first goods sold. In most companies, this
assumption closely matches the actual flow of goods, and so is considered the most
theoretically correct inventory valuation method.

48. LIFO
LIFO
"LIFO" stands for last-in, first-out, meaning that the most recently
produced items are recorded as sold first.

49. CONCLUSION

50. Q AND A