Welcome to this one day intensive course on finance for non finance managers/professionals Besides learning essential concepts, we will discuss the difference among financial accounting, management accounting and financial management In Module 1, we will discuss the basics of financial accouning such as financial transactions, jargon used, conventions etc Also the various ways of presenting these accounts-basic information about the three financial statements

1. Shahid Hussain Raja
Cambridge.UK
www.shahidhussainraja.com

2.  Introduction
 Need and importance of finance for managers
 Role of finance in organisation
 What is Financial Accounting
 Financial Transactions: Definition, Types & Sources
 Who Uses these Accounts
 GAAP-Generally Accepted Accounting Practices
 Branches of Accounting
 How financial information is presented
 Conclusion

3.  Welcome to this one day intensive course on finance for non finance
managers/professionals
 Besides learning essential concepts, we will discuss the difference among
financial accounting, management accounting and financial management
 In Module 1, we will discuss the basics of financial accouning such as
financial transactions, jargon used, conventions etc
 Also the various ways of presenting these accounts-basic information about
the three financial statements

4.  Retired in 2012 as Federal Secretary, Govt. of Pakistan, held
various senior positions during 35 year’s service. Served as Chief
Instructor, National School of Public Policy, Lahore(Pakistan)
 M.A.(Economics), M.A.(Political Science), M.Sc.(Defence and
Strategic Studies).Post Graduate Diploma holder (Development
Studies- University of Cambridge). Executive Development Program
at the JF Kennedy School of Government, Harvard University, USA.
 Author of 8 books on various public policy, national/global &
financial issues. Conducts courses online and offline

5.  Being a manager is an honour with perks, privileges and
prestige attached but is also a big responsibility.
 Multiple Roles-operational head, advisor to senior
management, bridge between employees and the bosses
 Globalisation and technological developments demand all
rounder managers-technically sound/financially proficient
 Unfortunately, majority not well conversant with finance
leaving it to accountants who are different from finance

6.  More than 70% of your decisions will be about financial issues-ignore it at
the cost of your job or at least promotion
 Preparation of accounts is a specialized job of accounts branch
◦ to record all financial transactions &
◦ turn into meaningful financial information for financial analysis/ decision
making by management.
 However, managers must know how they prepare accounts to ensure
relevant, accurate and timely information.
 Only possible if you have broad idea of how they have used certain pieces of
information regarding all financial transactions made

7.  Every business needs 3 types of resources-human, physical/ material
and financial. However, financial resources-fuel as well as the oil.
 Beginning and the end for which the a business firm strives
 Prudent financial management essential for survivalgrowth of firm
 Also necessary because of interdependency of financial institutions.
 2007/8 global financial crises? Wrong investment and lending
decisions of a few major American banks in the 2000s

8.  Financial Accounting-recording and categorising of financial
transactions and its structured presentation to the management
by the accounts branch
 Management Accounting-reading, interpreting and utilizing the
above information for operational activities of the firm by the
management for planning, control and decision-making.
 Financial Management-Using the information and inputs
received for taking strategic decisions to manage the finances
efficiently and effectively by the senior management

9.  Cost Accounting: Normally used in manufacturing business to
determine competitive edge over competitors and take decisions
regarding future courses of action
 Auditing:
◦ External auditing -examination of financial statements by
independent party to examine fairness of presentation &
compliance with GAAP.
◦ Internal auditing -evaluating adequacy of company's internal control
structure by testing its duties, policies and procedures and other
management controls.
 Tax Accounting: How to legally minimise the tax burden-tax
planning, preparation of tax returns and tax advisory services

10.  Treasury: Usually found in very large company or group of companies.
Management of bank balances to optimise interest payments and
management of exchange risk
 Accounting Systems: Development of accounting procedures and systems-
employment of business forms, accounting personnel direction, and
software management.
 Fiduciary Accounting: Handling of accounts managed by a person entrusted
with the custody and management of property of or for the benefit of
another person.
 Forensic Accounting: Court and litigation cases, fraud investigation, claims
and dispute resolution, and other areas that involve legal matters.

11.  Process of recording, categorising and presenting recorded
monetary business transactions in standardised formats
during/point of time.
 Basically the job of the professional accountants
 Legal requirement but essential for management for financial
analysis, strategic management and business decisions
 Carried out under some basic principles/concepts/conventions

12.  Chartered Institute of Management Accountants (CIMA) is the
world's largest professional body of management accountants
 The classification and recording of monetary transactions;
 The presentation and interpretation of the results of those
transactions in order to assess performance over a period and
the financial position at a given date;
 The monetary projection of future activities arising from
alternative planned courses of action

13.  Any payment made or received by a firm
 There are four types of financial transactions
 Income-sale of goods or assets or earning from investments
 Expense-accounting for expenditure
 Assets- purchase of land, plants etc
 Liabilities- raw material purchased on credit
 All financial transactions originate in 3 heads of activities of a firm
 Operating-manufacturing, marketing, selling
 Investing-making investments in capital goods, bonds etc
 Financing- obtaining loans, paying interest, clearing debts

14. Income Expense Asset Liability
Operating Sale of
good/service
Purchase of
inputs/wages
Purchase of
Machinery
Hiring of machine
on credit
Investing Income from
government
bonds purchased
Payment for
purchase of
shares as
investment
Sale of stocks and
shares bought
long time ago
Payment to stock
broker for
maintaining
investment
account
Financing Interest income
from a savings
account
Payment of
interest/principal
on the loan
obtained

15.  All financial transactions are first recorded in a General
Journal-date wise
 These are, then transferred into Accounts Ledgers as
per their respective heads of accounts-month wise
 Number of accounts vary from company to company
depending on the size of the firm

16. ◦ Capital Account: to record investments into the business, Fixed Asset
◦ Sales Account: to record sales of the goods sold
◦ Debtor Account: to record sales of goods and services on credit
◦ Purchases Account: Record of goods/raw material purchased
◦ Creditor Account :to record goods purchased on credit
◦ Overhead Account to record expenses necessarily incurred in order to
run the business

17.  Owners-What is happening to my equity ?
 Management-How is our firm doing ?
 Lenders-Are they worth lending money ?
 Competitors-Why they are more successful ?
 Government-Is this firm eligible for tax allowances or ?
 Employees-Are we getting equitable share ?
 Suppliers-Are they worth selling goods ?
 Shareholders-To purchase more shares or sell present ones ?

18.  Like other professions, Accounting has also accumulated a vast
body of good practices and conventions
 Known as Generally Accepted Accounting Practices (GAAP),these
provide uniformity and consistency of carrying out the accounting
 Although trending towards global harmonisation, these are still
known by the name of the country adopting them. UK GAAP etc
 Unlike some other countries the UK GAAP has no statutory or
official backing but accepted by all accounting firms

19.  Legal/regulatory Framework: Company law as laid down by
Parliament in various Companies Acts, notably 1985, 1989 and 2000
 Accounting Standards: Accounting standards which comprise a set of
professional rules governing the detailed calculations and
presentation of information in published financial statements
 Stock Exchange Regulations: Stock exchange regulations augmenting
the above in the case of a listed company
 Historical Conventions:

20.  Entity concept-firm has its own individuality different from its
owner’s identity
 Monetary concept-only transactions recorded in money terms
 Going Concern-firm has perpetual existence
 Consistency-Standard terms, used every year
 Materiality-ignore the trivial, record the essential

21.  Duality-transactions recorded under double entry system of
classification
 Realization-transaction is recorded in the month when done whether
cash came/paid later or earlier
 Matching-record the costs of sales against the value of those same sales
in the same period when determining profit or loss
 Accrual-Expenses recorded in the same period when made irrespective
of their payment time
 Prudence-ignore the expected profit until realized; include the expected
loss before hand

22. Financial information about a business firm over/at a point of
time presented in three structured standard formats
 Balance Sheet- What a firm owns and what it owes. Shows its
financial health and liquidity position
 Income Statement-Is it earning profits or losing money.
Shows the profitability position
 Cash Flow Statement-From where cash is being generated
and where it is being spent. Shows the solvency position

23.  Business Organisation: entity carrying out business activities, having
its own legal entity & assumed to be going concern for indefinitely
 Assets: an economic resource that company owns(land, machinery etc)
 Liability: legal obligations to pay back in money terms (loan, payables)
 Book value: historical value of an asset
◦ Gross Book Value: price paid at the time of its purchase in the past
◦ Net Book Value: its present book value after allowing for depreciation due to
use/lapse of time

24.  Expenditure: One time payment made for purchase of good/service
 Expenses: Accounting for the benefits derived over period of time
from the goods for which expenditure was incurred in the past
 Variance Analysis: Difference between the budgeted amount and
actual expenditure under any head of expenditure in a budget
 Ratio Analysis: Techniques to interpret data presented in financial
statements to assess the financial health of a firm for comparison

25.  Depreciation: reduction in value of tangible assets due to
use/lapse of time
 Amortisation: reduction in value of an intangible asset
 Receivables: expected income from customers for goods sold
or services provided in the past
 Payables: which the firm owes to others for goods purchased
or services acquired

26. Thanks