Topics: Generally Accepted Accounting Principles, Balance sheet, Asset Pages: 8 (2060 words) Published: March 10, 2013
Flirting with Finance
explain some the most

This Handbook aims to


SEEMINGLY complicated" topics in the field of Financial Accounts ”SUPPOSEDLY scary” bits of finance in

and Financial Management in a conceptual way. Once the concepts are clear then calculation part becomes extremely easy. This handbook explains the

layman’s term. It also contains the definition of basic financial terms explained in a way understood by students from all backgrounds. It is basically a compilation of data from various sources that’s gonna make your finance life fun and easy. It also includes pouring over books.

links to various

tutorial videos and sites that are much easier to study from rather than knowledge brush up and for getting your fundas right before sitting for interviews!! This book will also be real handy to do some

So let’s go have some fun with Finance….



 The Balance Sheet is one of the three essential measurement reports for the performance and health of a company along with the Profit and Loss Account and the Cashflow Statement.  The Balance Sheet is a 'snapshot' in time of who owns what in the company, and what assets and debts represent the value of the company. (It can only ever be a snapshot because the picture is always changing.)  The term 'balance sheet' is derived from the simple purpose of detailing where the money came from, and where it is now. The balance sheet equation is fundamentally: (where the money came from) Capital + Liabilities = Assets (where the money is now). Hence the term 'double entry' - for every change on one side of the balance sheet, so there must be a corresponding change on the other side - it must always balance.  The Balance Sheet does not show how much profit the company is making (the P&L does this), although previous years' retained profits will add to the company's reserves, which are shown in the balance sheet.

Here is an example of a balance sheet:

 One of the three principal business reporting and measuring tools (along with the balance sheet and cashflow statement).  Basically the P&L shows how well the company has performed in its trading activities.  The P&L is essentially a trading account for a period, usually a year, but also can be monthly and cumulative. It shows profit performance, which often has little to do with cash, stocks and assets (which must be viewed from a separate perspective using balance sheet and cashflow statement  The P&L typically shows sales revenues, cost of sales/ cost of goods sold, generally a gross profit margin (sometimes called 'contribution'), fixed overheads and or operating expenses, and then a profit before tax figure (PBT).  A fully detailed P&L can be highly complex, but only because of all the weird and wonderful policies and conventions that the company employs.


 One of the three essential reporting and measurement systems for any company. The cashflow statement provides a third perspective alongside the Profit and Loss account and Balance Sheet.  The Cashflow statement shows the movement and availability of cash through and to the business over a given period, certainly for a trading year, and often also monthly and cumulatively.  The availability of cash in a company that is necessary to meet payments to suppliers, staff and other creditors is essential for any business to survive, and so the reliable forecasting and reporting of cash movement and availability is crucial.

 An accounting term that refers to all ongoing business expenses not including or related to direct labour, direct materials or third-party expenses that are billed directly to customers.  Overhead must be paid for on an ongoing basis, regardless of whether a company is doing a high or low volume of business. It is important not just for budgeting purposes, but for determining how

much a company...
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