Master Note of Accounting and Finance

Introduction Du-pont is very useful and helpful tool for manager, investors, and analyst that is created in 1920s by American Chemical Manufacturing Giant, Dupont Corporation for the purpose analyzing operation efficiency in the organization. Du-pont analysis is an extended examination of Return on Equity (ROE) of a company which analysis Net Profit Margin, Assets Turnover, and Financial Leverage or Equity Multiplier Ratio. In simple words, it breaks down the ROE to analyze how corporate can increase the return for their shareholders. Net Profit Margin is related to Profitability Ratio Total Assets Turnover is related to Efficiency Ratio Equity Multiplier is related to Leverage Ratio Derivation of Du-pont Model  Components of Du-Pont Analysis The following are the five components of Du-Pont Analysis listed as bellows: Net profit Margin Ratio: It compares total net profit to total sales. It measures the profitability ratio of the company. Total Assets Turnover Ratio: It compares ...

Introduction Net worth is the remain assets value claim by shareholder's after discharging all the liabilities i.e. long-term and short term liabilities. Net worth is what is owns minus what is owed. Net worth is total assets (include both financial and non-financial assets) minus any total debts you owe. It acts as an indicator of your financial health. Types of Net Worth Basically there are two types of net worth explained as bellows: Personal Net worth: Personal net worth is the amount of a person that is calculated by subtracting total liabilities from total assets. The assets include bank deposit, investment in stock, real estate property, gold, insurance etc. While liabilities include home loan, mortgage loan, car loan, credit card loan, personal loan etc. Business Net Worth: It is also known as book-value of company or shareholder's equity. Business prepare the balance sheet which is also known as net worth statement. The business net worth or shareholder's equity...

Introduction Forecast is a predict or estimate a future event or trend. In other words, it is the prediction of future data based on past data and/or human judgment. Financial forecasting describes the process by which firms think about and prepare for the future. The forecasting process provides the means for a firm to express its goals and priorities and to ensure that they are internally consistent. It also assists the firm in identifying the assets requirements and needs for external financing. The financial forecasting is the major part of the financial planning under Financial Management. The financial planning includes major three types of planning are listed as below: Strategic Planning: It defines, how the firms plans to make money in the future. It is the process of formulating, implementing and evaluating and controlling the implementing strategies. Long-term Financial Planning: Generally, it prepares three to five years projected income statements and balance sheet. It is...

Introduction to Financial Statements Any join stock company or corporation has established with its own a legal entity and performs various business activities for the purpose of earning profits. There are a number of stakeholders includes shareholders, BOD, management of the company, Government agencies, creditors, etc. who are keen to know about the results of its financial activities performed during a certain period of time. Therefore, in order to communicate the results of business operations and financial position to its stakeholders, the company prepares and publishes the statements of its financial affairs on a periodic basis. The entire financial activities has published though the documents called Financial Statements. Meaning of Financial Statements The financial statements are written reports of a financial affairs of a company. It include its trading and profit and loss account known as Income Statement, Balance Sheet, and Cash Flow Statements. To known about its compone...

Introduction Business uses cash book that records cash as well as bank transactions. A cash book is one of the type of subsidiary book (Day Book) that records original entry of all cash receipts and payments including bank deposits and withdrawals. Cash book has both debit and credit column representing cash and bank column hence it acts as a ledger account. Bank also records the transactions of customers. They keep all the deposits transaction in credit side and withdraws transactions in debit side of bank book.   Sometime bank as per cash book and cash as per bank book does not match. Hence it is necessary to reconcile it to fix the error of accounting. A bank reconciliation statement is a summary of banking and business activity that reconciles an entity's bank account with its financial records. Importance of Bank Reconciliation Statement Although, it is not necessary to prepare it and not fixed date to prepare it. It is only prepared due to the following reasons: To mat...

Introduction Inventory is one of the most visible and tangible aspects of doing business. Raw material, Goods in process or Work-in-Process and Finished goods all represents various forms of inventory. Each type represents money tied up until the inventory leaves the company as purchased products. Likewise, merchandise stocks in a wholesale or retail store contribute to profits only when their sale puts money into the cash register. In literate sense, inventory refers to stock of anything necessary to do business. These stocks represents a large portion of the business investment and must be well managed in order to maximize profits. Meaning and Nature of Inventory Every business organization needs inventory for smooth running of its activities. It serves as link between production and distribution processes. Inventory is the quantity of goods held by a merchandising company for resale to customers. Merchandising companies determine the quantity of investment items by a physical counts...

Meaning of Voucher Voucher can be any form. It is an evidence for business transaction. It just needs to act as evidence of a transaction not the look of it that matters. They are also called sources of document that help to identify the sources of transactions.  Accounting reports are taken as truthful financial information; hence all accounting records have to be based on facts and carefully supported by documentary proof. These documents, which provides the authenticity of happening of a transaction and event, are known as source documents. The following major sources of documents are listed as follows: Cash Memo: A seller creates cash memo and gives to buyer in the case of cash sales. Invoice or Credit Bill: A seller creates invoice usually for credit transaction with specific due date for payment. Receipts: It is a proof of document that state the details of financial transaction that received from sellers or creditors.   Payments: It is a proof of document t...

Meaning of Cash Book Cash book is one of the type of subsidiary book (Day Book) that records original entry of all cash receipts and payments including bank deposit and withdrawal.   There are various types of subsidiary books listed as follows: Cash Book Purchase Book Sales Book Purchase Return Book Sales Return Book Bills Receivable Book Bills Payable Book Journal Proper A cash book has both debit and credit hence it acts as a ledger account. Cash book has different types and used based on organizational requirements. They are: Single Column Cash Book: Under this type, only debit cash and credit cash columns are available. Double Column Cash Book: Under this type, both debit (cash and bank) and credit (cash and bank ) columns are available. Triple Column Cash Book : Under this type, both debit (cash and bank as well as discount) and credit (cash and Bank as well as discount) columns are available. *Contra entry refers to the transactions involving both cash and bank and having ...