Download - ACCOUNTING PROCESS and CLASSIFICATION
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UNDERSTANDING HOW TO
MANAGE SCHOOL FINANCES
Venkat
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Overview of this SessionOverview of this Session
BASIC ACCOUNTING COCEPTS
FINANCIAL STATEMENTS FINANCIAL PLANNING
MODES OF INVESTMENT FOR SCHOOLS
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PRINCIPLES OF DEBIT AND CREDIT
Personal account:- Debit the receiver
credit the giver
Real account:- Debit what comes in creditwhat goes out
Nominal account:- Debit all expenses and
losses credit all incomes and gains
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THE ACCOUNTING CYCLE
Torecord opening entries in the general ledger
Torecord transactions and events in thejournal
Topostjournal entries in appropriate accounts in the general ledger
Tobalance the accounts in the general ledger
Toprepare the trial balance
Topass adjustment entries
Toprepare therevised trial balance
Topass closing entries toprepare financial statements
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TYPES OF JOURNALS
1. Purchase Day Book2. Sales Day Book
3. Purchase Return Book
4. Sales Return Book
5. Cash Book
6. Journal Proper
Core Accounting Principles
Matching Principle : Revenues have to bematched and correlated with all the expensesof a particular year. In other words , profit isdetermined after charging the expenses of aperiod with the revenues earned in the sameperiod.
Principle of Conservatism: This principlerequires the accountants not to anticipate gainsbut to provide for all possible losses Ex : Lowerof cost or market price policy is adopted whilevaluing inventory.
Principle of Materiality : Information is
material if its misstatement could influence thedecisions of users taken on the basis of financialstatements. Materiality depends on t h e sizeand nature of the item or error. It isnecessitated by practicability and feasibility
Dual Aspect Concept
Business Entity Concept
CostConcept
Money Measurement
Concept
Realization Concept
ACCOUNTING CONCEPTS
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The relationship among asset , liability andequity can be expressed by the following
equation.
Assets = Liabilities + Owners EquityThe effect of all business transactions is
reflected in this equation.
Shows Financial Position
-- Assets
-- Liabilities
--Equity
. Shows Performance
-- Income
-- Expenses
ACCOUNTING EQUATION
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1) Economic Entity
Assumption
2) Going Concern
Assumption
3) Monetary UnitAssumption
4) Periodicity
Assumption
ACCOUNTING
ASSUMPTIONS
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TRIAL BALANCE
FEATURES
Closingbalances ofaccountsintheledgeraswellas cashbalancearetaken
Itteststhearithmeticalaccuracy ofledgerbalances
It canbe preparedmonthly,quarterlyandyearly
It isasourcedocument forpreparing financialstatement
CLOSING ENTRIES
STEPS
Transferbalances inrevenue
accountsto the Profit & Loss
account
Transferbalances intheexpense
accountto the Profit & Loss
account
Transferbalances inthe Profit &
Lossaccountto Profit & Loss
Appropriationaccount
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FINANCIAL STATEMENTS
Balance Sheet
Income Statement or Profit and
Loss Account
Cash Flow Statement
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Balance Sheet
ASSET SIDE
Fixed Asset
1. Land
2. Building
3. Plant and Machinery
4. Furniture and
Fixture
5. Vehicles
LIABILITIES SIDE
Share Capital- Equity Share Capital
- Preference Share CapitalReservesand Surplus- Capital reserves- General reserve- Capital redemption
reserve- Debentureredemption
reserve
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Balance Sheet
Investment
1. Investment in govt.securities
2. Investment in shares,debentures andbonds
3. Investment inimmovable
properties4. Investment in thecapital ofpartnership firms
Balance Sheet
Loan Funds
Secured Loans
- Term Loans- Debentures
- Working capital loans
Unsecured Loans
- Fixed deposits- Debentures
- Security deposits
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Balance Sheet
Current Assets, Loans,andAdvances
Current Assets- Inventories- Sundry debtors
- Cash and bank balances
Loansand Advances- Advances recoverable in cash or in
kind or for value tobereceived- Advance income tax- Advance deposit of sales tax and
excise- Inter-corporate deposits
Current LiabilitiesandProvisions
Current Liabilities
- Sundry Creditors- Expenses Payable
- Advances fromcustomers
- Unclaimed dividends
- Interest accrued but not due
Provisions- Provision for taxation
- proposed dividend
- provision forcontingencies
Balance Sheet
Miscellaneous Expenditure
Debitbalance in Profitand Los
account
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Income Statement
The Income Statement (orProfit & Loss Statement)
reports the income, expenses
and profits for a specific
period oftime.
Sales
- Cost of Goods Sold
- SG&A Expense
+Other Income
- Other Expenses
= Income Before Taxes- Income Taxes
= Net Income(div.by SharesOutstanding)
= Earnings Per Share(EPS)
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CASH FLOW STATEMENT
Features
* Prepared foragiven period
* Comparative position foreachelement of
cash flow isgiven.
* Cash inflowsand outflows for operating,
investingand financingactivitiesaredisclosed.
* Itshowsthereconciliationbetween openingand closing cashbalances.
Operating Activities
1) Cashreceipts fromsale ofgoods orservices
2) Cashreceipts fromroyalties, fees,
commission
3) Cash paymentsto suppliers,employees
4) Cash payments orrefunds of incometax
Investing Activities
1) Cash paymentsto acquire fixedassets
2) Cashreceipts fromdisposal of fixedasset
and intangibles
3) Cash paymentsto acquireshares,
warrants ordebt instruments
4) Cashreceipts fromdisposal fromshares,
warrants ordebt instruments
5) Cashadvancesandloansmadeto third
parties
6) Cashreceipts fromtherepayment of
advancesandloansmadeto third parties
Financing Activities
1) Cash proceeds from issue ofshares,
debentures,loans,bonds
2) Cashrepayments ofamountborrowed
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Financial planning isthetask of determininghowabusinesswillaffordto achieve
itsstrategic goalsand objectives.
The Financial Plandescribeseach oftheactivities,resources,equipmentand
materialsthatareneededto achievethese objectives,aswellasthetimeframes
involved
The financial planning process involves the following steps -
1) Conducting need analysis
2) Evaluating existing resources
3) Conducting risk assessment
4) Developing a financial plan
5) Implementing the financial plan
6) Monitoring the financial plan
FINANCIAL PLANNING
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What are school managements major
responsibilities with regard to finance?
1. To develop the schools annual budget
2. Toensure that properrecords are kept of all
the schools financial operations
School Strategic Plan
Student outcomes:goals & targets
Whatwehaveto do:keystrategies
Howwewillachievethe outcomes: peopleandmoney 16
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The schools Annual Budget
The financial plan that makes sure that the schools
resources (people, programs, services, equipment etc)
support its educational priorities and objectives
How it will use these resources to produce the results
aimed for in the strategic plan
How it will maximise student outcomes through the most
efficient and effective use of its limited resources
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What funds are available to the school
each year?
Funds provided by the government (both credit& cash)
Fess Collected
The funds held in all School bank accounts
Other funds
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How is the annual budget created?
The strategic plan is used as a starting point to
determine the strategies to be funded
Finance team work out what they need to do, and
how much money will be needed This is balanced against estimates of the total
money available
Finance committee produces its recommended
plan and submits it to Management for approval
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Financeresponsibilities
Keep informed about the financial position by carefullyconsidering the financial reports.
Monitor budget income targets against what has been
collected
ensure that all money coming into the hands of themanagement/finance team is expended for proper purposes
relating to the school
Monitor school accounts to decide if there are opportunities
to invest surplus funds to earn interest income Minimise risk by creating and approving an annual
investment policy e.g. using the High Yield Investment Account
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Roleof the Principal
Chairperson of all school committee meetings Signatory for school accounts, cheques and
contracts as required
Uphold all managing decisions and work inpartnership with the team
Ensure management stays f ocused on improvingstudent learning outcomes
The principal is the overall educational leader andmanager of the school Accountable for the preparation, implementation
and evaluation of the school's strategic plan
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The Schools Processes
THE WORK OF THE SCHOOL
Recruit
Students
Recruit StaffTeach
Students
Develop
and
EvaluateTeachers
Develop
Curriculum
Manage
FinancesCommunicate Raise Funds
Manage
Facilities
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The forms and modes of investing or depositing the money.
i) investment in Government Savings Certificates and any other securities or certificates
issued by the Central Govt. under the Small Savings Scheme ;
ii) deposit in any account with the Post Office Savings Bank Account ;
iii) deposits in any account with any scheduled bank or a co-operative society engaged in
carrying on the banking business (including a co-operative land mortgage bank or a co-
operative land development bank) ;
iv) investment in units of the Unit Trust of India.
v) investment in any security for money created and issued by the Central Govt. or a StateGovt.
vi) investment in debentures of any company or corporation, the principal whereof and the
interest whereon are guaranteed by the Central or State Government.
vii) investment or deposit in any public sector company.
MODES OF INVESTMENT FOR SCHOOLS
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viii) deposit with or investment in any bonds issued by a Central Government
approved financial corporation engaged in providing long-term finance for
industrial development in India.
ix) deposits with or investments in any bonds issued by any Central Government
approved public Company formed and registered in India with the main object
of carrying on the business of providing long-term finance for construction or
purchase ofhouses
ixa) w.e.f. 01.04.2001, deposits in bonds issued by a public company engaged in
long term finance for development of urban infrastructure.
x) investment in immovable property.
xi) deposits with the Industrial Development Bank of India (IDBI).
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xii) any other form or mode of investment or deposit as may be prescribed.
Rule 17C ofthe Income Tax Rules, 1962 have so far prescribed the following :
a) investment in the units issued under the Scheme ofthe Mutual Fund
referred to in clause (23D) of Section 10 ofthe Income Tax Act, 1961 ;
b) any transfer ofdeposits to the Public Account of India;
c) deposits made with an authority constituted in India for the purposes
of housing accommodation, planning & development of cities, towns
and villages.
d) investment by way of acquiring equity shares of a depository as
defined in clause (e) ofsub-section (1) of Section 2 ofthe Depositories
Act, 1996.
MODES OF INVESTMENT FOR SCHOOLS
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Shri. P. Sharath Kumar, LLB, CFE, CFAP, FCA.Chartered Accountant
E-mail : [email protected] 26
Thank YouThank You
Presented byPresented by
Venkat , B.com, ACA,CSVenkat , B.com, ACA,CS
Chartered AccountantChartered Accountant