ACCOUNTING FOR FINANCIAL SERVICES

Course Objectives:

· To impart knowledge of fundamental accounting principles and concepts which provide foundation for all business decisions.

· To focus on applications of accounting principles, concepts, processes, systems and controls in financial service business.

· To demonstrate applications of accounting in banking business, particularly in disciplines of credit, operating controls and managerial decisions.

Course Contents

Segments-I                 The Basics of Business Accounting

· Accounting and its functional objectives.

· Accounting – defined as information system for decision making.

· The business transaction and its classifications.

· The business entity concept and how it differs from legal entity concept.

· The business activities – operating, investing and financing.

· The basic accounting equation.

· Introduction to generally accepted accounting principles (GAAP) and international accounting standards.

· Introduction to financial statements – balance sheet, income statement and cash flow statement.

· Elements of financial statements & their classifications.

· Financial statements and business decisions.

Segments-II                Accounting Data Processing (Phase-I)

· Trial Balance, format and uses

· The need for adjusting accounts

· Time period concepts and revenue recognition principles

· Major types of adjusting entries – accruals, prepayments, advance receipts & payments, merchandise inventories, bad debts, depreciation and amortization etc.

· Adjusted trial balance

· Preparing financial statements from adjusted trial balance

Segments-III              Accounting Data Processing (Phase-II)       

· Introduction to worksheet

· Closing process through “expense & revenue summary account”

· Post closing trial balance – contents & uses

· Correcting, reversing and opening entries

Segments-IV              Inventory Valuation

· Inventory valuation

· Physical & cost flow assumptions

· Inventory valuation under different cost flow assumptions:

FIFO, LIFO and weight Average etc.

· Lower of cost market method of inventory valuation

· Gross Profit & Retail Price method of inventory valuation on financial statements

Segment-V                  Receivables

· Creation of accounts receivable

· Collection of receivable

· Valuation of account

· Estimation of bad debts

· Aging of accounts receivable

· Writing off and recoveries

· Notes receivables

· Presentation on financial statements

Segment-VI:               Accounting for Fixed Assets

· Acquisition of fixed assets

· Depreciation methods and their effects on financial statements

· Intangibles and natural resources – simple accounting appreciation

· Typical issues related to tangible & intangible fixed assets

Segments-VII:            Introduction to Financial Statements

· Profit & loss statement

· Balance sheet

· Cash flow statement

· Statement of equity

· Critical elements to ascertain health of the enterprises.

Segment-VIII:            Analysis of Financial Statement       

· Horizontal and vertical analysis

· Financial ratios including cash flow ratios

· Interpretations & applications of financial ratios in banking decisions

Segment-IX:               Accounting for Banks

· Banking assets & liabilities

· Banking revenue and expenditure items

· Contingent and off balance sheet items

· Capital requirements for commercial banks

· Write off process, impact

Segment-X:    Financial statement of banking institutions – SBP suggested format

· Profit & loss statement

· Balance sheet

· Cash flow statement

· Statement of equity

RECOMMENDED READING MATERIAL

1.         Pakistan, Institute of Bankers                Accounting for Financial Services

2.         Pakistan, Institute of Bankers                Accounting Lesson Notes, Volume-I & II

3.         Meigs and Meigs                                  The Basis for Business Decisions

SUPPLEMENTARY READINGS

1.         Pakistan, Institute of Bankers                Audit in Banks – Philosophy and Techniques

2.         N.P. Agrawal, Sugan C. Jain                Accounting & Finance for Banks

            Priti Gupta

3. Indian Institute of Banking                      Accounting & Finance for Bankers

& Finance

4. Samuel C. Weaver                                Finance and Accounting for Non-financial

J. Fred Weston                                     Mangers

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