ACT16101 BUSINESS ACCOUNTING AND FINANCIAL MANAGEMENT (Code: ACT16101)

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BUSINESS ACCOUNTING AND FINANCIAL MANAGEMENT –

ACT16101

CONTENTS

1 Introduction  to  Accounting  ;  Meaning  and  Definition  of  Accounting;  Scope  and

Objectives  of  Accounting,  Accounting  as  Science  or  an  Art,  Objectives  of  Accounting; Importance and Limitations of Accounting;  Process of Accounting, Cash System, Accrual System,  Values;  Book-keeping,  Definition,  Importance  of  Book  Keeping,  Methods  of Accounting, Importance of Double Entry System, Steps involved in Double entry system, Rules  of  Double  Entry  System;  Types  of  Accounts,  Personal  Accounts,  Real  Accounts, Nominal Accounts.

2

Principles of Accounting:  Meaning and Need of Accounting Theory; Generally Accepted Accounting  Principles  (GAAP),  Classification  of  Accounting  Principles;  Capital  and Revenue Items.Accounting  Standards  in  India  :  Accounting  Standards,  Meaning  of  Accounting Standards,  Need  and  Formulation  of  Accounting  Standards,  Nature;  Statements  of Accounting Standards (AS 1), Disclosure of Accounting Policies, Introduction, Explanation.

3Accounting Equation and Accounting Cycle :  Accounting  Equation,  Equity  as  Residual Claims, Rules for Accounting Equation, Effect of Transactions on the Accounting Equation; Accounting Cycle; Account, Kinds of Account.Preparation  of  Journal,  Ledger  and  Balancing:  Books  of  Original  Record,  Compound Journal  Entry,  Opening  Journal  Entry,  Subsidiary  Books  of  Original  Records;  Ledger; Balancing, Balancing of Different types of Accounts.

4Subsidiary Books : Meaning of Subsidiary Books; Cash Book, Kinds of Cash Book, Single Column Cash Book, Two Column Cash Book, Three or Triple Column Cash Book, Petty Cash  Book;  Other  Subsidiary  Books,  Purchases  Day  Book,  Sales  Day  Book,  Purchase Returns Book, Sales Returns Book, Bills Receivable Book, Bills Payable Book.

5Trial  Balance:  Meaning  of  Trial  Balance;  Methods  of  Preparation  of  Trial  Balance, Preparation  of  Trial  Balance  with  the  Help  of  Balances;  Types  of  Errors,  Errors  which cannot be located by Trial Balance, Errors which can be located by Trial Balance.Financial Statements: Meaning of Financial Statements; Final Accounts with Adjustments; Balance Sheet.

6Financial  Management  and  Indian  Financial  System:  Meaning  and  Objectives  of

Financial Management; Functions of Financial Management; Role of Financial Management in  the  Organisation;  Indian  Financial  System,  Financial  Assets;  Indian  Financial  Markets, Capital Market in India,  Corporate Debt Market in India,  Money Market;  Financial Bodies and Institutions, Merchant Bankers/Investment Banks,  Mutual Funds,  Discount and Finance House  of  India,  Investment  Management  Company,  Regulatory  Bodies,  Auditing  Bodies, Credit Rating Agencies, Securities Trading Corporation of India Ltd.

7Risk  and  Return  Relationship  :  Meaning  of  Return  and  Rate  of  Return;  Concept  and Types  of  Risk,  Interest  Rate  Risk,  Market  Risk,  Inflation  Risk,  Business  Risk,  Financial Risk,  Liquidity  Risk;  Measurement  of  Risk;  Risk  and  Return  of  the  Portfolio, Diversification of the Risk of Portfolio; Relationship between Risk and Return.

8Time  Value  of  Money:  Foundations  of the Time  Value  of  Money;  Classifications  of the Time Value of Money; Frequency of Compounding; Effective Rate of Interest; Future Value of an Annuity, Future Value of Annuity Due, Sinking Fund Factor Method; Present Value of Single Cash Flow; Present Value of Annuity; Capital Recovery Factor Method.Sources  of  Capital:  Equity  Shares,  Sweat  Security,  Non  Voting  Shares,  Bonus  Issue; Preference Shares; Debentures; Bonds; Warrants; Sources of Short-term Capital.

9 Capital Structure Theory  :  Capital Structure Theories;  Net Income Approach (NI);  NOI Approach;  Traditional  or  Intermediate  Approach  or  WACC  Approach;  Modigliani  Miller Approach (MM); Designing Capital Structure, Features of an Appropriate Capital Structure, Guidelines for Capital Structure Decisions,  Factors Determining the Capital Structure;  The Trade-off Theory: Cost of Financial Distress and Agency Costs,  Consequences  of Financial MBA (HUMAN RESOURCE MANAGEMENT) Distress, Optimum Capital Structure: Trade-off Theory.

10 Cost of Capital  :  Meaning and Assumptions of Cost of Capital;  Measurement of Cost of  Debt;  Cost of Preference Share Capital;  Cost of Equity Share Capital,  Dividend Valuation  Model,  Capital  Asset  Pricing  Model  Approach;  Weighted  Average  of  Cost  of  Capital; Marginal Cost of Capital. Leverage  Analysis  :  Operating  Leverage;  Financial  Leverage;  EBIT-EPS  Analysis; Combined Leverage.

11 Working  Capital  Management:  Concepts  of  Working  Capital,  Gross  Working  Capital  Concept,  Net Working Capital Concept,  Kinds of Working Capital,  Importance of Working  Capital,  Components of Working Capital;  Objectives of the Working Capital Management;  Determinants of Working Capital; Forecasting Working Capital; Need to Maintain Balanced Working Capital,  Dangers of Excessive Working Capital,  Dangers of Inadequate Working  Capital;  Working  Capital  Policies;  Working  Capital  Finance,  Approaches  for  Financing  Current Assets,  Trade-off between Profitability, Risk and Liquidity,  Financing Implications  of various Committee Reports.

12 Cash, Receivables and Inventory Management : Concepts of Cash Management, Motives for  Holding  Cash,  Aspects  of  Cash  Management,  Factors  Determining  Cash  Needs;  Objectives  of  Cash  Management;  Cash  Planning  or  Cash  Budget;  Cash  Management Strategies,  Accelerating  Cash  Collections,  Slowing  Down  Cash  Payments;  Concept  of  Receivables Management; Objectives of Accounts Receivables Management;  Credit Policy, Lenient  Credit  Policy,  Stringent  Credit  Policy,  Credit  Policy  Variables;  Meaning  and  Definition of Inventory;  Components or Classification of Inventory;  Inventory Management  – Objectives; Decision Areas of Inventory Management; Tools and Techniques of Inventory Management/Control,  ABC  Analysis,  Economic  Order  Quantity  (EOQ),  Order  Point  Problem,  Two-Bin  Technique,  VED  Classification,  HML  Classification,  SDE Classification, FSN Classification, Order Cycling System, Just in Time (JIT).

13 Capital  Budgeting:  Meaning  and  Definition;  Features  of  Capital  Budgeting  Decisions; Significance  of  Capital  Budgeting;  Obstacles  for  Capital  Budgeting;  Process/Steps  of Capital  Budgeting;  Principles  of  Capital  Budgeting;  Ranking  of  Capital  Budgeting Proposals  or  Classification  of  Investment  Proposals;  Methods  of  Capital  Budgeting,  Pay Back  Period  Method,  Accounting  or  Average  Rate  of  Return,  Discounted  Cash  Flows Method;  Present  Value  Method;  Capital  Rationing,  Divisible  Project,  Indivisible  Project; Risk Analysis in Capital Budgeting.

14 Dividend  Policy:  Management  of  Profits;  Dividend  Policy;  Types  of  Dividend  Policies, Advantages  of  Stable  Dividend  Policy,  Limitations  of  Stable  Dividend  Policy;  Factors Influencing  Dividend  Policy;  Forms  of  Dividends;  Reasons  or  Objectives  for  Issuing  the Stock  Dividend;  Dividend  Policy  and  Valuation  of  the  Firm,  Relevant  Theory,  Walter's Model (Relevant),  Gordon's Model, Modigliani-Miller Model;  Criteria for Delusion in EPS,Dividend  Policy-Stability,  Stable  Dividend  Payout  Ratio,  Stable  Dividends/Steadily Changing  Dividends;  Practical  Aspects  of  Dividend  Policy,  Employee  Stock  Option  Plan (ESOP),  Earned  Value  Analysis  (EVA),  Shares  Buyback;  Capital  Asset  Pricing  Model (CAPM).