BIRLA INSTITUTE OF TECHNOLOGY AND SCIENCE, Pilani

Pilani Campus
Instruction Division

FIRST SEMESTER 2022-2023

Course Handout Part II
Date: 16-01-2023

In addition to part -I (General Handout for all courses appended to the timetable) this portion gives
further specific details regarding the course.

Course No. : ECON F212

Course Title : FUNDAMENTALS OF FINANCE & ACCOUNTING
Instructor-in-charge : Rajan Pandey
Instructors : Aprajita Pandey
Tutorial Instructors : TBA

1. Course description:
Accounting is the language of business. Through this language, the business (i.e. the Company) not only
maintain the records of transactions it undertakes during the course of its existence, but also
communicates with the outside world by publishing various financial reports that summarize transactions
undertaken by the company. Therefore, it is important to note here that this course entails two important
and interrelated aspects, i.e.,
a. Recording transactions, and
b. Preparing financial statements such as balance sheet, income statement, etc.
Since, b. follows a., it is important to learn the recording of transactions first to learn preparing financial
statements.
The course will introduce you to the following key concepts: introduction, standards and basic rules of
accounting, double-entry accounting system, identifying and recoding transactions, preparing trial
balance, dealing with incomplete transactions, preparing the balance sheet, types of ownership,
credibility and role of auditing, measuring income, adjustments to the accounts, preparing the statement
of cash flows, recording sales revenue, reporting inventories and cost of goods sold, recording capital
assets, liabilities and interest, stockholders' equity and valuation of financial assets.
This course is specifically designed to meet the educational needs of second year Economics students
and students pursing Finance minor program. To complete the program requirement, the students from
Economics and Finance background require a basic understanding on accounting principles and financial
statement analysis. This course serves that purpose, and it is prerequisite to other advanced courses that
students from (MSc) Economics and Finance (minor) undertake in the subsequent semesters. Hence,
being elementary in nature this course has got its relevance and importance. Besides, a few students also
take this course as an elective to pursue their academic interests in the field of finance.

2. Scope and Objective:

The scope of this course largely encapsulates an introduction to the reporting system used by
businesses to record and convey financial information to investors, analysts, and regulators. This

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Instruction Division

reporting system is referred to as financial accounting. The key learning objectives that this course
accomplishes enables participants in learning:
a. how companies identify and record transactions that have a financial impact and are critical to
day-to-day functioning of the company.
b. how using a systematic procedure, the recorded transactions are summarized into meaningful
and standardized reports (financial statements) such as the balance sheet, statement of income
etc.
c. the key components that form part of these financial statements.
d. how these financial statements are analyzed and what information do they convey about the
financial well-being and prospects about the company.

3. Text Book: The below given text-book (prefer 11th Edition) is highly recommended for this course.
TB1: Horngren, Sundem, Elliott and Philbrick, “Introduction to Financial Accounting”,
Pearson Education India Ltd., 11th edition, 2018.

4. Ref. Books:
R1: Libby, Robert., Libby, Short, “Financial Accounting”, Tata McGraw-Hill., 6th edition, 2011
R2: R Narayanaswamy, Financial Accounting: A managerial perspectives,6th edition, PHI 2017
5 Course Plan:
Module Lecture/tutorial session References Learning
No. objectives
1. Basics of L1.1 Introduction, significance of financial Class Notes Understanding
financial accounting, scope and prospects, evaluation scheme of the relevance
Accounting the course ofaccounting
L1.2 Understanding business, Why we invest, Class in business
financial statement users, analyzing financial Notes; Ch. transactions
statements, double-entry accounting system, debits 1,R1 and its
and credits, Accounting rules and procedures recording
L1.3 Assumptions in financial reporting, GAAP, Class process
Indian accounting system, IFRS, Ind AS, and Indian Notes; Ch.
GAAP, Accounting methods, types of accounts, 1,R1
analyzing transactions, accounting process
2: L2.1 Accounting system: traditional versus modern, Ch.3, TB1 Identifying the
Accounting Analyzing, and journalizing transactions, posting steps
: The transactions to ledger, accounting rules involved in
Language L2.2: Preparing the trial balance, effects of errors; Ch.3, TB1& the recording
of Business accounting system, Some basic accounting concepts class notes
and ofbusiness
L2.3: Revenue and expense transactions, Ch.3, TB1; transactions
recording
depreciation, and prepaid transactions, Ch. 1R2
transactions and
L2.4: accumulated depreciation, adjusted vs Ch.3, TB1 preparation of
unadjusted trial balance

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Instruction Division

L2.5: Financial statements from trial balance Ch.3, TB1 trial

L2.6: Closing the accounts, capital vs revenue, types Ch.3, TB1 balance
of errors, ethics
T2.1 CASE STUDY and Critical thinking problems
3: L3.1: Basics of income measurement, operating cycle, Ch.2, TB1 Preparing and
Measuring concepts related to income, recognition of revenue, the analyzing the
Income to income statement income
Assess L3.2: Understanding income statement, cash Ch.2, TB1 statement
Performanc dividends and retained earnings
e L3.3: Four popular financial ratios with real-world Ch.2, TB1
cases.
T3.1 Critical thinking problems and real-world cases Class notes
4. L4.1 Adjustments to the accounts. four types of Ch.4, TB1 Understand

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Instruction Division

Adjustment adjustments different

s to the L4.2: four types of adjustments (cont), classified Ch.4, TB1 types of
accounts balance sheet accounting
and L4.3 Income statement and profitability evaluation Ch.4, TB1 adjustments
Financial ratios
Statements T4.1 Critical thinking problems using financial Ch.4, TB1
statements
5. L5.1 Overview the cash flow statement, preparing the Ch.5, TB1 Preparation
Statement clash flow statement, types of cash flow activities, of cash flow
of cash inflows and outflows of cash flows statements
flows L5.2 Cash flow statement and balance sheet, examples using direct
of cash flow statements and indirect
L5.3 Methods of preparing cash flow statements, Ch.5, TB1 methods and
accounting rules, the importance of cash flow its
statements importance
T5.1 Critical thinking problems and real-world cases
6: L6.1: recognition of sales revenue, measuring sales Ch.6, TB1 Recording
Accounting revenue, cash sales and account receivables the sales
for Sales L6.2: Measuring of uncollectible accounts Ch.6, TB1 using contra
Assessing the level of account receivable, Internal account and
control internal
controls
T6.1 Critical thinking problems and real world cases
7: L7.1: Profit and cost of goods sold, types of inventory Ch.7, TB1 Estimating
Inventories systems, cost of merchandise acquired, Inventory the cost of
and Cost of valuation methods goods sold
Goods Sold L7.2: Inventory valuation methods: LIFO and FIFO, Ch.7, TB1 and
effects of inventory errors, importance of gross profits, inventory
internal control of inventories valuation
T7.1 Critical thinking problems
8. Long- L8.1: Overview of long-lived assets, expenditure Ch.8, TB1 Estimating
lived versus expenses, acquisition of tangible assets, and
Assets and depreciation of building and equipment accounting
Depreciatio L8.2: Changes in estimated useful life, contrasting Ch.8, TB1 tangible and
n income tax and shareholding reporting intangible
L8.3 Methods of depreciation, Depreciation and cash Ch.8, TB1 assets
flow, gains and losses on sales of tangible assets,
impairment, goodwill
T8.1 Critical thinking problems
9. L9.1 Accounting for current liabilities, other liabilities, Ch.9, TB1 Understand
Liabilities long-term liabilities the
and Interest L9.2 Bond accounting, accounting for lease, other Ch.9, TB1 recording of
long-term liabilities current and

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L9.3 Debt ratios and interest covering ratios, pensions Ch.9, TB1 non-current
and deferred taxes liabilities
T9.1 Critical thinking problems
10 L10.1 Types of share capital, cash dividend, preferred Ch.10, TB1 Understanding
Stockholde stock types ofshares
r’s Equity L10.2 additional stock issuance, stock splits and stock Ch.10, TB1 and
dividends, repurchase of stocks how to
L10.3 Other issuance of common stocks, retained Ch.10, TB1 account
earnings restricts, other components of stock holders' owners'
equity capital
11: L11.1 Sources of information about companies Ch.12, TB1 Evaluate the
Financial Auditor's report, objectives of financial statement performance
Statement analysis, evaluating trends and financial
Analysis L11.2 Financial ratios, operating performance and Ch.12, TB1 position of
financial decisions, real world cases financial
L11.3 Prominence of earning per share, Disclosure of Ch.12, TB1 statements and
nonrecurring items, international issues, valuation performanceof
issues, relating cash flow and net income companies

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Instruction Division

6 Evaluation Scheme:

Component Duration Weightage Date& Time Remarks

(marks)
Mid-Semester Test 90 Min. 30% (90) As per timetable Closed book

Comprehensive Exam 3 hrs. 40% (120) As per timetable Partly open book
Quizzes (Best 3 of 4) 30 Min. 30% (90) To be announced Closed book

7 Learning outcome

Students who complete this course would be able to

a. Understand the accounting methods for recording the business transactions.
b. Evaluate various financial concepts and preparation of financial statements-balance
sheet,income statement, and cash flow statement.
c. Identify the financial position and performance of the companies.
d. Make better economic decisions while undertaking investments in financial assets.

Closed Book Test: No reference material of any kind will be permitted inside the exam hall.

Open Book Exam: Only prescribed reference (i.e., textbook/reference books) and hand-
written lecture notes are allowed inside the exam hall. The use of calculator is permitted in all
exams, including quizzes. Exchange of any material is not allowed inside the examination hall.

Make-up policy:
The application for make-up of the mid-semester and the comprehensive exam will not be
entertained without genuine reasons. Application must be submitted to instructor-in-charge along
with documents supporting the reason for seeking make-up beforehand. All such documents must
be verified by the respective authorities such as hostel warden and medical superintendent.

Chamber Consultation Hour: To be announced by respective instructors.

Notices: Notices concerning the course will be circulated via Nalanda and/or will be put on
Economics and Finance Notice Board (6165, NAB).

Instructor in-charge
ECON F212

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