Accounting Class -
Foundation
VIPUL MEHTA
What is a business?
What is a business?
What happens in a business?
What is the goal of a business?
What are different forms of business?
Sole proprietorship
Partnership
◦ 2 up to 100 partners
Limited liability partnership (LLP)
Company
◦ One person company
◦ Private limited company
◦ 2 up to 200 shareholders
◦ Public limited company
So Where does the money come from?
Shareholders (owners of the company)
Lenders
◦ Bank
◦ Bonds/Debentures
Illustration – IPO of Zomato Ltd.
Zomato is a technology-enabled food delivery business which
partners with restaurants and serves customer orders via its
mobile app and website
IPO Details
Issue ₹76 per
Zomato Ltd. went public via an Initial Public Offering (IPO) on 23- Price share
Jul-2021
Funds ₹9375Cr.
raised
Prior to IPO, Zomato was a private company, not listed on any
stock exchange.
This implies that prior to IPO, shares of Zomato were not liquid
and could not be readily transferred
Illustration – IPO of Zomato Ltd.
After the IPO, the shares of Zomato began to trade on
the stock exchanges (NSE and BSE)
IPO Details
IPO price was set as ₹76 per share and the company Issue ₹76 per
raised a total of ₹9375Cr. via the IPO Price share
Funds ₹9375Cr.
The IPO opened on the Listing Day at ₹116 per share, raised
thus giving handsome 50%+ gains to investors at the time
of opening
Who are the stakeholders?
Shareholders vs Stakeholders
◦ Shareholders are the people who own shares
◦ They ‘own’ part of the company
◦ Stakeholders are the people who may or may not own shares yet influence and are influenced by a
company’s existence
Stakeholders and
their stakes in
publicly-held
companies
Shareholders Employees/ Customers/
Management Suppliers
Lenders Government Community
Invested share Remuneration Quality and
capital and and career prices of goods
dividends growth and service
offered
Tax dues from Social
Principal lent the company responsibility of
and interest and compliance business
of laws
Multiple stakeholders and their respective stakes
What is accounting?
What are the types of business transactions?
◦ Monetary
◦ Non-monetary
Should we record the monetary business transactions?
If so, how?
What is accounting?
Accounting is…
An art of
Recording
Classifying
Summarizing &
Interpreting
business transactions
capable of being expressed in terms of money.
What is accounting?
Accounting is a language
Accounting is the language of business
It is the language in which business transactions are recorded, understood, and communicated
What is the outcome of accounting?
Outcome of accounting is to know a company’s:
Revenue (or sales)
Expenses (or costs) Revenue – Expenses = Profit
Profit
Assets
Liabilities
In other words, outcome of accounting is periodic publishing of business transactions in a
consistent manner
At the end of each quarter and every year, accountants prepare the financial statements of the
company
Who should know accounting?
Anyone who is interested in knowing the financial health of a business
All stakeholders
◦ Shareholders
◦ Lenders
◦ Employees
◦ Management
◦ Customers
◦ Suppliers
◦ Government
◦ Potential investors
Why should you know accounting?
It’s in the curriculum!
I want to work in finance
I want to work in marketing
I want to work in HR
I want to start a business
Recording
Why to record transactions?
1. Can’t remember how much expenses company has made
2. Statutory requirement – acts as documentary evidence
3. To run the business efficiently and effectively
Classification
Classification is the process of writing similar transactions at one place
Common classification of items:
Cash
Revenue
Expenses
◦ Salary
◦ Rent
Purchases
Interest
Tax
Summarizing & Interpreting
Summarizing is putting it all together
Interpreting is done by the stakeholders, i.e., shareholders, lenders, management, customers,
suppliers, government, and potential investors
The outcome of accounting
Outcome of accounting is to know a company’s:
Revenue (or sales)
Expenses (or costs)
Profit
Assets
Liabilities
At the end of each quarter and every year, accountants prepare the financial statements of the
company
