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PAT vs Cash Flow from Operating Activities: A Practical Understanding under AS 3

1 Comment / Accounting / Dr. Sujit Dutta

In the world of accounting, “profit” and “cash” are not always the same. A company may report a strong Profit After Tax (PAT) under the Statement of Profit & Loss prepared in accordance with GAAP, Accounting Standards and Schedule III of the Companies Act, yet still face cash shortages in day-to-day operations. This happens because

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Understanding Break-Even Point within Cost Concepts

1 Comment / Accounting / Dr. Sujit Dutta

In business, every activity involves a sacrifice of resources—materials, manpower, money and time. This sacrifice, when expressed in monetary terms, is known as cost. Whether a firm is manufacturing a product or providing a service, cost becomes the starting point for all financial decisions. But understanding cost is not just about knowing “how much” is

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Profit is Not Cash: Understanding the Real Cash Flow in a Business

7 Comments / Accounting / Dr. Sujit Dutta

Accounting Standard AS 3 and its converged version Ind AS 7, which is aligned with IAS 7 under IFRS, are very important for students to understand the concept of cash flow. Cash flow is not the same as accounting profit. In many situations, the cash generated by a business may be higher or lower than

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Provision and Reserve: Important for Accounting and Growth

7 Comments / Accounting / Dr. Sujit Dutta

Reserve is the term which refers to a sum or percentage of profit that a company retains or keeps aside at the end of a financial year towards meeting future contingencies that may occur. It is also used to strengthen the business. There are two types of reserves in an organisation A capital reserve is created

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AS or IND AS – What’s the difference?

6 Comments / Accounting / Dr. Sujit Dutta

Accounting is a process of recording an organization’s financial transactions in order to make important decisions. In accounting, every financial transaction must be recorded in the books following a standard and consistent format. If there were no common standards, different firms might follow their own rules and formats to record transactions and present financial statements.

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Final Accounts vs. Financial Statements Dilemma

5 Comments / Accounting / Dr. Sujit Dutta

Accounting is simply the language of business. Just as people keep a personal diary to remember daily events, businesses use accounting to record every rupee that comes in and every rupee that goes out. The output is financial statements like Profit and Loss Account, Balance Sheet, and Cash Flow. Anand & Neha’s Final Accounts Dilemma

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