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Historical Cost vs Fair Value Accounting: A Practical Understanding under AS and Ind AS

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Financial statements are prepared according to a framework of accounting principles commonly known as GAAP (Generally Accepted Accounting Principles). GAAP includes accounting concepts, conventions, standards and disclosure requirements that guide companies in preparing financial statements in a consistent and comparable manner. Traditionally, Indian Accounting Standards (AS) largely emphasized the historical cost concept, under which assets […]

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Understanding GAAP, AS, Ind AS and IFRS

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In the modern business environment, financial statements are not prepared merely to calculate profit; they are prepared to communicate financial information in a structured, reliable and globally understandable manner. While studying accounting and corporate reporting, students frequently encounter terms such as GAAP, Accounting Standards (AS), Ind AS and IFRS, which often create conceptual confusion because

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

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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 the Asset Side: Linking Investment Decisions with Financial Ratios

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Having examined the funding side of the Balance Sheet in our last blog, it is equally important to understand how these funds are deployed within the business. This tells us that whatever funds a business raises—whether from owners (equity) or borrowings (debt) must be fully utilised in acquiring assets. But the real question is: how

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Understanding the Funding Side of the Balance Sheet: A Gateway to Connected Ratio

1 Comment / Finance & Tax / Dr. Sujit Dutta

When we analyze the liability side of the Balance Sheet, we are essentially looking at the sources of funds—primarily shareholders’ equity and borrowings. However, the Balance Sheet presents only a snapshot at a point in time. To truly understand how these funds are raised, repaid, or managed over a period, we must look beyond and

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Debt–Equity & Interest Coverage Ratio: Linking Lending Decisions with Ind AS 23

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In today’s competitive business environment, companies frequently rely on external financing to support expansion, manage working capital, or undertake capital-intensive projects. Financial institutions, however, do not extend credit based solely on growth prospects—they closely evaluate a company’s financial stability and repayment capacity before making lending decisions. Two of the most critical metrics in this evaluation

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Understanding Debt Service Coverage Ratio (DSCR) from a Lending Perspective

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Lending institutions use this ratio as a key measure of a company’s ability to pay off the principal and interest on a loan. Before granting a loan, the bank will calculate your company’s debt service coverage ratio. If it’s good, the bank will consider that you should be able to meet your repayment obligations. If

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Understanding Break-Even Point within Cost Concepts

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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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Hedging: A Tool to Manage Foreign Currency Risk

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Students, suppose you are working in the treasury department of an MNC. Your company enters into foreign currency transactions every day. We know that forex market is volatile and exchange rate volatility can turn profits into losses overnight. Therefore, your responsibility is not to predict the market, but to protect the company using hedging tools

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Understanding Purchasing Power Parity (PPP) in Foreign Exchange Transactions

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Purchasing power parity (PPP) is an economic theory of exchange rate determination. It states that the price levels between two countries should be equal. Example: If markets are efficient and trade is possible, exchange rates should reflect the purchasing power of currencies. This idea leads to the Purchasing Power Parity (PPP) Theory. In simple words:

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