Module 02 · Accounting Foundations¶
What this module does. Teaches the language every later module speaks: the accounting equation, accrual accounting and revenue recognition, the three statements line by line, how they link, and the deeper cuts — inventory, depreciation, capitalisation, leases, consolidation, deferred tax, provisions, share-based payments — plus the Ind AS / IFRS / US GAAP differences an analyst meets. Kaveri Pumps' FY26 statements are annotated in full.
Why it matters. Ratios, valuation and forensics are arithmetic on these statements. If you do not know what a line contains, how it was measured and what choice produced it, every later number is a guess.
Lessons¶
| # | Lesson | One line | Time |
|---|---|---|---|
| 02.1 | The accounting equation & double entry | Assets = Liabilities + Equity; a 10-transaction walkthrough | 60 min |
| 02.2 | Accrual accounting & revenue recognition | Cash vs accrual; Ind AS 115's five steps; where revenue goes wrong | 75 min |
| 02.3 | The income statement, line by line | Schedule III P&L; EBITDA to EPS; Kaveri FY26 annotated | 90 min |
| 02.4 | The balance sheet, line by line | Every line, its measurement, what is not on it | 100 min |
| 02.5 | The cash-flow statement | CFO/CFI/CFF; the indirect walk; free cash flow | 90 min |
| 02.6 | How the three statements link | The linkages; the tie-out drill; what breaks | 90 min |
| 02.7 | Deeper cuts I: assets & expenses | Inventory, depreciation, impairment, capitalisation, leases, grants | 90 min |
| 02.8 | Deeper cuts II: group accounts, tax, provisions | Consolidation, goodwill, deferred tax, provisions, SBC, FX, OCI, related parties | 90 min |
| 02.9 | Ind AS vs IFRS vs US GAAP | The differences that matter; banks and insurers; a translator table | 60 min |
Connections¶
- Back: 01.2 (shares, EV) and 01.5 (compounding).
- Forward: Module 03 reads the documents these statements live in; Module 04 computes ratios on them; Module 09 looks for the choices that bend them; Module 10 projects them.
- Running example: Kaveri Pumps — every table in this module comes from it.
You're ready to move on when you can…¶
- Post any ordinary transaction to the three statements and say which balance-sheet lines move.
- Rebuild Kaveri's FY26 EBITDA, EBIT, PBT, PAT and EPS from the raw lines, and its CFO from PBT.
- Explain why the cash-flow statement can disagree with the P&L, and name four legitimate reasons.
- Roll forward gross block, accumulated depreciation, lease liabilities and other equity from FY25 to FY26.
- State what Ind AS 116 did to EBITDA, what Ind AS 115 requires for revenue, and how deferred tax arises.
- Read a consolidated P&L and say what NCI, share of associates and OCI mean.
Tested by: Mock 1 — Accounting & statements.