Abstract

At the end of the financial year ending on March 31, 2012, Ranganath wanted to present the financial statements of the auto ancillary manufacturing company he had started in 2011 to the banks which had provided him with financial resources. He gave them information with respect to the amount of revenues generated and expenses incurred. The information showed that he had fallen short of the expected revenues and that expenses were higher than budgeted. The main reason for higher expenses was the quality manpower that Ranganath had nurtured during the year by investing on their training and the amount he had invested in R&D. With the bankers calling for a meeting before releasing additional funds, Ranganath needed to convince them about the future prospects of his business. The case study can be helpful in discussing the nature of business transactions and application of the money measurement concept. The case can also be used to differentiate between qualitative and quantitative information and the kind of information that financial statements can communicate to stakeholders.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• The money measurement concept
• The difference between quantitative and qualitative information
• The limitations of financial statements in communicating qualitative information

Keywords

Accounting; Accounting principles; Accounting Concepts; Money Measurement Concept; Qualitative nature; Quantitative nature; Going concern concept; Profit and loss account; balance sheet.