Contents

About the Author

About the Book

Acknowledgements

1 INTRODUCTION TO ACCOUNTING

Introduction

Nature of Accounting

Importance of Accounting

Financial Accounting and Management Accounting

Users of Accounts

Accounting Context

Types of Accountancy

Types of Accountant

Limitations of Accounting

Conclusion

Discussion Questions

SECTION A: FINANCIAL ACCOUNTING: THE TECHNIQUES

2 THE ACCOUNTING BACKGROUND

Introduction

Financial Accounting

Language of Accounting

Student Example

Why Is Financial Accounting Important?

Accounting Principles

Accounting Conventions

Conclusion

Discussion Questions

Numerical Questions

Appendix 2.1: Illustration of a Consolidated Income Statement for Marks & Spencer plc 2010

Appendix 2.2: Illustration of a Consolidated Statement of Financial Position for Marks and Spencer plc 2010

Appendix 2.3: Illustration of a Consolidated Statement of Cash Flows for Marks and Spencer 2010

Appendix 2.4: Illustration of a Consolidated Income Statement for Volkswagen 2009

Appendix 2.5: Illustration of a Consolidated Balance Sheet (Statement of Financial Position) for Volkswagen 2009

Appendix 2.6: Illustration of a Consolidated Cash Flow Statement (Statement of Cash Flows) for Volkswagen 2009

3 RECORDING: DOUBLE-ENTRY BOOKKEEPING

Introduction

The Accounting Equation

Worked Example

Computers

Conclusion

Discussion Questions

Numerical Questions

4 MAIN FINANCIAL STATEMENTS: THE INCOME STATEMENT (PROFIT AND LOSS ACCOUNT)

Introduction

Context

Definitions

Layout

Main Components

Profit

Listed Companies

Capital and Revenue Expenditure

Limitations

Interpretation

Conclusion

Discussion Questions

Numerical Questions

5 MAIN FINANCIAL STATEMENTS: THE STATEMENT OF FINANCIAL POSITION (BALANCE SHEET)

Introduction

Context

Definitions

Layout

Main Components

Limitations

Interpretation

Listed Companies

Conclusion

Discussion Questions

Numerical Questions

Appendix 5.1: Horizontal Format of Statement of Financial Position

6 PREPARING THE FINANCIAL STATEMENTS

Introduction

Main Financial Statements

Trial Balance to the Income Statement (Profit and Loss Account) and the Statement of Financial Position (Balance Sheet)

Adjustments to Trial Balance

Comprehensive Example

Conclusion

Discussion Questions

Numerical Questions

7 PARTNERSHIPS AND LIMITED COMPANIES

Introduction

Context

Partnerships

Limited Companies

Distinctive Accounting Features of Limited Companies

Accounting Treatment For Limited Companies

Limited Company Example: Stevens, Turner Ltd

Limited Companies: Published Accounts

Conclusion

Discussion Questions

Numerical Questions

Appendix 7.1: Example of an Income Statement (Profit and Loss Account) using UK GAAP (Manchester United Ltd)

Appendix 7.2: Example of a Statement of Financial Position (Balance Sheet) using UK GAAP (Manchester United Ltd)

8 MAIN FINANCIAL STATEMENT: THE STATEMENT OF CASH FLOWS

Introduction

Importance of Cash

Context

Cash and the Bank Account

Relationship between Cash and Profit

Preparation of Statement of Cash Flows

Conclusion

Discussion Questions

Numerical Questions

Appendix 8.1: Main Headings for the Cash Flow Statement (Statement of Cash Flows) for Sole Traders, Partnerships and some Non-Listed Companies under UK GAAP

Appendix 8.2: Preparation of a Sole Trader's Cash Flow Statement Using the Direct Method Using UK Format

Appendix 8.3: Preparation of the Cash Flow Statement of Any Company Ltd using the Indirect Method Using UK GAAP

Appendix 8.4: Example of Statement of Cash Flow (Cash Flow Statement) Using UK GAAP (Manchester United Ltd)

9 INTERPRETATION OF ACCOUNTS

Introduction

Context

Overview

Importance of Ratios

Closer Look at Main Ratios

Worked Example

Report Format

Holistic View of Ratios

Performance Indicators

Limitations

Conclusion

Discussion Questions

Numerical Questions

Appendix 9.1: John Brown Plc

Appendix 9.2: The Cash Flows Ratio using UK GAAP

SECTION B: FINANCIAL ACCOUNTING: THE CONTEXT

10 REGULATORY AND CONCEPTUAL FRAMEWORKS

Introduction

Traditional Corporate Model: Directors, Auditors and Shareholders

Regulatory Framework

Regulatory Framework in the UK

Corporate Governance

Conceptual Framework

Conclusion

Selected Reading

Discussion Questions

11 MEASUREMENT SYSTEMS

Introduction

Overview

Measurement Systems

Deficiencies of Historical Cost Accounting

Illustrative Example of Different Measurement Systems

Real Life

Conclusion

Selected Reading

Discussion Questions

12 THE ANNUAL REPORT

Introduction

Definition

Context

Multiple Roles

Main Contents of the Annual Report

Presentation

Group Accounts

Impression Management

Conclusion

Selected Reading

Discussion Questions

13 CREATIVE ACCOUNTING

Introduction

Definition

Managerial Motivation

Methods of Creative Accounting

Example

Real Life

Case Studies

Creative Presentation

Controlling Creative Accounting

Conclusion

Selected Reading

Discussion Questions

14 INTERNATIONAL ACCOUNTING

Introduction

Context

Divergent Forces

Classification

Country Snapshots

Convergent Forces

Conclusion

Selected Reading

Discussion Questions

Appendix 14.1: List of International Standards

SECTION C: MANAGEMENT ACCOUNTING

15 INTRODUCTION TO MANAGEMENT ACCOUNTING

Introduction

Context

Relationship with Financial Accounting

Overview

Cost Minimisation and Revenue Maximisation

Use of Computers and Impact of Digital Technology

Art not a Science

Changing Nature of Management Accounting

Conclusion

Selected Reading

Discussion Questions

16 COSTING

Introduction

Importance of Cost Accounting

Types of Cost

Traditional Costing

Activity-Based Costing

Costing for Inventory Valuation

Different Costing Methods for Different Industries

Target Costing

Cost-Cutting

Conclusion

Discussion Questions

Numerical Questions

17 PLANNING, CONTROL AND PERFORMANCE: BUDGETING

Introduction

Management Accounting Control Systems

Nature of Budgeting

Cash Budget

Other Budgets

Manufacturing Budgets

Comprehensive Budgeting Example

Behavioural Aspects of Budgeting

Responsibility Accounting

Conclusion

Discussion Questions

Numerical Questions

18 PLANNING, CONTROL AND PERFORMANCE: STANDARD COSTING

Introduction

Nature of Standard Costing

Standard Cost Variances

Interpretation of Variances

Conclusion

Discussion Questions

Numerical Questions

19 SHORT-TERM DECISION MAKING

Introduction

Decision Making

Contribution Analysis

Decisions, Decisions

Throughput Accounting

Break-Even Analysis

Contribution Graph

Conclusion

Discussion Questions

Numerical Questions

20 STRATEGIC MANAGEMENT ACCOUNTING

Introduction

Nature of Strategic Management Accounting

Assessment of Current Position of the Business

Appraisal of Current Position of the Business

Strategic Choice of Future Direction

Conclusion

Selected Reading

Discussion Questions

Numerical Questions

21 LONG-TERM DECISION MAKING: CAPITAL INVESTMENT APPRAISAL

Introduction

Nature of Capital Investment

Capital Investment Appraisal Techniques

Payback Period

Accounting Rate of Return

Net Present Value

Profitability Index

Internal Rate of Return (IRR)

Other Factors

Conclusion

Discussion Questions

Numerical Questions

Appendix 21.1: Present Value of £1 at Compound Interest Rate (1 + r)

22 THE MANAGEMENT OF WORKING CAPITAL AND SOURCES OF FINANCE

Introduction

Nature of Sources of Finance

Short-Term Financing

Long-Term Financing

Cost of Capital

Conclusion

Discussion Questions

Numerical Questions

Glossary of Key Accounting Terms

Appendix: Answers

Index