Accounting and Finance for Non–specialists

ISBN-13: 9781118932070 / Angielski / Miękka / 2014 / 688 str.

Michael J. Jones

Opis

An accessible introduction to the basics of financial accounting, management accounting and finance aimed at undergraduate and MBA students taking a first, non-specialist course in accounting and finance.

Spis treści

About the Author xv

About the Book xvii

Acknowledgements xxiii

1 INTRODUCTION TO ACCOUNTING AND FINANCE 1

Introduction 2

Nature of Accounting and Finance 2

Importance of Accounting and Finance 4

Financial Accounting and Management Accounting 5

Users of Accounts 7

Accounting Context 9

Types of Accountancy 12

Types of Accountant 18

Limitations of Accounting 21

Conclusion 21

Discussion Questions 23

SECTION A: FINANCIAL ACCOUNTING: THE TECHNIQUES 25

2 THE ACCOUNTING BACKGROUND 27

Introduction 28

Financial Accounting 28

Language of Accounting 30

The Process of Accounting 38

The Accounting Equation 38

Student Example 44

Why Is Financial Accounting Important? 48

Accounting Principles 48

Accounting Conventions 49

Conclusion 51

Discussion Questions 52

Numerical Questions 53

Appendix 2.1: Illustration of a Consolidated Income Statement for Marks & Spencer plc 2010 55

Appendix 2.2: Illustration of a Consolidated Statement of Financial Position for Marks and Spencer plc 2010 57

Appendix 2.3: Illustration of a Consolidated Statement of Cash Flows for Marks and Spencer 2010 59

Appendix 2.4: Illustration of a Consolidated Income Statement for Volkswagen 2009 61

Appendix 2.5: Illustration of a Consolidated Balance Sheet (Statement of Financial Position) for Volkswagen 2009 62

Appendix 2.6: Illustration of a Consolidated Cash Flow Statement (Statement of Cash Flows) for Volkswagen 2009 64

3 MAIN FINANCIAL STATEMENTS: THE INCOME STATEMENT (PROFIT AND LOSS ACCOUNT) 66

Introduction 67

Context 67

Definitions 69

Layout 71

Main Components 72

Profit 80

Listed Companies 83

Capital and Revenue Expenditure 83

Limitations 84

Interpretation 84

Conclusion 84

Discussion Questions 85

Numerical Questions 85

4 MAIN FINANCIAL STATEMENTS: THE STATEMENT OF FINANCIAL POSITION (BALANCE SHEET) 87

Introduction 88

Context 89

Definitions 90

Layout 91

Main Components 93

Limitations 104

Interpretation 105

Listed Companies 106

Conclusion 106

Discussion Questions 107

Numerical Questions 108

Appendix 4.1: Horizontal Format of Statement of Financial Position 109

5 PREPARING THE FINANCIAL STATEMENTS 110

Introduction 111

Main Financial Statements 111

Trial Balance to the Income Statement (Profi t and Loss Account) and the Statement of Financial Position (Balance Sheet) 113

Adjustments to Trial Balance 117

Comprehensive Example 125

Conclusion 129

Discussion Questions 129

Numerical Questions 130

6 PARTNERSHIPS AND LIMITED COMPANIES 142

Introduction 143

Context 144

Partnerships 145

Limited Companies 151

Distinctive Accounting Features of Limited Companies 155

Accounting Treatment For Limited Companies 164

Limited Company Example: Stevens, Turner Ltd 166

Limited Companies: Published Accounts 171

Conclusion 176

Discussion Questions 177

Numerical Questions 178

Appendix 6.1: Example of an Income Statement (Profi t and Loss Account) using UK GAAP (Manchester United Ltd) 188

Appendix 6.2: Example of a Statement of Financial Position (Balance Sheet) using UK GAAP (Manchester United Ltd) 189

7 MAIN FINANCIAL STATEMENT: THE STATEMENT OF CASH FLOWS 191

Introduction 192

Importance of Cash 193

Context 195

Cash and the Bank Account 195

Relationship between Cash and Profi t 199

Preparation of Statement of Cash Flows 201

Conclusion 215

Discussion Questions 215

Numerical Questions 216

Appendix 7.1: Main Headings for the Cash Flow Statement (Statement of Cash Flows) for Sole Traders, Partnerships and some Non–Listed Companies under UK GAAP 223

Appendix 7.2: Preparation of a Sole Trader s Cash Flow Statement Using the Direct Method Using UK Format 224

Appendix 7.3: Preparation of the Cash Flow Statement of Any Company Ltd using the Indirect Method Using UK GAAP 225

Appendix 7.4: Example of Statement of Cash Flow (Cash Flow Statement) Using UK GAAP (Manchester United Ltd) 228

8 INTERPRETATION OF ACCOUNTS 230

Introduction 231

Context 231

Overview 232

Importance of Ratios 234

Closer Look at Main Ratios 235

Worked Example 247

Report Format 255

Holistic View of Ratios 257

Performance Indicators 258

Limitations 259

Conclusion 260

Discussion Questions 261

Numerical Questions 262

Appendix 8.1: John Brown Plc 271

Appendix 8.2: The Cash Flows Ratio using UK GAAP 273

SECTION B: FINANCIAL ACCOUNTING: THE CONTEXT 275

9 REGULATORY AND CONCEPTUAL FRAMEWORKS 277

Introduction 278

Traditional Corporate Model: Directors, Auditors and Shareholders 279

Regulatory Framework 284

Regulatory Framework in the UK 290

Corporate Governance 295

Conceptual Framework 300

Conclusion 308

Selected Reading 309

Discussion Questions 310

10 MEASUREMENT SYSTEMS 311

Introduction 312

Overview 312

Measurement Systems 315

Deficiencies of Historical Cost Accounting 317

Illustrative Example of Different Measurement Systems 317

Real Life 320

Conclusion 321

Selected Reading 321

Discussion Questions 322

11 THE ANNUAL REPORT 323

Introduction 324

Definition 324

Context 325

Multiple Roles 326

Main Contents of the Annual Report 331

Presentation 348

Group Accounts 350

Impression Management 354

Conclusion 357

Selected Reading 358

Discussion Questions 359

SECTION C: MANAGEMENT ACCOUNTING 361

12 INTRODUCTION TO MANAGEMENT ACCOUNTING AND FINANCE 363

Introduction 364

Context 365

Relationship with Financial Accounting 366

Relationship between Management Accounting and Finance 368

Overview 368

Cost Minimisation and Revenue Maximisation 376

Use of Computers and Impact of Digital Technology 377

Art not a Science 378

Changing Nature of Management Accounting 379

Conclusion 379

Selected Reading 380

Discussion Questions 381

13 COSTING 382

Introduction 383

Importance of Cost Accounting 384

Types of Cost 385

Traditional Costing 389

Activity–Based Costing 395

Costing for Inventory Valuation 399

Different Costing Methods for Different Industries 403

Target Costing 407

Cost–Cutting 407

Conclusion 408

Discussion Questions 409

Numerical Questions 409

14 PLANNING, CONTROL AND PERFORMANCE: BUDGETING 415

Introduction 416

Management Accounting Control Systems 416

Nature of Budgeting 417

Cash Budget 421

Other Budgets 422

Manufacturing Budgets 425

Comprehensive Budgeting Example 428

Behavioural Aspects of Budgeting 433

Responsibility Accounting 437

Conclusion 439

Discussion Questions 439

Numerical Questions 440

15 PLANNING, CONTROL AND PERFORMANCE: STANDARD COSTING 445

Introduction 446

Nature of Standard Costing 447

Standard Cost Variances 448

Interpretation of Variances 457

Conclusion 458

Discussion Questions 459

Numerical Questions 460

16 SHORT–TERM DECISION MAKING 464

Introduction 465

Decision Making 465

Contribution Analysis 467

Decisions, Decisions 471

Throughput Accounting 477

Break–Even Analysis 479

Contribution Graph 483

Conclusion 485

Discussion Questions 486

Numerical Questions 486

SECTION D: BUSINESS FINANCE 491

17 LONG–TERM DECISION MAKING: CAPITAL INVESTMENT APPRAISAL 493

Introduction 494

Nature of Capital Investment 494

Capital Investment Appraisal Techniques 498

Payback Period 500

Accounting Rate of Return 502

Net Present Value 504

Profitability Index 507

Internal Rate of Return (IRR) 507

Other Factors 512

Conclusion 512

Discussion Questions 513

Numerical Questions 514

Appendix 17.1: Present Value of £1 at Compound

Interest Rate (1 + r) 517

18 THE SOURCES OF FINANCE 518

Introduction 519

Nature of Sources of Finance 519

Long–Term Financing 520

Cost of Capital 531

Conclusion 534

Discussion Questions 535

Numerical Questions 536

19 MANAGEMENT OF WORKING CAPITAL 537

Introduction 538

Working Capital 538

Short–Term Financing 541

Conclusion 552

Discussion Questions 552

Numerical Questions 553

Glossary of Key Accounting Terms 555

Appendix: Answers 587

Index 641

O autorze

Michael Jones is Professor of Financial Reporting and Director of the Financial Reporting and Business Communication Unit at the University of Bristol. He is also author of Accounting 3rd Edition, Financial Accounting 2nd Edition, Creative Accounting, Fraud and International Accounting Scandals and Management Accounting, all published by John Wiley and Sons Ltd.

Blurb

Accounting and finance are key aspects of business. All those who work for, or deal with, businesses need to understand these subjects. Essentially, understanding accounting and finance is a prerequisite for understanding business.

Accounting and Finance is intended as an essential textbook for students studying accounting and finance for the first time and aims to equip them with the necessary understanding of the theory and practice of financial accounting, management accounting and business finance. The text provides a self–contained, introductory, one–year course covering all the major aspects of accounting and finance, which can be used by students on both accounting and non–accounting degrees, as well as those on MBA and MSC courses. It is designed to be useful for UK students and for those studying accounting in English overseas

Designed to be engaging and accessible, Accounting and Finance features:

• Lively and clear presentational style
• Full IFRS coverage
• Combination of theory and practice stressing the underlying concepts and the context within which accounting operates
• Comprehensive chapter on the interpretation of accounts
• Financial data from a wide variety of international companies
• Numerous real–life examples to bring the subject to live
• End–of–chapter question of escalating difficulty together with accompanying answers, enabling the student to develop their understanding of the key concepts
• Rich supporting website at www.wileyeurope.com/college/jones featuring accounting concept modules for students as well as solutions, quizzes, extra questions and PowerPoint slides for lecturers.