Features

Case Studies

Press Extracts

Figures

Preface

Acknowledgements

Guided Tour

Online Learning Centre (OLC)

1 Financial accounting: the building blocks

Learning objectives
Introduction
What is accounting, and its uses and purposes?
The conceptual frameworks of accounting
The Statement of Principles (SOP)
UK accounting concepts
True and fair view
UK accounting and financial reporting standards
International accounting standards
Financial accounting, management accounting and financial management
Accounting and accountancy
Types of business entity: sole traders; partnerships; limited companies; public limited companies
An introduction to financial statement reporting
Users of accounting and financial information
Accountability and financial reporting
Summary of key points
Questions
Discussion points
Exercises

2 Financial statements of limited companies – balance sheet

Learning objectives
Introduction
Capital expenditure and revenue expenditure
Financial statements of limited companies
Construction and use of financial statements
What does the balance sheet tell us?
Structure of the balance sheet
Capital reserves or shareholders’ equity
Liabilities
Assets
Balance sheet formats
Valuation of assets
Summary of key points
Questions
Discussion points
Exercises

3 Financial statements of limited companies – profit and loss account

Learning objectives
Introduction
What does the profit and loss account tell us?
What is profit?
Structure of the profit and loss account
Profit and loss account formats
Profit and loss and the balance sheet
Depreciation
Cost of sales
Bad and doubtful debts
Profit and loss and cash flow
Summary of key points
Questions
Discussion points
Exercises

4 Financial statements of limited companies – cash flow statement

Learning objectives
Introduction
What does the cash flow statement tell us?
Structure of the cash flow statement
Direct and indirect cash flow
Cash flow statement formats
Cash flow links to the balance sheet and profit and loss account
Summary of key points
Questions
Discussion points
Exercises

5 Business performance analysis

Learning objectives
Introduction
The performance review process
Limitations of the performance review process
Economic performance measurement
Ratio analysis
The best performance measure – cash or profit?
Summary of key points
Questions
Discussion points
Exercises

Case Study I: Buzzard Ltd

6 Published reports and accounts

Learning objectives
Introduction
Why are annual accounts filed and published?
Chairman’s statement
Chief executive’s statement
Financial review
Accounting policies
Financial highlights
Profit and loss account, balance sheet, and cash flow statement
Horizontal analysis
Vertical analysis
Notes on the accounts
Segmental reporting
Corporate social responsibility (CSR) reporting
Directors’ report
Inflation and reporting
Value added statements
Summary of key points
Questions
Discussion points
Exercises

7 Corporate governance

Learning objectives
Introduction
Corporate governance code of practice
The audit and the role of auditors
Directors’ responsibilities
Insolvency
Wrongful trading
Fraudulent trading
Disqualification of directors
Summary of directors’ obligations and responsibilities
Actions to ensure compliance
Summary of key points
Questions
Discussion points
Exercises

Case Study II: Buzzard Ltd (2)

8 Sources of finance and the cost of capital

Learning objectives
Introduction
Sources of finance
The weighted average cost of capital (WACC)
Cost of debt and equity capital
Cost of equity and risk, CAPM and the β factor
Return on equity and financial structure
Economic value added (EVA^TM) and market value added (MVA)
Summary of key points
Questions
Discussion points
Exercises

9 Information technology and accounting, and e-business

Learning objectives
Introduction
Business processes and IT
The development of computerised accounting systems
Payroll and human resources management (HRM) software
Accounting software
Manufacturing and other processes
Enterprise resource planning (ERP) systems software
Spreadsheets
Databases
Communicating and presenting information
Other applications
The new economy
E-business
Computer security
Data protection
The impact of IT and e-business on accounting
Summary of key points
Questions
Discussion points
Exercises

Case Study III: Design Pierre Ltd

Appendices

Outline of appendices

1 Double-entry – the basics

Learning objectives
Introduction
Theory and practice of double-entry bookkeeping
Books of account and the ledgers in action
The trial balance
Profit and loss account
Balance sheet
Cash flow statement
Accrual accounting and cash accounting
Summary of key points
Questions
Discussion points
Exercises

2 FRSs, SSAPs, IASs, and IFRSs

3 Solutions to selected exercises

Glossary of key terms

Index