Accounting and finance for non-specialists

Description

Front Cover Half Title Page Title Page Copyright Page Brief Contents Contents Preface Acknowledgements 1 Introduction to accounting and finance Introduction What are accounting and finance? Who are the users of accounting information? Providing a service Weighing up the costs and benefits Accounting as an information system Management accounting and financial accounting Scope of this book The changing face of accounting Why do I need to know anything about accounting and finance? The quest for wealth creation Meeting the needs of other stakeholders Balancing risk and return Not-for-profit organisations Summary Key terms Reference Further reading Critical review questions Part One FINANCIAL ACCOUNTING 2 Measuring and reporting financial position Introduction The major financial statements – an overview The statement of financial position The effect of trading transactions Classifying assets Classifying claims Statement layouts Capturing a moment in time The role of accounting conventions Money measurement Valuing assets Meeting user needs Summary Key terms Reference Further reading Critical review questions Exercises 3 Measuring and reporting financial performance Introduction The income statement Different roles Income statement layout Further issues Recognising revenue Recognising expenses Depreciation Costing inventories Trade receivables problems Uses and usefulness of the income statement Summary Key terms Further reading Critical review questions Exercises 4 Accounting for limited companies Introduction The main features of limited companies The role of the Stock Exchange Managing a company The UK Corporate Governance Code Financing limited companies Borrowings Withdrawing equity The main financial statements Dividends Additional financial statements The directors’ duty to account The need for accounting rules Sources of accounting rules The auditors’ role Management commentary Creative accounting Summary Key terms Further reading Critical review questions Exercises 5 Measuring and reporting cash flows Introduction The statement of cash flows Why is cash so important? The main features of the statement of cash flows A definition of cash and cash equivalents The relationship between the main financial statements The layout of the statement of cash flows The normal direction of cash flows Preparing the statement of cash flows What does the statement of cash flows tell us? Summary Key terms Further reading Critical review questions Exercises 6 Analysing and interpreting financial statements Introduction Financial ratios Financial ratio classifications The need for comparison Calculating the ratios A brief overview Profitability Efficiency Relationship between profitability and efficiency Liquidity Financial gearing Investment ratios Trend analysis Using ratios to predict financial failure Limitations of ratio analysis Summary Key terms Further reading Critical review questions Exercises Part Two MANAGEMENT ACCOUNTING 7 The relevance and behaviour of costs Introduction What is meant by ‘cost’? Relevant costs: opportunity and outlay costs Cost behaviour Fixed cost Variable cost Semi-fixed (semi-variable) cost Finding the break-even point Contribution Margin of safety Operating gearing and its effect on profit Weaknesses of break-even analysis Using contribution to make decisions: marginal analysis Summary Key terms Further reading Critical review questions Exercises 8 Full costing Introduction What is full costing? Why do managers want to know the full cost? Single-product businesses Multi-product businesses Overheads as service renderers Activity-based costing Using full (absorption) cost information Summary Key terms Further reading Critical review questions Exercises 9 Budgeting Introduction How budgets link with strategic plans and objectives Time horizon of plans and budgets How budgets help managers Budgets and forecasts Limiting factors How budgets link to one another Using budgets in practice Preparing budgets Non-financial measures in budgeting Budgeting for control Measuring variances from budget Making budgetary control effective Behavioural issues The use of variance analysis Summary Key terms Further reading Critical review questions Exercises Part Three FINANCE 10 Making capital investment decisions Introduction The nature of investment decisions Investment appraisal methods Accounting rate of return (ARR) Payback period (PP) Net present value (NPV) Why NPV is better Internal rate of return (IRR) Some practical points Investment appraisal in practice Investment appraisal and strategic planning Summary Key terms Further reading Critical review questions Exercises 11 Financing a business Introduction The main objective of financing policy Sources of finance Internal sources of finance Internal sources of long-term finance Internal sources of short-term finance External sources of finance External sources of long-term finance Forms of borrowing External sources of short-term finance Long-term versus short-term borrowing Gearing and the financing decision Share issues The role of the Stock Exchange The Alternative Investment Market Providing long-term finance for the small business Islamic finance Summary Key terms References Further reading Critical review questions Exercises 12 Managing working capital Introduction What is working capital? The scale of working capital Managing inventories Managing trade receivables Managing cash Managing trade payables Managing working capital Summary Key terms Further reading Critical review questions Exercises Appendix A: Glossary of key terms Appendix B: Solutions to self-assessment questions Appendix C: Solutions to critical review questions Appendix D: Solutions to selected exercises Appendix E: Present value table Index Back Cover