Accounting, 3rd Edition

Description

We asked over 5000 accounting lecturers what would help them teach and students learn? The results were: Help with student engagement and varying levels of ability; Real world examples to be used in class; Content to break up lectures and engage students. Accounting 3e has been developed to incorporate these elements and much more! Accounting 3e provides a very accessible and easy-to-follow introduction and is aimed at students studying accounting for the first time.  The book introduces concepts in an engaging and easy-to-follow manner, and examples are tried and tested with many graded questions and answers. The third edition is updated to reflect IFRS terminologies and format including the reorganisation of the UK standards committee in July 2012.  Double entry bookkeeping is included, however, this can be bypassed for students not requiring this. Accounting 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 (Profi t 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 (Profi t 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 Profi 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