Accounting in a Business Context

by Berry, Aidan; Jarvis, Robin

• ISBN13: 9781408030479
• ISBN10: 1408030470
• Edition: 5th
• Format: Paperback
• Copyright: 2011-02-01
• Publisher: Cengage Learning EMEA

Summary

Now in its fifth edition, this highly respected and popular text provides non-specialist accounting and finance students on business studies courses with an essential introduction to the role of accounting in a wider managerial setting.Completely updated to reflect recent changes in International Financial Reporting Standards (IFRS), Accounting in a Business Context is one of the most comprehensive texts available. The logical step-by-step approach introduces students to accounting initially by considering an accessible cash-based small business, then carefully builds layers of complexity (e.g. buying and selling on credit) to facilitate clear understanding.New to this Edition- Updated to reflect recent changes in International Financial Reporting Standards (IFRS)- Newpedagogical features to aid learning, including "Learning Outcomes' and 'Activity' boxes - Increased use of real-life examples in the case studies - Use of more international companies in case studies and examples - Enhanced online support resources- Exciting new text design

Table of Contents

Case studies	p. xi
Acknowledgements	p. xii
Preface to the fifth edition	p. xiv
Walk through tour	p. xvi
About the website	p. xvii
Financial Accounting	p. 1
Introduction to accounting	p. 3
Why study accounting?	p. 4
Our approach to the study of accounting	p. 5
What is accounting?	p. 5
For what purpose is it used?	p. 7
Who uses accounting information?	p. 8
Limitations of accounting information	p. 21
Summary	p. 25
References	p. 25
Review Questions	p. 25
Problems for discussion and analysis	p. 26
Wealth and the measurement of profit	p. 27
Originalcost	p. 31
Historic cost	p. 32
Replacement cost	p. 32
Economic value	p. 34
Net realizable value	p. 34
Conclusion	p. 38
Summary	p. 42
References	p. 42
Review Questions	p. 43
Problems for discussion and analysis	p. 43
The measurement of weafth	p. 45
The measurement of wealth Importance of statement of financial	p. 46
position or balance sheet	p. 47
Assets	p. 48
Current and non-current assets	p. 50
Liabilities	p. 53
Owners' equity	p. 55
The statement of financial position	p. 55
Determinants of the format of the statement of financial position or balance sheet	p. 62
Conclusion	p. 64
Suggested statement of financial position format	p. 65
Summary	p. 66
References	p. 67
Further reading	p. 67
Review Questions	p. 67
Problems for discussion and analysis	p. 67
The income statement and the cash flow statement	p. 71
Importance of income statements	p. 72
Revenue	p. 73
The realization principle	p. 75
Expenses	p. 79
The income statement	p. 83
Influences on the format of the income statement	p. 87
Summary	p. 91
References	p. 93
Further reading	p. 93
Review Questions	p. 93
Problems for discussion and analysis	p. 93
Introduction to the worksheet	p. 97
Double entry and the worksheet	p. 100
Single entry error	p. 108
Incorrect double entry	p. 109
Addition, subtraction and transposition errors	p. 109
Summary	p. 114
Review Questions	p. 114
Problems for discussion and analysis	p. 115
Inventory	p. 119
The nature of the business and inventory valuation	p. 123
The determination of the cost of goods sold	p. 125
Valuation of inventory	p. 132
Effects of price changes	p. 141
Summary	p. 145
References	p. 146
Review Questions	p. 146
Problems for discussion and analysis	p. 146
Amounts receivable and amounts payable	p. 151
Trade receivables and prepayments	p. 152
Prepayments	p. 153
Bad debts	p. 156
Trade payables and accruals	p. 158
Accruals	p. 159
Summary	p. 168
Review Questions	p. 169
Problems for discussion and analysis	p. 169
Non-current assets, fixed assets and depreciation	p. 171
Difference between current and non-current assets	p. 174
The cost of a non-current asset	p. 175
Cost or value	p. 180
The useful life of fixed assets	p. 180
Depreciation or amortization	p. 181
Why depreciate?	p. 182
Methods of depreciation	p. 186
Sales of fixed assets	p. 189
Effects on the cash flow statement	p. 193
Summary	p. 196
References	p. 196
Further reading	p. 196
Review Questions	p. 196
Problems for discussion and analysis	p. 197
Financing and business structures	p. 199
Size of business	p. 202
Short-term finance	p. 203
Medium-term finance	p. 206
Long-term finance	p. 210
Other sources of finance	p. 216
Financing structures and financial risk	p. 217
Summary	p. 219
References	p. 219
Further reading	p. 219
Review Questions	p. 220
Problems for discussion and analysis	p. 220
Cash How Statements	p. 223
The Need for Cash Flow information	p. 224
Types of Cash Flows	p. 225
Financing Activities	p. 231
Producing a Cash Flow Statement from the income Statement and Statement of Financial Position	p. 236
Summary	p. 240
References	p. 242
Review Questions	p. 243
Problems for discussion and analysis	p. 243
Final accounts and company accounts	p. 247
The traditional approach	p. 248
End of period adjustments	p. 252
Discussion	p. 254
Final accounts	p. 254
Forms of organization	p. 256
Summary	p. 265
Review Questions	p. 266
Problems for discussion and analysis	p. 266
Answer to Activity 11.2	p. 268
Financial Statement analysis	p. 271
User needs	p. 272
Context for financial statement analysis	p. 276
Effect of price changes	p. 277
Projections and predictions of the future	p. 277
The common needs explained	p. 284
Techniques of analysis	p. 292
Trend analysis	p. 293
Common size statements	p. 295
Ratio analysis	p. 298
Summary of major issues	p. 307
Further reading	p. 309
Review Questions	p. 309
Problems for discussion and analysis	p. 309
Management Accounting	p. 317
Internal users and internal information	p. 319
Management's information needs	p. 321
External users' information needs	p. 326
Impacts of organizational size	p. 327
Impacts of organizational structure	p. 328
Summary	p. 328
Review Questions	p. 329
Problems for discussion and analysis	p. 329
Planning and Control	p. 331
The planning and control process	p. 332
The control system	p. 339
The cost and benefits of accounting information systems	p. 341
Organizational and environmental context	p. 341
Users of planning information and the impact of organizational size	p. 342
Summary	p. 342
References	p. 342
Further reading	p. 343
Review Questions	p. 343
Problems for discussion and analysis	p. 343
Cost behaviour and cost-volume-profit analysis	p. 345
Cost behaviour	p. 346
Cost-volume-profit analysis	p. 357
Summary	p. 366
References	p. 366
Further reading	p. 366
Review Questions	p. 367
Problems for discussion and analysis	p. 367
Accounting for overheads and product costs	p. 369
Full costing	p. 371
Absorption costing	p. 373
Activity-based costing (Abc)	p. 382
Different types of production processes	p. 386
Marginal costing	p. 387
Income measurement and inventory valuations	p. 368
Summary	p. 394
References	p. 395
Further reading	p. 395
Review Questions	p. 395
Problems for discussion and analysis	p. 395
Accounting for decision making: when there are no resource constraints	p. 401
Relevant costs and benefits	p. 403
Fixed and variables costs, and the contribution approach to decision making	p. 410
The range of products to be manufactured and sold	p. 411
Closing an unprofitable department/division	p. 412
Summary	p. 414
Review Questions	p. 414
Problems for discussion and analysis	p. 415
Accounting for decision Decision making with constraints and decisions which are mutully exclusive	p. 419
Decision making with Constraints	p. 420
The contribution approach with one scarce resource	p. 421
The contribution per unit of scarce resource and the internal opportunity cost	p. 424
Make or buy decisions	p. 427
Qualitative factors	p. 430
Summary	p. 431
Further reading	p. 431
Review Questions	p. 431
Problems for discussion and analysis	p. 432
Budgets	p. 435
The purpose of budgets	p. 436
The budget process	p. 438
The budget time period	p. 441
Preparation of budgets	p. 442
Flexible budgets	p. 452
Summary	p. 455
References	p. 455
Further reading	p. 455
Review Questions	p. 456
Problems for discussion and analysis	p. 456
Investment decisions	p. 461
Accounting rate of return (ARR)	p. 462
The payback method	p. 466
Discounted cash flow (DCF)	p. 467
Summary	p. 478
Reference	p. 479
Further reading	p. 479
Review Questions	p. 479
Problems for discussion and analysis	p. 479
Management of working capital	p. 483
The importance of management of working capital	p. 485
The working capital cycle	p. 487
Trade credit	p. 490
Trade receivables	p. 492
Inventory	p. 496
Cash management	p. 502
Summary	p. 507
Further reading	p. 507
Review Questions	p. 507
Problems for discussion and analysis	p. 507
Answers	p. 511
Partnerships	p. 537
Present value and annuity tables	p. 545
Index	p. 553
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