Business Accounting An Introduction to Financial and Management Accounting

by Collis, Jill; Holt, Andrew; Hussey, Roger

• ISBN13: 9780230276239
• ISBN10: 0230276237
• Edition: 2nd
• Format: Paperback
• Copyright: 2012-08-07
• Publisher: Palgrave Macmillan

Summary

Business Accounting, 2Ecovers financial and management accounting in an accessible, non-technical style that is particularly suitable for undergraduate students of business and finance and MBAs. The active learning approach seeks to convey the ability to understand and evaluate financial information for a range of business services. The book has well developed pedagogical features with each chapter including learning objectives and activities within the text to illustrate the principles and introduce the next learning point. The text includes exam-style practice questions at the end of each chapter to test the learning outcomes.

Author Biography

Jill Collis is Director of the Accounting and Auditing Research Centre, Brunel University, UK. She has co-authored several books on accounting and research methods and her writing reflects her understanding of the needs of students and lecturers. Andrew Holt is Principal Lecturer in Accounting at Kingston University. He has previously held positions at Metropolitan State College of Denver and the University of Gloucestershire, UK. Roger Hussey is Dean of Guangzhou International Business School, China. After a career in industry, he become Director of Research into Employee Communications at St. Edmund Hall, Oxford University, UK, and later held a chair at the University of the West of England, Bristol.

Table of Contents

List of figures	p. xi
List of tables	p. xiii
Preface	p. xv
Acknowledgements	p. xvii
Acronyms	p. xviii
The world of accounting and finance	p. 1
Introduction to business accounting	p. 3
Introduction	p. 3
Business entities	p. 4
The accountancy profession	p. 12
Nature and purpose of accounting	p. 13
Overview of financial accounting	p. 15
Overview of management accounting	p. 18
Accounting principles	p. 23
Conclusions	p. 27
Practice questions	p. 28
The importance of cash	p. 30
Introduction	p. 30
The finance gap	p. 31
Main sources of finance	p. 34
Need for cash flow information	p. 39
Preparing a cash flow forecast	p. 41
Planning capital requirements	p. 46
Preparing a cash flow statement for management	p. 48
Conclusions	p. 51
Practice questions	p. 51
Financial accounting	p. 55
The accounting system	p. 57
Introduction	p. 57
Main sources of data	p. 58
Double-entry bookkeeping	p. 59
Recording transactions	p. 62
Preparing a trial balance	p. 71
Limitations of a trial balance	p. 77
Conclusions	p. 78
Practice questions	p. 78
Regulatory framework for financial reporting	p. 81
Introduction	p. 81
Need for regulation	p. 82
International harmonization and convergence	p. 89
Company law	p. 93
UK accounting standards	p. 98
International financial reporting standards	p. 101
The future of UK GAAP	p. 107
Conclusions	p. 109
Practice questions	p. 109
Conceptual framework for financial reporting	p. 112
Introduction	p. 112
Need for a conceptual framework	p. 113
Objective of general purpose financial reporting	p. 115
Qualitative characteristics of usefulness	p. 118
Elements of financial statements	p. 121
Recognition and measurement of elements	p. 124
Concepts of capital and capital maintenance	p. 125
Conclusions	p. 127
Practice questions	p. 127
Statement of comprehensive income	p. 129
Introduction	p. 129
Purpose of the statement of comprehensive income	p. 130
Preparing a draft statement of comprehensive income	p. 133
Difference between cash and profit	p. 139
Inventory, accruals and prepayments	p. 142
Depreciation of property, plant and equipment	p. 144
Bad debts and doubtful receivables	p. 148
Finalizing the statement of comprehensive income	p. 149
Conclusions	p. 152
Practice questions	p. 153
Statement of financial position	p. 157
Introduction	p. 157
Purpose of the statement of financial position	p. 158
Preparing a draft statement of financial position	p. 159
Inventory, accruals and prepayments	p. 168
Depreciation of property, plant and equipment	p. 169
Bad debts and doubtful receivables	p. 172
Finalizing the statement of financial position	p. 173
Conclusions	p. 177
Practice questions	p. 178
Consolidated financial statements	p. 183
Introduction	p. 183
Group structure of companies	p. 184
Consolidated statement of financial position at acquisition	p. 188
Consolidated statement of financial position after acquisition	p. 196
Consolidated statements of comprehensive income and changes in equity	p. 198
Associates	p. 201
Joint arrangements	p. 205
Conclusions	p. 211
Practice questions	p. 211
Financial statement analysis	p. 214
Introduction	p. 214
Ratio analysis	p. 215
Investment ratios	p. 216
Profitability ratios	p. 222
Liquidity and efficiency ratios	p. 227
Gearing ratios	p. 231
Trend analysis	p. 233
Limitations of ratio analysis	p. 234
Conclusions	p. 235
Practice questions	p. 236
Ethics, governance and corporate social responsibility	p. 241
Introduction	p. 241
Ethics and the professional accountant	p. 242
Corporate governance	p. 246
Development of the corporate governance code in the UK	p. 248
The UK Corporate Governance Code (2010)	p. 250
Overview of international corporate governance codes	p. 253
Environmental and corporate social responsibility	p. 255
Conclusions	p. 260
Practice questions	p. 261
Management accounting	p. 265
Importance of cost information	p. 267
Introduction	p. 267
Management's need for information	p. 268
Cost accounting	p. 270
Classifying costs and expenses	p. 273
Elements of total cost	p. 277
Conclusions	p. 280
Practice questions	p. 280
Costing for product direct costs	p. 283
Introduction	p. 283
Material control	p. 284
Costing direct materials	p. 286
Advantages and disadvantages of different costing methods	p. 291
Costing direct labour	p. 292
Costing direct expenses	p. 295
Conclusions	p. 296
Practice questions	p. 296
Costing for indirect costs	p. 298
Introduction	p. 298
Absorption costing	p. 299
Allocating and apportioning production overheads	p. 301
Calculating the production overhead absorption rate	p. 304
Calculating the production cost per unit	p. 306
Apportioning service cost centre overheads	p. 307
Predetermined overhead absorption rates	p. 310
Conclusions	p. 311
Practice questions	p. 312
Activity-based costing	p. 314
Introduction	p. 314
Need for an alternative to absorption costing	p. 315
Main stages in activity-based costing	p. 317
Activities and cost drivers	p. 318
The decision to adopt activity-based costing	p. 320
Costing for marketing and administration overheads	p. 321
Advantages and disadvantages of activity-based costing	p. 322
Conclusions	p. 324
Practice questions	p. 324
Marginal costing	p. 327
Introduction	p. 327
Classifying costs by behaviour	p. 328
Calculating contribution	p. 331
Breakeven analysis	p. 332
Contribution analysis	p. 335
Limiting factors	p. 338
Limitations and the relevant range	p. 340
Conclusions	p. 341
Practice questions	p. 341
Budgetary planning and control	p. 344
Introduction	p. 344
Importance of business planning	p. 345
Main stages in budgetary control	p. 346
Purpose of budgetary control	p. 349
Budget setting	p. 351
Fixed and flexible budgets	p. 356
Advantages and disadvantages of budgetary control systems	p. 360
Conclusions	p. 361
Practice questions	p. 362
Standard costing	p. 364
Introduction	p. 364
Standard costs and revenues	p. 365
Variance analysis	p. $66
Direct materials variance	p. 367
Direct labour variance	p. 370
Advantages and disadvantages of standard costing	p. 372
Conclusions	p. 373
Practice questions	p. 373
Capital investment appraisal	p. 375
Introduction	p. 375
Purpose of capital investment appraisal	p. 376
Simple payback period method	p. 378
Advantages and disadvantages of the simple payback method	p. 382
Accounting rate of return	p. 383
Advantages and disadvantages of the accounting rate of return	p. 386
Conclusions	p. 388
Practice questions	p. 389
Discounting methods of investment appraisal	p. 391
Introduction	p. 391
Time value of money	p. 392
Net present value	p. 394
Internal rate of return	p. 396
Discounted payback period	p. 398
Advantages and disadvantages of discounted cash flow methods	p. 401
Conclusions	p. 402
Practice questions	p. 403
Issues in management accounting	p. 405
Introduction	p. 405
Strategic management accounting	p. 406
Market-orientated accounting	p. 411
Target costing	p. 415
Balanced scorecard	p. 418
Accounting for quality	p. 425
Environmental management accounting	p. 428
Conclusions	p. 431
Practice questions	p. 432
Appendix: Present value table for ¿1 at compound interest	p. 436
Glossary of terms	p. 437
Index	p. 447
Table of Contents provided by Ingram. All Rights Reserved.