Financial accounting for decision makers

Front Cover
Half Title Page
Title Page
Copyright Page
Brief contents
Contents
Preface
How to use this book
Acknowledgements
1 Introduction to accounting
	Introduction
	Learning outcomes
	What is accounting?
	Who are the users of accounting information?
	The conflicting interests of users
	How useful is 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
	Accounting for business
	What is the purpose of a business?
	What kinds of business ownership exist?
	How are businesses organised?
	The quest for wealth creation
	Meeting the needs of other stakeholders
	Balancing risk and return
	Reasons to be ethical
	Not-for-profit organisations
	Summary
	Key terms
	References
	Further reading
	Critical review questions
2 Measuring and reporting financial position
	Introduction
	Learning outcomes
	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
	Self-assessment question
	Summary
	Key terms
	Reference
	Further reading
	Critical review questions
	Exercises
3 Measuring and reporting financial performance
	Introduction
	Learning outcomes
	The income statement
	Different roles
	Income statement layout
	Further issues
	Recognising revenue
	Recognising expenses
	Profit, cash and accruals accounting
	Depreciation
	Costing inventories
	Trade receivables problems
	Uses and usefulness of the income statement
	Self-assessment question
	Summary
	Key terms
	Further reading
	Critical review questions
	Exercises
4 Accounting for limited companies (1)
	Introduction
	Learning outcomes
	The main features of limited companies
	Legal safeguards
	Public and private companies
	Taxation
	The role of the Stock Exchange
	Capital market efficiency
	Managing a company
	Financing limited companies
	Share capital
	Reserves
	Bonus shares
	Share capital jargon
	Borrowings
	Raising share capital
	Withdrawing equity
	The main financial statements
	Dividends
	Self-assessment question
	Summary
	Key terms
	References
	Further reading
	Critical review questions
	Exercises
5 Accounting for limited companies (2)
	Introduction
	Learning outcomes
	The directors’ duty to account
	The need for accounting rules
	Sources of accounting rules
	Problems with standards
	Accounting rules or accounting choice?
	The need for a conceptual framework
	The IASB framework
	The auditors’ role
	The framework of annual financial reports
	Presenting the financial statements
	Management commentary
	Directors’ report
	Strategic report
	Accounting standards and accounting policies
	Creative accounting
	Self-assessment question
	Summary
	Key terms
	References
	Further reading
	Critical review questions
	Exercises
6 Measuring and reporting cash flows
	Introduction
	Learning outcomes
	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
	Reconciliation of liabilities from financing activities
	What does the statement of cash flows tell us?
	Problems with IAS 7
	Self-assessment question
	Summary
	Key terms
	Reference
	Further reading
	Critical review questions
	Exercises
7 Recognising and reporting assets and liabilities
	Introduction
	Learning outcomes
	Provisions, contingent liabilities and contingent assets
	Provisions
	Contingent liabilities
	Contingent assets
	Internally-generated intangible assets
	Leases
	Borrowing costs
	Self-assessment question
	Summary
	Key terms
	Further reading
	Critical review questions
	Exercises
	Appendix: Time value of money
8 Analysing and interpreting financial statements (1)
	Introduction
	Learning outcomes
	Financial ratios
	Financial ratio classifications
	The need for comparison
	Calculating the ratios
	A brief overview
	Profitability
	Efficiency
	Relationship between profitability and efficiency
	Liquidity
	Operating cash cycle
	Financial gearing
	Self-assessment question
	Summary
	Key terms
	Further reading
	Critical review questions
	Exercises
9 Analysing and interpreting financial statements (2)
	Introduction
	Learning outcomes
	Investment ratios
	Financial ratios and the problem of overtrading
	Key performance indicators
	Common-size financial statements
	Trend analysis
	Using ratios to predict financial failure
	Limitations of ratio analysis
	Self-assessment question
	Summary
	Key terms
	References
	Further reading
	Critical review questions
	Exercises
10 Reporting the financial results of groups of companies
	Introduction
	Learning outcomes
	What is a group of companies?
	How do groups arise?
	Types of group relationship
	Preparing a group statement of financial position
	Inter-company assets and claims
	Goodwill arising on consolidation and asset carrying amounts
	Preparing a group income statement
	The statement of comprehensive income
	Inter-company trading
	Group statement of cash flows
	Accounting for less than a controlling interest – associate companies
	The argument against consolidation
	Self-assessment question
	Summary
	Key terms
	Further reading
	Critical review questions
	Exercises
11 Increasing the scope of financial reporting
	Introduction
	Learning outcomes
	The development of financial reporting
	From stewardship to decision making
	Segmental financial reports
	Summary financial statements
	Interim financial statements
	The value added statement
	Inflation accounting and reporting
	Self-assessment question
	Summary
	Key terms
	References
	Further reading
	Critical review questions
	Exercises
12 Governing a company
	Introduction
	Learning outcomes
	Corporate governance
	The board of directors
	The UK Corporate Governance Code
	Tasks of the board
	Chairing the board
	The role of non-executive directors
	The audit process
	Remunerating directors
	Performance measures
	Assessing board performance
	The rise of shareholder activism
	Self-assessment question
	Summary
	Key terms
	References
	Further reading
	Critical review questions
	Exercises
Appendix A Recording financial transactions
	Introduction
	Learning outcomes
	The basics of double-entry bookkeeping
	Recording trading transactions
	Balancing accounts and the trial balance
	Preparing the financial statements (final accounts)
	The ledger and its division
	Summary
	Key terms
	Further reading
	Exercises
Appendix B Glossary of key terms
Appendix C Solutions to self-assessment questions
Appendix D Solutions to critical review questions
Appendix E Solutions to selected exercises
Index
Back Cover