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Tables of Contents for Financial and Management Accounting
Chapter/Section Title
Page #
Page Count
Preface to the second edition
xvii
FINANCIAL ACCOUNTING
Part 1 A conceptual framework: setting the scene
1
96
Who needs accounting?
3
22
Introduction
4
1
The development of a conceptual framework
5
1
The Statement of Principles
6
1
Types of business entity
7
5
Users and their information needs
12
5
General purpose or specific purpose financial statements?
17
1
Stewards and agents
17
1
Who needs financial statements?
18
2
Summary
20
5
Further reading
21
1
Self-testing on the chapter
21
1
Activities for study groups
21
1
Notes and references
22
1
Supplement: Introduction to the terminology of business transactions
23
2
A systematic approach to financial reporting: the accounting equation
25
27
Introduction
26
1
The accounting equation
26
2
Defining assets
28
1
Examples of assets
29
3
Recognition of assets
32
2
Defining liabilities
34
2
Examples of liabilities
36
1
Recognition of liabilities
37
2
Defining the ownership interest
39
1
Recognition
40
1
Changes in the ownership interest
40
1
Position after a change has occurred
41
1
Evidence that assets and liabilities meet the definition and recognition criteria
42
2
Summary
44
8
Further reading
45
1
Self-testing on the chapter
45
1
Activities for study groups
46
1
Questions
46
2
Notes and references
48
1
Supplement: Debit and credit bookkeeping
49
3
Financial statements from the accounting equation
52
22
Introduction
53
1
The accounting period
53
1
Financial statements for external users
54
1
The balance sheet
55
3
The profit and loss account
58
1
The cash flow statement
59
4
Accounting policies
63
1
Usefulness of financial statements
63
1
Summary
64
10
Self-testing on the chapter
65
1
Activities for study groups
65
1
Questions
65
1
Notes and references
66
1
Supplement: Using the accounting equation to analyse transactions
67
7
Ensuring the quality of financial statements
74
23
Introduction
75
1
Qualitative characteristics of financial statements
75
4
Prudence explained
79
2
Measurement conventions
81
1
Regulation of financial reporting
82
6
Reviewing published financial statements
88
5
Summary
93
4
Further reading
94
1
Self-testing on the chapter
94
1
Activities for study groups
95
1
Questions
95
1
Notes and references
95
2
Part 2 Reporting the transactions of a business
97
90
Accounting information for service businesses
99
32
Introduction
100
1
Analysing transactions
101
1
Illustration of the application of the accounting equation
101
3
Illustration of accounting for a service business
104
6
A process for summarising the transactions: a spreadsheet
110
1
Financial statements as a means of communication
111
3
Summary
114
17
Self-testing on the chapter
115
1
Questions
116
1
Supplement: Recording transactions in ledger accounts: a service business
117
14
Accounting information for trading businesses
131
29
Introduction
132
1
Goods purchased for resale
132
3
Manufacturing goods for resale
135
5
Illustration of accounting for a trading business
140
3
A process for summarising the transactions: a spreadsheet
143
2
Financial statements of M. Carter, wholesaler
145
3
Summary
148
12
Self-testing on the chapter
148
2
Questions
150
1
Supplement: Recording transactions in ledger accounts: a trading business
151
9
Published financial statements
160
27
Introduction
161
1
Impact of the European Union
162
1
The Statement of Principles
162
4
Individual financial statements: the required forms of presentation
166
1
Balance sheet
166
5
Profit and loss account
171
3
Cash flow statement
174
5
Other forms of communication
179
1
Reducing the amount of information reported
179
1
Summary
180
7
Further reading
180
1
Self-testing on the chapter
181
1
Activities for study groups
182
1
Questions
182
1
Notes and references
183
1
Supplement: Balance sheet format 1, as prescribed by the Companies Act 1985
184
3
Part 3 Recognition and measurement
187
118
Fixed assets
189
41
Introduction
190
1
Definitions
191
2
Recognition
193
2
Users' needs for information
195
1
Information provided in the financial statements
196
2
Usefulness of published information
198
2
Depreciation: an explanation of its nature
200
4
Reporting fixed assets and depreciation in financial statements
204
11
Summary
215
15
Further reading
216
1
Self-testing on the chapter
216
1
Activities for study groups
217
1
Questions
217
1
Notes and references
218
1
Supplement: Recording fixed assets and depreciation
219
11
Current assets
230
30
Introduction
231
1
Definitions
231
1
The working capital cycle
232
2
Recognition
234
3
Users' needs for information
237
1
Information provided in the financial statements
237
4
Measurement and recording
241
1
Stocks of raw materials and finished goods
241
4
Debtors
245
3
Prepayments
248
1
Investments held as current assets
248
1
Revenue recognition
249
2
Summary
251
9
Further reading
251
1
Self-testing on the chapter
251
1
Activities for study groups
252
1
Questions
253
1
Notes and references
254
1
Supplement: Bookkeeping entries for (a) bad and doubtful debts; and (b) prepayments
255
5
Liabilities due within one year
260
21
Introduction
261
1
Definitions
261
1
Recognition
262
2
Users' needs for information
264
1
Information provided in the financial statements
265
2
Measurement and recording
267
1
Current liabilities
267
2
Accruals and the matching concept
269
4
Liabilities for taxation
273
1
Summary
274
7
Self-testing on the chapter
275
1
Activities for study groups
275
1
Questions
276
1
Notes and references
277
1
Supplement: Bookkeeping entries for accruals
278
3
Provisions and long-term liabilities
281
24
Introduction
282
1
Users' needs for information
283
1
Information provided in the financial statements
284
4
Provisions for liabilities and charges
288
2
Deferred income
290
2
Long-term liabilities
292
7
Summary
299
6
Self-testing on the chapter
299
1
Activities for study groups
300
1
Questions
300
1
Notes and references
301
1
Supplement: Bookkeeping entries for provisions and deferred income
302
3
Part 4 The reporting entity and its owners
305
64
Ownership interest
307
33
Introduction
308
1
Definition and recognition
309
1
Presentation of ownership interest
309
8
Additional primary financial statements
317
1
Users' needs for information
318
1
Information provided in the financial statements
319
6
Dividends
325
1
Regulatory framework
326
1
Issue of further shares on the Stock Exchange
327
4
Summary
331
9
Self-testing on the chapter
331
1
Activities for study groups
332
1
Questions
332
2
Notes and references
334
1
Supplement: A spreadsheet for adjustment to a trial balance at the end of the accounting period
335
5
Group accounts and segmental reporting
340
29
Introduction
341
1
Definitions
342
2
Effect of acquisition: the parent company's balance sheet
344
1
Effect of acquisition: the group's consolidated balance sheet
344
1
Acquisition and disposal: the group profit and loss account
345
1
Goodwill on acquisition
346
5
Associated companies
351
1
Users' needs for information
352
1
Information provided in the financial statements
353
4
The construction of consolidated financial statements
357
1
The consolidated balance sheet
358
4
Constructing the consolidated profit and loss account
362
2
Summary
364
5
Self-testing on the chapter
365
1
Activities for study groups
365
1
Questions
366
1
Notes and references
367
2
Part 5 Performance analysis and current developments in financial reporting
369
64
Analysis of corporate performance
371
31
Introduction
372
1
Operating and financial review
373
2
Ratios for analysis
375
1
Systematic approach to ratio analysis
376
6
Investors' views on risk and return
382
3
Pyramid of ratios
385
1
Links to the cash flow statement
386
1
Use and limitations of ratio analysis
387
1
Practical advice on interpreting ratios
388
1
Information provided in the financial statements
388
2
The analyst and the auditor
390
1
Worked example of ratio analysis
391
7
Summary
398
4
Further reading
398
1
Self-testing on the chapter
398
1
Activities for study groups
399
1
Questions
399
2
Notes and references
401
1
Developing issues in financial reporting
402
31
Introduction
403
2
Dynamic nature of the true and fair view
405
2
Measurement of value
407
4
Off-balance sheet finance
411
1
Related parties
412
2
Social and environmental disclosures
414
2
The reporting cycle
416
2
Summary financial statements
418
1
Corporate governance
419
2
Financial Reporting Review Panel
421
1
Harmonisation of international accounting practice
422
3
A financial reporting standard for smaller enterprises
425
1
How valid is the stakeholder model?
426
1
Summary
427
6
Further reading
427
1
Self-testing on the chapter
428
1
Activities for study groups
428
1
Notes and references
428
5
MANAGEMENT ACCOUNTING
Part 6 Setting the scene and defining the basic tools of management accounting
433
76
Functions of management accounting
435
25
Introduction
436
1
Meeting the needs of internal users
437
1
Management functions
438
7
Role of management accounting
445
3
Judgements and decisions: case study illustrations
448
2
Case studies explored
450
4
Terminology of management accounting
454
1
Summary
455
5
Notes and references
455
1
Further reading
456
1
Self-testing on the chapter
456
1
Cases for study groups
457
1
Questions
457
3
Classification of costs
460
21
Definition of a cost
461
1
The need for cost classification
461
1
The meaning of `activity'
462
1
Variable costs and fixed costs
462
5
Direct costs and indirect costs
467
2
Product costs and period costs
469
1
Costs for planning and control
469
1
Costs for decision making
470
1
Developing cost classification to meet changing circumstances
471
1
Cost coding
472
1
Cost selection and reporting
473
2
Summary
475
6
Further reading
475
1
Self-testing on the chapter
476
1
Cases for study groups
477
1
Questions
478
3
Accounting for materials, labour and overheads
481
28
Introduction
482
1
Keeping the score: total product cost
482
2
Accounting for materials costs
484
4
Accounting for labour costs
488
2
Production overheads
490
10
Moving forward
500
2
Summary
502
7
Notes and references
502
1
Further reading
503
1
Self-testing on the chapter
503
1
Cases for study groups
504
1
Questions
505
4
Part 7 Applying the basic tools of management accounting
509
52
Job costing and contract costing
511
26
Introduction
512
1
Job cost records: an illustration
512
3
Job costing: applying the accounting equation to transactions
515
6
Contract accounts
521
3
Illustration of contract accounting
524
5
Summary
529
8
Self-testing on the chapter
530
1
Cases for study groups
530
1
Questions
531
6
Process costing
537
24
Introduction
538
1
The role of management accounting
539
1
Allocation of costs to products in a process industry
540
9
Joint product costs and by-products
549
4
Decisions on joint products: sell or process further
553
2
Summary
555
6
Further reading
555
1
Self-testing on the chapter
555
2
Cases for study groups
557
1
Questions
557
4
Part 8 Planning and controlling
561
114
Preparing a budget
563
43
Purpose and nature of a budget system
564
4
Administration of the budgetary process
568
5
The benefits of budgeting
573
4
Problems of budgeting
577
3
Limitations of line item budgets
580
2
Practical example - development of a budget
582
10
Budget periods shorter than 12 months
592
4
Summary
596
10
Further reading
596
1
Self-testing on the chapter
596
1
Cases for study groups
597
1
Questions
598
8
Standard costs
606
36
Introduction
607
1
Purpose of creating standard costs
608
1
The level of output to be used in setting standards
608
1
The control process
609
2
Direct materials cost variance
611
2
Direct labour cost variance
613
2
Variable overhead cost variance
615
1
Fixed overhead expenditure variance
615
2
Case study: Allerdale Ltd
617
6
Investigating variances
623
1
Flexible budgets and variance analysis
624
1
Case study: Brackendale Ltd
625
4
Is variance analysis, based on standard costs, a useful exercise?
629
2
A broader view of applications of variance analysis
631
1
Summary
632
10
Further reading
633
1
Self-testing on the chapter
633
1
Cases for study groups
634
1
Questions
635
7
Performance evaluation and feedback reporting
642
33
Introduction
643
2
Preparing performance reports
645
1
Performance evaluation
646
2
Measurement of performance against budget
648
7
Divisionalised companies
655
8
Non-financial performance measures
663
2
Management use of performance measurement
665
3
Summary
668
7
Further reading
668
1
Self-testing on the chapter
669
1
Cases for study groups
669
1
Questions
670
5
Part 9 Profit, performance and current developments
675
96
Profit measurement and short-term decision making
677
38
Introduction
678
1
Cost behaviour: fixed and variable costs
679
5
Breakeven analysis
684
4
Using breakeven analysis
688
3
Limitations of breakeven analysis
691
1
Applications of contribution analysis
692
2
Short-term decision making
694
5
Pricing decisions
699
3
Absorption costing and variable costing
702
5
Dangers of short-termism
707
1
Summary
708
7
Further reading
709
1
Self-testing on the chapter
709
1
Cases for study groups
710
1
Questions
711
4
Capital budgeting
715
32
Purpose of capital budgeting
716
1
The role of the management accountant in capital budgeting
717
1
The assumptions adopted
717
1
Making a decision on a capital investment
718
1
Selecting acceptable projects
719
1
Payback method
720
2
Accounting rate of return
722
2
Net present value method
724
6
Internal rate of return
730
3
Mutually exclusive projects
733
3
Which methods are used in practice?
736
1
Control of investment projects: authorisation and review
737
1
Advanced manufacturing technologies
738
1
Summary
739
8
Further reading
739
1
Self-testing on the chapter
739
1
Cases for study groups
740
1
Questions
740
5
Supplement: Table of discount factors
745
2
The frontiers of management accounting
747
24
Introduction
748
1
Activity-based costing
749
9
Total quality management and cost of quality
758
2
Benchmarking
760
1
Life-cycle costing
760
1
Advanced manufacturing technologies
761
3
Strategic management accounting
764
2
Business process re-engineering
766
2
Evolution or revolution?
768
3
Further reading
768
1
Self-testing on the chapter
769
1
Cases for study groups
770
1
Glossary
771
12
Appendix I Information extracted from annual report of Safe and Sure plc, used throughout Financial Accounting
783
13
Appendix II Solutions to numerical questions in Financial Accounting
796
25
Appendix III Solutions to numerical questions in Management Accounting
821
42
Index
863