Class notes
MN10476: Accounting for Managers Lecture Notes
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Detailed lecture notes for each lecture. Final exam grade: 92%
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OutlineLecturer: Dr Ting Qiu – t.qiu@bath.ac.uk
Office: WH 9.02
Office hours: Mondays 15:00 – 17:00 (or contact me to arrange other times individually if needed) [available
15:00-16:00]
As accounting is a fundamentally practical activity students will be encouraged to attempt the questions at the
end of each relevant chapter of the set text. Answers will be provided later for these questions via Moodle. To
support learning, weekly seminars are provided in which previously specified questions will be worked through.
Students are most strongly advised to make sure they attend the seminars.
Assessment detail
Coursework (25%)
Exam (75%)
Aims
The unit aims to test the students' ability to:
* Explain the conceptual and regulatory framework of accounting.
* Apply interpretative techniques to published financial statements.
* Apply double entry techniques to record transactions and prepare financial statements.
* Explain and apply the concepts of inventory valuation (IAS2) and revenue recognition (IAS18)
* Explain the basic concepts and processes used to determine product and service costs.
* Explain absorption cost, marginal cost, ABC and relevant cost concepts.
* Apply CVP analysis and interpret the results.
* Explain the role of budgets and standard costing within organisations.
* Prepare and interpret budgets, standard costs and variance statements
Learning outcomes
* Students will understand how accounting and financial management serves the purpose of developing and
operating a business.
* They will acquire a broad knowledge of the different dimensions of financial management and accounting
which they may study in depth in later years of the course and an introductory working knowledge of basic
tools of financial analysis and practice.
Skills
Financial data manipulation and interpretation
Analytical and communication skills in relation to financial information
Accreditation for some professional exams.
Content
(a) Financial planning and control
1
,* The financial dimension of businesses and other organisations
* Estimating costs for planned activities : fixed and variable costs; direct and indirect costs; basic elements of
product cost
* Preparation of cash budgets
* Annual budgeting, profit planning, liquidity control and longer term financial projections,
* Preparation of budgets and projected Profit and Loss Accounts and Balance Sheets
* Controlling operations and cost control
(b) Reporting results in financial terms
* Basic distinctions between the accounts of sole traders, partnerships and companies
* Preparation of final accounts from incomplete records
* Preparation of trial balance
* Reporting performance and financial results to higher levels in the organisation: cost centre reports, profit
centre reports, investment centre reports
* Reporting the results to shareholders and other outside parties: preparation of final accounts, structure and
interpretation of final accounts, underlying concepts (going concern, prudence, materiality, etc.)
* Measures of performance in the financial press: share prices, earnings per share, p/e ratios, assessing the
quality of earnings announcements, etc.
* Outline of the role of company law, the accounting profession and Accounting Standards in controlling the
content of published information
* Outline of complications created by going international / global for investment analysis, financing the
business, financial control and financial reporting
2
,LECTURE 1: The importance of accounting and finance
Definition
Accounting may be defined as:
1. The classification and recording of monetary transactions
2. The presentation and interpretation of the results of those transactions
3. The monetary projection of future activities from alternative courses of action
Users of accounting
Internal users — these are the owners and managers of the business. They use a mix of management and
financial accounting information
1. Owners
a. They invest capital to start and run business with the aim of making profits, and therefore need
accurate financial information to know what they have earned or lost during a particular period
of time
2. Managers
a. Managers need accurate financial information to analyze and evaluate an organization’s
financial performance to make important decisions regarding improving its performance
External users — normally only use financial accounting information
3
, 1. Government agencies
a. Use financial information of businesses for the purpose of imposing taxes and regulations
2. General public
a. A source of education for students of accounting and finance
b. A source of information for people looking for job opportunities
3. Suppliers
a. These are business individuals or organizations that normally sell merchandise or raw materials
to other businesses on credit.
b. They use accounting information to have an idea about the future creditworthiness of the
business and to decide whether or not to continue to provide goods to them.
4. Lenders
5. Investors
Features of useful financial information
1. Accurate
a. Free from error
2. Reliable
a. Users must trust that the data represents what they believe it should be representing
3. Clear
a. So it can be easily understood by its users
4. Consistent
a. The same methods and standards of measurement of data must be used to allow for
comparison over time and between different data sets
5. Relevant
a. So it can be applied to the purpose requires
The conceptual frameworks of accounting
How can the credibility and usefulness of accounting and financial information be ensured?
● Accounting operates within a framework
● This framework is constantly evolving as new problems are encountered, new practices and techniques
are developed, and the objective of users of financial information change
● The search for a definitive conceptual framework, a theoretical accounting model, has resulted in many
conceptual frameworks being developed
The Statement of Principles (SOP)
SOP — a basic structure for determining objectives, in which there is a thread from the theory to the
practical application of accounting standards to transactions that are reported in published accounts
● The SOP is not an accounting standard, merely a set of guidelines
● Its use is not mandatory
● By virtue of the subject, constantly in need of revision
4
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