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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

LecturerDrs. E. J. Galama, CHN University, Retail Business School

Accounting and Finance

Lectures by Eelco Galama

lectures will be introduction to workshops,according schedule in module book

Workshops: students to prepare exams,

exercises, according schedule; by Galama

Fill in attendance list

OHT 0Time is money, so be in time for the

lecture!

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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

LecturerDrs. E. J. Galama, CHN University, Retail Business School

Introduction to

accounting and

finance

Measuring and

reporting

financial position

Cost-volume-profit

analysisFull costing

Financing the

business

Measuring and

reporting cash

flows

Accounting for

limited

companies

Measuring and

reporting

financial

performance

Budgeting

The management

of

working capital

Analysis and

interpretation of

financial

statements

Capital

investment

decisions

Ch 1 Ch 2 Ch 3

Ch 6 Ch 5 Ch 4

Ch 7 Ch 8 Ch 9

Ch 10Ch 11Ch 12

OHT Overview all the chapters

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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

LecturerDrs. E. J. Galama, CHN University, Retail Business School

Introduction to accounting and finance

OBJECTIVES

You should be able to:

Identify the main users of financial information and

discuss their needs

Explain the nature and roles of accounting and finance

Explain why an understanding of accounting and

finance is likely to be relevant to your needs

Distinguish between financial and management

accounting

OHT 1.1

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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

LecturerDrs. E. J. Galama, CHN University, Retail Business School

Business

organisation

Competitors

Lenders

Managers

Owners Customers

Suppliers Investment

analysts

Community

representatives

Government

Employees and

their

representatives

Main users of financial information

relating to a business organisationOHT 1.3

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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

LecturerDrs. E. J. Galama, CHN University, Retail Business School

The characteristics that influence the

usefulness of accounting information

Characteristics

that make

financial

information

useful

Understandability

Comparability

ReliabilityRelevance

Limitation to the

application of

the qualitative

characteristics

Cost/Benefit

Necessary for

including

information in the

financial statements

Materiality

OHT 1.4

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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

LecturerDrs. E. J. Galama, CHN University, Retail Business School

Information

analysis

Information

identificationInformation

reporting

Information

recording

The accounting information systemOHT 1.5

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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

LecturerDrs. E. J. Galama, CHN University, Retail Business School

The planning and control process

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6

Step 7

Identify business objectives

Consider options

Prepare a long-term plan based on the

most appropriate option(s)

Prepare short-term plans (budgets)

Perform and collect information

on actual performance

Respond to divergences between plans

and actuals, and exercise control

Revise plans (and budgets) if necessary

OHT 1.6

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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

LecturerDrs. E. J. Galama, CHN University, Retail Business School

Financial and management accounting

Nature of the reports produced

Level of detail

The existence of regulations

Reporting interval

Time horizon

Range and quality of information

The major differences concern:

OHT 1.7

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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

LecturerDrs. E. J. Galama, CHN University, Retail Business School

Measuring and reporting financial position

OBJECTIVES

You should be able to:

Prepare a simple balance sheet and interpret theinformation that it contains

Explain the nature and purpose of the three major

financial statements

Discuss the limitations of the balance sheet in

portraying the financial position of a business

Discuss the accounting conventions underpinning the

balance sheet

OHT 2.1

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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

LecturerDrs. E. J. Galama, CHN University, Retail Business School

The major financial statements an

overview

Profit and loss account

Balance sheet

Cash flow statement

OHT 2.2

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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

LecturerDrs. E. J. Galama, CHN University, Retail Business School

Relationship between the balance

sheet, profit and loss account and

cash flow statement

Profit and lossaccount 1

Balance sheet at the

beginning of Period 1

Profit and lossaccount 2

Cash flow statement 2

TimePeriod 1 Period 2

Cash flow statement 1

Balance sheet at

the end of Period 1

Balance sheet at

the end of Period 2

OHT 2.3

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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

LecturerDrs. E. J. Galama, CHN University, Retail Business School

Assets

Major characteristics

A probable future benefit

exists

The business has an exclusive

right to control the benefit

The benefit must arise from some

past transaction or event

The asset must be capable of

measurement in monetary terms

OHT 2.4

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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

LecturerDrs. E. J. Galama, CHN University, Retail Business School

Claims

There are essentially two

types of claim against

a business:

Capital

Liabilities

OHT 2.5

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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

LecturerDrs. E. J. Galama, CHN University, Retail Business School

The balance sheet equation

equals

LiabilitiesAssets Capital

plus

OHT 2.6

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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

LecturerDrs. E. J. Galama, CHN University, Retail Business School

The effect of trading operations on

the balance sheet

equals

Profit

(Loss)Assets Capital

plus

(minus)

Liabilities

plus

The balance sheet equation can be extended as follows:

OHT 2.7

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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

LecturerDrs. E. J. Galama, CHN University, Retail Business School

The classification of assets

The classification of

assets may vary

according to the nature

of the business:

Fixed assets

Current assets

OHT 2.8

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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

LecturerDrs. E. J. Galama, CHN University, Retail Business School

Cash

Trade

debtors

Stock

The circulating nature of current

assetsOHT 2.9

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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

LecturerDrs. E. J. Galama, CHN University, Retail Business School

The classification of claims

Long-term liabilities

Current liabilities

OHT 2.10

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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

LecturerDrs. E. J. Galama, CHN University, Retail Business School

The equation for the horizontal layout

Fixed

assets = CapitalLong-term

liabilities

Current

liabilities++Currentassets+Fixed

assets

OHT 2.11

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Pearson Education Limited 2003 Atrill, McLaney:Accounting and Finance for Non-Specialists, 4th edition

L t D E J G l CHN U i it R t il B i S h l

Accounting conventions and the

balance sheet

Accounting conventions

Money measurement

Historic cost

Going concern

Dual aspect

Prudence

Stable monetary unit

ObjectivityBusiness entity

OHT 2.12