BSc Business Administration. Lead College – Royal Holloway. BA1020
Accounting for Management. Aims. This module provides an introduction to
accounting.
University of London International Programmes BSc Business Administration Lead College – Royal Holloway
BA1020 Accounting for Management
Aims
This module provides an introduction to accounting. It is suitable for two types of student: (i) those who expect to become managers and who will therefore need to use accounting reports for decision-making, and (ii) those who intend to specialise in accounting later. The module includes material on financial reporting, management accounting and finance. The main aims of the course are: • To develop the basic techniques of financial, management accounting and financial management • To communicate and present financial information using basic accounting formats • To develop independent working skills using multiple sources of information • To develop basic analytical skills to interpret financial performance • To utilise management accounting techniques as a method for strategic decision-making • To improve cognitive skills, effective problem solving, numerical and quantitative skills, effective use of CIT, effective team working and interpersonal skills
Pre-requisites
Learning Outcomes
None
Essential Reading • •
Accounting: an Introduction (McLaney & Atrill) Financial Accounting: An International Introduction (Alexander & Nobes)
Included as study materials once registered on the course.
Assessment
This module is assessed by a three hour unseen written examination.
By the end of this module students should be able to: • Research accounting information using the library and company web pages • Explain the importance of accounting information to business and society
• Prepare and explain the significance of the Profit and Loss Account, Balance Sheet and Cash Flow Statement • Interpret financial accounting information - using ratio analysis • Understand management accounting as a tool for planning, decision-making and control • Describe the behaviour of costs • Understand the relationships between costs, volume and profit • Prepare budgets and construct a cash flow forecast • Explain the management of working capital • Demonstrate an ability to understand the fact that accounting information is constructed within variable social and institutional conditions
Syllabus Topic 1 provides an introduction to the subject of accounting. The topic defines what accounting is, why we need accounting, what makes good accounting information and who uses accounting information. The topic also explains that accounting is split into two distinct areas: financial and management accounting. Topic 2 examines the main types of financial statements presented: cash flow, financial position (balance sheet) and performance. This includes a discussion of the meaning of the terms “asset” and “liability”. Topic 3 builds on our study of the basics of financial statements by looking at some issues that you will need to understand in order to interpret financial position. We look at the definition of assets, and how they are measured. This includes a discussion of depreciation and impairment. Topic 4 looks at the definition and measurement of liabilities. We distinguish liabilities from equity. We also examine the different types of entity that might run businesses. This includes an introduction to methods of raising the finance (liabilities or equity) for starting or expanding a business. Topic 5 studies the different types of income and expenses, and how they are presented in income statements. We also ask where the profit goes, including a discussion of tax. Topic 6 examines the recording of transactions by double entry book-keeping. We look at how to maintain ’accounts’, how to check that they add up, and how to prepare financial statements from the records. Topic 7 continues the discussion of double-entry book-keeping. It looks at adjustments made to the trial balance for prepayments, accruals, impairments, depreciation and bond interest. Then, financial statements are prepared from trial balances. Topic 8 returns to cash flow statements, prepared under IFRS. We look in more detail how to calculate operating cash flow, how present cash flow statements, and how interpret them.
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Topic 9 asks a major question that can be looked at now that we have studied several aspects of accounting: to what extent are there rules on how to do accounting, or can accountants do what they like? Topic 10 applies our discussions in Topics 1 to 9 to real financial statements of large listed companies. We look, here, at the main types of contents of annual reports, at the purpose of the audit report, and at the types of financial statements provided by companies. Topic 11 looks at how to interpret balance sheets and income statements in a comparative way. The comparisons are over time and between companies. A powerful aid to comparisons is to put one number in the context of another by calculating a ratio. In this topic, we set out how to calculate ratios of profitability, liquidity, working capital and financial structure. Topic 12 moves on to look at extra ratios that can be used by investors in the shares of listed companies. These include the famous “earnings per share” and “price earnings ratio” that are published every day in newspapers. Topic 13 is the first of a series of topics the use of accounting data to make decisions inside a company, i.e. on management accounting. We start, here, with decisions about the best level of production to adopt. This involves considering different types of costs and revenues. Topic 14 continues our discussion of decisionmaking by managers. We look at how to choose between various possible courses of action, and how to make decisions when some inputs (e.g. specialised labour) is in restricted supply. Topic 15 introduces budgeting. A budget is a plan expressed in money. It is prepared and approved prior to the budget period and may show income, expenditure or the capital to be employed. We look at the budgeting process and at different types of budgets. Topic 16 outlines the preparation of a master budget, and then examines in more detail the construction of cash forecasts and budgets. We also look at how to ensure that managers work with budgets rather than against them.
Topic 17 examines the system of standard costing, which looks at the comparison of budgeted and standard costs of labour and materials for particular production jobs or production lines. Topic 18 introduces an area of finance. In Topic 4 of this course, we briefly examined one aspect of finance: raising money to run the business. Now, we look at the other side: spending on capital projects. This topic introduces the concept of investment appraisal, and looks at how to use two simple methods: payback period and accounting rate of return. Topic 19 notes that the investment appraisal techniques of Topic 18 have one major problem: they ignore the time value of money. In this topic, we investigate that issue, and look at two methods that take account of it: net present value and internal rate of return. We then summarise the advantages and disadvantages of the methods.
