Professional Documents
Culture Documents
01 - Finance and Accounting - Intro PDF
01 - Finance and Accounting - Intro PDF
Allocation of resources;
Performance evaluation and control;
Continue with certain business operations;
Invest in particular projects or new ventures;
Sell particular products
References:
Atrill, P., and E. Mclaney, Accounting and Finance: For NonSpecialists, 8edn. 2013, Prentice Hall.
Atrill, P., and E. Mclaney, Management Accounting: For Decision
Makers, 4edn. 2005, Prentice Hall.
Atrill, P., Financial Management: For Decision Makers, 5edn.
2009, Prentice Hall
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2.
3.
effective planning
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Step 1
Step 2
Consider options
Step 3
Step 4
Step 5
Step 6
Step 7
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Financial Accounting
Management Accounting
Focus
Mainly external
Internal only
Nature of reports
General purpose
Specific purpose
Level of detail
Broad overview
Quite detailed
Restrictions
No restrictions
Reporting interval
Time horizon
Mainly historical
Range of information
Quantifiable in money
terms; focus on objective
and verifiable data
The Cash Flow Statement (shows the sources and uses of cash
for a period i.e. cash movements cash in & cash out)
The Income Statement - statement of financial performance
(traditionally known as Profit and Loss; measures and reports
how much profit has been generated in a period )
The Balance Sheet - statement of financial position (shows
overall net financial position at the end of a particular period)
Note that only the cost of the paper sold is measured against the
sales to find profit, not the total cost of the wrapping paper
purchased.
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Note that the profit of $35 has led to an increase in wealth of $35
Note also that the increase in cash of $10 is not the same as the increase
in wealth because wealth does not exist only in the form of cash (see
inventory)
Income statement
Income statement
Period 1
Period 2
Time
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manager
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owner)
(mutual agency)
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investment
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Public Berhad
Ltd / Bhd
Yes
No
Typical size
Large
Smaller
Extent of regulation
Extensive
Moderate
Some restrictions
Subject to reporting
requirements
Depends on size
Extensive regulation
Yes
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Owners' Claim
(Shareholders' Equity)
Shares
(investment by owners)
etc
etc
etc
etc
etc
etc
Reserves
(Profits and gains subsequently made)
$50,000
$50,000
$60,000
Shareholders equity
Share capital - 50,000 shares
Reserves (retained profits)
$50,000
$10,000
$60,000
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