Accounting, 3rd Edition

766 Pages·2013·41.133 MB·English

by  Michael J. Jones

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ACCOUNTING
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ACCOUNTING
Third Edition
Michael Jones
University of Bristol
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This edition fi rst published 2013 by John Wiley & Sons, Ltd
Copyright © 2013 Michael Jones
Second edition published 2006
First edition published 2002
Cover photograph: © Eduardo Leite. Used under licence from iStockphoto
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ISBN 9781119977186 (pbk)
ISBN 9781118678008 (ebk)
A catalogue record for this book is available from the British Library.
Set in 10/12pt Sabon Roman by Thomson Digital, India
Printed and bound in Great Britain by Bell & Bain Ltd, Glasgow
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I would like to dedicate this book to the following
people who have made my life richer.
• My father, Donald, who died in 2003
• My mother
• My daughter, Katherine
• Jill and Zoe Solomon
• Tony Brinn (in memoriam)
• All my friends in Hereford, Cardiff and elsewhere
• All my colleagues
• And, fi nally, my past students!
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Contents
About the Author xv
About the Book xvii
Acknowledgements xxiii
1 INTRODUCTION TO ACCOUNTING 1
Introduction 2
Nature of Accounting 2
Importance of Accounting 4
Financial Accounting and Management Accounting 5
Users of Accounts 6
Accounting Context 8
Types of Accountancy 12
Types of Accountant 17
Limitations of Accounting 20
Conclusion 20
Discussion Questions 22
SECTION A: FINANCIAL ACCOUNTING: THE TECHNIQUES 23
2 THE ACCOUNTING BACKGROUND 25
Introduction 26
Financial Accounting 26
Language of Accounting 28
Student Example 36
Why Is Financial Accounting Important? 40
Accounting Principles 40
Accounting Conventions 41
Conclusion 43
Discussion Questions 44
Numerical Questions 45
Appendix 2.1: Illustration of a Consolidated Income Statement
for Marks & Spencer plc 2010 46
Appendix 2.2: Illustration of a Consolidated Statement of Financial
Position for Marks and Spencer plc 2010 48
Appendix 2.3: Illustration of a Consolidated Statement of Cash
Flows for Marks and Spencer 2010 50
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CONTENTS
viii
Appendix 2.4: Illustration of a Consolidated Income Statement
for Volkswagen 2009 52
Appendix 2.5: Illustration of a Consolidated Balance Sheet
(Statement of Financial Position) for Volkswagen 2009 53
Appendix 2.6: Illustration of a Consolidated Cash Flow
Statement (Statement of Cash Flows) for Volkswagen 2009 55
3 RECORDING: DOUBLE-ENTRY BOOKKEEPING 57
Introduction 58
The Accounting Equation 59
Worked Example 64
Computers 76
Conclusion 76
Discussion Questions 77
Numerical Questions 77
4 MAIN FINANCIAL STATEMENTS: THE INCOME
STATEMENT (PROFIT AND LOSS ACCOUNT) 83
Introduction 84
Context 84
Defi nitions 86
Layout 88
Main Components 89
Profi t 97
Listed Companies 100
Capital and Revenue Expenditure 100
Limitations 101
Interpretation 101
Conclusion 101
Discussion Questions 102
Numerical Questions 102
5 MAIN FINANCIAL STATEMENTS: THE STATEMENT
OF FINANCIAL POSITION (BALANCE SHEET) 104
Introduction 105
Context 106
Defi nitions 107
Layout 108
Main Components 110
Limitations 121
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