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Financial accounting for decision makers PDF

618 Pages·2019·10.33 MB·English
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NINTH EDITION Peter Atrill & Eddie McLaney NINTH N I N T H E D I T I O N Peter Atrill EDITION GS LGS R With a comprehensive and accessible introduction to the subject, Financial Eddie McLaney Accounting for Decision Makers focuses on the ways in which fi nancial statements FF R E N and information can be used to improve the quality of decision making. OI K N A The practical emphasis throughout the book ensures the material is always relevant, R E A whilst the authors’ style of introducing topics gradually and explaining technical A N LI terminology in a clear, friendly style caters for all students, whether on specialist D K TM accounting or non-specialist business degrees. EN A C C N IS A N Key features: I I I IOA I C O • Examples from the real world have been updated and expanded. These U examples demonstrate the practical application and value of key concepts NL CTM and techniques. N I A S • Interactive ‘open-learning’ style, ideal for self-study, encourages you to check M O I your progress continually. AC N C • Coverage of developments to the International Financial Reporting Standards A KC N (IFRS) including an update to the discussion of the Conceptual Framework for CE Financial Reporting. EO N D R • Recent changes to corporate governance provisions are explained. N SU O C • Chapter 12 now includes more detail about the role of the auditor. U R N • Activities and exercises which enable you to constantly test your O understanding and reinforce learning. IA T I F • Key terms, glossary and bulleted summaries providing excellent revision aids. I S F N A O G I C Join over 10 million students benefi ting from Pearson Use the power of MyLab Accounting to accelerate your MyLabs learning. You need both an access card and a course ID to access MyLab Accounting: This title can be supported by MyLab Accounting™, an E NC online homework and tutorial system designed to test and 1. Is your lecturer using MyLab Accounting? Ask your build your understanding. MyLab Accounting provides lecturer for your course ID. A D a personalised approach, with instant feedback and 2. Has an access card been included with the book? numerous additional resources to support your learning. Check the inside back cover of the book. tr i C • A personalised study plan 3. If you have a course ID but no access card, go to l l • Usable either following chapter-by-chapter structure or http://www.pearson.com/mylab/accounting R by learning objective to buy access. M I • Worked solutions showing you how to solve diffi cult problems c AO • Limitless opportunities to practise L a F n Peter Atrill is a freelance academic who has worked with leading institutions in the UK, Europe and SE Asia. e F He was formerly the Head of Business and Management and Head of Accounting and Law at Plymouth Business y School, Plymouth University. Eddie McLaney is an academic author who was formerly the Accounting Subject Group Leader and Principal Lecturer in Accounting and Finance at Plymouth Business School, Plymouth University. Cover image: © Shutterstock Premier/Allies Interactive www.pearson-books.com CVR_ATRIL_ 09_51257.indd 1 3/14/19 12:43 PM LGS R A E N K I C A I TM N N N A O U I N S OI C I E FCD CR O A F A01 Atrill's Financial Accounting For Decis 51257.indd 1 19/03/2019 06:55 At Pearson, we have a simple mission: to help people make more of their lives through learning. We combine innovative learning technology with trusted content and educational expertise to provide engaging and effective learning experiences that serve people wherever and whenever they are learning. From classroom to boardroom, our curriculum materials, digital learning tools and testing programmes help to educate millions of people worldwide – more than any other private enterprise. Every day our work helps learning flourish, and wherever learning flourishes, so do people. To learn more, please visit us at www.pearson.com/uk A01 Atrill's Financial Accounting For Decis 51257.indd 2 19/03/2019 06:55 NINTH EDITION LGS R A E N K I C A I TM N N N A O U N I S O I C I E FC D C R O A F Peter Atrill Eddie McLaney Harlow, England • London • New York • Boston • San Francisco • Toronto • Sydney Dubai • Singapore • Hong Kong • Tokyo • Seoul • Taipei • New Delhi Cape Town • São Paulo • Mexico City • Madrid • Amsterdam • Munich • Paris • Milan A01 Atrill's Financial Accounting For Decis 51257.indd 3 19/03/2019 06:55 PEARSON EDUCATION LIMITED KAO Two KAO Park Harlow CM17 9SR United Kingdom Tel: +44 (0)1279 623623 Web: www.pearson.com/uk Second edition published 1999 by Prentice Hall Europe (print) Third edition published 2002 by Pearson Education Limited (print) Fourth edition published 2005 (print) Fifth edition published 2008 (print) Sixth edition published 2011 (print) Seventh edition published 2013 (print and electronic) Eighth edition published 2016 (print and electronic) Ninth edition published 2019 (print and electronic) © Prentice Hall Europe 1996, 1999 (print) © Pearson Education Limited 2002, 2005, 2008, 2011 (print) © Pearson Education Limited 2013, 2016, 2019 (print and electronic) The rights of Peter Atrill and Edward McLaney to be identified as authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. The print publication is protected by copyright. Prior to any prohibited reproduction, storage in a retrieval system, distribution or transmission in any form or by any means, electronic, mechanical, recording or otherwise, permission should be obtained from the publisher or, where applicable, a licence permitting restricted copying in the United Kingdom should be obtained from the Copyright Licensing Agency Ltd, Barnard’s Inn, 86 Fetter Lane, London EC4A 1EN. The ePublication is protected by copyright and must not be copied, reproduced, transferred, distributed, leased, licensed or publicly performed or used in any way except as specifically permitted in writing by the publishers, as allowed under the terms and conditions under which it was purchased, or as strictly permitted by applicable copyright law. Any unauthorised distribution or use of this text may be a direct infringement of the authors’ and the publisher’s rights and those responsible may be liable in law accordingly. All trademarks used herein are the property of their respective owners. The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners. Contains public sector information licensed under the Open Government Licence (OGL) v3.0. http://www.nationalarchives.gov.uk/doc/open-government-licence/version/3/. Contains Parliamentary information licensed under the Open Parliament Licence (OPL) v3.0. http://www.parliament.uk/site-information/copyright/open-parliament-licence/ The screenshots in this book are reprinted by permission of Microsoft Corporation. Pearson Education is not responsible for the content of third-party internet sites. The Financial Times. With a worldwide network of highly respected journalists, The Financial Times provides global business news, insightful opinion and expert analysis of business, finance and politics. With over 500 journalists reporting from 50 countries worldwide, our in-depth coverage of international news is objectively reported and analysed from an independent, global perspective. To find out more, visit www.ft.com/pearsonoffer. ISBN: 978-1-292-25125-7 (print) 978-1-292-25131-8 (PDF) 978-1-292-25130-1 (ePub) British Library Cataloguing-in-Publication Data A catalogue record for the print edition is available from the British Library Library of Congress Cataloging-in-Publication Data A catalog record for the print edition is available from the Library of Congress 10 9 8 7 6 5 4 3 2 1 23 22 21 20 19 Print edition typeset in 9.25/13 pt and Helvetica Neue LT W1G by Pearson CSC Print edition printed and bound in Slovakia by Neografia Cover image: © Shutterstock Premier/Allies Interactive NOTE THAT ANY PAGE CROSS REFERENCES REFER TO THE PRINT EDITION A01 Atrill's Financial Accounting For Decis 51257.indd 4 19/03/2019 06:55 Brief contents Preface xv How to use this book xvii Acknowledgements xix 1 Introduction to accounting 1 2 Measuring and reporting financial position 33 3 Measuring and reporting financial performance 73 4 Accounting for limited companies (1) 116 5 Accounting for limited companies (2) 160 6 Measuring and reporting cash flows 202 7 Recognising and reporting assets and liabilities 238 8 Analysing and interpreting financial statements (1) 268 9 Analysing and interpreting financial statements (2) 313 10 Reporting the financial results of groups of companies 348 11 Increasing the scope of financial reporting 406 12 Governing a company 443 Appendix A Recording financial transactions 495 Appendix B Glossary of key terms 514 Appendix C Solutions to self-assessment questions 525 Appendix D Solutions to critical review questions 536 Appendix E Solutions to selected exercises 545 Index 580 BRIEF CONTENTS v A01 Atrill's Financial Accounting For Decis 51257.indd 5 19/03/2019 06:55 A01 Atrill's Financial Accounting For Decis 51257.indd 6 19/03/2019 06:55 Contents Preface xv How to use this book xvii Acknowledgements xix 1 Introduction to accounting 1 Introduction 1 Learning outcomes 1 What is accounting? 2 Who are the users of accounting information? 2 The conflicting interests of users 4 How useful is accounting information? 4 Providing a service 6 Weighing up the costs and benefits 9 Accounting as an information system 11 Management accounting and financial accounting 13 Scope of this book 15 The changing face of accounting 16 Accounting for business 18 What is the purpose of a business? 18 What kinds of business ownership exist? 19 How are businesses organised? 22 The quest for wealth creation 22 Meeting the needs of other stakeholders 23 Balancing risk and return 26 Reasons to be ethical 27 Not-for-profit organisations 28 Summary 30 Key terms 32 References 32 Further reading 32 Critical review questions 32 2 Measuring and reporting financial position 33 Introduction 33 Learning outcomes 33 The major financial statements – an overview 34 The statement of financial position 38 CONTENTS vii A01 Atrill's Financial Accounting For Decis 51257.indd 7 19/03/2019 06:55 The effect of trading transactions 45 Classifying assets 47 Classifying claims 49 Statement layouts 50 Capturing a moment in time 52 The role of accounting conventions 53 Money measurement 57 Valuing assets 60 Meeting user needs 65 Self-assessment question 66 Summary 67 Key terms 69 Reference 69 Further reading 69 Critical review questions 70 Exercises 70 3 Measuring and reporting financial performance 73 Introduction 73 Learning outcomes 73 The income statement 74 Different roles 75 Income statement layout 76 Further issues 78 Recognising revenue 81 Recognising expenses 84 Profit, cash and accruals accounting 88 Depreciation 89 Costing inventories 98 Trade receivables problems 104 Uses and usefulness of the income statement 108 Self-assessment question 108 Summary 109 Key terms 111 Further reading 111 Critical review questions 111 Exercises 112 4 Accounting for limited companies (1) 116 Introduction 116 Learning outcomes 116 The main features of limited companies 117 Legal safeguards 120 Public and private companies 120 Taxation 122 viii CONTENTS A01 Atrill's Financial Accounting For Decis 51257.indd 8 19/03/2019 06:55 The role of the Stock Exchange 123 Capital market efficiency 124 Managing a company 126 Financing limited companies 126 Share capital 128 Reserves 130 Bonus shares 132 Share capital jargon 134 Borrowings 135 Raising share capital 137 Withdrawing equity 142 The main financial statements 145 Dividends 148 Self-assessment question 150 Summary 151 Key terms 152 References 153 Further reading 153 Critical review questions 153 Exercises 154 5 Accounting for limited companies (2) 160 Introduction 160 Learning outcomes 160 The directors’ duty to account 161 The need for accounting rules 162 Sources of accounting rules 164 Problems with standards 167 Accounting rules or accounting choice? 169 The need for a conceptual framework 170 The IASB framework 171 The auditors’ role 173 The framework of annual financial reports 173 Presenting the financial statements 174 Management commentary 181 Directors’ report 182 Strategic report 182 Accounting standards and accounting policies 185 Creative accounting 189 Self-assessment question 196 Summary 197 Key terms 199 References 199 Further reading 199 Critical review questions 199 Exercises 200 CONTENTS ix A01 Atrill's Financial Accounting For Decis 51257.indd 9 19/03/2019 06:55

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