Financial accounting for decision makers

618 Pages·2019·10.33 MB·English

by  E. J. McLaney, Peter Atrill

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: [phone]
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