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About this book

The Business Briefings series offers authoritative introductory textbooks in core business topics. Covering the basics and providing springboards to further study, the books take a no-nonsense, practical approach, and are ideal as accessible introductions or as revision guides.

This book covers the essentials of financial accounting, providing students with a clear and succinct overview of the topic. It has been carefully developed to cover the key subjects including double-entry bookkeeping, accounting regulations, and the preparation and analysis of financial statements. This is an ideal guide for students coming to the subject for the first time, or for those seeking a quick refresher.

Key benefits:
• Concise yet authoritative
• Ideal as an introduction or revision guide
• Includes answers to revision questions

Table of Contents

1. Introduction to Financial Accounting

Abstract
This chapter provides an introduction to accounting in a business context, and financial accounting in particular. After studying this chapter, you should be able to:
  • Identify the main professional accountancy bodies.
  • Explain the need for a code of ethics for professional accountants.
  • Explain the nature and purpose of accounting.
  • Distinguish between financial accounting and management accounting.
  • Compare different types of business entity.
Jill Collis

2. The Accounting System

Abstract
In order to generate financial information, a business needs to establish an accounting system in which to keep the accounting records. Some small enterprises keep a simple cash-based accounting system, but many businesses record transactions using a system known as double-entry bookkeeping. When you have studied this chapter, you should be able to:
  • Explain the accounting equation.
  • Describe and apply the principles of double-entry bookkeeping.
  • Balance the ledger accounts.
  • Prepare a trial balance.
  • Discuss the limitations of a trial balance.
Jill Collis

3. Financial Reporting Frameworks

Abstract
This chapter introduces the fundamental accounting principles for financial accounting and the regulatory and conceptual frameworks that underpin statutory financial reporting by limited liability entities in the UK. After studying this chapter, you should be able to:
  • Explain the fundamental accounting principles.
  • Describe the key elements of the regulatory framework for financial reporting.
  • Explain the need for international convergence in financial reporting practices.
  • Discuss the key principles of the IASB’s Conceptual Framework for Financial Reporting.
  • Define the elements of financial statements and the criteria for their recognition and measurement.
Jill Collis

4. Statement of Comprehensive Income

Abstract
Under IAS 1, Presentation of Financial Statements (IASB, 2011a), a complete set of financial statements includes a statement of comprehensive income. After studying this chapter, you should be able to:
  • Explain the purpose of the statement of comprehensive income.
  • Differentiate between accruals and prepayments.
  • Calculate depreciation using the straight-line method.
  • Differentiate between bad debts and doubtful receivables.
  • Prepare a statement of comprehensive income.
Jill Collis

5. Statement of Financial Position

Abstract
Under IAS1, Presentation of Financial Statements (IASB, 2011a), a complete set of financial statements includes a statement of financial position. After studying this chapter, you should be able to:
  • Explain the purpose of the statement of financial position.
  • Differentiate between non-current assets and current assets.
  • Differentiate between non-current liabilities and current liabilities.
  • Calculate depreciation using the reducing balance method.
  • Prepare a statement of financial position.
Jill Collis

6. Statement of Cash Flows

Abstract
Under IAS 1, Presentation of Financial Statements (IASB, 2011a), a complete set of financial statements includes a statement of cash flows. After studying this chapter, you should be able to:
  • Explain the purpose of the statement of cash flows.
  • Differentiate between cash and cash equivalents.
  • Classify cash flows into operating, investing or financing activities.
  • Prepare a statement of cash flows using the direct method.
  • Prepare a statement of cash flows using the indirect method.
Jill Collis

7. Consolidated Financial Statements

Abstract
This chapter focuses on the consolidated financial statements that are prepared for a group of companies following a business combination. After studying this chapter, you should be able to:
  • Explain the purpose of consolidated financial statements.
  • Describe the concept of control.
  • Prepare a consolidated statement of financial position.
  • Prepare a consolidated statement of comprehensive income.
  • Prepare a consolidated statement of changes in equity.
Jill Collis

8. Financial Statement Analysis

Abstract
This chapter takes a user perspective and explains a technique for analyzing the main financial statements covered in this book. When you have studied this chapter, you should be able to:
  • Explain the purpose of ratio analysis.
  • Define and calculate the main investment and profitability ratios.
  • Calculate the main liquidity, efficiency and gearing ratios.
  • Interpret the meaning of these ratios.
  • Discuss the limitations of ratio analysis.
Jill Collis
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