Accountancy

1 Introduction to Accountancy.- The Users of Accounting Information.- Organisation of the Finance Function.- Financial accounting.- Management accounting.- Treasury function.- Auditing.- The Financial Statements.- Chairman's statement.- The directors' report.- The auditor's report.- The profit and loss account.- The balance sheet.- The notes to the accounts.- The statement of source and application of funds.- Other statements appearing in annual reports.- Other statements advocated by the corporate report.- The Interrelationships of the Financial Statements.- Accounts and the Banker.- This Book.- Further Reading.- 2 Accounting Principles and Practice I.- The Accounting Standards Committee.- The Accounting Requirements of the Companies Acts.- The Fundamental Concepts and Principles of Accounting.- Accounting concepts under the Companies Act and SSAP 2.- Accounting bases and accounting policies.- Accounting rules.- Stocks and Work-in-Progress.- The significance of stock valuation.- Stock cost allocation methods.- Stock valuation under the Companies Acts and accounting standards.- Standard accounting practice: stocks and work-in-progress (SSAP 9).- Differences between the Act and the Standard.- Long-Term Contract Work-in-Progress.- Long-term contract work-in-progress and the Companies Act 1981.- Base Stocks.- Research and Development Expenditure.- Foreign Currency Translation.- Conclusion: Accounting Principles and the Banker.- Further Reading.- 3 Accounting Principles and Practice II.- Depreciation and Accounting for Fixed Tangible Assets.- Methods of depreciation.- Misconceptions concerning depreciation.- Accounting regulations governing tangible fixed assets and depreciation.- Accounting for leases and hire purchase contracts.- Accounting for Intangible Fixed Assets.- Goodwill.- Accounting for Investments.- Investments shown as current assets.- Investment held as fixed assets.- Accounting for Liabilities.- Accounting for Contingencies.- Accounting for Post Balance Sheet Events.- Conclusion: Significance for the Banker.- Further Reading.- 4 Taxation.- Corporation Tax.- Advance Corporation Tax.- Ascertaining Taxable Income.- Capital allowances.- Stock appreciation relief.- Disallowed items.- A basic taxation computation.- Capital Gains.- Relief for Losses.- Close Companies.- Taxation of Partners and Sole Traders.- Deferred Taxation.- Calculation of deferred tax liability.- Deferred taxation and the 1984 tax changes.- Deferred taxation in the event of liquidation.- Franked and Unfranked Investment Income.- The Presentation of Taxation in Company Accounts.- Taxation and the Banker.- Further Reading.- 5 The Accounting Requirements of the Companies Acts.- The General Regulations Governing.- Company Accounts.- The Standard Formats for Accounts.- The balance sheet.- The profit and loss account.- Extraordinary items, exceptional items and prior year adjustments.- The supplementary notes to the accounts.- The directors' report.- Examples drawn from the accounts of public companies.- The Accounting Exemptions for Small and Medium-Sized Companies.- The modified accounts of a small company.- Notes to the accounts.- The modified accounts of a medium-sized company.- The auditor's special report.- Distributable Profits under the Companies Acts.- The Disclosure of Transactions Involving Directors.- The Companies Acts and the Banker.- Further Reading.- 6 Group Accounts.- Accounting for Trade Investments.- Associated and Related Companies.- The Accounting Treatment of Associated Companies (SSAP 1).- Accounting for Groups of Companies.- The principles of consolidated accounts.- Bookkeeping Procedures for Consolidation.- Further consolidation adjustments.- More complicated aspects of consolidation.- Provisions of the Companies Act Concerning Group Accounts.- Standard Accounting Practice - Group Accounts - (SSAP 14).- Merger and Acquisition Methods of Accounting for Amalagations.- The development of standard practice regarding merger accounting.- Accounting and merger acquisitions.- Accounting for Foreign Currency Translations.- The consolidated financial statements stage.- The closing rate/net investment method.- The temporal method.- Conclusion: Group Accounts and the Banker.- Further Reading.- 7 Inflation and Accounting.- The Deficiencies of Historic Cost Accounting in a Period of Inflation.- SSAP 16 - Current Cost Accounting.- Current cost profit.- Scope and Application.- Method of presentation.- Criticisms of SSAP 16 in Practice.- The Statement of Intent and ED 35.- Current Cost Accounts and the Banker.- Further Reading.- 8 Interpretation of Financial Accounts.- Preliminary Examination of the Annual Report.- Ratio Analysis.- Activity.- Profitability.- Liquidity.- Control of working capital.- Solvency.- Concluding comments on ratio analysis.- Empirical Research on the Predictability of Company Accounts.- Conclusion.- Further Reading.- 9 Management Accounting and the Analysis of Profit Performance.- Management Accounts and Financial Accounts.- Budgeting and Budgetary Control.- Dealing with risk and uncertainty in budgeting.- Examining a Budget.- Costs and Costing.- Profit Volume Analysis.- Break-even charts in practice.- Break-even charts and the bankers.- Control.- Budgetary control.- Responsibility accounting.- Ratio analysis.- Standing costing.- Monthly management accounts and the banker.- Absorption Costing and Marginal Costing.- Marginal costing and the banker.- Conclusion.- Further Reading.- 10 Planning and Controlling Working Capital and the Flow of Funds.- The Flow of Funds within a Business: The Working Capital Cycle.- Planning the Flow of Funds.- Projected funds' flow statements.- Projecting the balance sheet.- Cash flow budgets.- Controlling the Flow of Funds.- Calculating the Working Capital Cycle.- Statement of Source and Application of Funds.- Conclusion.- Further Reading.- 11 Investment Decisions.- The Time Value of Money.- DCF Methods of Investment Appraisal.- Net Present Value.- The Internal Rate of Return.- The NPV and IRR Methods Compared.- Conventional Methods of Investment Appraisal.- The payback method.- The return on capital.- Profitability index.- Conclusions.- DCF and Conventional Methods of Investment Appraisal Compound.- Risk and Uncertainty in Capital Investment.- Inflation and Investment Appraisal.- The Administrative Framework for Investment Decisions.- Conclusion: Investment Decisions and the Banker.- Further Reading.- 12 Financing Decisions.- The Criteria for Selecting Finance.- Options and Alternatives.- Ordinary share capital.- Retained profits.- Preference shares.- Long-term debt.- Medium-term debt.- Short-term finance.- Calculating the Cost of Capital.- Conclusion.- Further Reading.- 13 Company Valuation.- Earnings per Share.- Investment Ratios.- The price earnings ratio.- Earnings yield.- Dividend yield.- Dividend cover.- Net assets per share.- The Valuation of Companies: Theoretical and Practical Approaches.- Dividend valuation models.- Earnings valuation models.- Balance sheet valuation.- The valuation of Tayles trading.- Valuation of Private Companies and Partnerships.- The Accountant's Approach to Valuing Goodwill.- The Accountant's Report.- The Gone Concern Valuation.- Estimating realisable value.- Estimating prior claims.- Conclusion.- Further Reading.- 14 Accounting for Reorganisations and Reconstructions.- Share Capital and Share Premium.- Redeemable Shares.- Purchase by a Company of its Own Shares.- Regulations.- Payment for the purchase.- The purchase or redemption of shares out of capital by private companies.- Reconstructions, Reorganisation and Liquidations.- Devising a suitable scheme.- Evaluating a scheme from the viewpoint of the banker.- The causes and symptoms of corporate collapse.- Appendix 1 Information to be Given as Notes to the Accounts in Accordance with the Companies Act.- Appendix 2 Present Value Table.