OHT 0 Time Is Money, So Be

OHT 0 Time is money, so be in time for the
lecture!
Accounting and Finance
• Lectures by Eelco Galama

• lectures will be introduction to workshops,
according schedule in module book
• Workshops: students to prepare exams,
exercises, according schedule;
• by Galama
• Fill in attendance list
© Pearson Education Limited 2003 Atrill, McLaney: Accounting and Finance for Non-Specialists, 4th edition
Lecturer Drs. E. J. Galama, CHN University, Retail Business School
OHT Overview all the chapters
Measuring and Measuring and
Introduction to reporting
accounting and reporting
financial
financial position
Ch 1 finance Ch 2 Ch 3performance
Analysis and
Measuring and Accounting for
interpretation of
reporting cash limited
financial
flows companies
Ch 6 statements Ch 5 Ch 4
Cost-volume-profit Full costing Budgeting

analysis
Ch 7 Ch 8 Ch 9
Financing the The management Capital

business of investment
Ch 12
working capital
Ch 11 Ch 10decisions
OHT 1.1 Introduction to accounting and finance
OBJECTIVES
You should be able to:
Explain the nature and roles of accounting and finance
Identify the main users of financial information and

discuss their needs
Distinguish between financial and management

accounting
Explain why an understanding of accounting and

finance is likely to be relevant to your needs
OHT 1.2 Financial and management accounting
Financial accounting Management accounting
Nature of reports General purpose Specific purpose

produced
Level of detail Overview Detailed information
Restrictions Highly regulated Not regulated
Reporting
Annual/Semi-annual Monthly/Weekly/Daily
interval
Time horizon Backward looking Forward looking
Range of Monetary and non-monetary

information Primarily monetary
items measured on an information with greater
objective basis reliance on subjective
information
OHT 1.3 Main users of financial information
relating to a business organisation
Owners Customers Competitors
Employees and
Managers their
representatives
Business
organisation
Lenders Government
Investment Community
Suppliers
analysts representatives
OHT 1.4 The characteristics that influence the
usefulness of accounting information
Materiality Cost/Benefit
Comparability
Characteristics
that make
Relevance financial Reliability
information
useful
Understandability
Necessary for Limitation to the

including application of
information in the the qualitative
financial statements characteristics
OHT 1.5 The accounting information system
Information Information Information Information

identification recording analysis reporting
OHT 1.6 The planning and control process
Step 1 Identify business objectives
Step 2 Consider options
Prepare a long-term plan based on the

Step 3
most appropriate option(s)
Step 4 Prepare short-term plans (budgets)
Perform and collect information

Step 5 on actual performance
Respond to divergences between plans

Step 6 and actuals, and exercise control
Step 7 Revise plans (and budgets) if necessary

OHT 1.7 Financial and management accounting
The major differences concern:
Nature of the reports produced
Level of detail
The existence of regulations
Reporting interval
Time horizon
Range and quality of information
OHT 2.1 Measuring and reporting financial position
OBJECTIVES
You should be able to:
Explain the nature and purpose of the three major

financial statements
Prepare a simple balance sheet and interpret the

information that it contains
Discuss the accounting conventions underpinning the

balance sheet
Discuss the limitations of the balance sheet in

portraying the financial position of a business
OHT 2.2 The major financial statements – an
overview
Cash flow statement
Profit and loss account
Balance sheet
OHT 2.3 Relationship between the balance
sheet, profit and loss account and
cash flow statement
Balance sheet at the Balance sheet at Balance sheet at

beginning of Period 1 the end of Period 1 the end of Period 2
Profit and loss Profit and loss

account 1 account 2
Cash flow statement 1 Cash flow statement 2
Period 1 Period 2 Time
OHT 2.4 Assets
Major characteristics
A probable future benefit

exists
The business has an exclusive

right to control the benefit
The benefit must arise from some

past transaction or event
The asset must be capable of

measurement in monetary terms
OHT 2.5 Claims
There are essentially two

types of claim against
a business:
Capital
Liabilities
OHT 2.6 The balance sheet equation
equals plus
Assets Capital Liabilities
OHT 2.7 The effect of trading operations on
the balance sheet
The balance sheet equation can be extended as follows:
equals plus plus

(minus)
Capital Profit
Assets Liabilities
(Loss)
OHT 2.8 The classification of assets
The classification of
assets may vary
according to the nature
of the business:
Fixed assets
Current assets
OHT 2.9 The circulating nature of current
assets
Stock
Trade
Cash
debtors
OHT 2.10 The classification of claims
Long-term liabilities
Current liabilities
OHT 2.11 The equation for the horizontal layout
Current
Fixed
assets
assets +
Current
assets = Capital + Long-term
liabilities + liabilities
OHT 2.12 Accounting conventions and the
balance sheet
Accounting conventions
Money measurement Dual aspect
Historic cost Prudence
Going concern Stable monetary unit
Business entity Objectivity

OHT 0 Time Is Money, So Be

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OHT 0 Time is money, so be in time for the

Accounting and Finance

• Lectures by Eelco Galama

Cost-volume-profit Full costing Budgeting

Financing the The management Capital

Explain the nature and roles of accounting and finance

Identify the main users of financial information and

Distinguish between financial and management

Explain why an understanding of accounting and

Financial accounting Management accounting

Nature of reports General purpose Specific purpose

Level of detail Overview Detailed information

Restrictions Highly regulated Not regulated

Time horizon Backward looking Forward looking

Range of Monetary and non-monetary

Owners Customers Competitors

Necessary for Limitation to the

Information Information Information Information

Step 1 Identify business objectives

Step 2 Consider options

Prepare a long-term plan based on the

Step 4 Prepare short-term plans (budgets)

Perform and collect information

Respond to divergences between plans

Step 7 Revise plans (and budgets) if necessary

Nature of the reports produced

The existence of regulations

Range and quality of information

Explain the nature and purpose of the three major

Prepare a simple balance sheet and interpret the

Discuss the accounting conventions underpinning the

Discuss the limitations of the balance sheet in

Cash flow statement

Profit and loss account

Balance sheet at the Balance sheet at Balance sheet at

Profit and loss Profit and loss

Cash flow statement 1 Cash flow statement 2

Period 1 Period 2 Time

A probable future benefit

The business has an exclusive

The benefit must arise from some

The asset must be capable of

There are essentially two

Assets Capital Liabilities

The balance sheet equation can be extended as follows:

equals plus plus

Money measurement Dual aspect

Historic cost Prudence

Going concern Stable monetary unit

Business entity Objectivity

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