Solutions Manual for Accounting For Managers Interpreting Accounting Information for Decision Making 4th Edition By Paul M. Collier

Accounting For Managers Interpreting Accounting Information for Decision
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Making 4e Paul M. Collier (Solutions Manual All Chapters, 100% Original
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Verified, A+ Grade) Missing Chapters (4, 5, 9) By Publisher
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Chapter 1 pp Solutions


1.1 Explain the difference between accounting, an account,
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and accountability.
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Accounting is a collection of systems and processes used to record, report
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and interpret business transactions. An account is an explanation or report
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in financial terms about those transactions. Accountability arises from the
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stewardship function, that managers have to provide an account to other
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stakeholders in the business.
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1.2 Summarise the main activities of management accountants. pp pp pp pp pp pp



The main activities of management accountants includes participation in
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planning, primarily through budgets; generating, analysing, presenting and
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interpreting information to support decision-making, and monitoring and
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controlling performance.
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1.3 Explain how the role of management accounting has changed over the
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last 100 years.
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The origin of management accounting was cost accounting in factories,
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where accountants were close to the business and advised non-financial
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managers.
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Management accountants have advised on economies of scale as well as of
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scope as businesses grew and diversified as divisionalization,
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conglomerates and multinational organizations increased the demand for
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accounting information. Non-financial performance information has come
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to challenge management accounting information. Although new techniques
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have been developed, new manufacturing technologies and the growth of
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service industries has not been matched by the changing role of
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management accountants. Management accounting is increasingly
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decentred in organizations, with IT carrying out the bulk of routine
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transaction processing. Organizations are increasingly looking for
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management accountants to use their financial expertise to contribute to
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strategy formulation and implementation.
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,Chapter 2 pp Solutions


2.1 Explain the idea of value-based management and how shareholder
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value relates to the interaction between product and capital markets.
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Value-based management uses a variety of techniques to measure increases
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in shareholder value, which is assumed to be the primary goal of all
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business organizations. Shareholder value refers to the economic value of
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an investment by discounting future cash flows to their present value using
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the cost of capital for the business. To achieve shareholder value, a business
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must generate profits in their markets for goods and services (product
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markets) that exceed the cost of capital (the weighted average cost of
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equity and borrowings) in the capital market.
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2.2 Explain the key issues in corporate governance as they relate
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to accounting.
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The responsibilities of the Board include setting the company’s strategic
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goals, providing leadership to senior management, monitoring business
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performance and reporting to shareholders. The last two of these explicitly
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relate to accounting, and the first two implicitly do so. In the UK the
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Combined Code and in the US the Sarbanes-Oxley Act include important
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responsibilities of the Board in relation to financial statements and
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performance management. The role of a Board is to provide leadership of
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the company within a framework of prudent and effective controls which
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enables risk to be assessed and managed. These controls include many
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accounting controls including budgets, capital expenditure evaluations, etc.
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The financial reports of a company are the responsibility of the Board which
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must ensure that the company keeps proper accounting records which
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disclose with reasonable accuracy the financial position of the company at
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any time and ensure that financial reports comply with the Companies Act.
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The Board is also responsible for safeguarding the company’s assets and for
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taking reasonable steps to prevent and detect fraud.
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,Chapter 3 pp Solutions
3.1 An accounting system comprises accounts that can be grouped into:
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c) assets, liabilities, income and expenses
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3.2 A transaction to record the sale of goods on credit would involve a
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double entry for the sales value to the following accounts:
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d) increase debtors and increase sales
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Note there also is an associated entry for the cost of goods sold: increase
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cost of sales and reduce inventory
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3.3 A retail business has sales of £100,000 cost of goods sold of £35,000
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salaries of £15,000 rental of £4,000 and advertising of £8,000. All of
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the income and expenses have been paid out of the owner’s initial
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capital of
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£25,000. In addition, the business paid cash of £30,000 for stock (which
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remains unsold) and purchased equipment on credit for £20,000. The
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financial statements of the business would show:
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b) Profit of £38,000 cash of £33,000 and capital of
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pp £63,000 Profit Sales pp 100,000
Cost of sales pp pp -35,000
Salaries pp -15,000
Rent - 4,000
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Advertising - 8,000
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£38,000

Cash Capital£25,000
Plus profit 38,000 pp



- Inventory
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£33,000


Capital Initial £25,000
Plus profit pp 38,000
£63,000

Assets
Cash 33,000 + Equipment 20,000 + Inventory 30,000 = 83,000
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Liabilities
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Creditors (Equipment) 20,000 + Capital 63,000 = 83,000
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3.4 A Balance Sheet shows liabilities of £125,000 and assets of £240,000.
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The Income Statement shows income of £80,000 and expenses of
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£35,000. Capital is:
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b) £115,000

, Capital = assets – liabilities = 240,000 – 125,000 = 115,000
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3.5 A transaction to record the purchase of fixed assets on credit
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would involve:
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c) increasing creditors and increasing fixed assets
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3.6 For each of the following transactions, identify whether there is
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an increase or decrease in profit, cash flow, assets or liabilities:
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Transaction Profit Cash Flow pp Assets Liabilities
Income - pp (excluding cash) pp



Expense
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s
Issues shares to public
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(Equity)
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Borrows money over 5pp pp pp Increases Increases (Long pp



years pp term debt)
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cash for pp Decreases Increases (Fixed pp



equipment
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Buys inventory on credit
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asset: (Current
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stock) liability:
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creditors)
goods on credit Increases (Selling
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price less pp pp (Current pp



cost price) pp pp asset: pp



debtors @ pp pp



selling pp



price) pp



2. Decreases
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asset: stock p p pp



@ cost price) pp pp pp



cash for salaries,Decreases
rent,
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etc. pp (Expenses pp



)
cash to suppliers pp ppDecreases Decreases
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liability: pp



Creditor) pp



Receives cash from pp pp Increases Decreases (Current pp



customers
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debtors pp



Depreciates equipmentDecreases pp Decreases (Fixed pp



(Depreciation pp assets) pp



expense) pp