Solutions Manual_
Accounting For Managers: Interpreting Accounting Information For Decision Making 5th Edition,
By Paul M. Collier| All Chapters 1-18| Latest Edition With Verified Solutions| Rated A+
,TABLE OF CONTENTS
PART I CONTEXT OF ACCOUNTING
CHAPTER: 1 INTRODUCTION TO ACCOUNTING
CHAPTER: 2 ACCOUNTING AND ITS RELATIONSHIP TO SHAREHOLDER VALUE
AND CORPORATE GOVERNANCE
CHAPTER: 3 RECORDING FINANCIAL TRANSACTIONS AND THE PRINCIPLES OF
ACCOUNTING
CHAPTER: 4 MANAGEMENT CONTROL, ACCOUNTING, AND ITS RATIONAL-
ECONOMIC ASSUMPTIONS
CHAPTER: 5 INTERPRETIVE AND CRITICAL PERSPECTIVES ON ACCOUNTING AND
DECISION MAKING
PART II THE USE OF FINANCIAL STATEMENTS FOR DECISION MAKING
CHAPTER: 6 CONSTRUCTING FINANCIAL STATEMENTS: IFRS AND THE
FRAMEWORK OF ACCOUNTING
CHAPTER: 7 INTERPRETING FINANCIAL STATEMENTS
CHAPTER: 8 ACCOUNTING FOR INVENTORY
PART III USING ACCOUNTING INFORMATION FOR DECISION MAKING,
PLANNING, AND CONTROL
CHAPTER: 9 ACCOUNTING AND INFORMATION SYSTEMS
CHAPTER: 11 OPERATING DECISIONS
CHAPTER: 12 HUMAN RESOURCE DECISIONS
CHAPTER: 13 OVERHEAD ALLOCATION DECISIONS
CHAPTER: 14 STRATEGIC INVESTMENT DECISIONS
CHAPTER: 15 PERFORMANCE EVALUATION OF BUSINESS UNITS
CHAPTER: 16 BUDGETING
CHAPTER: 17 BUDGETARY CONTROL
CHAPTER: 18 STRATEGIC MANAGEMENT ACCOUNTING
,CHAPTER 1: INTRODUCTION TO ACCOUNTING
SOLUTIONS
1.1 EXPLAIN THE DIFFERENCE BETWEEN
ACCOUNTING, AN ACCOUNT, AND
ACCOUNTABILITY.
ACCOUNTING IS A COLLECTION OF SYSTEMS AND PROCESSES
USED TO RECORD, REPORT AND INTERPRET BUSINESS
TRANSACTIONS. AN ACCOUNT IS AN EXPLANATION OR REPORT
IN FINANCIAL TERMS ABOUT THOSE TRANSACTIONS.
ACCOUNTABILITY ARISES FROM THE STEWARDSHIP FUNCTION,
THAT MANAGERS HAVE TO PROVIDE AN ACCOUNT TO OTHER
STAKEHOLDERS IN THE BUSINESS.
1.2 SUMMARISE THE MAIN ACTIVITIES OF MANAGEMENT ACCOUNTANTS.
THE MAIN ACTIVITIES OF MANAGEMENT ACCOUNTANTS
INCLUDES PARTICIPATION IN PLANNING, PRIMARILY THROUGH
BUDGETS; GENERATING, ANALYSING, PRESENTING AND
INTERPRETING INFORMATION TO SUPPORT DECISION-MAKING,
AND MONITORING AND CONTROLLING PERFORMANCE.
1.3 EXPLAIN HOW THE ROLE OF MANAGEMENT ACCOUNTING HAS
CHANGED OVER THE LAST 100 YEARS.
THE ORIGIN OF MANAGEMENT ACCOUNTING WAS COST
ACCOUNTING IN FACTORIES, WHERE ACCOUNTANTS WERE
CLOSE TO THE BUSINESS AND ADVISED NON-FINANCIAL
MANAGERS.
MANAGEMENT ACCOUNTANTS HAVE ADVISED ON ECONOMIES
OF SCALE AS WELL AS OF SCOPE AS BUSINESSES GREW AND
DIVERSIFIED AS DIVISIONALIZATION, CONGLOMERATES AND
MULTINATIONAL ORGANIZATIONS INCREASED THE DEMAND
FOR ACCOUNTING INFORMATION. NON-FINANCIAL
PERFORMANCE INFORMATION HAS COME TO CHALLENGE
MANAGEMENT ACCOUNTING INFORMATION. ALTHOUGH NEW
TECHNIQUES HAVE BEEN DEVELOPED, NEW MANUFACTURING
TECHNOLOGIES AND THE GROWTH OF SERVICE INDUSTRIES HAS
NOT BEEN MATCHED BY THE CHANGING ROLE OF
MANAGEMENT ACCOUNTANTS. MANAGEMENT ACCOUNTING IS
INCREASINGLY DECENTRED IN ORGANIZATIONS, WITH IT
CARRYING OUT THE BULK OF ROUTINE TRANSACTION
PROCESSING. ORGANIZATIONS ARE INCREASINGLY LOOKING
FOR MANAGEMENT ACCOUNTANTS TO USE THEIR FINANCIAL
EXPERTISE TO CONTRIBUTE TO STRATEGY FORMULATION AND
IMPLEMENTATION.
,CHAPTER 2: ACCOUNTING AND ITS RELATIONSHIP
TO SHAREHOLDER VALUE AND CORPORATE
GOVERNANCE
SOLUTIONS
2.1 EXPLAIN THE IDEA OF VALUE-BASED MANAGEMENT AND
HOW SHAREHOLDER VALUE RELATES TO THE INTERACTION
BETWEEN PRODUCT AND CAPITAL MARKETS.
VALUE-BASED MANAGEMENT USES A VARIETY OF TECHNIQUES
TO MEASURE INCREASES IN SHAREHOLDER VALUE, WHICH IS
ASSUMED TO BE THE PRIMARY GOAL OF ALL BUSINESS
ORGANIZATIONS. SHAREHOLDER VALUE REFERS TO THE
ECONOMIC VALUE OF AN INVESTMENT BY DISCOUNTING
FUTURE CASH FLOWS TO THEIR PRESENT VALUE USING THE
COST OF CAPITAL FOR THE BUSINESS. TO ACHIEVE
SHAREHOLDER VALUE, A BUSINESS MUST GENERATE PROFITS IN
THEIR MARKETS FOR GOODS AND SERVICES (PRODUCT
MARKETS) THAT EXCEED THE COST OF CAPITAL (THE
WEIGHTED AVERAGE COST OF EQUITY AND BORROWINGS) IN
THE CAPITAL MARKET.
2.2 EXPLAIN THE KEY ISSUES IN CORPORATE
GOVERNANCE AS THEY RELATE TO ACCOUNTING.
THE RESPONSIBILITIES OF THE BOARD INCLUDE SETTING THE
COMPANY’S STRATEGIC GOALS, PROVIDING LEADERSHIP TO
SENIOR MANAGEMENT, MONITORING BUSINESS PERFORMANCE
AND REPORTING TO SHAREHOLDERS. THE LAST TWO OF THESE
EXPLICITLY RELATE TO ACCOUNTING, AND THE FIRST TWO
IMPLICITLY DO SO. IN THE UK THE COMBINED CODE AND IN THE
US THE SARBANES-OXLEY ACT INCLUDE IMPORTANT
RESPONSIBILITIES OF THE BOARD IN RELATION TO FINANCIAL
STATEMENTS AND PERFORMANCE MANAGEMENT. THE ROLE OF
A BOARD IS TO PROVIDE LEADERSHIP OF THE COMPANY WITHIN
A FRAMEWORK OF PRUDENT AND EFFECTIVE CONTROLS WHICH
ENABLES RISK TO BE ASSESSED AND MANAGED. THESE
CONTROLS INCLUDE MANY ACCOUNTING CONTROLS INCLUDING
BUDGETS, CAPITAL EXPENDITURE EVALUATIONS, ETC. THE
FINANCIAL REPORTS OF A COMPANY ARE THE RESPONSIBILITY
OF THE BOARD WHICH MUST ENSURE THAT THE COMPANY KEEPS
PROPER ACCOUNTING RECORDS WHICH DISCLOSE WITH
REASONABLE ACCURACY THE FINANCIAL POSITION OF THE
COMPANY AT ANY TIME AND ENSURE THAT FINANCIAL REPORTS
COMPLY WITH THE COMPANIES ACT. THE BOARD IS ALSO
RESPONSIBLE FOR SAFEGUARDING THE COMPANY’S ASSETS AND
FOR TAKING REASONABLE STEPS TO PREVENT AND DETECT
FRAUD.
,CHAPTER 3: RECORDING FINANCIAL TRANSACTIONS
AND THE PRINCIPLES OF ACCOUNTING
SOLUTIONS
3.1 AN ACCOUNTING SYSTEM COMPRISES ACCOUNTS THAT CAN BE
GROUPED INTO:
C) ASSETS, LIABILITIES, INCOME AND EXPENSES
3.2 A TRANSACTION TO RECORD THE SALE OF GOODS ON CREDIT
WOULD INVOLVE A DOUBLE ENTRY FOR THE SALES VALUE
TO THE FOLLOWING ACCOUNTS:
D) INCREASE DEBTORS AND INCREASE SALES
NOTE THERE ALSO IS AN ASSOCIATED ENTRY FOR THE COST OF
GOODS SOLD: INCREASE COST OF SALES AND REDUCE
INVENTORY
3.3 A RETAIL BUSINESS HAS SALES OF £100,000 COST OF GOODS
SOLD OF £35,000 SALARIES OF £15,000 RENTAL OF £4,000 AND
ADVERTISING OF £8,000. ALL OF THE INCOME AND
EXPENSES HAVE BEEN PAID OUT OF THE OWNER’S INITIAL
CAPITAL OF
£25,000. IN ADDITION, THE BUSINESS PAID CASH OF £30,000 FOR
STOCK (WHICH REMAINS UNSOLD) AND PURCHASED
EQUIPMENT ON CREDIT FOR £20,000. THE FINANCIAL
STATEMENTS OF THE BUSINESS WOULD SHOW:
b) PROFIT OF £38,000 CASH OF £33,000 AND
CAPITAL OF £63,000 PROFIT SALES 100,000
COST OF SALES -
35,000 SALARIES
-15,000
RENT - 4,000
ADVERTISING - 8,000
£38,000
CASH CAPITAL£25,000
PLUS 38,000
PROFIT
- -30,000
INVENTOR
Y
£33,000
CAPITA INITIAL £25,000
L
PLUS 38,000
PROFIT
, £63,000
ASSETS
CASH 33,000 + EQUIPMENT 20,000 + INVENTORY 30,000 =
83,000 LIABILITIES
CREDITORS (EQUIPMENT) 20,000 + CAPITAL 63,000 = 83,000
3.4 A BALANCE SHEET SHOWS LIABILITIES OF £125,000 AND
ASSETS OF £240,000. THE INCOME STATEMENT SHOWS
INCOME OF £80,000 AND EXPENSES OF £35,000. CAPITAL IS:
b) £115,000
Accounting For Managers: Interpreting Accounting Information For Decision Making 5th Edition,
By Paul M. Collier| All Chapters 1-18| Latest Edition With Verified Solutions| Rated A+
,TABLE OF CONTENTS
PART I CONTEXT OF ACCOUNTING
CHAPTER: 1 INTRODUCTION TO ACCOUNTING
CHAPTER: 2 ACCOUNTING AND ITS RELATIONSHIP TO SHAREHOLDER VALUE
AND CORPORATE GOVERNANCE
CHAPTER: 3 RECORDING FINANCIAL TRANSACTIONS AND THE PRINCIPLES OF
ACCOUNTING
CHAPTER: 4 MANAGEMENT CONTROL, ACCOUNTING, AND ITS RATIONAL-
ECONOMIC ASSUMPTIONS
CHAPTER: 5 INTERPRETIVE AND CRITICAL PERSPECTIVES ON ACCOUNTING AND
DECISION MAKING
PART II THE USE OF FINANCIAL STATEMENTS FOR DECISION MAKING
CHAPTER: 6 CONSTRUCTING FINANCIAL STATEMENTS: IFRS AND THE
FRAMEWORK OF ACCOUNTING
CHAPTER: 7 INTERPRETING FINANCIAL STATEMENTS
CHAPTER: 8 ACCOUNTING FOR INVENTORY
PART III USING ACCOUNTING INFORMATION FOR DECISION MAKING,
PLANNING, AND CONTROL
CHAPTER: 9 ACCOUNTING AND INFORMATION SYSTEMS
CHAPTER: 11 OPERATING DECISIONS
CHAPTER: 12 HUMAN RESOURCE DECISIONS
CHAPTER: 13 OVERHEAD ALLOCATION DECISIONS
CHAPTER: 14 STRATEGIC INVESTMENT DECISIONS
CHAPTER: 15 PERFORMANCE EVALUATION OF BUSINESS UNITS
CHAPTER: 16 BUDGETING
CHAPTER: 17 BUDGETARY CONTROL
CHAPTER: 18 STRATEGIC MANAGEMENT ACCOUNTING
,CHAPTER 1: INTRODUCTION TO ACCOUNTING
SOLUTIONS
1.1 EXPLAIN THE DIFFERENCE BETWEEN
ACCOUNTING, AN ACCOUNT, AND
ACCOUNTABILITY.
ACCOUNTING IS A COLLECTION OF SYSTEMS AND PROCESSES
USED TO RECORD, REPORT AND INTERPRET BUSINESS
TRANSACTIONS. AN ACCOUNT IS AN EXPLANATION OR REPORT
IN FINANCIAL TERMS ABOUT THOSE TRANSACTIONS.
ACCOUNTABILITY ARISES FROM THE STEWARDSHIP FUNCTION,
THAT MANAGERS HAVE TO PROVIDE AN ACCOUNT TO OTHER
STAKEHOLDERS IN THE BUSINESS.
1.2 SUMMARISE THE MAIN ACTIVITIES OF MANAGEMENT ACCOUNTANTS.
THE MAIN ACTIVITIES OF MANAGEMENT ACCOUNTANTS
INCLUDES PARTICIPATION IN PLANNING, PRIMARILY THROUGH
BUDGETS; GENERATING, ANALYSING, PRESENTING AND
INTERPRETING INFORMATION TO SUPPORT DECISION-MAKING,
AND MONITORING AND CONTROLLING PERFORMANCE.
1.3 EXPLAIN HOW THE ROLE OF MANAGEMENT ACCOUNTING HAS
CHANGED OVER THE LAST 100 YEARS.
THE ORIGIN OF MANAGEMENT ACCOUNTING WAS COST
ACCOUNTING IN FACTORIES, WHERE ACCOUNTANTS WERE
CLOSE TO THE BUSINESS AND ADVISED NON-FINANCIAL
MANAGERS.
MANAGEMENT ACCOUNTANTS HAVE ADVISED ON ECONOMIES
OF SCALE AS WELL AS OF SCOPE AS BUSINESSES GREW AND
DIVERSIFIED AS DIVISIONALIZATION, CONGLOMERATES AND
MULTINATIONAL ORGANIZATIONS INCREASED THE DEMAND
FOR ACCOUNTING INFORMATION. NON-FINANCIAL
PERFORMANCE INFORMATION HAS COME TO CHALLENGE
MANAGEMENT ACCOUNTING INFORMATION. ALTHOUGH NEW
TECHNIQUES HAVE BEEN DEVELOPED, NEW MANUFACTURING
TECHNOLOGIES AND THE GROWTH OF SERVICE INDUSTRIES HAS
NOT BEEN MATCHED BY THE CHANGING ROLE OF
MANAGEMENT ACCOUNTANTS. MANAGEMENT ACCOUNTING IS
INCREASINGLY DECENTRED IN ORGANIZATIONS, WITH IT
CARRYING OUT THE BULK OF ROUTINE TRANSACTION
PROCESSING. ORGANIZATIONS ARE INCREASINGLY LOOKING
FOR MANAGEMENT ACCOUNTANTS TO USE THEIR FINANCIAL
EXPERTISE TO CONTRIBUTE TO STRATEGY FORMULATION AND
IMPLEMENTATION.
,CHAPTER 2: ACCOUNTING AND ITS RELATIONSHIP
TO SHAREHOLDER VALUE AND CORPORATE
GOVERNANCE
SOLUTIONS
2.1 EXPLAIN THE IDEA OF VALUE-BASED MANAGEMENT AND
HOW SHAREHOLDER VALUE RELATES TO THE INTERACTION
BETWEEN PRODUCT AND CAPITAL MARKETS.
VALUE-BASED MANAGEMENT USES A VARIETY OF TECHNIQUES
TO MEASURE INCREASES IN SHAREHOLDER VALUE, WHICH IS
ASSUMED TO BE THE PRIMARY GOAL OF ALL BUSINESS
ORGANIZATIONS. SHAREHOLDER VALUE REFERS TO THE
ECONOMIC VALUE OF AN INVESTMENT BY DISCOUNTING
FUTURE CASH FLOWS TO THEIR PRESENT VALUE USING THE
COST OF CAPITAL FOR THE BUSINESS. TO ACHIEVE
SHAREHOLDER VALUE, A BUSINESS MUST GENERATE PROFITS IN
THEIR MARKETS FOR GOODS AND SERVICES (PRODUCT
MARKETS) THAT EXCEED THE COST OF CAPITAL (THE
WEIGHTED AVERAGE COST OF EQUITY AND BORROWINGS) IN
THE CAPITAL MARKET.
2.2 EXPLAIN THE KEY ISSUES IN CORPORATE
GOVERNANCE AS THEY RELATE TO ACCOUNTING.
THE RESPONSIBILITIES OF THE BOARD INCLUDE SETTING THE
COMPANY’S STRATEGIC GOALS, PROVIDING LEADERSHIP TO
SENIOR MANAGEMENT, MONITORING BUSINESS PERFORMANCE
AND REPORTING TO SHAREHOLDERS. THE LAST TWO OF THESE
EXPLICITLY RELATE TO ACCOUNTING, AND THE FIRST TWO
IMPLICITLY DO SO. IN THE UK THE COMBINED CODE AND IN THE
US THE SARBANES-OXLEY ACT INCLUDE IMPORTANT
RESPONSIBILITIES OF THE BOARD IN RELATION TO FINANCIAL
STATEMENTS AND PERFORMANCE MANAGEMENT. THE ROLE OF
A BOARD IS TO PROVIDE LEADERSHIP OF THE COMPANY WITHIN
A FRAMEWORK OF PRUDENT AND EFFECTIVE CONTROLS WHICH
ENABLES RISK TO BE ASSESSED AND MANAGED. THESE
CONTROLS INCLUDE MANY ACCOUNTING CONTROLS INCLUDING
BUDGETS, CAPITAL EXPENDITURE EVALUATIONS, ETC. THE
FINANCIAL REPORTS OF A COMPANY ARE THE RESPONSIBILITY
OF THE BOARD WHICH MUST ENSURE THAT THE COMPANY KEEPS
PROPER ACCOUNTING RECORDS WHICH DISCLOSE WITH
REASONABLE ACCURACY THE FINANCIAL POSITION OF THE
COMPANY AT ANY TIME AND ENSURE THAT FINANCIAL REPORTS
COMPLY WITH THE COMPANIES ACT. THE BOARD IS ALSO
RESPONSIBLE FOR SAFEGUARDING THE COMPANY’S ASSETS AND
FOR TAKING REASONABLE STEPS TO PREVENT AND DETECT
FRAUD.
,CHAPTER 3: RECORDING FINANCIAL TRANSACTIONS
AND THE PRINCIPLES OF ACCOUNTING
SOLUTIONS
3.1 AN ACCOUNTING SYSTEM COMPRISES ACCOUNTS THAT CAN BE
GROUPED INTO:
C) ASSETS, LIABILITIES, INCOME AND EXPENSES
3.2 A TRANSACTION TO RECORD THE SALE OF GOODS ON CREDIT
WOULD INVOLVE A DOUBLE ENTRY FOR THE SALES VALUE
TO THE FOLLOWING ACCOUNTS:
D) INCREASE DEBTORS AND INCREASE SALES
NOTE THERE ALSO IS AN ASSOCIATED ENTRY FOR THE COST OF
GOODS SOLD: INCREASE COST OF SALES AND REDUCE
INVENTORY
3.3 A RETAIL BUSINESS HAS SALES OF £100,000 COST OF GOODS
SOLD OF £35,000 SALARIES OF £15,000 RENTAL OF £4,000 AND
ADVERTISING OF £8,000. ALL OF THE INCOME AND
EXPENSES HAVE BEEN PAID OUT OF THE OWNER’S INITIAL
CAPITAL OF
£25,000. IN ADDITION, THE BUSINESS PAID CASH OF £30,000 FOR
STOCK (WHICH REMAINS UNSOLD) AND PURCHASED
EQUIPMENT ON CREDIT FOR £20,000. THE FINANCIAL
STATEMENTS OF THE BUSINESS WOULD SHOW:
b) PROFIT OF £38,000 CASH OF £33,000 AND
CAPITAL OF £63,000 PROFIT SALES 100,000
COST OF SALES -
35,000 SALARIES
-15,000
RENT - 4,000
ADVERTISING - 8,000
£38,000
CASH CAPITAL£25,000
PLUS 38,000
PROFIT
- -30,000
INVENTOR
Y
£33,000
CAPITA INITIAL £25,000
L
PLUS 38,000
PROFIT
, £63,000
ASSETS
CASH 33,000 + EQUIPMENT 20,000 + INVENTORY 30,000 =
83,000 LIABILITIES
CREDITORS (EQUIPMENT) 20,000 + CAPITAL 63,000 = 83,000
3.4 A BALANCE SHEET SHOWS LIABILITIES OF £125,000 AND
ASSETS OF £240,000. THE INCOME STATEMENT SHOWS
INCOME OF £80,000 AND EXPENSES OF £35,000. CAPITAL IS:
b) £115,000
