Accounting lecture 1
First three lectures is about financial accounting. Last three lectures is about management
accounting.
Free option to participate in Midterm exam, if you do and you pass the test → 0.5 bonus
Debt = borrowing money, for example from banks
Equity (eigen vermogen) = outside investors get a stake in your company in return for their
money
You can re-invest net profit or (if you are a bigger company) you may hand out dividends (but
only if the board wants it, so you don’t have to)
Accounting = collecting, analysing and communicating financial information. This information
is useful for those who need to make decisions and plans about businesses.
The business cycle:
,All accounting users (McLaney and Atrill):
We can divide users in internal and external groups with different requirements
Internal users requirements
management Information for costing, decision making,
planning and control
Employees and employee organisations Information about job security and for
(Trade unions) collective bargaining
External users Requirements
Shareholders (current and potential) Information for buying and selling shares
Analysts advisers (brokers, dealers) Information for buying and selling shares
Lenders (bank, creditors) Information about assets and the
company’s cash position
Business contacts (competitors, suppliers, Information about the long-term prospects
buyers) and survival of the business and the
company’s cash position
Government and agencies (tax authorities, Information to enable governmental
government statistical) planning, information primarily on profits to
use as a basis for calculating tax
Public (citizens, local communities, Information about the social and
educational groups, NGO’s environmental impact of corporate
activities
There are multiple users and that is why interests of the various groups may collide.
Principal-agent conflicts between owners and managers are common
Accounting information is an important tool to monitor and report business performance
and the use of funds
,There are two types of accounting:
1. Financial accounting:
= the measuring and reporting of financial information for external users
2. Management accounting:
= the measuring and reporting of financial information for the managers of a business
They differ in terms of:
- Types of reports made
- Level of reporting detail
- Time orientation
- Degree of regulation
- Range and quality of information produced
Financial decisions must be taken in three key areas which are all inter-related:
, Part 2: Balance sheet
Financial performance and position contained in three financial statements:
1. Income statement
2. balance sheet
3. cash flow statement
Contained as part of company’s annual report (AR)
- all companies must prepare these annually, and send to all shareholders
- Some content is required by law or accounting regulations
- Other content discretionary
Only small amount of annual report is made up of financial statements:
- This part is regulated and is subject to annual audit
financial statements:
Statement of financial position (balance sheet):
First three lectures is about financial accounting. Last three lectures is about management
accounting.
Free option to participate in Midterm exam, if you do and you pass the test → 0.5 bonus
Debt = borrowing money, for example from banks
Equity (eigen vermogen) = outside investors get a stake in your company in return for their
money
You can re-invest net profit or (if you are a bigger company) you may hand out dividends (but
only if the board wants it, so you don’t have to)
Accounting = collecting, analysing and communicating financial information. This information
is useful for those who need to make decisions and plans about businesses.
The business cycle:
,All accounting users (McLaney and Atrill):
We can divide users in internal and external groups with different requirements
Internal users requirements
management Information for costing, decision making,
planning and control
Employees and employee organisations Information about job security and for
(Trade unions) collective bargaining
External users Requirements
Shareholders (current and potential) Information for buying and selling shares
Analysts advisers (brokers, dealers) Information for buying and selling shares
Lenders (bank, creditors) Information about assets and the
company’s cash position
Business contacts (competitors, suppliers, Information about the long-term prospects
buyers) and survival of the business and the
company’s cash position
Government and agencies (tax authorities, Information to enable governmental
government statistical) planning, information primarily on profits to
use as a basis for calculating tax
Public (citizens, local communities, Information about the social and
educational groups, NGO’s environmental impact of corporate
activities
There are multiple users and that is why interests of the various groups may collide.
Principal-agent conflicts between owners and managers are common
Accounting information is an important tool to monitor and report business performance
and the use of funds
,There are two types of accounting:
1. Financial accounting:
= the measuring and reporting of financial information for external users
2. Management accounting:
= the measuring and reporting of financial information for the managers of a business
They differ in terms of:
- Types of reports made
- Level of reporting detail
- Time orientation
- Degree of regulation
- Range and quality of information produced
Financial decisions must be taken in three key areas which are all inter-related:
, Part 2: Balance sheet
Financial performance and position contained in three financial statements:
1. Income statement
2. balance sheet
3. cash flow statement
Contained as part of company’s annual report (AR)
- all companies must prepare these annually, and send to all shareholders
- Some content is required by law or accounting regulations
- Other content discretionary
Only small amount of annual report is made up of financial statements:
- This part is regulated and is subject to annual audit
financial statements:
Statement of financial position (balance sheet):
