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ssif Learning Outcomes
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tio  identify and discuss the needs of the main users of accounting information
n:  prepare basic financial statements
Int  distinguish between profit and cash
ern  calculate and explain the significance of key ratios for assessing the financial position of
al the firm
 Analyze and interpret accounting information from both a company and a management
perspective.
 Apply a range of management accounting techniques to various business situations
calling for analysis, planning, budgeting and control and decision-making.

 Evaluate capital investment projects using appraisal techniques.

 assess the performance of a business using non-financial performance indicators
 explain and apply measures to manage performance in a divisionalised business structure
 Financial accounting is concerned with the preparation of financial statements: standardized
reports of a particular nature used for investors, analysts, the government (taxation for example)
etc.
 Management accounting is concerned with planning and control of organisational
activities with a described end (although there are many critical view points on this) of
improving efficiency.

Financial accounting:-

 Production of financial statements and what makes up financial statements.

 Annual reports, the basic financial statements; the income statement, the statement of
financial position and statement of cash flow.

 Each represents a particular ‘game’ with its own set of rules which you must follow in
order to categories each economic reality as a number on the relevant statement.

 Limited liability companies and their particular characteristics.

 Financial accounting aspect by looking at some techniques to analyze the financial

statements of companies.

Management accounting:-

 How management accountants use accounting information to plan and control business
activities.

 How organizations internally categories their costs and plan and control accordingly;

 How costs are calculated and how they (might) behave.

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ssif  Should we consider ‘sunk’ costs which have already been committed in planning future
ica investment? These questions talk to the relevance of costs.
tio
n:  Short term and long term decision: example, cost-volume-profit analysis or breakeven
Int analysis is a technique.
ern
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 How managers use limiting factor analysis when thinking about scarce resources.

 Capital investment decisions of large amounts of money and how appraise different
investment opportunities.

 Planning and control; particularly through budgeting and flexi-budgets, as well as non-
financial control – which is also fundamental to the running of an organization.

Overview of Units

Unit 1 – Financial Reporting

 The whole idea behind financial reporting is to provide as many user groups as possible
with as wide a range of information as possible in order that these user groups can make
economic decisions that will ultimately benefit the organisation concerned.
o key contents of a company’s Annual Report.
o identify the different user groups who might be interested in reviewing aspects of
a company’s annual report.
o useful characteristics that accounting information contained in the annual report
should possess.
o accounting concepts that underpin the preparation of accounting information.

Unit 2 – Basic Financial Statements

 how data is measured and recorded and how the accounting function ensures the effective
operation of accounting and financial systems.
 how to apply the fundamental accounting concepts, including the use of the Accounting
Equation, which underpin the preparation of financial statements.
 Two financial statements: the Income Statement and the Statement of Financial Position
(Balance Sheet).
 issue of ‘profit versus cash’. One of the basic errors made by students new to accounting
is believing that profit and cash are the same thing. Indeed, many potentially successful
firms have failed, not because of a lack of profits, but because of a shortage of cash.
 the differences between profit and cash and will develop your ability to prepare a cash
budget and appreciate the role that it plays in the running of the business.

Unit 3 – Limited Liability Companies

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ssif  Three main types of business enterprise (sole traders; partnerships and limited liability
ica companies).
tio  How the financial statements of a limited liability company are presented and appreciate
n: the regulatory framework that surrounds the preparation of such statements.
Int
 l regulatory reports that limited liability companies need to prepare, namely a Statement
ern
of Changes in Equity and a Cash Flow Statement.
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Unit 4 – Analysis and Interpretation of Financial Statements

 how to make the maximum use from the information offered to best interpret the
financial performance and the financial position of the reporting entity.
 analyze and interpret accounting information through the use of ratio analysis; calculate
and interpret key ratios to help current and potential shareholders assess investments; and
recognize the limitations of ratio analysis.

Unit 5 – Management Accounting

 the remaining six units turns to management accounting which exists to provide internal
parties with the necessary information for decision making, and for planning and
controlling the business.
 Differences between financial and management accounting and the role that management
accounting plays in business today.
 How to classify costs for management accounting purposes and how to perform basic
costing calculations.

Unit 6 – Cost Behavior

 The basic principles of cost behaviour and consider how an understanding of the
relationship between costs, volume and profit (break-even analysis) can greatly assist key
short term business planning.

Unit 7 – Short-term Decision-Making

 The information available to managers focuses on the costs and revenues that are relevant
to the particular decision being made.
 Decision- making is making a choice between alternatives in pursuit of an objective,
having firstly considered all the relevant quantitative and qualitative information
affecting each course of action.
 Nature of the decision making process and how to determine what information is
relevant.
 decision-making in conditions of uncertainty and risk will also be explored.

Unit 8 – Capital Investment Decisions

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ssif  The need to make capital investment decisions and describe the factors to be considered
ica prior to spending the capital.
tio  Examine and evaluate the main investment appraisal methods used to assess the projects,
n: and show you how to carry out simple calculations using each of the methods.
Int
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Unit 9 – Budgeting
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 Plans generated from the decision-making process need to be communicated and co-
ordinated throughout the organisation
 Budgets translate the organisation’s plans into financial terms and are a means of
allocating responsibility to managers and motivating them to attain budget targets;
against these the manager’s performance is measured.
 budgets are thus a key component of the organisation’s planning and control mechanism.
 To make budgets set at the planning stage more relevant for control purposes, it is
necessary to ‘flex’ them to reflect actual activity levels, if these differ from the planned
levels. how this is done.

Unit 10 – Performance Measurement

 Accounting numbers are not always good or complete performance measures and a single
performance measure seldom reveals all the necessary information to properly evaluate
performance.
 Major development in performance measurement, the Balanced Scorecard.
 The ways that companies with more than one division might measure and manage
performance, using Return on Investment (ROI) and Residual Income (RI) calculations.
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