The Finance and Accounting Desktop Guide: Accounting Literacy for the Non-Financial Manager

330 Pages·2007·2.34 MB·English

by  Ralph Tiffin

2nd edition
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IFC
The finance
and accounting
desktop guide
Accounting literacy for the
non-financial manager
Ralph Tiffin
Thorogood Publishing Ltd
10-12 Rivington Street
London EC2A 3DU
Telephone: [phone]
Fax: [phone]
Email: [email protected]
Web: www.thorogoodpublishing.co.uk
© Ralph Tiffin 2007
All rights reserved.No part of this publication may
be reproduced,stored in a retrieval system or
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This book is sold subject to the condition that it shall
not,by way of trade or otherwise,be lent,re-sold,
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acting or refraining from action as a result of any
material in this publication can be accepted by the
author or publisher.
A CIP catalogue record for this book is
available from the British Library.
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PB ISBN: 1 85418 309 5
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Blank
CONTENTS
Icons...............................................................................10
Introduction...................................................................11
Section 1:
Balance sheets.........................................................13
What is a balance sheet?.................................................14
What do balance sheets reveal?......................................19
Interpreting balance sheet profiles................................21
Checklist.........................................................................23
Section 2:
Balance sheets.........................................................25
Balance sheets:structure and contents – UK.................26
Interpreting the balance sheet.......................................28
Balance sheets:structure and contents – US..................35
Checklist.........................................................................48
Section 1:
Profit and loss accounts........................................49
What is a profit and loss account?..................................50
What do profit and loss accounts
reveal about a business?.................................................55
Checklist.........................................................................61
Section 2:
Profit and loss accounts........................................63
Profit and loss accounts in
published or statutory accounts.....................................64
US revenue or income statement
(P & L account) structure and contents.........................71
Checklist.........................................................................80
5
C o n t e n t s
Section 1:
Cash flow statements.............................................81
If there are profits there must be cash...........................82
Cash flow statements.....................................................82
What can cash flow statements tell us?..........................87
Checklist.........................................................................88
Section 2:
Cash flow statements.............................................89
Published cash flow statements.....................................90
Definitions......................................................................94
Compiling and interpreting a cash flow statement........95
Checklist.......................................................................105
Section 1:
Accounting records and systems.....................107
Why have accounting records?....................................108
Distinction between accounting
systems and accounting records..................................109
Checklist.......................................................................119
Section 2:
Accounting records and systems.....................121
Accounting systems and procedures............................122
Classic ledger structure................................................124
Sales system..................................................................130
Purchase system...........................................................131
Wages system...............................................................132
Audit function..............................................................135
Checklist.......................................................................142
6
C o n t e n t s
Section 1:
Accounting concepts,
policies and standards.........................................143
Why do we need concepts and rules?..........................144
Fundamental accounting concepts..............................145
Fundamental concepts in operation............................146
Accounting policies......................................................149
Checklist.......................................................................152
Section 2:
Accounting concepts,
policies and standards.........................................153
Accounting standards...................................................154
Detailed accounting policies........................................156
Developing accounting policies...................................168
A contractor.................................................................169
A travel agency.............................................................170
Creative accounting.....................................................172
Creative accounting illustration...................................174
Checklist.......................................................................177
Section 1:
Interpretation..........................................................179
Ratio analysis................................................................180
Checklist.......................................................................189
Section 2:
Interpretation..........................................................191
Detailed ratio analysis...................................................192
Profitability ratios.........................................................196
Asset turnover analysis.................................................197
Stock market measures.................................................207
Detailed performance measurement – bench marking...211
What is bench marking?...............................................211
Checklist.......................................................................215
7
C o n t e n t s
Section 1:
Cash budgeting.......................................................217
Cash flow forecasts......................................................218
Outline of a simple cash flow forecast.........................222
Checklist.......................................................................225
Section 2:
Cash budgeting.......................................................227
What is capital expenditure?........................................228
Cash flow forecasts......................................................232
Non-discounted measures............................................234
Discounted cash flow techniques and measures.........235
Sensitivity analysis........................................................236
Checklist.......................................................................243
Section 1:
Costing for planning..............................................245
What is costing?...........................................................246
Costing for planning.....................................................249
Checklist.......................................................................253
Section 2:
Costing for planning..............................................255
Detailed planning and break-even analysis...................256
Checklist.......................................................................266
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