Leiwy Danny - Accounting : understanding and practice.

Accounting

Fourth Edition

Accounting

Understanding and Practice

Fourth Edition

Danny Leiwy and Robert Perks

London Boston Burr Ridge, IL Dubuque, IA Madison, WI New York San Francisco St. Louis
Bangkok Bogot Caracas Kuala Lumpur Lisbon Madrid Mexico City
Milan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto

Accounting. Understanding and Practice, Fourth Edition

Danny Leiwy and Robert Perks

ISBN-13 9780077139131

ISBN-10 0077139135

Published by McGraw-Hill Education (UK) Limited

Shoppenhangers Road

Maidenhead

Berkshire

SL6 2QL

Telephone: 44 (0) 1628 502 500

Fax: 44 (0) 1628 770 224

Website: www.mheducation.co.uk

British Library Cataloguing in Publication Data

A catalogue record for this book is available from the British Library

Library of Congress Cataloging in Publication Data

The Library of Congress data for this book has been applied for from the Library of Congress

Acquisitions Editor: Tom Hill

Development Editor: Stephanie Frosch

Production Editor: Alison Davis

Marketing Manager: Alexis Thomas

Text Design by HL Studios

Cover design by Adam Renvoize

Printed and bound in Spain by Grafo Industrias Grficas.

Published by McGraw-Hill Education (UK) Limited an imprint of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY 10020. Copyright 2013 by McGraw-Hill Education (UK) Limited. All rights reserved. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill Companies, Inc., including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.

Fictitious names of companies, products, people, characters and/or data that may be used herein (in case studies or in examples) are not intended to represent any real individual, company, product or event.

ISBN-13 9780077139131

ISBN-10 0077139135

2013. Exclusive rights by The McGraw-Hill Companies, Inc. for manufacture and export. This book cannot be re-exported from the country to which it is sold by McGraw-Hill.

Dedication

To Malki

Kate and Menachem

Jonny and Natalie

and

David and Jo

Brief Table of Contents

Part 1
Introduction to Financial Accounting

Part 2
Financial Management

Part 3
Introduction to Management Accounting

The following additional material is available online at www.mheducation.co.uk/textbooks/leiwy4:

Detailed Table of Contents

Part 1
Introduction to Financial Accounting

Part 2
Financial Management

Part 3
Introduction to Management Accounting

The following additional material is available online at www.mheducation.co.uk/textbooks/leiwy4 :

About the Authors

Danny Leiwy [lu:i] teaches at the London School of Economics and Political Science and on the University of Londons International Programme at City University, London. He is a Senior Teaching Fellow at the School of Oriental and African Studies (SOAS), University of London. Danny is currently in practice as a Chartered Accountant. He was a Principal Lecturer in Accounting and Tax at the University of Westminster for 30 years, teaching at both undergraduate and postgraduate level.

Robert Perks formerly taught Accounting and Finance at the International Business School on the Isle of Man. Robert also held chairs at the following universities: Queens University, Belfast, Middlesex University, Aberdeen University, Birkbeck College University of London and University of Westminster.

Preface

This book is intended to help readers understand accounting and to see how it can be used in practice, particularly in the interpretation and management of company finances. It should appeal to future managers, rather than to those who simply want to become accountants. It is intended to be user-friendly for those who are put off by conventional presentations of the subject based on arcane rules and procedures. Non-specialist accounting students, for whom figures are sometimes a painful necessity, will probably find that this is as good as it gets with accounting textbooks.

It is an introductory text, which is particularly suitable for degree courses in management and business studies, including MBAs and other masters degree programmes. It is suitable for year-long introductory accounting modules or semester-long modules on financial accounting and management accounting. The approach is analytical, critical and evaluative, amply illustrated with real-world examples and for those modules that include the preparation of accounts, there is an extended section on bookkeeping and the preparation of financial accounts at the end of Part 1 (Chapters 9 and 10).

The book is divided into three parts and begins with financial accounting (Chapters 110) and then moves on to financial management (Chapters 11 and 12) and then to management accounting (Chapters 1318). Readers may be interested in the application of published financial reports in relation to the stock market (Chapter 5), financing a company (Chapter 11), investment appraisal (Chapter 14), or current issues in the rapidly developing area on financial accounting (Chapters 3 and 8). In response to requests from users, this 4th edition provides a new introduction with an explanation of characteristics of a limited liability company that result in the need for public disclosure to various stakeholders of every companys financial accounts. The production of accounts from incomplete records has been moved online and some more advanced management accounting developments such as backflush accounting and balanced scorecards are briefly explained in an online Appendix.

Interpretation of accounts is a problem for many students and a simplified ready reference guide to accounting ratios is now provided in Chapter 4, with more advanced issues dealt with in a separate chapter (Chapter 7). After covering the basics of statements of financial position and income statements (Chapters 1 and 2), the book is designed so that any chapter can be studied in almost any order according to the readers particular interests, or the requirements of a course.

Ample resources are provided to enable readers to understand and apply financial accounting. Self-testing questions (numerical, theoretical and analytical) are included in each chapter, with answers at the end of the book. Assessment questions are provided without answers. Discussion questions and group activities are included to encourage readers to become involved in exploring important questions; and these can be related to current issues in the press by analysing the Accounting in context illustrations. There is also an extensive glossary at the back of the book.

All companies produce annual reports and accounts that include a great deal of valuable information if only managers, analysts, financial journalists, economists, bankers and everyone with an interest in business and management would take the time and trouble to understand them. This book is intended to help. Similarly, students who produce projects and dissertations, and politicians and journalists who analyse particular companies and industries, can benefit from the thorough understanding of published financial statements that this book provides. In the main it explains financial accounting as an important resource that has valuable applications and gives an understanding of management accounting techniques used widely in businesses everywhere; but its approach is also critical, and it encourages readers to think about important issues and to reach their own conclusions.