TITLE : BASIC ACCOUNTING PRACTICE. 3RD ED.*

 
Foreword xi
 
Introduction xiii
 
Aeknowledgements xv
 
Part 1 Financial Accounting
 
1 The Financial Accounting Framework 3
 
The Accounting Entity 3
Bookkeeping and the Dual Aspect 4
The Ledger 11
The Bookkeeping System 12
 
2 Profit Measurement and the Final Accounts 16
 
The Meaning of Profit 16
Profit as a Change in Net Worth 16
Profit measurement and the Maintenance of Capital 18
The Profit and Loss Account 19
Preparing tne lwront ana LOSS ACcount
	Calculating the gross margin 20
	Stock valuation 22
		No value attached to closing stock 22
		Closing stock shown at market value 22
 		Closing stock shown at cost value 23
	Integrating closing stock in the bookkeeping system 24
	Calculating the net profit 25
The Trial Balance and the Preparation of the Profit and Loss Account
and the Balance Sheet 28
 
3 Period Profit Measurement: Some Further Adjustments 33
 
The Accrual of Revenue and Expenses 33
	The accrual of expenses 34
		Expenses paid in arrears 34
		Expenses paid in advance 36
		Accrued expenses: summary 38
	The accrual of revenues 39
The Treatment of Bad and Doubtful Debts 41
	Bad debts 41
	Doubtful debts 43
	Bad and doubtful debts: additional considerations 44
		Bad debts 44
		Doubtful debts 45
Adjustments and the Extended Trial Balance 45
	The extended trial balance 45
 
4 Assets: Recognition and Depreciation 53
 
The Meaning and Nature of Assets 53
	Fixed assets 55
	Current asset 57
The Concept of Depreciation 58
	The maintenance of capital 58
	Providing for depreciation 60
	Financial implications of depreciation 62
	Depreciation and the allocation of costs over time 62
Depreciation and Profit Measurement 63
Methods of Depreciation 63
Depreciation and the Valuation of Assets 66
The Economic Life of an Asset 69
The Disposal of Fixed Assets 70
Asset Values and Cash Flows 71
 
5 Partnership and Limited Companies 79
 
Financial Accounting for Partnerships 79
	The proprietary theory and partnerships 80
	The appropriation of net profit 80
	The control of partnerships 83
Financial Accounting for Limited Liability Companies 86
	Formal requirements for company status 87
	Share capital and shareholders' equity 88
	Types of shares 88
		Preference shares 89
		Ordinary shares 90
		Deferred shares 91
	Share capital transactions 92
		The formation of a company by the acquisition of a business 92
		Goodwill 93
	Loan capital 95
	The profit and loss account of a company 97
		The appropriation of profit 97
	The balance sheet of a company 100
	The disclosure of accounting information 100
		Companies Act 1981: format for vertical balance sheet	102
 
6 Control of Working Capital 120
 
The Journal 121
The Concept of Working Capital 122
The Control of Debtors 122
	Discounts allowed 124
	Other items 125
	(i) Sales 125
	(ii) Dishonoured cheques 125
	(iii) Bad debts 126
The Control of Creditors 127
Stock Control 133
	Controlling the flow of stock 133
		Purchases 133
		Stock 134
	The valuation of stock 136
		FIFO 137
		LIFO 137
		AVCO 138
		Retail price less gross margin 139
	Selecting the method of valuation 140
		FIFO 140
		LIFO 140
		AVCO and retail price 140
	Stock control and stock valuation 140
	Periodic or perpetual control? 143
Funds Flow Accounting 148
	Statements of sources and application of funds 148
		The nature of funds flows 151
		Measuring funds flows 152
		Preparing the statement of source and application of funds 156
		SSAP10 statements of source and application of funds 156
 
7 Accounting Concepts and the Need for Standards 163
 
Accoynting Concepts 164
	The entity concept 164
	The money measurement concept
	The dual aspect concept 167
	The cost concept 167
	The going concern concept 167
	The realization concept 168
	The concept of periodicity 169
	The matching concept 169
	The accruals concept 170
	The concept of consistency 170
	The concept of prudence 171
Accounting Standards 175
International Accounting Standards 179
Statements of Standard Accounting Practice 180
	SSAP2: Disclosureofaccountingpolicies 181
 
8 Interpretation, Valuation and Inflation 189
Interpretation 190
	Limitations of conventional financial analysis 190
	lnterpretation by ratio analysis 191
		Accounting ratios 191
Valuation 203
	The objectives of valuation 206
	The valuation of assets 107
	Alternative valuation methods 208
		Historical cost 208
		Realizable value 209
		Replacement cost 209
		Current cost 209
Inflation 210
	Fixed assets and depreciation 211
	The cost of sales adjustment 216
		Identifying the cost of sales 217
		Balance sheet rep,resentation of stock under CCA 219
	The monetary working capital adjustment 221
	The gearing adjustment 223
 
Part 2 Accounting for Planning and Control
Introduction 234
 
9 Basic Cost Accounting 235
 
Manufacturing Accounting 235
	The flow of costs 236
	Accounting for material costs 238
	Accounting for overhead costs 240
	Accounting for labour costs 242
	Accounting for cost of goods sold 242
Predetermined Overhead Costing 246
	Under- or over-absorbed factory overheads 250
Job Order Costing 251
Process Costing 256
	The production cost report 256
	The flow of costs in a process cost system 260
	Processing losses 261
	Accounting for opening work-in-progress stocks 262
Joint Costs and By-products Costs 266
	Joint products 266
	By-products 268
Recording Costs and Financial Transactions 269
	Separate cost and financial accounting 269
	Integrated cost and financial accounting 275
 
10 Long-range Planning and Capital Budgeting 279
The Nature of Capital Investment Decisions 279
Methods of Evaluation 280
	The payback method 280
	The accounting rate of return 281
	Discounted cash flow methods 283
		The net present value 283
		The internal rate of return 283
		Calculating the internal rate of return 285
		The payback period revisited 286
	Calculating the Cost of Capital 288
	Evaluating Risk 290
		Probability analysis 290
		Decision trees 292
Appendix 1: Dividends as a Basis for the Valuation of Shares 293
Appendix 2: Present Value of (Pound)$1   296
 
11 Budgeting for Profitability 297
Establishing Profit Goals and Sales Forecasting 298
	Cash flows and profit performance 298
	Sales forecasting 300
The Role of Cost-Volume-Profit Analysis in Profit Planning 302
	Planning 302
	The contribution margin statement 305
	The break-even chart 307
	The profit-volume chart 308
	Calculating the break-even point 310
	The effects of changes 310
Risk and Profit Planning 312
The Budgeting Process 314
Budgeting for Cash 323
Providing Flexibility in Budgeting 330
 
12 Cost Analysis for Short-term Tactical Decisions 332
 
Relevant Data for Making Tactical Decisions 333
The Contribution Margin and Limiting Factors 337
Examples of Tactical Decisions 340
	The make or buy decision 340
	The 'sell or further process' decision 345
	Dropping a product line 346
	'Special order' pricing 347
	The analysis of the firm's activities 348
Linear Programming 350
 
13 The Control of Profitability 355
 
Control of Costs 356
Standard Costing 357
The Analysis of Variances 359
	Direct materials and direct labour variances 359
	The accounting disposition of variances 363
		(1) Direct materials cost 364
		(2) Direct labour cost 365
		(3) Completion of job 365
Control of Factory Overheads 367
Control of Revenues 374
 
Part 3 Case Problems and Analysis
Introduction  379
 
Case Problems:
 
	1 T. Albert 380
	2 M. Primel 383
	3 Mesland Supplies Limited 385
	4 Thiron Manufacturing Company Limited 389
	5 Inland Tours Limited 391
	6 Latham Engineering Company Limited 394
	7 Olivet Hardware Company Limited 397
	8 Bartle plc 399
	9 The Westbourne Company Limited 401
	10 Jones Limited and Evans Limited 403
 
Case Study  :  Crimicar Components Limited 406
 
Index  409