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Book Details
Abstract
Financial Accounting An Introduction
Pauline Weetman seventh edition
The seventh edition of this well-respected and fully updated text retains all of the features that have contributed to the book’s popularity: focus on the accounting equation, student activities and real-life commentaries throughout each chapter, a clear and accessible writing style, and inclusion of real-world case studies. With a strong emphasis on the Conceptual Framework of the International Accounting Standards Board, Financial Accounting: An Introduction guides students in understanding the ‘why’ and not just the ‘what’ of financial accounting.
Key features:
- New case studies containing examples from real-world companies
- New coverage on fair value throughout
- New coverage of the Strategic Report and Directors’ Report
- Focuses on specific knowledge outcomes, with end-of-chapter self-evaluation
- Questions are graded according to difficulty to test student understanding
- Definitions and terminology is fully in-line with the revised IASB Conceptual Framework
- Experience-driven conversations between two managers are included throughout, providing a practical examination of real life scenarios
Financial Accounting: An Introduction is aimed at first-level undergraduates on business studies degrees taking introductory financial accounting classes; first-level specialist accounting undergraduate students; introductory core accounting for MBA and postgraduate specialist Masters students, focusing on analysis through the accounting equation and a questioning approach to problem solving; and professional courses where accounting is introduced for the first time.
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Pauline Weetman BA, BSc (Econ), PhD, CA, FRSE, is Professor Emerita of Accounting at the University of Edinburgh, and has extensive experience of teaching at undergraduate and postgraduate level, with previous chairs held at Stirling, Heriot-Watt, Strathclyde and Glasgow Universities. She received the Distinguished Academic Award of the British Accounting Association in 2005. She has convened the examining board of the Institute of Chartered Accountants of Scotland and was formerly Director of Research at ICAS.
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Cover | Cover | ||
| Title Page | iii | ||
| Copyright | iv | ||
| Contents in brief | v | ||
| Contents | vii | ||
| Preface to the seventh edition | xvii | ||
| Publisher's acknowledgements | xxiii | ||
| Financial accounting | 1 | ||
| Part 1 A conceptual framework: setting the scene | 3 | ||
| Chapter 1 Who needs accounting? | 4 | ||
| Real World Case | 4 | ||
| Learning outcomes | 6 | ||
| 1.1 Introduction | 6 | ||
| 1.2 The development of a conceptual framework | 7 | ||
| 1.3 The conceptual framework for financial reporting | 8 | ||
| 1.4 Types of business entity | 9 | ||
| 1.5 Users and their information needs | 13 | ||
| 1.6 General purpose or specific purpose financial statements? | 18 | ||
| 1.7 Stewards and agents | 18 | ||
| 1.8 Who needs financial statements? | 19 | ||
| 1.9 Summary | 20 | ||
| Further reading | 21 | ||
| Questions | 21 | ||
| A Test your understanding | 21 | ||
| B Application | 22 | ||
| C Problem solving and evaluation | 22 | ||
| Activities for study groups | 23 | ||
| Notes and references | 24 | ||
| Supplement: Introduction to the terminology of business transactions | 25 | ||
| S Test your understanding | 26 | ||
| Chapter 2 A systematic approach to financial reporting: the accounting equation | 27 | ||
| Real World Case | 27 | ||
| Learning outcomes | 29 | ||
| 2.1 Introduction | 30 | ||
| 2.2 The accounting equation | 30 | ||
| 2.3 Defining assets | 32 | ||
| 2.4 Examples of assets | 33 | ||
| 2.5 Recognition of assets | 36 | ||
| 2.6 Measurement of assets | 37 | ||
| 2.7 Defining liabilities | 38 | ||
| 2.8 Examples of liabilities | 39 | ||
| 2.9 Recognition of liabilities | 41 | ||
| 2.10 Measurement of liabilities | 42 | ||
| 2.11 Defining the ownership interest | 42 | ||
| 2.12 Recognition of the ownership interest | 43 | ||
| 2.13 Changes in the ownership interest | 43 | ||
| 2.14 Assurance for users of financial statements | 45 | ||
| 2.15 Summary | 46 | ||
| Further reading | 48 | ||
| Questions | 48 | ||
| A Test your understanding | 48 | ||
| B Application | 49 | ||
| C Problem solving and evaluation | 49 | ||
| Activities for study groups | 50 | ||
| Notes and references | 50 | ||
| Supplement: Debit and credit bookkeeping | 51 | ||
| S Test your understanding | 53 | ||
| Chapter 3 Financial statements from the accounting equation | 54 | ||
| Real World Case | 54 | ||
| Learning outcomes | 55 | ||
| 3.1 Introduction | 55 | ||
| 3.2 Who is in charge of the accounting system? | 56 | ||
| 3.3 The accounting period | 56 | ||
| 3.4 The statement of financial position (balance sheet) | 57 | ||
| 3.5 The income statement (profit and loss account) | 61 | ||
| 3.6 The statement of cash flows | 63 | ||
| 3.7 Usefulness of financial statements | 66 | ||
| 3.8 Summary | 67 | ||
| Questions | 67 | ||
| A Test your understanding | 67 | ||
| B Application | 68 | ||
| Activities for study groups | 69 | ||
| Supplement: using the accounting equation to analyse transactions | 70 | ||
| S Test your understanding | 76 | ||
| Chapter 4 Ensuring the quality of financial statements | 77 | ||
| Real World Case | 77 | ||
| Learning outcomes | 79 | ||
| 4.1 Introduction | 79 | ||
| 4.2 Qualitative characteristics of financial statements | 80 | ||
| 4.3 Accounting principles | 84 | ||
| 4.4 Applying prudence | 87 | ||
| 4.5 Regulation of financial reporting | 89 | ||
| 4.6 Reviewing published financial statements | 101 | ||
| 4.7 Summary | 106 | ||
| Further reading | 107 | ||
| Questions | 107 | ||
| A Test your understanding | 107 | ||
| B Application | 108 | ||
| C Problem solving and evaluation | 108 | ||
| Activities for study groups | 109 | ||
| Notes and references | 109 | ||
| Part 2 Reporting the transactions of a business | 111 | ||
| Chapter 5 Accounting information for service businesses | 112 | ||
| Real World Case | 112 | ||
| Learning outcomes | 114 | ||
| 5.1 Introduction | 114 | ||
| 5.2 Analysing transactions using the accounting equation | 115 | ||
| 5.3 Illustration of accounting for a service business | 118 | ||
| 5.4 A process for summarising the transactions: a spreadsheet | 122 | ||
| 5.5 Financial statements as a means of communication | 124 | ||
| 5.6 Summary | 127 | ||
| Questions | 127 | ||
| A Test your understanding | 127 | ||
| B Application | 128 | ||
| Supplement: Recording transactions in ledger accounts: a service business | 129 | ||
| S Test your understanding | 141 | ||
| Chapter 6 Accounting information for trading businesses | 142 | ||
| Real World Case | 142 | ||
| Learning outcomes | 144 | ||
| 6.1 Introduction | 144 | ||
| 6.2 Goods purchased for resale | 144 | ||
| 6.3 Manufacturing goods for resale | 147 | ||
| 6.4 Illustration of accounting for a trading business | 150 | ||
| 6.5 A process for summarising the transactions: a spreadsheet | 154 | ||
| 6.6 Financial statements of M. Carter, wholesaler | 156 | ||
| 6.7 Summary | 158 | ||
| Questions | 159 | ||
| A Test your understanding | 159 | ||
| B Application | 160 | ||
| Supplement: recording transactions in ledger accounts: a trading business | 161 | ||
| S Test your understanding | 168 | ||
| Part 3 Recognition in financial statements | 169 | ||
| Chapter 7 Published financial statements | 170 | ||
| Real World Case | 170 | ||
| Learning outcomes | 173 | ||
| 7.1 Introduction | 173 | ||
| 7.2 International influences | 174 | ||
| 7.3 Accounting framework | 176 | ||
| 7.4 Statement of financial position (balance sheet) | 179 | ||
| 7.5 Income statement (profit and loss account) | 184 | ||
| 7.6 Statement of cash flows | 186 | ||
| 7.7 Group structure of companies | 191 | ||
| 7.8 Group financial statements | 193 | ||
| 7.9 Small and medium-sized entities (SMEs) | 197 | ||
| 7.10 Beyond the annual report | 198 | ||
| 7.11 Summary | 202 | ||
| Further reading | 202 | ||
| Useful websites | 203 | ||
| Questions | 203 | ||
| A Test your understanding | 203 | ||
| B Application | 204 | ||
| C Problem solving and evaluation | 205 | ||
| Activities for study groups | 205 | ||
| Notes and references | 205 | ||
| Supplement 7.1: Information to be presented on the face of the statement of financial position, as required by IAS 1 | 206 | ||
| Supplement 7.2: Balance sheet format 1, as prescribed by the Companies Act 2006 | 207 | ||
| Supplement 7.3: Information to be presented on the face of the income statement, as required by IAS 1 | 209 | ||
| Supplement 7.4: UK Companies Act profit and loss account format 1 – list of contents | 210 | ||
| Chapter 8 Non-current (fixed) assets | 211 | ||
| Real World Case | 211 | ||
| Learning outcomes | 213 | ||
| 8.1 Introduction | 214 | ||
| 8.2 Definitions | 214 | ||
| 8.3 Recognition and measurement | 217 | ||
| 8.4 Users' needs for information | 219 | ||
| 8.5 Information provided in the financial statements | 219 | ||
| 8.6 Usefulness of published information | 221 | ||
| 8.7 Depreciation: an explanation of its nature | 223 | ||
| 8.8 Reporting non-current (fixed) assets and depreciation in financial statements | 228 | ||
| 8.9 Summary | 236 | ||
| Further reading | 236 | ||
| Questions | 236 | ||
| A Test your understanding | 237 | ||
| B Application | 237 | ||
| C Problem solving and evaluation | 238 | ||
| Activities for study groups | 239 | ||
| Notes and references | 239 | ||
| Supplement: recording non-current (fixed) assets and depreciation | 240 | ||
| S Test your understanding | 249 | ||
| Chapter 9 Current assets | 250 | ||
| Real World Case | 250 | ||
| Learning outcomes | 252 | ||
| 9.1 Introduction | 252 | ||
| 9.2 Definitions | 253 | ||
| 9.3 The working capital cycle | 253 | ||
| 9.4 Recognition and measurement | 255 | ||
| 9.5 Users' needs for information | 257 | ||
| 9.6 Information provided in the financial statements | 258 | ||
| 9.7 Measurement and recording | 262 | ||
| 9.8 Inventories (stocks) of raw materials and finished goods | 262 | ||
| 9.9 Receivables (debtors) | 266 | ||
| 9.10 Prepayments | 268 | ||
| 9.11 Revenue recognition | 269 | ||
| 9.12 Summary | 271 | ||
| Questions | 272 | ||
| A Test your understanding | 272 | ||
| B Application | 273 | ||
| C Problem solving and evaluation | 274 | ||
| Activities for study groups | 275 | ||
| Notes and references | 275 | ||
| Supplement: Bookkeeping entries for (a) bad and doubtful debts; and (b) prepayments | 276 | ||
| S Test your understanding | 280 | ||
| Chapter 10 Current liabilities | 281 | ||
| Real World Case | 281 | ||
| Learning outcomes | 283 | ||
| 10.1 Introduction | 283 | ||
| 10.2 Definitions | 284 | ||
| 10.3 Recognition and measurement | 285 | ||
| 10.4 Users' needs for information | 286 | ||
| 10.5 Information provided in the financial statements | 287 | ||
| 10.6 Measurement and recording | 288 | ||
| 10.7 Accruals and the matching concept | 290 | ||
| 10.8 Liabilities for taxation | 293 | ||
| 10.9 Summary | 295 | ||
| Questions | 295 | ||
| A Test your understanding | 296 | ||
| B Application | 296 | ||
| C Problem solving and evaluation | 297 | ||
| Activities for study groups | 297 | ||
| Notes and references | 297 | ||
| Supplement: Bookkeeping entries for accruals | 298 | ||
| S Test your understanding | 300 | ||
| Chapter 11 Provisions and non-current (long-term) liabilities | 301 | ||
| Real World Case | 301 | ||
| Learning outcomes | 303 | ||
| 11.1 Introduction | 303 | ||
| 11.2 Users' needs for information | 304 | ||
| 11.3 Information provided in the financial statements | 305 | ||
| 11.4 Provisions | 308 | ||
| 11.5 Deferred income | 310 | ||
| 11.6 Non-current (long-term) liabilities | 312 | ||
| 11.7 Summary | 318 | ||
| Questions | 318 | ||
| A Test your understanding | 318 | ||
| B Application | 319 | ||
| C Problem solving and evaluation | 319 | ||
| Activities for study groups | 320 | ||
| Notes and references | 320 | ||
| Supplement: Bookkeeping entries for provisions and deferred income | 321 | ||
| S Test your understanding | 322 | ||
| Chapter 12 Ownership interest | 323 | ||
| Real World Case | 323 | ||
| Learning outcomes | 325 | ||
| 12.1 Introduction | 325 | ||
| 12.2 Definition and recognition | 326 | ||
| 12.3 Presentation of ownership interest | 326 | ||
| 12.4 Statement of changes in equity | 334 | ||
| 12.5 Users' needs for information | 335 | ||
| 12.6 Information provided in the financial statements | 336 | ||
| 12.7 Dividends | 340 | ||
| 12.8 Issue of further shares on the Stock Exchange | 341 | ||
| 12.9 Summary | 344 | ||
| Questions | 344 | ||
| A Test your understanding | 344 | ||
| B Application | 345 | ||
| C Problem solving and evaluation | 346 | ||
| Activities for study groups | 347 | ||
| Notes and references | 347 | ||
| Supplement: A spreadsheet for adjustment to a trial balance at the end of the accounting period | 348 | ||
| S Test your understanding | 352 | ||
| Part 4 Analysis and issues in reporting | 353 | ||
| Chapter 13 Ratio analysis | 354 | ||
| Real World Case | 354 | ||
| Learning outcomes | 356 | ||
| 13.1 Introduction | 356 | ||
| 13.2 A note on terminology | 357 | ||
| 13.3 Systematic approach to ratio analysis | 357 | ||
| 13.4 Investors' views on risk and return | 365 | ||
| 13.5 Pyramid of ratios | 366 | ||
| 13.6 Use and limitations of ratio analysis | 368 | ||
| 13.7 Worked example of ratio analysis | 369 | ||
| 13.8 Linking ratios to the statement of cash flows | 375 | ||
| 13.9 Combining ratios for interpretation | 378 | ||
| 13.10 Summary | 381 | ||
| Questions | 381 | ||
| A Test your understanding | 381 | ||
| B Application | 382 | ||
| C Problem solving and evaluation | 384 | ||
| Notes and references | 384 | ||
| Chapter 14 Reporting corporate performance | 385 | ||
| Real World Case | 385 | ||
| Learning outcomes | 387 | ||
| 14.1 Introduction | 387 | ||
| 14.2 Strategy and performance | 388 | ||
| 14.3 Other guidance in analysis | 394 | ||
| 14.4 Segmental information | 397 | ||
| 14.5 Off-balance sheet finance | 402 | ||
| 14.6 Corporate social responsibility | 404 | ||
| 14.7 Corporate governance | 406 | ||
| 14.8 Meaning of ‘fair presentation' and ‘true and fair view' | 409 | ||
| 14.9 Measurement of value | 411 | ||
| 14.10 Risk reporting | 414 | ||
| 14.11 Developing issues: how valid is the stakeholder model? | 415 | ||
| 14.12 Summary | 416 | ||
| Further reading | 417 | ||
| Questions | 418 | ||
| A Test your understanding | 418 | ||
| B Application | 419 | ||
| C Problem solving and evaluation | 419 | ||
| Activities for study groups | 419 | ||
| Notes and references | 420 | ||
| Chapter 15 Reporting cash flows | 421 | ||
| Real World Case | 421 | ||
| Learning outcomes | 422 | ||
| 15.1 Introduction | 422 | ||
| 15.2 Cash and cash equivalents | 423 | ||
| 15.3 The direct method and the indirect method | 423 | ||
| 15.4 Preparing a statement of cash flows: the indirect method | 427 | ||
| 15.5 Preparing a statement of cash flows: the direct method | 435 | ||
| 15.6 Interpretation of cash flow information | 436 | ||
| 15.7 Illustration | 437 | ||
| 15.8 Summary | 441 | ||
| Further reading | 441 | ||
| Questions | 441 | ||
| A Test your understanding | 442 | ||
| B Application | 442 | ||
| C Problem solving and evaluation | 443 | ||
| Notes and references | 445 | ||
| Financial accounting terms defined | G1 | ||
| Appendices | A1 | ||
| I Information extracted from annual report of Safe and Sure Group plc, used throughout Financial Accounting | A1 | ||
| II Solutions to numerical and technical questions in Financial Accounting | A16 | ||
| Index | I1 |