FINANCIAL & MANAGERIAL ACCOUNTING

with Professor Teerooven Soobaroyen

Module Objectives

The course is an introductory course about the role of accounting in decision-making. It aims to give participants a practical grasp of accounting concepts from two perspectives: external and internal. Firstly, the basics of financial accounting concepts and the analysis of published financial statements will be considered as applicable to an external user of accounting information. Secondly, the management (or managerial) accounting perspective will cover the elements related to the use of accounting information for internal purposes, such as costing of products/services, relevant costs/benefits in decision-making, and the appraisal of divisional/managerial performance using financial and non-financial metrics. While the course brings forward, and relies on, a great deal of technical terms, it strives to avoid un- necessary jargon, and seeks to relate as much as possible to the participants􏰁 daily experiences as well as examples coming from various resources such as annual reports, business and general newspapers, advertising, books and videos. The over-riding objective is that managers should be able to properly discern and interpret accounting information, and contribute to discussions or decision making based on, or about, accounting data. Although there will be computational aspects within the course, the focus will not be on the preparation of financial statements but on the interpretation and analysis of the resulting numbers.

The financial accounting part of the course will be one-day long and aims at developing the participants’ understanding of the information contained within the primary financial statements (as per International Financial Reporting Standards – IFRS) i.e. the statement of financial position (i.e. balance sheet), the income statement, and the cash-flow statement and within the annual report in general. There will be a group activity to present the following morning. The remaining time will be devoted to cost and management accounting topics. By the end of the module, students will be able to:

Preliminary Tasks

(a) Explain the purpose, underlying assumptions and limitations of key corporate financial accounting statements, namely the Income statement, Statement of Financial Position (Balance sheet) and Cash flow statement.

(b) Apply the fundamental concepts of financial accounting to assess how particular transactions should be accounted for and the consequences thereof.

(c) Apply financial analysis techniques to evaluate a company’s performance by relying on information from accounting and other related statements.

(d) Explain and apply the main types of cost classifications in a number of decision making situations (e.g. break even, cost-volume-profit analysis, pricing, short term decision making)

(e) Explain the concept of management control systems and their role in organisations.

(f) Calculate divisional performance using financial metrics and evaluate the validity and usefulness of these measures in a given setting.

(g) Explain and critically discuss the role of performance management frameworks in companies, such as the Balanced Scorecard.