Accounting and Finance for Managers

Syllabus
Unit I: Introduction to Management Accounting
Introduction Principles Concept Accounting conventions Management accounting Its origin
Role function Growth Cost accounting Financial accounting Difference between various
accounting
Unit II: Financial Accounts A comparative analysis
Financial Accounting Journal Ledger Trail Balance Trading Profit and Loss account Balance
sheet Analysis and interpretation of financial statements Analysis of Comparative Balance Sheet
Common size statements (simple problems)
Unit III: Ratio analysis, Fund and cash flow analysis
Ratio analysis Nature Classification Limitations Interpretations of Ratios- Funds flow analysis
Concept Merits and Demerits Cash flow analysis Concept Merits and Demerits (simple problems)
Unit IV: Marginal costing, Budget and Budgetary Control
Marginal Costing Concept Advantages and Disadvantages Break even analysis Cost volume profit
analysis Budget and Budgetary control objectives Type of budgets Preparation of Sales, Cash,
flexible and master budgets (simple problems)
Unit V: Capital Budgeting and Reporting
Capital Budgeting Methods of ranking Investment proposals Payback method Average Rate of
Return method Discounted Cash Flow Method IRR method NPV method Excess present value
method (simple problems) _ Reporting to management Objectives of reports reports for different
levels of management preparation of reports Uses of Reports general Principles of a good
reporting

Table of Contents
Unit I:
1.0 Introduction to Management Accounting .......................................................................... 1
1.1. Introduction ............................................................................................................................. 1
1.2. Principles .................................................................................................................................. 1
1.3. Concept .................................................................................................................................... 5
1.4. Accounting conventions............................................................................................................ 9
1.5. Management accounting ........................................................................................................ 10
1.5.1. Its origin .............................................................................................................................. 11
1.5.2. Role ..................................................................................................................................... 12
1.5.3. Function .............................................................................................................................. 13
1.5.4. Growth ................................................................................................................................. 14
1.6. Cost accounting ..................................................................................................................... 16
1.7. Financial accounting ............................................................................................................... 17
1.8. Difference between various accounting ................................................................................. 17
Unit II: ................................................................................................................................ 25
2.0 Financial Accounts A comparative analysis ................................................................... 25
2.1. Financial Accounting ............................................................................................................... 25
2.2. Journal ..................................................................................................................................... 26
2.3. Ledger ..................................................................................................................................... 29
2.4. Trail Balance ............................................................................................................................ 38
2.5. Trading .................................................................................................................................... 47
2.6. Profit and Loss account ........................................................................................................... 48
2.7. Balance sheet .......................................................................................................................... 50
2.8. Analysis and interpretation of financial statements ............................................................... 55
2.9. Analysis of Comparative Balance Sheet .................................................................................. 56
2.10. Common size statements...................................................................................................... 58
Unit III: ............................................................................................................................... 64
3.0. Ratio analysis, Fund and cash flow analysis .................................................................... 64
3.1. Ratio analysis .......................................................................................................................... 64
3.1.1. Nature .................................................................................................................................. 65
3.1.2. Classification ........................................................................................................................ 65
3.1.3. Limitations............................................................................................................................ 69
3.1.4. Interpretations of Ratios ..................................................................................................... 74
3.1.5. Merits and Demerits ............................................................................................................ 88
3.1.6. Interpretations of Ratios ...................................................................................................... 90
3.2. Funds flow analysis ................................................................................................................ 91
3.2.1. Concept ................................................................................................................................ 92
3.2.2. Merits and Demerits ........................................................................................................... 92
3. 3. Cash flow analysis .................................................................................................................. 94
3.3.1. Concept ............................................................................................................................... 94
3.3.2. Merits and Demerits ........................................................................................................... 95
Unit IV: ............................................................................................................................. 101
4.0. Marginal costing, Budget and Budgetary Control .......................................................... 101
4.1. Marginal Costing ................................................................................................................... 101
4.1.1 .Concept .............................................................................................................................. 102
4.1.2. Advantages and Disadvantages ........................................................................................ 104

4.1.3. Break even analysis ........................................................................................................... 105

4.1.4. Cost volume profit analysis ................................................................................................ 110
4.2. Budget and Budgetary control .............................................................................................. 113
4.2.1. Objectives........................................................................................................................... 113
4.2.2. Type of budgets ................................................................................................................. 114
4.2.3. Preparation of Sales, ......................................................................................................... 116
4.2.4. Cash, flexible and master budgets ..................................................................................... 116
Unit V: .............................................................................................................................. 130
5.0. Capital Budgeting and Reporting .................................................................................. 130
5.1. Capital Budgeting .................................................................................................................. 130
5.1.1. Methods of ranking Investment proposals ........................................................................ 131
5.1.2. Payback method ................................................................................................................ 131
5.1.3. Average Rate of Return method ........................................................................................ 132
5.1.4. Discounted Cash Flow Method .......................................................................................... 133
5.1.5. IRR method........................................................................................................................ 135
5.1.6. NPV method ....................................................................................................................... 136
5.1.7. Excess present value method (simple problems) .............................................................. 137
5.2. Reporting to management .................................................................................................... 138
5.2.1. Objectives of reports.......................................................................................................... 138
5.2.2. Reports for different levels of management ..................................................................... 138
5.2.3. Preparation of reports ....................................................................................................... 138
5.2.4. Uses of Reports ................................................................................................................. 144
5.2.5. General Principles of a good reporting .............................................................................. 144