Normal view MARC view

Accounting midnight manual

Author: Moore, Mary Publisher: Adkins and Matchett, 2007.Language: EnglishDescription: 68 p. ; 21 cm.ISBN: 9781891112713Type of document: Book
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Item type Current location Collection Call number Status Date due Barcode Item holds
Book Asia Campus
Main Collection
Print HG10 .M66 2007
(Browse shelf)
900185240
Available 900185240
Total holds: 0

Digitized

lntroductlon I THE BUSINESS CYCLE .................... . ........................................................................................... 1 What happens first? ............................. . . ...................................................................................1 The next step: .............................................................................................. 1 And then: ........................................................................................................................................ 1 Finally:.............................................................................................................................. 1 The trick: ......................................................................................................................................... 1 Managing the business effectively:.................................................................................................1 THE INCOME STATEMENTIPROFIT AND LOSS ACCOUNT........................................................ 2 For example: ...................................................................................................................................2 So let's build an income statement: ................................................................................................ 3 So what happens to profit? ............................................................................................................. 4 THE BALANCE SHEET...................................................................................................................... 4 THE CASH FLOW STATEMENT ...................................................................................................... 6 SO HOW DOES IT ALL WORK THEN?............................................................................................. 6 The balance sheet must always balance........................................................................................ 6 What does the balance sheet look like now? ................................................................................. 7 And what about the income statemenuprofit and loss account?............................................. 8 And how does this fit into the balance sheet? ................................................................................8 And what about the cash flow statement? ...................................................................................... 8 And how does this fit into the balance sheet? .............................................................................. 8 And what about "DEBITS" and "CREDITS"? ..................................................................................9 The Income StatemenVProfit and Loss Account 11 REVENUES AND COSTS.............................................................................................................. 11 When revenues are included: ....................................................................................................... 11 When and where costs are included:........... ................................................................... 11 Key accounting links: .................................................................................................................... 11 Key indicators of profitability: ............................. .. ................................................................ 11 And finally a reminder: ........................... . . ................................................................................ 12 SALESIREVENUES ...................................................................................................................... 12 For example: ........................ ......................................................................................... 12 Why is this all so important?................................................................................................... 12 And where does cash come in?......................... . . .................................................................... 12 So let's take each in turn:.................. ................................................................................... 13 COSTSIEXPENSES......... ................................................................................................ 14 So let's look at some specific examples: .................................................................................. 14 inventories/stocks:....................................................................................................................... 14 Prepaid items: ............................................................................................................................... 15 Using up long termlfixed assets - Depreciationlamortization:...................................................... 16 Tax expense ................................................................................................................................. 17 BUT WHERE DO THESE COSTS APPEAR? ................................................................................. 17 COGS or SGBA? .......................................................................................................................... 18 What about non-recurring or unusual costs?................................................................................ 18 KEY INDICATORS OF PROFITABILITY ......................................................................................... 18 EBlT .............................................................................................................................................. 19 EBITDA and EBITA....................................................................................................................... 20 Net income.................................................................................................................................... 20 Working Capital 23 WHAT IS WORKING CAPITAL?...................................................................................................... 23 Current assets: .............................................................................................................................. 23 Current liabilities: .......................................................................................................................... 24 What is operating working capitallnet working investment?.........................................................24 Why is this important?................................................................................................................. 25 KEY ACCOUNTING LINKS..................... ................................................................................ 26 Accounting Fundamentals Accounting Fundamentals .......................................................................................................................................... .................... ....... ........... . Table of Contents ............................... ............................ .. . . ................ . . .................................................................................................................................. . . . Inventorieslstocks:........................................................................................................................ 26 ........ ................................................................................ 28 Inventorylstock issues:................ Accounts receivableldebtors and bad debts:................... .......................................... ..... 29 29 Prepaid itemslprepayments:....................................................................................................... Accounts payablelcreditors:.......................................................................................................... 30 Accruals or accrued expenses: ..................................................................................................... 30 KEY PERFORMANCE INDICATORS: ............................................................................................ 30 But what do they mean? ................................................ ........... ........................................ 30 33 FixedlNon-Current Assets WHAT ARE FIXEDINON-CURRENT ASSETS?.............................................................................. 33 Tangible Assets: ........................................................................................................................... 33 Intangible Assets: .......................................................................................................................... 33 Financial investments: .................................................................................................................. 33 ...................................................................................... 34 WHY ARE THEY IMPORTANT?.......... KEY ACCOUNTING LINKS............................................................................................................34 Depreciation:................................................................................................................................ 34 . . ..... what about asset sales? ................................................................................................... 36 KEY PERFORMANCE INDICATORS: .............................................................................................39 But what do they mean? ............................................................................................................... 39 Debt and Equity ..41 . THE SOURCES OF FUNDING ...................... . . ........................................................................ . 41 DEBT ...................................... ......... .......... .................................................................................... 42 ............................................................... 42 Presentation in the balance sheet: ................... 43 Key accounting links: .................................................................................................................. EQUITY ............................................................................................................................................43 Presentation in the balance sheet: ............................................................................................... 44 . 44 Key accounting links: .............................. ................................................................................ 44 Retained earnings: ............... ................................................................................................. Cash Flow Statement 47 What is a cash flow statement? .................................... ........................................................47 47 How to build a cash flow statement .............................................................................................. Four rules: .................................................................................................................................... 47 ORGANlSlNG THE CASH FLOWS ................................................................................................. 48 PRACTICAL PROBLEMS ..............................................................................................................49 Retained earnings:....................................................................................................................... 49 50 Depreciation:................................................................................................................................. . 52 THE STEPS: .............. ................................................................................................................ Step 1 - Categorize the cash flows using the balance sheet: ................................................... 53 Step 2 - Build any supplementary calculations necessary:...................... .............................53 Step 3 - Build the cash flow statement using the four rules and your balance sheet checklist: .. 55 OTHER CASH FLOW PRESENTATIONS:...................................................................................... 55 57 Ratio Analysis Some points to note about ratio analysis:.................................................................................. 57 LIQUIDITY AND SOLVENCY........................................................................................................ 57 Long - term: ......................... ....................................................................................................... . 57 Short -term: ................................................................................................................................ 60 EFFICIENCY RATIOS................................................................................................................... 61 61 Days or turnover ratios:................................................................................................................. O O of ratios: .................... / . .......................................................................................................... . 63 PPandE or fixed assets ratios: ..................................... ................................................................. 64 64 PROFITABILITY RATIOS................................................................................................................. 66 RETURN RATIOS ........................................................................................................................ AND FINALLY! ............................................................................................................................... 68 . . ......... ............................................................................................................... ............................................................................................................................... . . . . . . . ...................................................................................................................... . . .... . . . . .................................................................................................................................. ..

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