giáo trình Accounting and finance and introduction 8th by mclanlay atrill

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CVR_MCLA8297_08_SE_CVR.indd 1

Eddie McLaney
Peter Atrill

Front cover image:
© Getty Images

Eddie McLaney is Visiting Fellow in Accounting and Finance at Plymouth University.

AN INTRODUCTION

Accounting and Finance: An Introduction, now in its eighth edition, contains all
the information you need to start your business career. With its use of practical
techniques and real-world examples, this best-selling text teaches you the
basics of understanding and using financial information. This comprehensive
guide covers financial accounting, management accounting and financial
management in a single text, and provides you with the tools to make informed,

successful business decisions.

EIGHTH EDITION

ACCOUNTING
AND FINANCE

EIGHTH
EDITION

ACCOUNTING AND FINANCE

AN INTRODUCTION

Eddie McLaney
Peter Atrill

AN INTRODUCTION McLaney and Atrill

ACCOUNTING
AND FINANCE

EIGHTH EDITION

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Accounting and Finance

An Introduction

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Eighth
edition

Accounting
and Finance

An Introduction
Eddie McLaney
and
Peter Atrill

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Pearson Education Limited
Edinburgh Gate
Harlow CM20 2JE
United Kingdom
Tel: +44 (0)1279 623623
Web: www.pearson.com/uk

First published 1999 by Prentice Hill Europe (print)
Second edition published 2002 by Pearson Education Limited (print)
Third edition published 2005 (print)
Fourth edition published 2008 (print)
Fifth edition published 2010 (print)
Sixth edition published 2012 (print)
Seventh edition published 2014 (print and electronic)
Eighth edition published 2016 (print and electronic)
© Prentice Hall Europe 1999 (print)
© Pearson Education Limited 2002, 2005, 2008, 2010, 2012 (print)
© Pearson Education Limited 2014 (print and electronic)
© Pearson Education Limited 2016 (print and electronic)
The rights of Eddie McLaney and Peter Atrill to be identified as authors of this work have been asserted
by them in accordance with the Copyright, Designs and Patents Act 1988.
The print publication is protected by copyright. Prior to any prohibited reproduction, storage in a retrieval
system, distribution or transmission in any form or by any means, electronic, mechanical, recording or
otherwise, permission should be obtained from the publisher or, where applicable, a licence permitting
restricted copying in the United Kingdom should be obtained from the Copyright Licensing Agency Ltd,
Saffron House, 6–10 Kirby Street, London EC1N 8TS.

The ePublication is protected by copyright and must not be copied, reproduced, transferred, distributed,
leased, licensed or publicly performed or used in any way except as specifically permitted in writing
by the publishers, as allowed under the terms and conditions under which it was purchased, or as
strictly permitted by applicable copyright law. Any unauthorised distribution or use of this text may be a
direct infringement of the authors’ and the publisher’s rights and those responsible may be liable in law
accordingly.
All trademarks used herein are the property of their respective owners. The use of any trademark in this
text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor
does the use of such trademarks imply any affiliation with or endorsement of this book by such owners.
Pearson Education is not responsible for the content of third-party internet sites.
The Financial Times. With a worldwide network of highly respected journalists, The Financial Times
provides global business news, insightful opinion and expert analysis of business, finance and
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find out more, visit www.ft.com/pearsonoffer.
ISBN:  978-1-292-08829-7 (print)
978-1-292-08890-7 (PDF)
978-1-292-08830-3 (eText)
978-1-292-12567-1 (ePub)
British Library Cataloguing-in-Publication Data
A catalogue record for the print edition is available from the British Library
Library of Congress Cataloging-in-Publication Data
McLaney, E. J., author.
  Accounting and finance : an introduction / Eddie McLaney and Peter Atrill. – Eighth edition.
       pages cm
  ISBN 978-1-292-08829-7
 1.  Accounting.  I. Atrill, Peter, author. II. Title.
  HF5636.M44 2016
  657–dc23
2015026652

10 9 8 7 6 5 4 3 2 1
16 15 14 13 12
Print edition typeset in 9.5/12.5pt Stone Serif ITC Pro by 71
Printed and bound by L.E.G.O. S.p.A., Italy
NOTE THAT ANY PAGE CROSS REFERENCES REFER TO THE PRINT EDITION

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Brief contents

Prefacexxi
How to use this book
xxiii
Acknowledgements
xxv
1 Introduction to accounting and finance1

Part 1  Financial accounting37

2 Measuring and reporting financial position
39
3 Measuring and reporting financial performance77
4 Accounting for limited companies (1)121
5 Accounting for limited companies (2)159
6 Measuring and reporting cash flows201
7 Analysing and interpreting financial statements233

Part 2  Management accounting293
8 Making management decisions295
9 Cost–volume–profit analysis319
10 Full costing361
11 Costing and performance evaluation in a competitive environment408
12 Budgeting457
13 Accounting for control501

Part 3  Financial management545
14 Making capital investment decisions547
15 Financing a business596
16 Managing working capital653 ➔

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vi

Brief contents

Part 4  Supplementary information707
Appendix A
Appendix B
Appendix C
Appendix D
Appendix E
Appendix F

Recording financial transactions709
Glossary of key terms
728
Solutions to self-assessment questions745
Solutions to review questions766
Solutions to selected exercises781
Present value table830

Index833

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Contents

Prefacexxi
How to use this book

xxiii
Acknowledgementsxxv

1

Introduction to accounting and finance1
Introduction1
1
Learning outcomes
What are accounting and finance?
2
Who are the users of accounting information?
2
The conflicting interests of users
4
How useful is accounting information?
5
Evidence on the usefulness of accounting
6
Providing a service
7
Further qualities
8
Weighing up the costs and benefits
9
Accounting as an information system
11
Management accounting and financial accounting
13
Scope of this book

15
The changing face of accounting
16
Why do I need to know anything about accounting and finance?
17
Accounting for business
18
What is the purpose of a business?
18
What kinds of business ownership exist?
19
Sole proprietorship
19
Partnership20
21
Limited company

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How are businesses organised?
How are businesses managed?
The quest for wealth creation
Meeting the needs of other stakeholders
Balancing risk and return
Reasons to be ethical
Not-for-profit organisations

22
25
27

27
29
31
32

Summary
Key terms
References
Further reading
Review questions

33
35
35
35
36

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viii

CONTENTS

Part 1 Financial accounting
2

3

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Measuring and reporting financial position

39

Introduction
Learning outcomes

39
39

The major financial statements – an overview
The statement of financial position
Assets
Claims

40
44
44
47

The effect of trading transactions
Classifying assets
Current assets
Non-current assets

50
52
53

53

Classifying claims
Current liabilities
Non-current liabilities

55
55
55

Statement layouts
Capturing a moment in time
The role of accounting conventions
Business entity convention
Historic cost convention
Prudence convention
Going concern convention
Dual aspect convention

56
58
58
58
59
60
60
61

Money measurement
Goodwill and brands

Human resources
Monetary stability

62
62
63
64

Valuing assets
Non-current assets
Non-current assets with finite lives
Non-current assets with indefinite useful lives
Fair values
The impairment of non-current assets
Inventories

64
65
65
65
66
67
69

Meeting user needs

70

Self-assessment question 2.1
Summary

Key terms
Further reading
Review questions
Exercises

71
71
73
73
74
74

Measuring and reporting financial performance

77

Introduction
Learning outcomes

77
77

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The income statement
Different roles
Income statement layout
Gross profit
Operating profit
Profit for the period

78
79
80
81
81
81

Further issues
Cost of sales
Classifying expenses

82
82
83

Recognising revenue
Long-term contracts
Continuous and non-continuous services

85
86

88

Recognising expenses
When the expense for the period is more than the cash paid
during the period
When the amount paid during the period is more than the full
expense for the period
Profit, cash and accruals accounting

88

ix

89
91
93

Depreciation
Calculating the depreciation expense
Depreciation method
Impairment and depreciation
Depreciation and asset replacement
Depreciation and judgement

94
94
96
100
101
101

Costing inventories
Inventories – some further issues

103
107

Trade receivables problems
Doubtful debts

108
110

Uses and usefulness of the income statement

112

Self-assessment question 3.1
Summary
Key terms
Further reading
Review questions
Exercises

113
114
115
116
117
117

Accounting for limited companies (1)

121

Introduction
Learning outcomes

121
121

The main features of limited companies
Legal nature
Perpetual life
Limited liability
Legal safeguards
Public and private companies
Taxation
The role of the Stock Exchange

122
122
122
124
125
125
127
128

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Managing a company
Financing limited companies
Equity (the owners’ claim)
The basic division
Share capital
Reserves
Bonus shares
Share capital jargon

128
129
129
129
130
132
134
136

Borrowings
Raising share capital
Withdrawing equity
The main financial statements
The income statement

The statement of financial position

137
138
139
142
143
145

Dividends
Accounting for groups of companies

145
146

Self-assessment question 4.1
150
Summary
151
Key terms
153
Further reading
153
Review questions154
Exercises
154

5

Accounting for limited companies (2)

159

Introduction
159
Learning outcomes159
The framework of annual financial reports
The directors’ duty to account
The need for accounting rules
Sources of accounting rules
The growing authority of the IASB
Adopting IFRSs

160
161
161
164
164
165

Presenting the financial statements
167
Fair representation
167
Statement of financial position
168
Statement of comprehensive income
169
Statement of changes in equity
171

Statement of cash flows
172
Notes173
General points
173

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The need for a conceptual framework
The IASB framework

173
174

The auditors’ role
Segmental financial reports
Segmental reporting rules
Segmental disclosure
Segmental reporting problems

175
176
177
178
179

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Corporate governance
Strengthening the framework of rules
The UK Corporate Governance Code

180
181
182

Management commentary
Directors’ report
Strategic report
Creative accounting
Creative accounting methods
Checking for creative accounting
Creative accounting and economic growth

184
184
185
187
188
193
194

xi

Self-assessment question 5.1195
Summary195

Key terms197
References197
Further reading198
Review questions199
Exercises199

6

Measuring and reporting cash flows201
Introduction201
Learning outcomes201
The statement of cash flows
Why is cash so important?
The main features of the statement of cash flows
A definition of cash and cash equivalents
The relationship between the main financial statements
The layout of the statement of cash flows
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net increase or decrease in cash and cash equivalents

202
203
205
205
206
207
207
208

208
209

The normal direction of cash flows
Preparing the statement of cash flows
Deducing net cash flows from operating activities
Deducing the other areas of the statement of cash flows

209
211
211
216

Reconciliation of liabilities from financing activities
What does the statement of cash flows tell us?

219
219

Problems with IAS 7
222
Self-assessment question 6.1222
Summary224
Key terms225
Reference225
Further reading225
Review questions226
Exercises226

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Contents

7

Analysing and interpreting financial statements233
Introduction233
Learning outcomes233
Financial ratios
Financial ratio classifications
The need for comparison
Past periods
Similar businesses
Planned performance

234
234
236
236
237
237

Calculating the ratios
237

A brief overview
240
Profitability241
Return on ordinary shareholders’ funds (ROSF)
241
Return on capital employed (ROCE)
242
Operating profit margin
244
Gross profit margin
245
Efficiency247
Average inventories turnover period
247
Average settlement period for trade receivables
248
Average settlement period for trade payables
249
Sales revenue to capital employed ratio
251
Sales revenue per employee
251
Relationship between profitability and efficiency
253
Liquidity254
Current ratio
255
Acid test ratio
255
Cash generated from operations to maturing obligations ratio

256
Financial gearing
Gearing ratio
Interest cover ratio

257
260
261

Investment ratios
Dividend payout ratio
Dividend yield ratio
Earnings per share
Cash generated from operations per share
Price/earnings (P/E) ratio

262
262
263
264
266
266

Financial ratios and the problem of overtrading
Trend analysis
Using ratios to predict financial failure
Using single ratios
Using combinations of ratios
Z-score models

270
272
272
273
274
276

Limitations of ratio analysis
278
Quality of financial statements
278
Inflation279
The restricted view given by ratios
279

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The basis for comparison
Statement of financial position ratios
Self-assessment question 7.1
Summary
Key terms
References
Further reading

Review questions
Exercises

xiii

280
280
281
282
283
284
284
285
285

Part 2 Management accounting
8

9

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Making management decisions

295

Introduction
Learning outcomes

295

295

Cost–benefit analysis
What is meant by ‘cost’?
Relevant costs: opportunity and outlay costs
Sunk costs and committed costs
Non-measurable costs and benefits
Risk
Sensitivity analysis

296
297
299
304
306
307
308

Self-assessment question 8.1
Summary
Key terms
Further reading
Review questions
Exercises

311
312
313
313
314

314

Cost–volume–profit analysis

319

Introduction
Learning outcomes

319
319

Cost behaviour
Fixed cost
Variable cost
Semi-fixed (semi-variable) cost
Analysing semi-fixed (semi-variable) costs

320
320
322
323
324

Finding the break-even point
Contribution
Contribution margin ratio

325
332

332

Margin of safety
Achieving a target profit
Operating gearing
Operating gearing and its effect on profit

333
335
336
337

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Contents

Profit–volume charts
The economist’s view of the break-even chart
Failing to break even
Weaknesses of break-even analysis
Using contribution to make decisions: marginal analysis
Pricing/assessing opportunities to enter contracts
The most efficient use of scarce resources
Make-or-buy decisions
Closing or continuation decisions

338
339
341
341
344
345
347
349
351

Self-assessment question 9.1353
Summary354
Key terms355
Further reading355
Review questions356
Exercises356

10 Full costing361
Introduction361
Learning outcomes361
What is full costing?
Why do managers want to know the full cost?
Single-product businesses
Multi-product businesses
Direct and indirect cost
Job costing
Full (absorption) costing and the behaviour of cost
The problem of indirect cost

362

362
364
365
366
367
368
370

Overheads as service renderers
Job costing: a worked example
Selecting a basis for charging overheads
Segmenting the overheads
Dealing with overheads on a cost centre basis
Batch costing
Non-manufacturing overheads
Full (absorption) costing and estimation errors

370
370
374
377
377
387
388
389

Using full (absorption) cost information
Full cost (cost-plus) pricing
Price makers and price takers
Use of cost-plus information by price takers

391
393
393
394

Criticisms of full (absorption) costing
Full (absorption) costing versus variable costing
Which method is better?

396
396
398

Self-assessment question 10.1400
Summary401
Key terms402
Reference403
Further reading403

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xv

Review questions404
Exercises404

 osting and performance evaluation in a
11 C
competitive environment408
Introduction408
Learning outcomes408
Cost determination in the changed business environment
Costing and pricing: the traditional way
Costing and pricing: the new environment

409
409
410

Cost management systems
The problem of overheads
Taking a closer look

410
411
411

Activity-based costing
Attributing overheads
Benefits of ABC
ABC versus the traditional approach
ABC and service industries
Criticisms of ABC

412
413
414
414
414
419

Other costing approaches in the modern environment
421
Total life-cycle costing
421
Total quality management
424
Costing quality procedures
426
Target costing
427
Kaizen costing
428
Value chain analysis
429
Benchmarking431
Non-financial measures of performance
The balanced scorecard
Scorecard problems

433
434
440

Measuring shareholder value
440
The quest for shareholder value
441
How can shareholder value be created?
441
The need for new measures
442
Economic value added (EVA®)443
Self-assessment question 11.1448
Summary450
Key terms451
Reference451
Further reading451
Review questions452
Exercises452

12 Budgeting457
Introduction457
Learning outcomes457

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Contents

How budgets link with strategic plans and objectives
Time horizon of plans and budgets
How budgets help managers
Budgets and forecasts
Limiting factors
Periodic and continual budgets
How budgets link to one another
The budget-setting process
Using budgets in practice
Incremental and zero-base budgeting
Preparing budgets
The cash budget
Preparing other budgets

458
460
461
463
464
464
465
468
471
473
476
476
480

Activity-based budgeting
Non-financial measures in budgeting
Budgets and management behaviour
Who needs budgets?
Beyond conventional budgeting
Long live budgets!

483
485
485
485
487
489

Self-assessment question 12.1492
Summary493
Key terms494
References494
Further reading494
Review questions495
Exercises495

13 Accounting for control501
Introduction501
Learning outcomes501

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Budgeting for control
Types of control

Variances from budget
Flexing the budget
Sales volume variance
Sales price variance
Materials variances
Labour variances
Fixed overhead variance

502
503
505
506
507
509
511
512
513

Reasons for adverse variances
Variance analysis in service industries
Non-operating profit variances
Investigating variances
Variance analysis in practice

518
520
520
520
523

Compensating variances
Standard quantities and costs
Setting standards

523
524
525

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What kind of standards should be used?
Who sets the standards?
How is information gathered?
The learning-curve effect

xvii

525
525
525
526

Keeping standards relevant
Other uses for standard costing
Making budgetary control effective
Some problems . . .

The new business environment
Behavioural issues
The impact of management style
Failing to meet the budget
Budgets and innovation

527
528
528
529
530
532
533
535
536

Self-assessment question 13.1
Summary
Key terms
Reference
Further reading
Review questions
Exercises

537
537
539
539
539
540

540

Part 3 Financial management
14 Making capital investment decisions

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547

Introduction
Learning outcomes

547
547

The nature of investment decisions
Investment appraisal methods
Accounting rate of return (ARR)
ARR and ROCE
Problems with ARR

548
549
551
552
553

Payback period (PP)
Problems with PP

555
557

Net present value (NPV)
Interest lost
Risk
Inflation
What will logical investors do?
Using present value tables
The discount rate and the cost of capital
Why NPV is better
NPV’s wider application

559
560
560
561
562
565
566
567
568

Internal rate of return (IRR)
Problems with IRR

568
572

Some practical points

Investment appraisal in practice

573
577

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Contents

Investment appraisal and strategic planning
Risk and investment
Managing investment projects
Stage 1: Determine investment funds available
Stage 2: Identify profitable project opportunities
Stage 3: Evaluate the proposed project
Stage 4: Approve the project
Stage 5: Monitor and control the project

580
580
581
582
583
583
584
584

Self-assessment question 14.1586
Summary587
Key terms589
Reference589
Further reading589
Review questions590
Exercises590

15 Financing a business596
Introduction596
Learning outcomes596
The main objective of financing policy
Sources of finance
Internal sources of finance
Internal sources of long-term finance
Retained earnings
Dividend policy

597
597
597
598
598
599

Internal sources of short-term finance
Tighter credit control
Reducing inventories levels
Delaying payment to trade payables

Some further points

600
600
600
600
601

External sources of finance
602
External sources of long-term finance
602
Ordinary shares
603
Preference shares
603
Borrowing604
Forms of borrowing
608
Finance leases
612
Sale-and-leaseback arrangements
615
Hire purchase
616
Securitisation617

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External sources of short-term finance

Bank overdrafts
Debt factoring
Invoice discounting

619
619
619
621

Long-term versus short-term borrowing
Gearing and the financing decision
Raising long-term finance

623
624
628

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Share issues
Rights issues
Offers for sale and public issues
Setting a share price
Private placings
Bonus issues

628
629
632
632
633
633

The role of the Stock Exchange
Advantages of a listing
Disadvantages of a listing
Going private

634
634
636
638

The Alternative Investment Market
Providing long-term finance for the small business
Venture capital
Business angels
Government assistance

638
639
639
641
641

Islamic finance

642

xix

Self-assessment question 15.1642
Summary644
Key terms646
References646
Further reading647
Review questions648
Exercises648

16 Managing working capital653
Introduction653
Learning outcomes653

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What is working capital?
Managing working capital
The scale of working capital
Managing inventories
Budgeting future demand
Financial ratios
Recording and reordering systems
Levels of control
Inventories management models

654

655
655
658
661
661
661
663
665

Managing trade receivables
Which customers should receive credit and how much
should they be offered?
Length of credit period
Cash discounts
Debt factoring and invoice discounting
Credit insurance
Collection policies

669

Managing cash
Why hold cash?
How much cash should be held?

680
680
681

670
672

675
676
676
676

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CONTENTS

Controlling the cash balance
Cash budgets and managing cash
The operating cash cycle
Cash transmission
Bank overdrafts

682
683
683
688
689

Managing trade payables
Taking advantage of cash discounts
Controlling trade payables

690

692
693

Self-assessment question 16.1
Summary
Key terms
Further reading
Review questions
Exercises

695
696
698
699
700
700

Part 4 Supplementary information
Appendix A Recording financial transactions
Introduction
Learning outcomes
The basics of double-entry bookkeeping
Recording trading transactions
Balancing accounts and the trial balance
Preparing the financial statements (final accounts)
The ledger and its division

710
712
715

719
722

Summary
Key terms
Further reading
Exercises

723
724
724
725

Appendix B
Appendix C
Appendix D
Appendix E
Appendix F
Index

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709
709
709

Glossary of key terms
Solutions to self-assessment questions
Solutions to review questions
Solutions to selected exercises

Present value table

728
745
766
781
830
833

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Preface
This text provides a comprehensive introduction to financial accounting, management
accounting and core elements of financial management. It is aimed both at students
who are not majoring in accounting or finance and those who are. Those studying
introductory-level accounting and/or financial management as part of their course in
business, economics, hospitality management, tourism, engineering or some other area
should find that the book provides complete coverage of the material at the level
required. Students, who are majoring in either accounting or finance, should find the
book useful as an introduction to the main principles, which can serve as a foundation
for further study. The text does not focus on technical issues, but rather examines basic
principles and underlying concepts. The primary concern throughout is the ways in
which financial statements and information can be used to improve the quality of the
decisions made by those who use them. To reinforce this practical emphasis, throughout
the text, there are numerous illustrative extracts with commentary from real life including company reports, survey data and other sources.
The text is written in an ‘open-learning’ style. This means that there are numerous
integrated activities, worked examples and questions through all of the chapters to help

you to understand the subject fully. You are encouraged to interact with the material and
to check your progress continually. Irrespective of whether you are using the book as
part of a taught course or for personal study, we have found that this approach is more
‘user-friendly’ and makes it easier for you to learn.
We recognise that most readers will not have studied accounting or finance before,
and we have therefore tried to write in a concise and accessible style, minimising the use
of technical jargon. We have also tried to introduce topics gradually, explaining everything as we go. Where technical terminology is unavoidable we try to provide clear
explanations. In addition, you will find all of the key terms highlighted in the text. These
are then listed at the end of each chapter with a page reference. They are also listed alphabetically, with a concise definition, in the glossary given in Appendix B towards the end
of the book. This should provide a convenient point of reference from which to revise.
A further consideration in helping you to understand and absorb the topics covered is
the design of the text itself. The page layout and colour scheme have been carefully considered to enable easy navigation and digestion of material. The layout features a large
page format, an open design, and clear signposting of the various features and assessment material.
In this eighth edition, we have taken the opportunity to make improvements suggested by students and lecturers who used the previous edition. We have expanded the
discussion on the need for managers to have some understanding of accounting and
introduced a section on ethics in accounting (Chapter 1). The topic of risk has now been
introduced much earlier in the book (Chapter  8) and has been linked more clearly to
management decision making. In addition, the material in Chapters 12 and 13 has been
reordered to make their development more logical. We have updated and expanded the
number of examples from real life and have continued to reflect the latest international
rules relating to the main financial statements. To aid understanding, we have also

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Preface

increased the number of student progress questions (Activities) and explanatory
diagrams.
More detail about the nature and use of these features is given in the ‘How to use this
book’ section below.
We hope that you will find the book readable and helpful.
Eddie McLaney
Peter Atrill

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How to use this book
We have organised the chapters to reflect what we consider to be a logical sequence and,
for this reason, we suggest that you work through the text in the order in which it is presented. We have tried to ensure that earlier chapters do not refer to concepts or terms
that are not explained until a later chapter. If you work through the chapters in the
‘wrong’ order, you will probably encounter concepts and terms that were explained
previously.
Irrespective of whether you are using the book as part of a lecture/tutorial-based
course or as the basis for a more independent mode of study, we advocate following
broadly the same approach.

Integrated assessment material
Interspersed throughout each chapter are numerous Activities. You are strongly advised
to attempt all of these questions. They are designed to simulate the sort of quick-fire

questions that your lecturer might throw at you during a lecture or tutorial. Activities
serve two purposes:
●
●

To give you the opportunity to check that you understand what has been covered so far.
To encourage you to think about the topic just covered, either to see a link between
that topic and others with which you are already familiar, or to link the topic just
covered to the next.

The answer to each Activity is provided immediately after the question. This answer
should be covered up until you have deduced your solution, which can then be compared with the one given.
Towards the middle/end of each chapter there is a Self-assessment question. This is
more comprehensive and demanding than any of the Activities, and is designed to give
you an opportunity to check and apply your understanding of the core coverage of the
chapter. The solution to each of these questions is provided in Appendix C at the end of
the book. As with the Activities, it is important that you attempt each question thoroughly before referring to the solution. If you have difficulty with a self-assessment question, you should go over the relevant chapter again.

End-of-chapter assessment material
At the end of each chapter there are four Review questions. These are short questions
requiring a narrative answer or discussion within a tutorial group. They are intended
to help you assess how well you can recall and critically evaluate the core terms and
concepts covered in each chapter. Answers to these questions are provided in the
Appendix D at the end of the book. At the end of each chapter, except for Chapter 1,
there are seven Exercises. These are mostly computational and are designed to reinforce your knowledge and understanding. Exercises are graded as ‘basic’, ‘intermediate’
and ‘advanced’ according to their level of difficulty. The basic and intermediate level

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How to use this book

exercises are fairly straightforward: the advanced level ones can be quite demanding
but are capable of being successfully completed if you have worked conscientiously
through the chapter and have attempted the basic exercises. Solutions to four of the
exercises in each chapter are provided in Appendix D at the end of the book. A coloured
exercise number identifies these five questions. Here, too, a thorough attempt should be
made to answer each exercise before referring to the solution. Solutions to the other
three exercises and to the review questions in each chapter are provided in a separate
Instructors’ Manual.

Content and structure
The text comprises 16 chapters organised into three core parts: financial accounting,
management accounting and financial management. A brief introductory outline of the
coverage of each part and its component chapters is given in the opening pages of each
part.
The market research for this text revealed a divergence of opinions, given the target
market, on whether or not to include material on double-entry bookkeeping techniques.
So as to not interrupt the flow and approach of the financial accounting chapters,
Appendix A on recording financial transactions (including Activities and three Exercise
questions) has been placed in Part 4.

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