Financial Accounting for Decision Makers (6th Edition)

Book Preface

This text provides a comprehensive introduction to financial accounting. It is aimed both at students who are not majoring in accounting and at those who are. Those studying introductory-level financial accounting 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 accounting should find the book a useful introduction to the main principles, which can serve as a foundation for further study. The text does not focus on the technical aspects, but rather examines the basic principles and underlying concepts. The ways in which financial statements and information can be used to improve the quality of decision making are the main focus of the book. To reinforce this practical emphasis, there are, throughout the text, numerous illustrative extracts with commentary from company reports, survey data and other sources.

In this sixth edition, we have taken the opportunity to make improvements that have been suggested by both students and lecturers who used the previous edition. We have brought up to date and expanded the number of examples from real life. We have incorporated the many changes that have occurred with International Financial Reporting Standards since the last edition. We have also picked up on developments that have arisen in the area of corporate governance.

We have also greatly expanded the coverage of financial reports beyond the income statement, statement of financial position (balance sheet) and statement of cash flows. This expanded coverage forms a new chapter, Chapter 10. The financial reports covered in Chapter 10 include both those that are mandatory for certain businesses as well as those that individual businesses may choose to prepare.

The text is written in an ‘open-learning’ style. This means that there are numerous integrated activities, worked examples and questions throughout the text 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 of you will not have studied financial accounting before, and, therefore, we have 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, and then listed at the end of each chapter with a page reference. All of these key terms 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 important 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 allow for the 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. More detail about the nature and use of these features is given in the ‘How to use this book’ section below; and the main points are also summarised, using example pages from the text, in the ‘Guided tour’ on pp. xiv–xv.

We hope that you will find the book both readable and helpful.

Peter Atrill
Eddie McLaney

Brief contents
Guided tour of the book xiv
Guided tour of the Companion Website xvi
Preface xviii
How to use this book xx
Acknowledgements xxii
1 Introduction to accounting 1
2 Measuring and reporting financial position 30
3 Measuring and reporting financial performance 69
4 Accounting for limited companies (1) 114
5 Accounting for limited companies (2) 149
6 Measuring and reporting cash flows 186
7 Analysing and interpreting financial statements (1) 217
8 Analysing and interpreting financial statements (2) 261
9 Reporting the financial results of groups of companies 295
10 Increasing the scope of financial reporting 352
1 1 Governing a company 390
Appendix A Recording financial transactions 442
Appendix B Glossary of key terms 461
Appendix C Solutions to self-assessment questions 472
Appendix D Solutions to review questions 481
Appendix E Solutions to selected exercises 491
Index 528