Management Accounting - Relevant Costs

Relevant Costs

Right, onto the proper lecture material!

What is cost?

Basically there isn't a single way to define cost, which is quite inconvenient for us. What you're going to use the cost to figure out should tell you how to calculate it however.

Financial Reporting - Corporate Governance

Corporate Governance

Let’s start with some more recapping from last time:

• The gearing ratio measures what proportion of a business is funded by borrowing


• Depreciation does not count as a cash expense


• Current assets are usually only held during one operating cycle, so they are expected to be sold within a year

Financial Reporting - (More) Financial Statement Analysis

More Financial Statement Analysis

Let's start with some recapping from the last section.

• Let's say that a company's average debtor payback time in 2008 was 62 days, and in 2009 was 31 days. A possible reason for this is that the company has improved their credit control procedures, meaning they now collect their debts more quickly.

Financial Reporting - Financial Statement Analysis

Financial Statement Analysis

Who is interested in analysing a financial statement?

Financial Reporting - Market/Book Values

Market/Book Values

Quick example

Some things that are identical have different values.

An empty tin of dog food is worth about $0.10. An empty tin of Paris Hilton's dog food went on ebay for $305.

I think the message here is that most people are crazy, but there is probably some sort of deeper meaning too. If you manage to work out what it is, please let me know.

Financial Reporting - Income Statement Part 2

Income Statement Part 2

Measuring profit in the income statement

• The income statement measures the profit generated by the business over a period


• The previous section showed that it isn't always easy as we have to apply our own judgement a lot, like what method of depreciation to use

Financial Reporting - Income Statements Part 1

Income Statements Part 1

Some quick concepts / refreshers

• Trade receivables are an asset. A trade receivable is money owed to the company for goods that have been bought from them on credit.


• Capital is a claim on the business, as it represents the investment the owner had made in it.

Financial Reporting - Balance Sheet Part 2

Balance Sheets Part 2

Note: This post follows Balance Sheets 1 so read that if you haven't already.

Some quick concepts / refreshers

• The balance sheet is a statement of financial position at the time it is made


• The cash flow statement measures movement of cash over time

Financial Reporting - Balance Sheets Part 1

Balance Sheets Part 1

The major types of financial statement

3 types:

• Cash flow statement


• Income statement


• Balance sheet

Financial Reporting - Intro and Business Types

Fundamentals of Financial Reporting

Introduction to Accounting

The main users of financial information relating to a business

• Owners


• Customers


• Competitors


• Employees (and unions)


• Government


• Community reps


• Investment analysts


• Suppliers


• Lenders (Banks)


• Managers