Financial Accounting

Pauline Weetman

• Publisher: Pearson
• Year: 2019
• ISBN:
  9781292244518
• Edition: 8
• Topic: Business
• Subtopic: Accounting
• Index: Business

Gain a deeper understanding of the Financial Accounting principles with a leading text written by an expert in the field.

Financial Accounting, 8 th edition by Pauline Weetman, is a core textbook written by an expert teacher in the field that will offer you the resources you need to explore and acquire a deeper understanding of a wide range of concepts around the discipline.

This text is ideal for undergraduates in Business Studies degrees, Undergraduates in Accounting courses, students studying Accounting for MBA and Postgraduate courses, and Professional courses introducing Accounting for the first time.

This edition focuses on retaining all the features that have contributed to its popularity, including accounting equations, a clear and accessible writing style, a range of student activities throughout the book, and the extensive use of real-world case studies, offering you a deeper understanding of the topics.

Key features:

• Definitions and terminology aligned with the 2018 IASB Conceptual Framework.
• Fully up-to-date with the International Financial Reporting Standards (IFRS).
• New case studies provide examples from real-world companies.
• Activities aligned to each chapter section, encouraging students to explore and consider issues from different angles.
• Experience-driven conversations throughout the book between two managers expanded for this edition and updated with an even greater practical emphasis.
• Extensive coverage of fair value is provided throughout the text.
• Exploration of the Strategic Report and Directors' Report.
• Focus on specific knowledge outcomes with end-of-chapter self-evaluations.
• Questions testing your understanding are graded according to difficulty.

With a strong emphasis on the 2018 Conceptual Framework of the International Accounting Standards Board, this text is an essential resource that will guide you through the 'whys' and not just the'whats' of Financial Accounting.

Part 1

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A conceptual framework: setting the scene

1. Who needs accounting?

2. A systematic approach to financial reporting: the accounting equation

3. Financial statements from the accounting equation

4. Ensuring the quality of financial statements

Chapter 1

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Who needs accounting?

Real World Case

Oxfam: meeting users’ needs

Extracts from Annual Report and Accounts

Purpose and charitable objects

Oxfam Great Britain’s purpose is to help create lasting solutions to the injustice of poverty.

As stated in its Memorandum of Association, the objects for which Oxfam is established for the public benefit are:

• to prevent and relieve poverty and to protect vulnerable people, including through humanitarian intervention;
• to advance sustainable development;
• to promote human rights, equality and diversity, in particular where to do so contributes to the prevention and relief of poverty;
• in all cases working anywhere in the world.

Penny Tweedie/Alamy Stock Photo

Highlights (page 10)

11.6 million people reached directly in 51 countries

Nearly 9 million people supported in 31 humanitarian emergencies

1,168 grants to 737 partner organisations

450,000 people in the UK made a regular donation

How do we judge the impact of our work?

Oxfam is committed to ensuring that, in all that we do, we are accountable to those with whom we work, from our programme partners, communities and donors to other stakeholders such as our staff, volunteers, or those that we campaign through and with. We use several tools to monitor, evaluate, assess and learn from our stakeholders, including:

• reporting data on the numbers of people and communities reached by our programmes
• completing review exercises to understand – and speak about – our outcome achievements as well as our challenges, and how we deal with them
• undertaking evaluations to assess our overall strategies, test the core assumptions about how we contribute to social change, and assess our effectiveness in different contexts
• consulting with key stakeholders to gather their insights and assessments about our overall efforts.

Our success in achieving this commitment to accountability is measured annually through our membership of, and compliance with, the International NGO Accountability Charter and International Aid Transparency Initiative. More detail on our accountability objectives and achievements is set out on page 29.

Accounting conventions (page 38)

Oxfam is a public benefit entity. The financial statements are prepared in compliance with the Companies Act 2006, the Charities Act 2011, the Charities Statement of Recommended Practice (FRS 102), the Charities Accounts (Scotland) Regulations 2006 and Charities and Trustee Investment (Scotland) Act 2005, and FRS 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland.

Source: Oxfam, Annual report and accounts, 2015/16, pp. 9, 10, 12, 38, 50. http://www.oxfamannualreview.org.uk/

Discussion points

1. Who might be included in the stakeholders to whom Oxfam is accountable?
2. To what extent do the ‘Highlights’ meet the information needs of users of the annual report?

Contents

1.1	Introduction
1.2	The development of a conceptual framework
1.3	The Conceptual Framework for Financial Reporting
1.4	Types of business entity
	1.4.1	Sole trader
	1.4.2	Partnership
	1.4.3	Limited liability company
	1.4.4	Limited liability partnership
	1.4.5	Comparing partnership and limited liability company
1.5	Users and their information needs
	1.5.1	Management
	1.5.2	Owners as investors
	1.5.3	Lenders
	1.5.4	Suppliers and other trade creditors
	1.5.5	Employees
	1.5.6	Customers
	1.5.7	Governments and their agencies
	1.5.8	Public interest
1.6	Financial statements
	1.6.1	General purpose or specific purpose financial statements?
	1.6.2	Stewards and agents
	1.6.3	Who needs financial statements?
1.7	Summary
	Supplement: Introduction to the terminology of business transactions

Learning outcomes

After studying this chapter you should be able to:

• Define, and explain the definition of, accounting.
• Explain what is meant by a conceptual framework.
• Explain the distinguishing features of a sole trader, a partnership and a limited company.
• List the main users of financial information and their particular needs.
• Discuss the usefulness of financial statements to the main users.

Additionally, for those who choose to study the supplement:

• Define the basic terminology of business transactions.

1.1 Introduction

There is no single ‘official’ definition of accounting, but for the purposes of this text the following wording will be used:

Definition

Accounting is the process of identifying, measuring and communicating financial information about an entity to permit informed judgements and decisions by users of the information.¹

This definition may appear short, but it has been widely quoted over a number of years and is sufficient to specify the entire contents of this introductory textbook.

Taking the definition word by word, it leads to the following questions:

1. What is the process?
2. How is financial information identified?
3. How is financial information measured?
4. How is financial information communicated?
5. What is an entity?
6. Who are the users of financial information about an entity?
7. What types of judgements and decisions do these users make?

Writing the questions in this order is slightly dangerous because it starts by emphasising the process and waits until the final question to ask about the use of the information. The danger is that accountants may design the process first and then hope to show that it is suitable to...

Table of contents

• Cover
• Title page
• Contents in brief
• Contents
• Preface to the eighth edition
• Publisher’s acknowledgements
• Financial accounting
• Part 1 A conceptual framework: setting the scene
• Part 2 Reporting the transactions of a business
• Part 3 Recognition in financial statements
• Part 4 Analysis and issues in reporting
• Financial accounting terms defined
• I Information extracted from annual report of Safe and Sure Group plc, used throughout Financial Accounting
• II Solutions to numerical and technical questions in Financial Accounting
• Index
• Imprint