Subject Outline

Subject for Subject Code Subject Title Subject Credits Section Instructor Office Phone Email : : : : : : : : : MBA Semester I July 2011 -13 Batch MGT 521 Financial Reporting and Cost Control 3 Credits Section E Dr. R. Soundara Rajan, Alliance University Central Campus, NF 006 080 - 30938165

Instructor’s Profile: Over 39 years of work experience in industry out of which over 20 years in senior Management Positions as General Manager / company secretary. Work experience includes areas such as software Development, Finance and Audit, Business strategy, MIS, Computer center operation, management consultancy, ISO and standardization, Training and development, company secretarial functions including corporate governance. Worked as a Part time faculty / Evaluator / Paper setter with Professional Institutes such as Institute of chartered Accountants, Institute of Cost and works Accountants, Institute of company secretary and was a faculty for MBA program at Jamia Milia Delhi for business Legislation. Published number of papers in national and international forums A gold medalist from REC Trichy in B.E. ( Hons), Member of ICWA, Member of Company Secretary, MBA, M. Phil( Management) and Doctorate in Management

Subject Description: This subject aims to create a good understanding of the financial statements and the other components of the Annual Report like note on Accounts and Management Discussion & analysis that will have a bearing on the analysis and interpretation of these financial statements. It focuses

mainly on various tools for analyses and interpretation like ratio analysis, funds flow and cash flow analysis, highlighting sensitivity cash flow analysis. It also aims to underline the importance of transparency in disclosures with brief references to corporate governance. In addition it also introduces to the students, the tools for decision making such as cost-volume profit analysis and the applications of marginal costing. It provides an overview of the control techniques such as budgetary control, standard costing and variance analysis. Since, cost control and cost reduction have assumed greater significance in view of the recent recession elsewhere in the world and the consequent slow down in our own country, understanding cost concepts, costing methods and techniques, dissemination of costing information have become integral part of reporting. Hence, the subject also covers the various elements of cost, the methods of costing, with reference to different industries and also the costing techniques such as activity based costing and activity based management. Class Meets Office Hours Objective of the Subject: This course in FRCC has been designed to enable the student to acquire the skills necessary to use, interpret and analyze accounting data. The ultimate objective is to enable the student to become a better manager. The student should: • • • • • • • • • Understand the goal of presenting useful information to financial statement users so that proper decisions can be made Understand how to furnish information about the firm's economic resources, claims against those resources, owners’ equity, and changes in resources and claims Understand the evaluation of the amounts, timing, and uncertainties of cash flows Understand how cost control achieve the targeted cost objectives through the realization of predetermined cost targets to reduce costs Understand the significance of cost control and also the need to re-understand the cost implications Understand the various tools and techniques of costing and strategic cost management Understand the functions of each responsibility center within an organization and what are the inter-linkages between those centers Acquire the skills necessary to read, interpret and perform the calculations for the accounting reports involved in cost control and profit planning. be able to identify financial strengths and weaknesses of a business through appropriate analysis : : As per Dean’s Office schedule By appointment only

Subject structure:
LEARNING OBJECTIVES On completion of this unit you should be able to: ASSESSMENT CRITERIA To achieve the learning outcome you must demonstrate the ability to:

FINANCIAL REPORTING AND COST CONTROL Units Session Topics Session Required

COMPANIES FINAL ACCOUNTS – Introduction, Characteristics of companies, Form and contents of Balance sheet and Profit and loss Unit – account, Classification of items on a balance sheet, Off Balance sheet items, 1 Treatment of events occurring after Balance sheet and New form of Companies Balance sheet. ( Only theory)


Understanding the contents and format of P&L and Balance sheet of companies Understanding Annual reports and annexure Basic company law provisions related to annual reports

The students will be evaluated based on the conceptual understanding of the learning objectives and Learn how to read and understand financial statements and to observe the effects of routine business transactions on them. In the examination how accounting can be viewed as an information system In the presentation Appreciate the ethical issues and problems involved in using financial statement and window dressing. In the examination Reasons for Window Dressing and Why do these financial statement frauds and Window dressing take place


Limitations of Financial statements and Window Dressing. ( Only theory)


Understand the limitations of financial statement and creative accounting methodologies used by companies

Analysis and Interpretation of Financial statements, Ratio Analysis – Meaning of ratio, classification of ratios, Liquidity ratios, capital structure Unit-3 or solvency ratios, turnover or activity ratios, Profitability ratios, Advantages and Limitations of ratio analysis and its computations (Case study and Practicals)


Explain the meaning of performance, financial Status and investor ratios. Calculate investment Ratios and financial ratios in respect of performance and financial status of an enterprise. Interpret the results of the analysis of financial ratios of performance and financial status and investor ratios for users of financial statements. Explain the relationship between equity and debt Within a business (i.e. the gearing). Identification of flow of funds Steps in preparation of funds flow statement Advantages and significances of funds flow statement Difference between funds flow statement and financial statement, difference between FFS and Income statement

In the presentation, in the class through liquidity, capital structure, profitability, turnover and market ratio Calculation of different Ratios. Interpretation of the same. In the final examination analyses of financial statement through ratio analysis by using different ratios


Fund Flow statements Meaning of Fund Flow statements, Advantages of Fund Flow Statements ( only Theory)


In the presentation and in the examination examine FFS managerial uses, how do you construct FFS, funds from operation, treatment of profit on sale of investment in a FFS .


Cash Flow statements Meaning of Cash Flow statements, Meaning of cash flow, Classification of cash flows (AS-3), Treatment of items, preparation of Cash Flow statements, calculation of cash flow from operating activities, calculation of cash flow from investing activities, calculation of Financing activities, objectives and uses of cash flow statements and its computations. (Case study and Practicals )


Understand Advantages and Limitations of Cash Flow statements, Distinction between Fund Flow and Cash Flow Statement, Preparation of Cash Flow Statement (As per Accounting Standards 3)

In the case study discussions and Preparation of Funds from Operation, Investment and Financing Activity as per accounting standard AS 3. Be able to perform basic financial statement analysis. In the final examination preparation of cash flow statement.

Unit 6

Depreciation policy, Distinction between depreciation and Amortization (Theory)


Understand why businesses depreciate assets. Understand the conceptual difference between depreciation and cost recovery. Prepare a depreciation schedule using the straight-line method. And WDV method Understand major classification of inventory Distinguish between perpetual and periodical inventory Understand significance uses of FIFO and weighted average inventory valuation method, understand why company select given inventory method and impact to income and financial statement

In the presentation and in the examination different type of depreciation , Understand the conceptual difference between depreciation and cost recovery and SLM and WDV ( theoretical part only) In the presentation Methods of pricing of material issues and its impact on profitability. Inventory valuation method FIFO and weighted average and in the examination FIFO and weighted average inventory valuation practicals In the class presentation and

Unit 7

Inventory Valuation Methods of pricing of material issues and its impact on profitability. Inventory valuation method FIFO and weighted average (Case study and Practicals )


Unit 8

Introduction to cost concepts and cost accounting Concept of cost, cost centre, cost unit, methods and Technique of costing, Classification o costs, Elements of costs, Cost control and cost reduction. (Theory)


Determine cost classifications based on how the cost will be used Integration of cost and financial accounting Characteristics of good costing system. Different types of cost. Different methods of costing

Determine the costing method to use in custom situations and in massproduction situations and know how to apply those methods. In the examination different type of cost, objectives of costing , different methods of costing, difference between costing and financial accounting

Unit Costing : Objectives, procedure Unit 9 and its computation (tender and quotations) (Case study and Practicals ) 1

Understand the unit costing, Type of industries in which this system is used Describe usefulness of unit costing Why operating cost is called as services costing? Cost sheet and classification cost

In the class presentation and quiz Objectives, procedure and its computation and I the examination tender and quotation problems

Overheads accounting: Meaning and classification of overheads, accounting for overheads, allocation and apportionment of overheads, Re- apportionment of service department costs, absorption of overheads, methods of absorptions, and computations(only theory) Steps in over heads Allocation and Apportionment 2 Absorption of factory over head , administrative over heads, collection of over heads


In the presentation and case analysis allocation of over heads, collection of over heads and apportionment in the examination classification of overheads, method of reapportionment of services department cost, simulation equation method, repeated distribution method and trial and error method theoretical understanding In the presentation and in the case Activity based costing and theoretical aspects on traditional and the activitybased costing approaches to designing a costing system In the examination Use activity-based costing systems for activity-based management , Appreciate the significance of organisational context issues in activity-based costing/management system design and implementation distinguish between the traditional and the activity-based costing approaches to designing a costing system

Unit 11

Activity based costing and activity based management (Case study and Practicals )


Understanding under costing and over costing of products distinguish between the traditional and the activity-based costing approaches to designing a costing system Describe a four-part cost hierarchy Cost products or services using activitybased costing Use activity-based costing systems for activity-based management Compare activity-based costing and department-costing systems Appreciate the significance of organisational context issues in activitybased costing/management system design and implementation Need of the budget

Budgetary control: Unit 12 Meaning of budget, budgetary control, objectives and advantages, limitations, Flexible Budget and Cash Budget only – Computations (Case study and Practicals ) 2 session

Objectives and Functions Advantages and Limitations, Classification Preparation of Cash and Flexible Budget

In the presentation and in the examination prepare and evaluate cash well as flexible budgets and understand the different types of budget

Standard Costing and Variance analysis: Unit 13 Meaning of Standard cost and standard costing, Application of standard costing, Types of standards, VARIANCE Analysis, Material and Labour analysis only. (Case study and Practicals ) Tools for Decision Making and CVP Analysis including Marginal costing: Meaning of marginal cost, marginal costing, CVP analysis and Break even analysis, Contribution and P/V ratio, Margin of safety, Key factors Application of marginal costing. Decision making : Make or buy, Accept or reject and Product Mix – Computation (Case study and Practicals ) Understand the Standard costing and Budgetary control, Variance analysis , utility of variance analysis, material variance, labor variance

2 session

In the presentation and case standard costing and material variance and labour variance. In the examination theoretical and practical aspects on variance, material variance and labour variance

Unit 14

3 session

Relevance of adopting C-V-P concept in business operations. Concept of "contribution". How is it related to profit Application of marginal costing, pricing decision Maintain desired level of profit Accepting additional order Fixation of selling price Key factor analysis Alternative course of action Alternative methods of production Selection of suitable product mix Determining optimum level Evaluation of performances Concept of responsibility accounting, implementation of responsibility accounting, centers for controlling responsibility accounting organizational aspect of responsibility accounting, management repost system, social report system

In the presentation Understand the critical tradeoffs existing between total cost and sales volume in determining desired profit goals. How costs respond to changes in production levels, and how those changes affect managements’ decision to expand or reduce capacity levels. In the examination Decision making problems and theory

Unit 15

Responsibility accounting (Only theory)

1 session

In the presentation and case responsibility centers, implementation of responsibility accounting system, in the examination centers for controlling responsibility accounting organizational aspect of responsibility accounting, management repost system, social report system ( only theoretical aspects)

Prescribed Textbook – Management Accounting Text, Problems and Cases by Khan and Jain (Latest Edition) Tata McGraw-Hill Publications Bibliographical material (including electronic resources) Textbook: 1. Financial Reporting and Management Accounting, by William J. Bruns, Jr., Cengage Learning 2. Management Accounting by Khan and Jain ISBN No 5e edition McGraw Hill Education India Pvt Ltd 3. Management Accounting By Dr. Sudhindra Bhat 1st edition Excel Books new Delhi 4. Advanced Financial Management by Dr. S. N. Maheshwari Published by Sultan Chand and Sons, 2007 edition 5. Cost and Management Accounting, by M. N. Arora, 9th Edition, Vikas Publishing House 6. Annual Reports of Selected Companies 7. Analysts’ Reports on Different Industries & Companies. Websites: 1. 2. 3. 4. 5. 6. 7. Subject Culture and Pedagogy 1. 2. 3. 4. Lectures Student presentation and class room exercises Group discussion Case Analysis • Financial Terror on Investor’s: “A case study on Satyam Computer Services” by Dr. T.N. Ravi. • Driving down the bumpy road to safety: “A case study on TATA Motors” by Dr. T.N. Ravi

Implementing Activity Based Costing Model for a Financial Services Firm: “A case study on Unicon Securities Ltd.” by Mr. Vishal Agarwal and Prof. Anirban Dutta

Major Assignments: 1. Building a comprehensive report on a particular firm that would include the following: 1. 2. Executive Summary Introduction a. Industry Overview – India b. Company Overview Financial Analysis (last 5 years) a. Analysis of long-term assets & liabilities b. Analysis of working capital c. Analysis of profits d. Analysis of cash flows e. Analysis of investments f. Analysis of share price (BSE/NSE) Future outlook of the company Conclusion References (250 words) (2 pages) (2 pages) (2 pages) (2 pages) (2 pages) (2 pages) (2 pages) (2 pages) (2 pages) (500 words)


4. 5. 6.

2. In-depth study of manufacturing firm, covering following aspects 1. 2. 3. 4. Existing cost management principles and practices of the firm Lean management initiatives for cost reduction and cost control Innovation in the fields of inventory management, employee cost management, etc. Identifying issues related to product cost and solutions implemented

The objective of this assignment is to have hands on knowledge of the current practices in the industry and be abreast with the latest trends. ASSESSMENT Learning in this subject results primarily from in-class discussion and problem-solving as well as out-of-class analysis. Students will be encouraged to think, analyze, evaluate, and solve Problems – that is, not memorize. Students are expected to come to class on time and be prepared for the class (having read the assigned reading and done the assigned problems). The final student grade will be calculated as follows: Continuous Assessment (class individual participation) 10 grade

Quiz Exam - 10 Written Midterm exam - 20 Case presentation or Assignment - 10 Final Examination - 50 Total 100 Grade

Scheme of Evaluation Grading System

: Refer to Alliance Learning Experience Program Catalog : Refer to Alliance Learning Experience Program Catalog

Sign up to vote on this title
UsefulNot useful