Accounting For

Managers
Level 3 - UMAD5S-15-3
Week 1
Format of the Module…..
1 lecture a week for 1 semester. Main knowledge
1 lectorial a week for 1 semester. Illustration /
Example
Attendance crucial for working through examples
and gaining extra info!
1 tutorial workshop a week – putting theory into
practice and a chance to ask questions
Tutors
Ian Janes – Module Leader, takes Lectures,
Lectorials and some tutorials
Some tutorials will be taken by Helen Zhang
Students must stay in their designated tutorial
workshop group and NOT switch to other groups
Reading & Blackboard….
Core Text: ‘Accounting and Finance`: An
Introduction’
Module booklet – list of reading to be done in
advance of each workshop
Module booklet info also available on backboard
Tutorial solutions go up at the end of each week
Learning Outcomes &
Assessments…..
On completing this module you will understand:
- knowledge and skills needed to understanding key financial
concepts relevant to managers in a variety of business fields.
- how to work with accountants in dealing with business
problems.
- understand the financial techniques used in business today.
Coursework – 40%
Examination January – 2.5 hours – 60%
Why do we need to understand
finance?
Isn’t it just for boring people??
NO – It’s for Business People
Accounting is the language of business
In business – you need to be able to speak it
whatever your role or function
Why do we need to understand
financial information?
Its not just accountants that need to be concerned
about financial side of the business

If you work in business – likely that some form of

financial recording/performance measurement will be
part of your role

Financial management is a crucial aspect of all

thriving businesses
Why do we need to understand
financial information?
No department can work in isolation, need to
understand financial implications of
marketing/recruitment/investment/pricing
decisions:

Decisions based on information across

departments and involving many people – the
departments must work as a team!
Why do we need to understand
financial information?

This module will equip you with the skills you need
to successfully manage a business

To get ahead in business – you need accounting

skills!
Revision: What is Accounting?
Collecting, analysing & communicating financial
information

Allows managers to monitor, plan & control activities of

the business

Promotes informed decision making

Main Users: customers, competitors, employees,

government, community, investment analysts, suppliers,
lenders, managers & shareholders
The Main Features of Limited
Companies (1)
Legal nature
An artificial person
Incorporated by registration
Members or shareholders

Perpetual life
Shares passed to beneficiaries
Co. will continue unless there is voluntary liquidation

Limited liability
Co. is distinct from its owners
The Main Features of Limited
Companies (2)
Legal safeguards
Restrictions on withdrawal of equity
Published accounts

Public and private companies

Taxation
Corporation Tax paid in the UK
Now 19%
(significant given that basic rate income tax is 20%?)
Corporation Tax set to fall to 17% in 2020
The Main Features of Limited
Companies (3)
The role of the Stock Exchange
Primary market – new finance
Secondary market – trade in existing securities

Divorce of ownership and control

The Principal / Agent dilemma
 Public and private limited companies

Numbers of public and private limited companies in the UK, 2011/12

Figure 4.1
to 2015/16
Source: Based on information in Companies Register Activities in the United Kingdom 2015/16, Statistical Tables on Companies
Registration Activities 2011/12 to 2015/16, Analysis of the Companies Register Table A2 and Table A3, www.companieshouse.gov.uk
Capital structure and finance
costs
Ordinary share capital
Issued share capital is the actual share capital that
has been issued to shareholders.

Called up share capital is the amount of the

nominal value paid by the shareholder plus any
further amounts agreed to be paid in the future.

Paid up share capital is the amount of the nominal

value which has been paid at the current date.
Accounting for the issue of
shares
Shares issued at nominal Shares issued above the
value nominal value (premium)

Dr Cash Dr Cash
Cr Nominal value x no. Cr Share capital
shares Cr Share premium
Rights issue
The offer of new shares to existing shareholders in
proportion to their existing shareholding at a stated
price.
Advantages Disadvantages

Cheap to raise More expensive than issuing

finance debt

More successful than It may be unsuccessful in

selling shares to the raising the finance
public
Bonus issue
The issue of new shares to existing shareholders in
proportion to their existing shareholding. No cash is
received from a bonus issue.
Advantages Disadvantages
Market value of Admin costs of making the
shares reduce and bonus issue
therefore become
more marketable.

Issued share capital is

brought more into
line with assets
employed.
Accounting entries - bonus
issue
Dr Share premium Nominal value
or Dr Reserves

Cr Share capital Nominal value

Preference shares
Redeemable Irredeemable

The accounting treatment Shareholding and

is the same as loan dividends treated the
notes same as ordinary
shares
Dividends
Ordinary dividends – interim dividend
 The distribution of profits to shareholders e.g. 10c per share or
10% of nominal value.
Dr Retained earnings
Cr Bank
Final proposed dividends cannot be recorded as liabilities at the
year end unless they have been properly authorised before the
year end date

Preference dividends
 Usually based on a predetermined amount, such as 5% of the
nominal value of the shareholding.
Loan notes (loan stock)
Fixed term loans.
A ‘loan note’ is the document that is evident of the debt.
Accounting entries:
When the finance is first received
Dr Cash
Cr Long term liability
Finance charge
Dr Finance charges
Cr Cash/current liabilities