INTERNATIONAL ACCOUNTING
Introduction
never stop daring.
Dr Myriam Mincheneau
Professor in management control.
Audencia
Three activities:
Teaching for bachelor and master students and continuing education
Research
Managerial activities:
Head of the accounting, management control and economics department
Head of finance/management control specialisation of the Bachelor in Management (3rd year)
Co-head of Audit specialisation of the Grande Ecole (M1 and M2).
Diplomas
In France
Phd in management control
DESCF : Professional diploma which represents the M2 level in accounting training.
In Canada
MBA
Before coming to Audencia, I worked in a few companies and at the same time I taught in management and engineering schools.
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SYLLABUS
Course description
This course aims to build understanding of the basic accounting principles,
transactions, and operations. This Accounting course will help students to
develop their skills in the accounting field.
Course objectives
After learning, students are enabled to:
1. Understand the connection between financial accounting and the
communication of information.
2. Identify and explain the meaning of standard accounting terms.
3. Explain the importance of learning to understand financial accounting.
4. Explain how accounting transactions affect the accounting equation,
income statement, statement of owner’s equity, and balance sheet.
5. Prepare a trial balance and subsidiary ledger reports and explain their
interrelationships and role in the accounting system.
SYLLABUS
Design of Optimized course This course consists of 6 parts:
teaching
1. Introduction to financial accounting
2. Current transactions
3. Inventories transactions and End-of-period adjustments
4. Financial statements (Income statement, statement of owner’s equity, and
balance sheet)
5. First analysis
6. Introduction to multi-capital accounting
Course Examining Mode
20%: continous assesment 1 on Blackboard (30 mn)
20%: continous assesment 2 on Blackboard (30 mn)
60%: Final examination (2 hours)
References
Accounting for Non-Accounting Students Tenth Edition John R. Dyson and Ellie
Franklin Pearson
Class material booklet
Teaching and learning methods
Before each class (Blackboard)
1)Read the summary sheets (learning hub session file)
During each class
1) Review of the Lesson(teacher)
2) Surfing case’s preparation (group)
3) Surfing case’s correction
4) Case study(group)
5) Case study’s correction
6) ungraded test on blackboard
After each session
1) Review the session
2) Make self-corrected practical cases or prepare cases for next session
MATERIAL REQUIRED IN CLASS
Surfing’s booklet
Case studies’ booklet
Chart of accounts
Calculator
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HOW IS A COMPANY MANAGED ?
never stop daring.
HOW IS A COMPANY MANAGED ?
Market
Strategy
Investments
policy
Human
resources
management
Financial approach
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Marketing plan
Communication
Business
WHAT IS ACCOUNTING?
never stop daring.
DEFINITION OF ACCOUNTING
Objective:
Provide figures to report on the management and financial situation of the organisation
To whom?
Internal and external parties
Financial accouting is an information system which represents:
• Something
• By somebody
• For someone
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SEVERAL ACCOUNTINGS
Financial accounting
Managerial / cost accounting
For third parties
Internal use
Standardised with regulations
Not standardized, based on methods but tailored
by and for the company
Give a global vision of the situation of the
company
To measure the performance of a project, a
departement, the sale of a product…
To compare the economic situation of the firm
with its business industry, other companies…
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USERS OF ACCOUNTING INFORMATION
An information system for someone: you have to name the users, the
recipients of the accounting information
Internal users:
External users:
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WHAT IS THE INPUT OF ACCOUNTING: FLOWS BETWEEN THE COMPANY AND
STAKEHOLORS
Name the third parties with whom the company has exchanges and the nature of these
exchanges
Company or entity
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FLOWS WITH STAKEHOLDERS
The economy of a company is represented by exchanges, flows with third parties, internal or external. The purpose of accounting is
to describe all these exchanges.
Employees
Customers
Suppliers
Company or entity
Associates or
shareholders
Social
organizations
State and local
authorities
Banks
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SOME EXAMPLES OF ECONOMIC EXCHANGES
CU stands for currency unit such as dollar, pound…
Each exchange involves at least two flows:
receipt of a machine against cash out
When the company receives something from a third party in exchange, it gives or owes something else of
the same amount to the latter.
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SOME EXAMPLES OF ECONOMIC EXCHANGES
CU stands for currency unit such as dollar, pound…
Each exchange involves at least two flows:
cash in against a repayment obligation
When the company receives something from a third party in exchange, it gives or owes something else of
the same amount to the latter.
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CASE 1
Identify the stakeholders mentioned in the following transactions carried out by the company, the
flows between the company and these stakeholders and the transactions you would record.
1.
2.
3.
4.
5.
6.
7.
8.
01/01/Y Creation of the company: the business associates provide £45 000 in cash
10/01/Y Loan taken out from HSBC
15/03/Y Purchase of goods on credit
20/04/Y Sale of goods in cash
15/05/Y Hiring of a new employee
30/05/Y Drawing up of payroll and payment of salary to new employee
15/06/Y Payment of social security contributions to HMRC (Her Majesty’s Revenue and Customs)
30/06/Y Payment of a loan instalment
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COMMON RULES TO TRANSCRIPT THESE FLOWS
Events, exchanges
Accounting standards
& managerial choices
GAAP
Generally
Accepted
Accounting
Principles
IAS
International
Accounting
Standards
IFRS
International
Financial
Reporting
Standards
SELFREGULATION
Financial reporting
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Some options
are allowed by
the standards
Professional
firms
Professional
bodies
COMMON RULES TO TRANSCRIPT THESE FLOWS
Accounts and financial statements of smaller entities are done in accordance with the
Accounting guideline of their country: Generally Accepted Accounting Principles
(GAAP)
Larger entities listed on a stock exchange prepare their accounts under the international
accounting standards (IAS) and financial statements under International Financial
Reporting Standards (IFRS).
These standards are issued by an international regulatory body called the International
Accounting Standards Board (IASB).
Finally, in each country, self-regulation is carried out by professionals: Professional firms,
professional bodies and Chartered accountants.
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ACCOUNTING PRINCIPLES
Financial statements have to comply with accounting principles
Relevance
Reliability
Comparability
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RELEVANCE
Relevance: the information directly relates to the facts which are evaluated or made
understandable.
The absence of relevant information impacts the decision-making process of the users of
financial statements.
Relevant information should help a user to know the situation of the company but also
what it is going next, il has a « predictive value ».
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RELIABILITY
Reliability: you can depend on the information to make right decision. The information
must:
• Show the real situation. Representational faithfulness
• Be neutral: objective, unbiased.
• Be complete: containing all significant information.
• Be correct: free from material error (do not contain any serious or substantial
misstatements: the threshold depends on the size of the company…)
• Be prudent: not overestimate the amount of revenues and the value of assets or
underestimate the amount of expenses and liabilities (recognition of provisions for
example). One should then be conservative in recording the amount of the assets.
If information has been omitted or contains a material error = Financial
statements are misleading!!!
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COMPARABILITY
The information must be comparable with the previous
periods and with other companies.
The information must also be consistent. This means that the
company uses the same accounting treatment for the
same type of transactions (within the same financial year
and over years).
However, the company may switch accounting methods if
it is relevant and more accurate.
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TRANSCRIPTION OF THESE FLOWS IN ACCOUNTING :
DOUBLE-ENTRY ACCOUNTING
Each exchange involves at least two flows:
- Example 1: receipt of a machine against cash out.
- Example 2: cash in against a repayment obligation.
When the company receives something from a third party in exchange, it gives or owes
something else of the same amount to the latter.
I receive or I will receive …….… I give or I will give (I owe)
DEBIT
CREDIT
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BASIC UNIT OF ACCOUNTING: THE ACCOUNT (T-ACCOUNT)
The account is a table that represents a component of the business.
It is intended to record the flows concerning this component:
• the value of this component at the time of its entry into the assets,
• its changes in value during each accounting period.
It is used to sort and store all transactions of the company with third parties.
All transactions of the same nature will be recorded in the same account.
Debit (Dr)
Account name
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Credit (Cr)
DEBIT OR CREDIT ?
The firm
receives a
machine:
Technical
equipment on
debit
I receive or I will receive
DEBIT
The firm gives
money: cash at
bank on credit
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… I give or I will give (I owe)
CREDIT
DEBIT OR CREDIT ?
The firm
receives
money: cash at
bank on debit
I receive or I will receive
DEBIT
The firm owes
money: loans
payable on
credit
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… I give or I will give (I owe)
CREDIT
PROCESS AND DOCUMENTS
never stop daring.
From daily accounting entries to financial statements
Accounting documents
Invoice
1
Daily accounting works
Periodic works
End-of-year works
From daily accounting entries to financial statements
Accounting documents
Invoice
1
Company journal
Date
Account
D
C
01/01/Y
02/01/Y
Daily accounting works
Periodic works
End-of-year works
FROM DAILY ACCOUNTING ENTRIES TO FINANCIAL STATEMENTS
The journal which records the accounting transactions one by one in chronological order, each
operation results in an entry.
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From daily accounting entries to financial statements
Accounting documents
General ledger
Invoice
1
Account XXX
D
C
Total
Company journal
Date
Account
D
C
01/01/Y
02/01/Y
Daily accounting works
Periodic works
End-of-year works
FROM DAILY ACCOUNTING ENTRIES TO FINANCIAL STATEMENTS
The journal which records the accounting transactions one by one in chronological order, each
operation results in an entry.
The general ledger groups together all the accounts.
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From daily accounting entries to financial statements
Accounting documents
General ledger
Invoice
1
Account XXX
D
C
Total
Company journal
Date
Account
01/01/Y
D
Trial balance
C
Account
Balance
D
C
02/01/Y
Total
Daily accounting works
Periodic works
End-of-year works
FROM DAILY ACCOUNTING ENTRIES TO FINANCIAL STATEMENTS
The journal which records the accounting transactions one by one in chronological order, each
operation results in an entry.
The general ledger groups together all the accounts.
The trial balance is a worksheet that compiles the balance of the general ledger’s accounts.
W
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From daily accounting entries to financial statements
Accounting documents
Income statement
General ledger
Y
Sales
Account XXX
D
C
Invoice
1
Cost of goods sold
Gross profit
Operating profit
Income tax
Total
Journal
Date
Account
01/01/Y
Net profit
Trial balance
D
C
Account
Balance
D
C
02/01/Y
Total
Daily accounting works
Periodic works
End-of-year works
FROM DAILY ACCOUNTING ENTRIES TO FINANCIAL STATEMENTS
Financial statements: at the end of each accounting year, the company must close its annual
accounts and prepare documents summarizing its situation at a given time.
The income Statement (or profit and loss statement) is a calculation of what profit or loss you
might have made over a period time.
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From daily accounting entries to financial statements
Accounting documents
Income statement
General ledger
Y
Sales
Account XXX
D
C
Invoice
1
Cost of goods sold
Gross profit
Operating profit
Income tax
Total
Journal
Date
Account
01/01/Y
Net profit
Statement of
owner’equity
Trial balance
D
C
Account
Balance
D
C
Y
Opening balance
New shares
Net profit
02/01/Y
Total
Dividends
Closing balance
Daily accounting works
Periodic works
End-of-year works
From daily accounting entries to financial statements
Accounting documents
Income statement
General ledger
Balance sheet
Y
Y
Account XXX
D
C
Invoice
1
Sales
Fixed assets
Cost of goods sold
Current assets
Gross profit
Creditors… within 1 year
Operating profit
Creditors… after more than
1 year
Income tax
Total
Journal
Date
Account
01/01/Y
Net profit
C
Account
Balance
D
C
Y
Opening balance
New shares
Net profit
02/01/Y
Total
Dividends
Closing balance
Daily accounting works
Periodic works
Capital & reserves
Statement of
owner’equity
Trial balance
D
Net assets
End-of-year works
From daily accounting entries to financial statements
Accounting documents
Income statement
General ledger
Balance sheet
Y
Y
Account XXX
D
C
Invoice
1
Sales
Fixed assets
Cost of goods sold
Current assets
Gross profit
Creditors… within 1 year
Operating profit
Creditors… after more than
1 year
Income tax
Total
Journal
Date
Account
01/01/Y
Net profit
C
Account
Balance
D
C
Total
Opening balance
New shares
Dividends
Closing balance
Daily accounting works
Periodic works
Statement of cash flow
Y
Y
Net profit
02/01/Y
Capital & reserves
Statement of
owner’equity
Trial balance
D
Net assets
End-of-year works
Cash from operating activities
Cash from investing activities
Cash from financing activities
Cash and cash equivalent at
beginning of year
Cash and cash equivalent at
end of year
FROM DAILY ACCOUNTING ENTRIES TO FINANCIAL STATEMENTS
Financial statements: at the end of each accounting year, the company must close its annual
accounts and prepare documents summarizing its situation at a given time.
The income Statement (or profit and loss statement) is a calculation of what profit or loss you
might have made over a period time.
The balance Sheet (or statement of financial position) is a summary of what you own and
control, and what you are owed at the end of the period.
Depending on the accounting standards and the accounting process of the organization,
some companies also disclose
The Statement of retained earnings or the Statement of owner equity shows how much of a
dividend is paid to shareholders out of the profit for the period and any other contributions to or
from shareholders.
The Statement of cash flows is a summary of what cash you received and what cash you have
paid in that particular period.
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Merci de votre attention.