VILLANOVA UNIVERSITY
COLLEGE OF COMMERCE AND FINANCE
EMBA--Accounting
Instructor:
Robert N. West, Ph.D., CPA
Office:
2040 Bartley Hall
Office Hours - by appointment. I will promptly respond to
email and voice messages
519-4359 (secretary, 519-4340)
519-5204
Phone:
Fax:
Email:
Web Page:
Required Text:
Prerequisites:
robert.west@villanova.edu
www.homepage.villanova.edu/robert.west/emba101
Accounting: Text and Cases, Tenth Edition, Anthony,
Hawkins, and Merchant, Irwin McGraw-Hill Publishing Co.,
1999.
Basic understanding of accounting record keeping.
Proficiency in Excel.
Course Objectives:
 To prepare, understand, and analyze a set of financial statements.
 To obtain a basic understanding of accounting transactions
 To understand critical accounting concepts
 To understand how to use financial information to make decisions and
measure performance
 To think critically, actively participate in case discussions, and to be a
proficient user of information technology tools (primarily Excel).
Course Content:
This course will cover the basics of both financial and managerial accounting. Financial
accounting covers the material necessary to understand the financial statements: the
Balance Sheet, the Income Statement, and the Statement of Cash Flows. Managerial
accounting covers the use of financial information to make decisions. Managerial
accounting topics include budgeting, cost accounting systems, relevant cost analyses,
and performance measurement.
Your text includes 28 chapters. The first 14 chapters cover financial accounting topics
and the last 14 chapters cover managerial accounting. (We will not cover all of the
chapters. We cover in detail approximately 10-12 chapters.)
The first two classes will cover the fundamentals of financial accounting and managerial
accounting. Introductory financial topics will include transaction analysis, basic financial
statement preparation, and an overview of the three financial statements. Introductory
managerial topics will include cost behavior (fixed costs, variable costs, etc.) and
budgeting. Your first project will be to prepare a set of budgeted financial statements
using a spreadsheet (we will perform a sensitivity "what-if" analysis).
The remaining classes will cover a topic and a case each session. For those classes, a
formal written analysis is required. Your grade will largely be determined by your written
and verbal analysis of these cases. An in-class exam will be given at the end of the
financial accounting module (week seven). The exam will focus primarily on the
Statement of Cash Flows.
Topics for sessions three through ten include:
 Budgeting and Performance Measurement
 Investing Activity (Plant & Equipment, Investments in Stock)
 Financing Activity (Debt and Equity)
 Statement of Cash Flows, Financial Statement Analysis
 Cost Systems (Activity Based Costing, Management of Costs)
 Management Control Systems
 Strategic Cost Management, Short-term and Long-term Decisions
 Performance Measurement, ERP Systems
Grading:




Spreadsheet Budget Project
Four Case Analyses (short typewritten papers)
One Midterm Exam (50-75 minutes)
Class Participation
Attendance Policy: Attendance and active class participation are expected.
Method of Instruction:
The socratic/case method will be used. I will ask questions and you will provide your
comments and analysis. The class will be highly interactive. I fully realize that you are
busy individuals, however, being prepared for class is critical for success in this course
(mastering the course objectives). Even those with financial backgrounds will find the
cases stimulating and challenging.
I plan to do exercises and short problems in class with you. Your homework will
primarily consist of reading text and preparing case analyses and some problems. We
will discuss the cases in class on the day that you turn in your case write-up. You can
ask me for extra problems if you need to work on your skills in selected chapters.
The last portion of each class (roughly one hour) will be devoted to the topic for the
upcoming class. I will use this time to lecture and cover exercises and short problems.
The Text:
We will not cover the entire text, but I have listed all of the chapters below. I have
referenced the class sessions in which the topics will be covered. I will provide
powerpoint slides for most chapters on my web page, so that you can refer to topics not
formally covered in class on your own if you wish.
Chapter
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Topic
Nature and Purpose of Accounting
The Balance Sheet
The Income Statement
Accounting Information Systems
Revenue Recognition and Monetary Assets
Inventory and Cost of Goods Sold (COGS)
Property, Plant & Equipment
Sources of Capital: Debt
Sources of Capital: Equity
Other Net Income and Equity Items
(Extraordinary Items, Discontinued
Operations, Change in Accounting Method,
Pensions, Deferred Taxes, Foreign Currency
Accounting, Derivatives, Net Income;
Reporting Nonroutine Items)
Statement of Cash Flow
Investments in Stock
Financial Statement Analysis
Financial Statement Analysis
Introduction to Management Accounting
Cost Behavior
Full Costs and Their Uses
Job Costing, Activity-Based Costing, and Cost
Allocations
Standard Cost, Variable Costing, Quality
Costs, and Joint Costs
Variance Analysis (Actual vs. Expected)
Variance Analysis
Management Control Environment
Responsibility Accounting, Transfer Prices
Management Control Process
Strategic Planning and Budgeting
Reporting and Evaluation
Short-Run Decisions
Longer-Run Decisions: Capital Budgeting
Management Accounting System Design
Session Covered
1
1,2,3
1,2,3
1,3
1,3
3
4
5
5
6
6,7
4
All
All
2
2
7,10
7
7
7
8
3
2,3,9
9
9
4,10 (Finance Module)
8,9,10
The assignment schedule on the following two pages is your primary guideline for the course's topical
coverage.
Tentative Assignment Schedule. The far right column shows what is due for each class session. For
the first class session, I would like you to feel comfortable with recording transactions. Recordkeeping
fundamentals are provided in your text on pages 86-94. Do the transactions on those pages and then do
the 21 transactions for New Co. listed on the last page of this syllabus. We will go over the answers to
NewCo. together during the first class session.
Date
Cl Topical Coverage
#
8/13 1 Course Overview
Concepts and Terminology
Class Exercises
Due for this Class
Text, Cases, Articles
Chap
"Be Data Literate"
1,2,3,4
Sheepherders
Six MC Questions
Financial Statement Analysis, basic Division A vs. Div. B
Transaction Analysis (spreadsheet NewCo.
format)
Read Chapters 1,2
And pp. 86-94.
NewCo.--transactions
(You do not have to
prepare the financial
statements)
Financing, Investing, Operating
Activity
Explain Spreadsheet Project
STI, Master Budget
Explain CM, FC, VC terminology
Refer to Key Terms
sheet as needed
8/16 2 Cost Behavior, Break-even, What-ifs T-Shirt Guys
3,4,16
Budget preparation
Statistics
Performance Reports, basic
Kerm County
Hospital (perhaps)
Cash Flow vs. Accrual Basis
SCF?
Accruals and Deferrals
My Adj Entries
Interest
CASE 2-1, 3-1
8/30 3 Budgets, What-ifs
Excel demos
2,3,4,
24
Receivables and Inventory
(STI, if time) 5,6
Revenue Recognition
Informal
Expense Recognition
What is Cost?
Mfg. Product costs vs. Period Costs
Dealing with estimates (warranties,
A/D/A)
9/13 4 Plant & Equipment
What is cost? Capitalize vs.
Expense
Depreciation--S/L vs. MACRS
Tax Implications. Cash Flow
implications
Capital Budgeting, Investment
Lease vs. Buy
Investments in Other Cos.,
Acquisitions
Selling Assets demo
"What's the debit?"
Read Chs. 3,16
(40 pages)
T-Shirt Guys, 30 min.
NewCo. Fin. Stmts.
"What is an Asset?"
Maynard (perhaps)
Excel, budgeted F/S
Tentex problem
Read 4,24 (half)
WSJ articles
Adj. Entries exercises
**VideoDad (budget)
7 Read Ch.7
Case 7-2
September STI
In-class--View SS.
12 Ch. 12 (11 pages)
9/27 5 Financing Issues
Mortgage Loan
Debt, Equity
Bond--Analyze an
Lease
Amtz Schedule
Leverage, Debt vs. Equity, ROE
Preferred Stock, Venture Capital
HBR, Stock or Cash
OTHER
Understanding F/S which have:
JV, Equity Method, Consolidation
Analyzing Return on Investment
Other: Deferred Taxes and Pensions
Foreign Currency, Derivatives: Issue awareness
8 Read Ch.8
**Butler Lumber
9 Browse the chapter
10 Read Ch.10 (parts)
UFS (in class)
(if time permits,not
graded)
Kansas City Zephyrs
10/11 6 Statement of Cash Flows (SCF)
Last part of class session:
Discuss the shift to Managerial Acc. Lecture Ch. 15
11 Read Ch. 11
SCF problems
10/25 7 What is Management Accounting?
Managing Costs (the many views of
cost)
Job Cost vs. ABC
Cost of Quality
Cost of Complexity
Budgets, Standards, Variances
18 Exam (100 min.)
Take home Excel
due
Read Ch. 18
11/8 8 Management Control
Responsibility Centers
Intro to Performance
Measurement, EVA
Transfer Pricing
Strategic Cost Management, intro
11/22 9 Strategic Cost Management
Creative Ways to Control Costs
ERP and Cost Systems
22 Read Ch. 22
**Shuman Auto, C221
or Birch Paper, C222
Make or Buy…
Southwest Airlines
Bellcore (HBR) article
26 Read Ch. 26
**Baldwin Bicycle
C26-5
ITT, Corp. Purchasing
Cards
12/13 10 Short-run and Long-run Decision
25 Read Ch. 25
Making
Performance Measurement, Intro to
**Bay Industries,
EVA
Capital Budgeting??? (intro)
Write about an issue from your company
System Design Issues
and how you would address it.
Recordkeeping Primer.
There are five categories of accounts: Assets, Liabilities, Equity, Revenues, and Expenses. The account is
the fundamental accounting vehicle for recording transactions. An account must fall in one (and only one)
category. The asset category includes accounts such as Cash, Accounts Receivable, Investments,
Inventory, Equipment, and Supplies. A typical chart of accounts for a small business might show 30 asset
accounts, 30 liability accounts, two equity accounts, five revenue accounts, and hundreds of expense
accounts. As you undoubtedly know from your business experience, companies like to know what they
are spending their money on--that's why they have so many expense accounts (and, to a lesser extent,
asset accounts).
The fundamental accounting equation is: Assets = Liabilities + Equity
You may have noticed that two categories of accounts are missing: revenues and expenses. Think of
them as extensions of equity--revenues increase equity and expenses decrease equity.
Recording transactions (journal entries). Accounting uses debits and credits for recording
transactions. Debit means LEFT and credit means RIGHT. Assets have a debit balance. Increases in
assets are represented by debits, decreases by credits. So, for example, when cash is received you
would DEBIT Cash, and when cash is paid you would credit Cash. Liabilities and Equity have credit (right)
balances. Increases to liabilities and equity are represented by credits and decreases by debits. Since
revenues increase equity, they must be credits. Since expenses decrease equity, they must be debits.
Revenues and expenses never (almost never) decrease. So expenses, for example, are never credited-only debited. Read the eight pages in chapter four and do the transactions. Want more practice--try P41,4-2,4-3. Read chapters one and two first, so you get comfortable with the account names. Try
NewCo. when you feel ready.
Transaction Exercises, New Company
NewCo. entered into the following transactions during 1999.
Transactions 1-3: Financing Activity
1. Issue common stock for $50,000.
2. Borrowed $10,000 from a relative at 12% annual interest.
3. Three months later paid back the loan plus interest.
Transactions 4-8: Purchase Assets (also known as making
investments)
4. Purchased land for $15,000.
5. Purchased a building for $50,000 paying $10,000 cash and taking out a mortgage
loan for the remainder.
6. Purchased inventory on credit for $1,000.
7. Paid for the inventory purchased in transaction 6.
8. Paid for a one year hazard insurance policy on the building,$600.
Conducted Business Operations
Transactions 9-15: Provide Goods and Services
9. Sold inventory with a cost of $500 for $1,500 cash.
10. Sold inventory, on credit, with a cost of $500 for $1,200.
11. Provided computer consulting services for a client for $800 cash.
12. Provided computer consulting services, on credit, for $100.
13. Received payment from the customer 30 days after providing the services listed in
transaction 12.
14. Received $500 in advance for computer consulting services to be provided over the
next few weeks.
15. Provided 60% of the services listed in transaction 14.
Transactions 16-19: Incur Expenses
16. Paid employees salaries, $2,000.
17. Paid for an ad in the local newspaper, $50.
18. Received the telephone bill, $200.
19. Paid the telephone bill (20 days after receiving the bill).
20. Insurance expired, $150.
21. NewCo declared and paid a $50 dividend.
Required:
Record the 21 entries in T accounts or in journal entries. (or use a spreadsheet labeling
the account names in the first row and the amounts in the next 21 rows).
The financial statements are not due for the first class; just do the journal entries. Once
we cover the entries in class, and you all have the correct answers, then you will do the
financial statements.
Class Two: Prepare an Income Statement, Balance Sheet, and Statement of Cash Flows.
(Note: the amounts aren't very realistic, but the point of this exercise is to record
transactions and then summarize them in a set of financial statements).
Key Accounting Terms
Abbreviations: Quick Definitions
Short-term Investments
Accounts Receivable
Allowance for Doubtful Accounts
STI
A/R
A/D/A
Bad Debt Expense
Inventory
Prepaid Expenses (Insur., Rent)
Property, Plant, and Equipment;
Fixed Assets (F/A = PP&E)
Accumulated Depreciation
Long-term Investments
Goodwill
Accounts Payable
Notes Payable
Interest Payable
Wages Payable
Dividends Payable
Unearned Revenue
Deferred Income Taxes Payable
Long-term Debt
Capital Lease Payable
Contingent Liability
Common Stock
Retained Earnings
Treasury Stock
Preferred Stock
Cost of Goods Sold
Gross Profit (or Margin)
Selling, General &Admin Exps.
Earnings Before Interest & Taxes
Net Income (=Profit = Earnings)
Income Statement (I/S = P&L)
Profit & Loss Statement
Balance Sheet (A = L & O/E)
Statement of Cash Flow
Current Assets
Current Liabilities
Working Capital
Return on Sales
Return on Assets
Return on Equity
Earnings Per Share
Price Earnings Ratio
B/D/E
PP&E
F/A
A/D
LTI
GW
A/P
N/P
I/P
W/P
D/P
DIT
LTD
C/S
R/E
T/S
P/S
COGS
GP
SG&A
EBIT
NI
I/S
P&L
B/S
SCF
C/A
C/L
W/C
ROS
ROA
ROE
EPS
P/E
Investments in stocks and debt securities
Money owed to you for services provided
Estimated amount of receivables that will not be
collected.
Estimated sales that will not be collected.
Goods held (or being made) for resale
Services paid for in advance
Land, buildings, and equipment (at Cost)
Same
Depreciation to date on buildings & equip.
Amount paid for stock of acquired company
Excess of amount paid over Book Value
Money owed to vendors due <= 30 days
Loans owed to bankers, etc. (principal)
Interest owed on outstanding loans
Wages owed to employees
Dividends declared and owed to owners
Cash received for work NOT yet performed
Taxes that will not be paid until future years
Debt to be paid after the upcoming year.
Debt on certain long-term leases
Liabilities that may or may not materialize
Stock owned by voting shareholders
Earnings not distributed as dividends.
[Cost of] Stock bought back from owners
Equity security that behaves more like debt.
Cost of inventory sold to customers (exp.)
Sales less COGS
Operating expenses for the period
Operating Income (usually)
Revenue minus all expenses (including taxes)
Revenue minus expenses for a period
(another name for the Income Statement)
Financial position at a point in time
Cash inflows and outflows for a period.
Cash or items that will convert to cash < 1yr
Debts to be paid in less than one year.
C/A – C/L
Operating Income/Sales
Operating Income/Assets
Operating Income/Equity
NI/[wtd. Average] number of shares of C/S
Market price of stock/EPS
This sheet is organized (primarily) in Balance Sheet order, then Income Stmt, then ratios.