Fundamentals of financial and management accounting

Overview

Class Central Tips

This is an introductory course on financial and management accounting. The first part of this course will introduce the basic accounting principles and accounting terminology to understand how a company keeps control of financial events and provides information on how it is performing. These basic concepts will support the analysis of financial reports companies prepare. We will go through balance sheet, income statement, financial statement, learning how to read and analyze them. The course will also provide the basis of management accounting introducing some techniques (e.g. break- even analysis or NPV) to support managers in making short-term and long-term decisions, such as "Is it convenient to dispose a production machine and buy a new one?" or "How many products should the company sell in order to break-even?" The course will bring examples and case studies that will help students better understand the practical applications of the basic accounting principles and techniques. At the end of the course, students will be able to read, understand and analyze financial documents and to apply simple techniques to analyse costs and evaluate capital investment decisions.

Syllabus

Week 1 - Introduction to accounting

Within this week we will define what is an enterprise, what is accounting and we will discuss the distinction between financial and management accounting.

Financial reports

Within this week we will learn what is the "Annual report" and its components: balance sheet, income statement, cash flow statement.

Management accounting

Within this week we will learn the definition of management accounting, the definition of costs and their classification and the reference schema for cost allocation (proportional vs causal allocation).

Long-term decision making

Within this week we will learn the definition of decision making and the classification of the different types of decisions. We will introduce the concept of investment appraisal and explain the NPV formula for investment appraisal. We will furthermore solve small example of NPV application.

Short term decision making

Within this week we will introduce the basic concepts of short-term decision making: contribution margin, fixed costs, variable costs and avoidable costs. We will approach cost-volume-profit analysis and discuss examples of it.