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National Research University - Higher School of Economics
Faculty of World Economy and International Affairs
Course Syllabus and Description
Introduction to the Financial and Managerial
Accounting
Master of International Business Program
38.04.02 Management
Authors: Polina Vershinina, Maria Shevtsova, Tatiana Gavrilyuk
The Program cannot be used by other departments of the University and other universities without
prior permission from the Program authors’ department.
Moscow 2015
I.
General Course Information
1.
Overview
The course develops background for understanding and reading companies’ financial reports
and for assessing company’s financial position and making managerial decisions. The course covers basic
concepts of modern financial reporting and techniques of management accounting. It provides basic
knowledge in preparing, processing and interpreting the data about business transactions for different
types of external as well as internal investors, management and other accounting information users. The
course consists of lectures, seminars, case studies and self-study. “Principles of Accounting” is a threemonths course designed to prepare students for the “Corporate Finance” course.
2.
Course goals
The course is focused on developing skills required for preparing and analyzing companies’
financial statements and data for decision-making purposes. After completing the course students are
expected to be able to apply a set of accounting concepts to understand annual financial reports of
different corporations and calculate financial ratios to assess finance position. Students are expected to
apply managerial accounting analytical tools for internal control, pricing and developing different budgets
for financial planning purposes as well as to get essential skills in capital budgeting techniques.
Special attention is devoted to the conceptual basis of accounting, the basic accounting rules for
recording business operations, assets and liabilities, the methodology of preparing accounting reports, and
the requirements for their contents.
Duration of the Course - 228 hours, including 56 hours of an auditorium block (lectures
and seminars).
Self-study - 172 hours.
3.
Target audience
The Course is a mandatory for the 1st year students of “International Business” Master’s Program
at the Department of World Economy and International Affairs.
The Course could be also recommended to the students of other master’s programs in economics
and finance.
4.
The Methods of teaching
The studying process is based on following methods and forms of teaching: lectures, case-studies,
discussions, presentations, self-study, and final exam.
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Class attendance and preparation of the class material is obligatory. Lecture classes will consist of a
lecture by the instructor including discussions of the class material.
The course has 56 auditorium hours. The lectures are designed to help students to understand the
main concepts of the course. The tutorials provide illustrations of the frameworks taught during the
lectures. They are interactive and are aimed at enhancing the obtaining skills. Students should be prepared
to contribute to the discussion. Case studies are conducted in groups (up to 3-4 students) and facilitate
students to apply the knowledge gained during the course on a real examples.
5.
Assessment
The final grade for the course is based on accumulated grade for the classwork (40%) and the grade
for the final exam (60%). Accumulated classwork grade consists of two home assignments (20% - each),
class attendance (10%) and one intermediate test (50%). The exam is held in the form of a written test.
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II. Course Outline and list of readings
№
Topic
Total hours
classwork
total
Lectures
Seminars
homework including
homework
1
The nature and purpose of
accounting
4
1
3
14
18
2
Recording business transactions
9
4
5
20
29
3
Preparing financial statements
8
3
5
20
28
4
Analysis of financial statements.
Vertical and horizontal analysis.
4
1
3
14
18
5
Ratio analysis
4
1
3
14
18
6
Profitability ratios. Investment
analysis
4
1
3
14
18
7
The goals and tasks
managerial accounting.
4
1
3
14
18
8
Classifying
methods
7
2
5
20
27
9
Making management decisions
4
1
3
14
18
10
Budgeting
4
1
3
14
18
11
Monitoring budget fulfillment,
flexible budgeting
4
1
3
14
18
56
17
39
172
228
Total:
costs.
of
Costing
4
Topic 1. The nature and purpose of accounting.
The purpose of accounting. Financial reporting, Managerial reporting, Statistics and Tax
reporting. Basic accounting principles. Accounting standards, their role in financial accounting.
Qualitative characteristics of financial information: fair presentation, going concern, accruals,
consistency, materiality, relevance, reliability, faithful presentation, substance over form, neutrality,
prudence, completeness, comparability, understandability, business entity concept.
Topic 2. Recording business transactions
Double Entry accounting system. Debits and Credits, T-accounts, Books of prime entry,
Journals and Ledgers. Calculating account balances. Control accounts, The Chart of Accounts. The
accounting equation: Assets = Liabilities + Equity. Recording business transactions: their influence on the
accounting equation.
Recognition principles (periodic assumption, revenue and expense recognition).
Accruals
principle. Trial Balance; Building Accounting cycle, Year-end Adjustments (accrued income, deferred
income, accrued expenses, prepaid expenses, etc.), Closing entries. Reverse entries at the beginning of
the period.
Temporary (income and expense) versus permanent (assets and liabilities) accounts.
Recognition of expenses. Flow of costs (Opening inventory +purchases = Closing inventory +
Cost of Sales). Perpetual and periodic inventory systems. Recognition of sales.
Enterprise accounting policies: the means and organization of accounting, choosing accounting
methods.
Topic 3. Preparing Financial Statements.
Preparing Financial Statements
Components of Financial Statements: Statement of financial position (Balance Sheet), Income
Statement, Statement of changes in equity, Cash flow statement.
Statement of financial position (Balance sheet): Non-current assets and Current Assets, Long –
term Liabilities and Current liabilities, Equity (Share Capital and Retained earnings).
Income statement: Measuring Income to assess performance.
Revenue, Cost of sales,
Administrative expenses, Sales expenses, Interest expense, Other income and expense.
Definition of EBITDA, EBIT, Gross Profit, Net profit, etc.
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Topic 4. Analysis of financial statements. Vertical and horizontal analysis.
Interpretation of financial statements.
Importance and purpose of analysis of financial
statements.
Vertical analysis - a method of financial statement analysis in which each entry for each of the
three major categories of accounts (assets, liabilities and equities) in a balance sheet is represented as a
proportion of the total account, alias, it shows the relationship off financial statement item to its base,
which is 100% figure. Common size statement.
Horizontal analysis - a procedure in fundamental analysis in which an analyst compares ratios or
line items in a company's financial statements over a certain period of time, alias, the study of percentage
change from year to year. Comparative Income Statement, Comparative Balance Sheet. Trend analysis
(over several years).
Topic 5. Ratio analysis.
Profitability ratio – as a means for evaluating of a company’s ability to recoup its expense and
to reward investors. Rate of return on sales. Return on Equity. Rate of return on total assets. Earnings
per share of common stock.
Liquidity ratio – as a means for evaluating of a company’s ability to generate cash to pay the
bills and to serve the debt. Current ratio. Debt ratio.
Asset management coefficient as a means for evaluating of management’s ability to manage
assets and to use it for profit generation. Rate of return on total assets. Return on capital employed
(ROСЕ)
Ratios indicating ability to sell inventory and collect receivables: Inventory turnover, accounts
receivable turnover, day’s sales in receivables
Limitations of ratio analysis. Red Flags in Financial Statement analysis: Earning problems,
Decreased Cash flow, excessive debt, inability to collect receivables, Buildup of inventories, trends of
sales, inventory and receivables.
Topic 6. Profitability ratios. Investment analysis: EPS, P/E, ROCE, TRS, EVA
Calculation and application of figures:
I. Earnings per share (EPS). Shows the amount of net income earned for each share of
common stock.
II. Price / earnings coefficient (P/E) is the ratio off common stock price to earning per share.
III. Dividend yield is the ratio of dividends per share of stock to the stock market price.
IV. Economic Value Added (EVA) = Net income +Interest expense – Capital Charge.
V. Book Value per share of common stock.
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Topic 7. The goals and tasks of managerial accounting.
The concept, essence, goals and basic principles of management accounting. The reasons for
separating management accounting as a relatively independent discipline and the area of professional
activity. Manufacturing accounting as a component of management accounting.
Management and financial accounting, comparative characteristics. The role of management
accounting in modern conditions of business management.
Topic 8. Classifying costs. Costing.
The concept of costs and expenses. Classifying costs depending on changes in manufacturing
volumes: variable, fixed, mixed. Manufacturing costs and period costs. The essence and concept of cost,
the role of cost data in modern business management. Classifying costs according to the possibility of
attributing them to a specific cost object: direct and indirect costs.
Cost accounting methods: absorption and the variable costing (accounting for variable costs),
their advantages and disadvantages. The influence of the costing method on the value of manufacturing
costs and the business profitability.
Topic 9. Making management decisions.
Analyzing the “cost – volume – profit” ratio (CVP – analysis). The break-even point. Initial
prerequisites for break-even analysis. Using break-even analysis for planning production volumes, profits
and pricing.
The relevancy approach in management decision-making process. Relevant revenues and costs.
Using the relevancy approach in typical business situations: determining the production volume,
special orders, defining the production structure with due consideration of a limiting factor, decisions to
discontinue production when a segment is unprofitable, “make-buy” decisions.
Topic 10. Budgeting.
Strategic, tactical and operational planning. Budgeting and its objectives. Defining the budget,
its periodicity and principles of its development. Basic functions of a budget.
The General (Master) budget. The purpose and procedure for its preparation. Operational and
financial budgets. The principle budget factor.
Fixed and flexible budgets, "zero" and incremental budgets, periodic and rolling budgets. Using
flexible budgets in planning and analyzing budget fulfillment.
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Topic 11. Monitoring budget fulfillment, flexible budgeting.
The overview of the “standard cost” system. The concept of standard costs, principles for their
determination. Classifying standards. Use of standard costs in costing production, labor and services.
Variances Analysis as a means of control. Calculation of variances in direct material costs, direct labor
costs and overheads and other expenses. Operating Statement (Flexible budget profit vs Actual profit).
List of readings
Compulsory books
1. Weygandt J.J., Kimmel P.D., Kieso D.E. : Financial Accounting IFRS edition. John Wiley and
Sons, Inc. 2011 ISBN – 13 978-0470-552200-1
2. Dobrynskaya, V. Financial Accounting: A Key to Your Success in the Exam. SU–HSE
Publishing House, 2007.
Supplementary books
3.
Harrison W.T.Jr., Horngren C. T. Financial Accounting – Seventh edition. Pearson Education
2008.
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