SESSION 1

A THEORETICAL
FRAMEWORK
 Development of
Accounting
• Stewardship accounting - to prevent
fraud
• Financial accounting - provision of
financial information to shareholders in
annual statements
• Management accounting - detailed
information for decision -making by
management
 Drivers for change
• Need for comparability of financial
information from country to country
• “Creative” accounting might be
misleading
• Development of new performance
indicators
• New users require different types of
information e.g. “green” accounting
 Result
• Continuous evolution of accounting
procedures
 Users of financial information
• Shareholders
• Management
• Government/their agencies
• Lenders - banks
• Suppliers
• Local communities - public
• Customers
• Employees
Accounting Theory Framework
• Elements - Assets, Liabilities, Capital,
Revenue, Expenses
• Concepts - Entity, Money measurement,
Going Concern, Cost, Realization, Accrual,
Matching, Periodicity, Consistency,
Prudence
• Procedures - Recording, Classifying,
Summarizing, Reporting Transactions,
Interpreting Reports
Three fundamental financial
statements
• Income Statement(Profit and loss account)
• Balance Sheet
• Cash Flow Statement
 FKI plc
• FKI plc is a major international diversified
engineering group quoted on the London
Stock Exchange.
– FKI Logistex –automated material handling
systems
– Lifting products and services
– Window hardware and storm and screen door
hardware.
– Energy technology - turbogenerators
 FKI plc Annual Report
2007
• Can be found at
http://www.fki.co.uk/investorrelations/
• Chairman’s statement
• Operating and financial review
• Corporate social responsibility report
• Governance
– Director’s report
• Group financial statements
• Company financial statements
• Other information
Group Financial Statements
• Independent auditor’s report
• Consolidated income statement
• Consolidated balance sheet
• Consolidated cash flow statement
• Consolidated statement of recognised gains
and losses
• Notes to the consolidated financial
statements
 The Balance Sheet
• Asset (IASC) - a resource controlled by the
enterprise as a result of past events and
from which future economic benefits are
expected to flow to the enterprise
• Fixed assets - not intended for resale
• Current assets - expected to be transformed
into cash within one year
• Current liabilities - amounts owed and due
for payment within one year
Income statement (Profit
and loss account)
• Report on the flows of revenue and
expenses in a period
• Based on matching a period’s sales revenue
earned with the expenses incurred in
earning those revenues. NOT cash receipts
and payments.
 Cash flow statement
• Classifies sources and uses of cash flow
from different business activities:
– Operating activities
– Investing activities
– Financing activities