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Course Handout
Accounting For Managers (AFM)
Semester-I
Course Overview
This course is designed to help you develop a framework for understanding financial statements and managerial reports by learning the
basic accounting principles, concepts and standards. At the end of this course, students will be capable of preparing and understanding financial
statements and use financial and management accounting information for taking business decisions.
Course Objectives:
Course Objectives
To develop conceptual knowledge required for preparation of books of accounts.
To be able to prepare books of accounts on the basis of principles and regulations of accounting.
To be able to analyze, interpret financial statements for prudent business decisions
Learning Outcome of the Course:
Understanding book keeping system, concepts of Accounting, Accounting standards and cost concepts.
Prepare Financial and Cost statements required for reporting and analysis purpose.
Familiarity with terminologies, accounting methods and various uses of financial statements.
Knowing Importance of managerial reports and techniques to analyze them for decision making.
Sessions
1

Topics

Teaching Objectives

Learning Outcomes

Introductory Session

Understanding and
appreciating why
accounting is important?

Need for Accounting Information

To introduce the
course and highlight its
significance and role in
a business career.
To differentiate
accounting Vs. nonaccounting
information

Financial Statements Overview

To know about the

important financial
statements and the
purpose thereof.
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Becoming familiar with

type of information that
affects books of
accounting.
Becoming familiar with
important accounting
statements and their need
for a firm.

Cases
to
be Sources
Discussed
/Readings
Introduction
to
Framework given
by ICAI.
Case 1-2: Kim
Fuller

AHM
(Chptr-1)

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3-4

Basic Accounting Concepts: Balance

To discuss the
Sheet
elements of Balance
Overview
Sheet.
Assets, Liabilities and Owners
To discuss the various
Equity
concepts that Balance
Basic Concepts
Sheet is based on.
Money Measurement Concept, Entity
Concept, Going Concern Concept,
Cost Concept, The Dual Aspect
Concept
5-7
Basic Accounting Concepts: Income
To discuss the
Statement
elements of Income
Basic Concepts
Statement.
The Accounting Period Concept,
To discuss the various
Conservatism Concept, Realization
concepts
and principles
Concept, Matching Concept
that Income Statement
Consistency Concept, Materiality
is based on.
Concept
Recognition of Expenses
To highlight the
Criteria for Expense Recognition,
differences between
Expenses and Expenditure,
expenses and
The Income Statement
expenditures;
Revenues, Cost of Sales, Gross Margin,
revenues,
profits, and
Expenses, Gains, Net Income, Retained
gains;
Earnings.
Relationship between Balance
Sheet and Income Statement
Accrual versus Cash Based
Accounting
8
Comprehensive Case
To discuss a practical
accounting problem by
applying the learning
so far.
9-10
Revenue Recognition
To Discuss the criteria
Concept Gross versus Net
for revenue recognition
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Extended understanding
about Balance Sheet

Understanding the role

of various concepts in
identifying assets,
liabilities and equity
related transactions, and
knowledge of their
appropriate recording.
Understanding the
application of the
principles and concepts
associated with income
statement.
Ability to discern the
accounting line items
rightly in appropriate
heads.

Case 2-2: Music

Mart Inc
Lone Pine Cafe.

Case 3-3:
Dispensers of
California, Inc.

AHM
(Chptr-2)

AHM
(Chptr-3)

Case 3-4:
Pinetree Motel
Maynard
Company(B)

Enables to prepare
Income statement of a
firm.

Ability to handle a real

time problem of
preparing final accounts.

Absor Private
Ltd

Understanding of how
accounting transactions

Case 5-3: Joan

Holtz (A)

INTERNAL

AHM
(Chptr-5)

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Timing of Revenue Recognition
Delivery / Sales Method, Collection
Method, Production Method,
Percentage of Completion Method,
Installment Method
Amount of Revenue
Recognition
Cash Discounts, Revenue Adjustment
versus Expense, Warranty Costs.
11
12-13

14-16

17-19

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under accrual
accounting so
as to know when, and
how much revenue
should be recognized.
To discuss various
methods associated
with revenue
recognition.

Test-I
Inventory valuation in Merchandising /
To discuss principle
Manufacturing / Service Companies
and various methods of
Full Cost of Inventory
inventory valuation
Product versus Period Cost
Periodic versus Perpetual
Methods of Inventory Costing
Specific Identification Method
FIFO, LIFO, Average Cost
Method
Valuation Principle
Long-Lived Assets
To describe the nature
of long-term assets and
Asset versus Expense
its various kinds.
Self Constructed Assets
Depreciation and Disposal
To discuss their
Depletion and Appreciation
recording principle in
Intangible Assets
the books of accounts.
Goodwill, Patents and Copyrights
Research and Development Cost
Purpose
of
Cash
Flow
To discuss the
difference
between
Statement
cash flow and earnings
Utility, Liquidity versus
and importance of
Profitability
cash-flow statement
Contents of Cash Flow
(CFS)

influence operating
decisions and

Stern Corporation
(A)

AS-9

Knowledge of improper
ways that can be used to
inflate the operating
performances.

Familiarity with the

methods to value
inventory and
understanding the
reporting consequences
under each method.

Learning how the Long

term assets differ from
other assets in terms of
its use in the business
and valuation in the
books.

Case 6-2: Lewis

Corporation
Case 6-4: Joan
Holtz (B)

Case 7-1- Stern

corporation (B)

AHM
(Chptr-6)
AS-2

AHM
(Chptr-7)

Case 7-3: Stafford

Press
AS-10, 26
John Holtz(C)

Learning and
appreciating about cash
flow statement being a
derivative of Income
Statement and Balance
Sheet.

Asian Paints

INTERNAL

AS 3

AHM
(Chptr-11)

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20

21
22-24

25-28

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Statement
Cash flow from Operating
Activities
Cash flow from Investing
Activities
Cash flow from Financing
Activities
Direct method versus Indirect
method
Non Cash transactions
Understanding Annual Report
Notes, Schedules, Auditors
Report, Directors Report, M D
& A, Off Balance Sheet Items
Test II
Relation of Cost to Volume
Variable and Fixed Costs, Unit Costs
Break Even Analysis &
Applications
Break Even Point, Target Profit,
Operating Leverage, Contribution

Full Cost Concept & Uses

Measurement of Direct Costs
Allocation of Indirect Costs
Activity Based Costing
Cross-Subsidies

To discuss the broader

activities affecting the
cash flows to the firm

Learning how and why a

company can be cash
rich yet unprofitable, and
vice-versa.

To discuss the
preparation of CFS
under different
methods.

Enables to prepare cashflow statement for a

company.

To discuss the annual

reporting by
companies and detailed
content of the report

Familiarity with the

annual reports of
companies, its purpose
and content

To discuss the costvolume relationship

and computation of
BEP.

Enables to understand
how cost structure plays
a vital role in
magnifying profits or
losses of a firm and
changes the level of
BEP.

Case 16-1:
Hospital Supply,
Inc.

Enables to identify the

relevant costs associated
with a cost object for
strategic decisionmaking.

Pepe Denim

Makes to learn how to

prepare the cost sheet.

Case 18-2
California
Creamery Inc.

To discuss concept of
operating leverage and
how it affects profits.
To discuss the
preparation of cost
sheet and various
classifications of cost.
To discuss the ways of
cost allocation across
cost objects.

Annual reports of
Infosys and
another less
known company
in manufacturing
sector

AHM
(Chptr-14)

AHM
(Chptr-16)

Case 16-3: Bill

French

Case 18-1: Huron

Automotive
Company

INTERNAL

AHM
(Chptr-18)

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To explain ABC
method of costing
29
30-33

Test III
Decisions Involving Alternative
Choices
Dropping a product line
Shut down / Subcontract
Acceptance of Special Order

To discuss the
considerable factors
associated with
strategic decisions of
the firm such as 'make
or buy' a product,
using case analysis
approach.

Enables to understand
the merits of ABC
Costing over other
methods.
Enables to identify the
important criteria while
evaluating alternatives
for decision making.

. Precision
Worldwide Inc

Case 26-2:
Forner Carpet
Company

AHM
(Chptr-26)

Baldwin Bicycle
Company

Instructor: K.Rajyalakshmi
E-mail: rajyalakshmik@ibsindia.org
Office: Foo6
Consultation Hours...Monday 3P.M TO 5P.M
Guidelines:
No background of accounting, finance or economics is necessary however; you should not skip the classes unless you absolutely have to do
so. This is not the course that you can self teach.
Ensure that you read all the recommended materials and come to the class prepared, and on time.
Reading Material:
1. Accounting Text and Cases by Robert Anthony, David Hawkins and Kenneth Merchant (AHM), 13/e
2. Framework for Preparation and Presentation of Financial Statements Issued by ICAI
(http://www.mca.gov.in/XBRL/pdf/framework_fin_statements.pdf)
3. Accounting Standards (AS) Issued by ICAI (http://www.icai.org/post.html?post_id=8660)
Supplementary Reading Material:
1. Accounting for Decision Making by Belverd Needles, Marian Powers and Susan Crosson, Cengage Learning
2. Introduction to Financial Accounting by Charles Horngren, Gart Sundem, John Elliott and Donna Philbrick (9th Edition), Pearson
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3. Introduction to Management Accounting by Horngren, Sundem, Stratton, Burgstahler and Schatzberg (14th Edition), Pearson
4. Financial Accounting for Business Managers by Ashish K Bhattacharyya (3rd Edition), PHI Learning
Evaluation:
The evaluation for the course will be based on Class Participation (30%), Tests (30%) and End Term Exam (40%).

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