School of Management and Entrepreneurship, Shiv Nadar University

Dadri, Gautam Buddha Nagar, Greater Noida, 201314

Academic Year 2020-21: Quarter I
MBA | Financial Accounting | FAC 501

Course instructor: Prof Ankur Mehra

Overview
After completing this course on Financial Accounting (FA), students would have a general
understanding of accounting concepts and be able to converse in the language of financial
statements. Financial Accounting is the first course in accounting. It focuses on accounting policies
and financial analysis rather than on accounting mechanics. This course will help students
understand how accounting standards and managerial incentives affect the financial reporting
process. The learning in each session would depend crucially on ideas introduced in previous
sessions.
Companies communicate economic and financial information to firm’s investors and other
stakeholders through corporate financial reports. Financial statements such as Income Statement,
Balance Sheet and Cash Flow Statement form the core of the annual report. Companies follow
Generally Accepted Accounting Principles (GAAP) to prepare these statements and accounting is
viewed as the business language used by companies to communicate with investors. It is vital for
every business manager to understand accounting language to be able to assess how a decision will
impact the firm’s financial health. A business manager must be able to proficiently analyse
financial statements and evaluate the firm’s financial performance. They should be able to answer
questions such as how much money must be raised to meet the capital expenditure, how much
inventory a firm must hold, will the firm be able to repay its debts and others.

Expected Outcome
At the end of this course students should be able:
 Understand the process through which transactions are recorded, and financial statements
are prepared

 Understand the basic structure of the balance sheet, the profit and loss statement and the
cash flow statement.

 Appreciate the extent to which financial statements may or may not reflect the economic
substance of the firm’s financial condition and results of operation
  Develop mastery of concepts and language of accounting and financial statements so they
can be used as useful management tools for communication, monitoring and resource
allocation.
 Be able to analyse the financial performance of listed companies

Topics
 The objective of corporate financial reporting, including financial statements

 Users of financial statements

 Accounting equation and the structure of the balance sheet

 Process for recording transactions in Journal, Ledger and Trial balance

 Preparation of profit and loss account, balance sheet, statement of retained earnings and
cash flow statement

 Understanding financial statements of limited liability companies

 GAAP related to income recognition, inventory valuation, accounting for property, plant
and equipment.

 Tools & Techniques for analysing financial statements.

Main Text
“Financial Accounting” by Kimmel, Weygandt & Kieso, International Student Version, Wiley
Publications, 7th Edition; ISBN: 9788126551262

Reference Text:
Accounting: Texts and Cases – The Financial Accounting Chapters, 13th Edition, By Robert
Anthony and David Hawkins and Kenneth A. Merchant and Prakash Singh

Pedagogy: Lectures, Discussions of Cases, Simulations, and Analysis of Financial Statements

Evaluation
 Two Announced Quizzes: .........................20%

 Unannounced Short Quizzes:…10%

 Mid-term Examination………20%

 End-term examination + Simulation: ..........25%

 Project: ..................................25%
 Important Instruction to Students

 Unannounced Short Quizzes: There will be ‘n’ number of unannounced short quizzes
of five minutes each during sessions. These can be held at the start of the session, at the
end of the session or in-between the session through Blackboard. However, only your
best scores in ‘n-2’ quizzes will be used for grading purposes.

 Project: A group project demonstrating your understanding of the use and interpretation
of financial statements is required to be completed. The instructor takes no responsibility
in monitoring the dynamics of each group. A separate document with detailed instructions
on the project will be shared in due time.

 Preparing for class: You should realise that you are in a Post Graduate Program. It is
necessary to read and become familiar with the materials assigned for each session before
you come to class.

 Cases: Case studies are an important learning component of this course. There are no case
submission expected from you for this course. However, questions based on cases are likely
to be asked in the quizzes and exams. Hence, it is important for you to read and analyse
assigned cases before coming to the class.

 Academic integrity: This is taken very seriously. Any violation of the ethical code of
conduct during any component of the course would necessitate a minimum course grade D
or F.
 Course Coverage: Course outline is indicative in nature and is subject to change. Any
major change in the course outline will be communicated to students in class.
 Sessions: Given the difficulty level of the course, we will be doing 25 Sessions to complete
this two-credit course. These sessions is inclusive of problem solving sessions and sessions
for conducting quizzes. Attendance in all sessions are mandatory.
 The course outline is indicative in nature and is subject to change.

COURSE OUTLINE

Sessions 1 - 2: Introduction & Accounting Equation

Reading: Chapter 1 (thorough), 3 (pages 84‐92 & 110‐111)
CASE: Ribbons an’ Bows, Inc.(Anthony Text Book); MARIA HERNANDEZ ASSOCIATES (HBS)
Coverage:
a. Primary forms of business organization

b. Users & Principal Uses of Accounting

c. Three forms of business activities

d. Purpose and content of each of the financial statements

e. Meaning of Assets, Liabilities, Equity, Income, Expenses, Dividend, Retained Earnings.

f. Qualitative characteristics of Accounting Information

g. Accounting Cycle & Process and State the Basic Accounting Equation

h. GAAP ‐ Principles and Concepts - Separate Entity, Going Concern, Money Measurement,
Accounting Period, Materiality, Realisation, Matching, Conservatism, Historical Cost, Fair Value

i. Apply Accounting Equation to understand the impact of selected transactions on Income,

Expenses, Assets, Liabilities and Shareholder’s Net worth.

Sessions 3-6: Accounting Mechanics

Reading: Chapter 3 (Pages 92‐110), 4(thorough)
CASE: MARIA HERNANDEZ ASSOCIATES (HBS)
Coverage:
a. Understand which accounts are affected in a transaction

b. Rules of debiting and crediting an account

c. Journal entries of transactions under accrual accounting.

d. Adjustment and closing entries under accrual accounting.

e. Ledger Accounts and Trial Balance

Sessions 6-7: Preparing and Understanding Income Statement

Reading: Chapter 5 (thorough), Chapter 4 (review)
Coverage:
a. Income Statement

b. Product Cost versus Period Cost

c. Net Sales, Cost of Goods Sold, Gross Profit, Operating Expenses, Operating Income / Profit,
Non-Operating Income, Earnings / Profit before Interest and Taxes, Interest Expenses, Earnings /
Profit before Taxes, Tax Expenses (Current tax and Deferred tax), Net Income / Profit, Income/
Profit for Equity holders, Basic and Diluted EPS
Sessions 8-10: Preparing and Understanding Balance Sheet
Reading: Chapter 2 (thorough), Chapter 3 (review), 4 (review), and 5 (review);
Coverage:
a. Balance Sheet

b. Tangible Fixed Assets net of Accumulated Depreciation, Investments, Receivables net of

Allowance for Doubtful Debt, Current Assets & Liabilities, Net Working Capital, Long-Term
Liabilities (Deferred tax and Leases), Total Borrowings (Short & Long Term), Total Liabilities,
Net Worth (Preference Shares, Equity Shares, Bonus Shares, Stock Split and Share Buyback),
Capital Employed

Sessions 11 through 13: Financial Statement Analysis ‐ Tools & Application

Reading: Chapter 13 (thorough)
Coverage:
a. Trend Analysis and Common Size Statements

b. Financial Ratios - A&M Fashion Case

Sessions 13 through 15: Preparing, Understanding & Analysing Cash Flow Statements
Reading: Chapter 12 (thorough)
Standalone Cash Flow Statement of chosen companies
Coverage:
a. Cash Flow from Operating Activities under Indirect Method, Compute Cash Flow from
Operating Activities under Direct Method, Compute Cash flow from Investing Activities,
Compute Cash Flow from Financing Activities

b. Analysis of Cash Flow Statement

Sessions 16 – 17: Accounting for Tangible Fixed Assets – Acquisition, Depreciation,

Impairment, and Disposal
Reading: Chapter 9 (pages 383-401)
CASE: DEPRECIATION AT DELTA AIR LINES AND SINGAPORE (A)
Coverage:
a. Provisions for the historical cost of tangible fixed assets and ascertain the historical cost of
tangible fixed assets.

b. Provisions for Depreciation and Amortization and compute Depreciation (SLM & WDV only).
c. Provisions for impairment of tangible fixed assets, test impairment and ascertain impairment
loss & reversal of impairment loss.

d. Provisions for tangible fixed asset retirement/disposal and compute the gain or loss on
retirement/disposal.

e. Impact of all the above on financial statements and ratios.

Sessions 18: Inventory Valuation

Reading: Chapter 6 (pages 236 ‐ 253)
Coverage:
a. Provisions on Inventory.
b. Value of COGS and Closing Inventory

c. FIFO, LIFO, & Weighted Average Cost methods

d. Ascertain the impact of all the above on financial statements and ratios.

Sessions 19 & 20: Revenue Recognition and Account Receivables

Reading: Chapter 8 (page 136-137, pages 341-348, 357)
Coverage:
a. Understand and apply the provisions on Revenue Recognition as per IndAS 115

b. Revenue Recognition for Loyalty Points, Bundled offerings and other mini-cases

c. Understand Receivables and Accounting for uncollectible accounts

Sessions 20: Simulations & Course Wrap-up

Reading: Where Financial Reporting still fall short by Sherman & Young (HBS Article)

Simulations: Financial Analysis Simulation: Data Detective (HBS) - Product #: 8742-HTM-ENG

Coverage:

a. What financial reporting doesn’t tell us?

b. Why valuations of Digital companies defies financial statements?

c. Tech behind Financial Accounting & Future of Financial Accounting

d. Course Wrap-up

About the Instructor:

Prof Ankur holds doctorate in Finance & Control from Indian Institute of Management Calcutta.
Before pursuing his doctorate, Ankur completed his Master of Finance & Control from Department
of Financial Studies, University of Delhi and BBA (International Business) from Institute of
Management Sciences, University of Lucknow. Ankur qualified UGC’s Junior Research
Fellowship in Management in December 2012.
Email ID: ankur.mehra09@snu.edu.in; Mobile Number: +91 9903831354
Office: C 212D, Shiv Nadar University