London School of Economics and Political Science (LSE)

Modules

Principles of accounting [25]

This course is designed to introduce you to financial and management accounting. Traditionally concerned with measuring, recording and reporting financial transactions and events, modern accounting provides a broad range of information for a wide variety of users. Financial accounting and reporting is primarily concerned with the needs of users outside the business, such as shareholders, regulators and creditors. In contrast, management accounting is concerned with the needs of users who are internal to the business, such as directors, managers, and employees.

The course is arranged in two sections. The first section introduces and explains financial accounting concepts and conventions, and provides a grounding in double-entry bookkeeping and the preparation of basic financial statements.

The second section introduces a range of management accounting applications and techniques for planning, decision-making and control. Reference is made throughout to underlying theories and principles. Emphasis is placed on the ability to explain and interpret accounting information.

Section 1
Balance sheets, cash flow statements, and income statements: their construction, use and interpretation. Accounting concepts and conventions: their nature, purposes and limitations. The nature and capital structure of different forms of businesses including limited companies. The essential differences between accounting and economic concepts of income.

Section 2
Cost behaviour, marginal and total absorption costing for stock. Introduction to budgetary planning and control, including standard costs, targets, and simple variance analysis. Techniques for short and long-term decision-making, including: C-V-P analysis, relevant costs, introduction to capital investment appraisal.