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Subject Outline

Subject for : MBA Semester I July 2011 -13 Batch

Subject Code : MGT 521

Subject Title : Financial Reporting and Cost Control

Subject Credits : 3 Credits

Section : Section E

Instructor : Dr. R. Soundara Rajan,

Office : Alliance University Central Campus, NF 006

Phone : 080 - 30938165

Email : soundara.rajan@alliance.edu.in

Instructors Profile:

Over 39 years of work experience in industry out of which over 20 years in senior Management

Positions as General Manager / company secretary. Work experience includes areas such assoftware Development, Finance and Audit, Business strategy, MIS, Computer center operation,

management consultancy, ISO and standardization, Training and development, company

secretarial functions including corporate governance.

Worked as a Part time faculty / Evaluator / Paper setter with Professional Institutes such as

Institute of chartered Accountants, Institute of Cost and works Accountants, Institute of

company secretary and was a faculty for MBA program at Jamia Milia Delhi for business

Legislation. Published number of papers in national and international forums

A gold medalist from REC Trichy in B.E. ( Hons), Member of ICWA, Member of Company

Secretary, MBA, M. Phil( Management) and Doctorate in Management

Subject Description:

This subject aims to create a good understanding of the financial statements and the other

components of the Annual Report like note on Accounts and Management Discussion & analysis

that will have a bearing on the analysis and interpretation of these financial statements. It focuses

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mainly on various tools for analyses and interpretation like ratio analysis, funds flow and cash

flow analysis, highlighting sensitivity cash flow analysis. It also aims to underline the

importance of transparency in disclosures with brief references to corporate governance. In

addition it also introduces to the students, the tools for decision making such as cost-volume

profit analysis and the applications of marginal costing. It provides an overview of the control

techniques such as budgetary control, standard costing and variance analysis.

Since, cost control and cost reduction have assumed greater significance in view of the recent

recession elsewhere in the world and the consequent slow down in our own country,

understanding cost concepts, costing methods and techniques, dissemination of costing

information have become integral part of reporting. Hence, the subject also covers the various

elements of cost, the methods of costing, with reference to different industries and also the

costing techniques such as activity based costing and activity based management.

Class Meets : As per Deans Office schedule

Office Hours : By appointment only

Objective of the Subject:

This course in FRCC has been designed to enable the student to acquire the skills necessary touse, interpret and analyze accounting data. The ultimate objective is to enable the student to

become a better manager.

The student should:

Understand the goal of presenting useful information to financial statement users so thatproper decisions can be made

Understand how to furnish information about the firm's economic resources, claimsagainst those resources, owners equity, and changes in resources and claims

Understand the evaluation of the amounts, timing, and uncertainties of cash flows Understand how cost control achieve the targeted cost objectives through the realization

of predetermined cost targets to reduce costs

Understand the significance of cost control and also the need to re-understand the costimplications

Understand the various tools and techniques of costing and strategic cost management Understand the functions of each responsibility center within an organization and what

are the inter-linkages between those centers

Acquire the skills necessary to read, interpret and perform the calculations for theaccounting reports involved in cost control and profit planning.

be able to identify financial strengths and weaknesses of a business through appropriateanalysis

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Subject structure:

FINANCIAL REPORTING AND COST CONTROL

LEARNING OBJECTIVES

On completion of this unit you should be

able to:

Units Session Topics SessionRequired

Unit 1

COMPANIES FINAL ACCOUNTS Introduction, Characteristics of

companies, Form and contents ofBalance sheet and Profit and loss

account, Classification of items on abalance sheet, Off Balance sheet items,

Treatment of events occurring afterBalance sheet and New form of

Companies Balance sheet. ( Onlytheory)

1

Understanding the contents and format ofP&L and Balance sheet of companies

Understanding Annual reports andannexure

Basic company law provisions related toannual reports

Unit-2Limitations of Financial statements

and Window Dressing. ( Only theory)1

Understand the limitations of financialstatement and creative accountingmethodologies used by companies

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Unit-3

Analysis and Interpretation of

Financial statements, Ratio Analysis Meaning of ratio, classification ofratios, Liquidity ratios, capital structure

or solvency ratios, turnover or activityratios, Profitability ratios, Advantagesand Limitations of ratio analysis and itscomputations (Case study and

Practicals)

3

Explain the meaning of performance,financial

Status and investor ratios. Calculateinvestment

Ratios and financial ratios in respect ofperformance and financial status of anenterprise. Interpret the results of the

analysis of financial ratios of performance

and financial status and investor ratios forusers of financial statements. Explain therelationship between equity and debtWithin a business (i.e. the gearing).

Unit-

4

Fund Flow statements

Meaning of Fund Flow statements,

Advantages of Fund Flow Statements (only Theory)

1

Identification of flow of funds

Steps in preparation of funds flowstatement

Advantages and significances of funds

flow statement

Difference between funds flow statementand financial statement, differencebetween FFS and Income statement

Unit-5

Cash Flow statements

Meaning of Cash Flow statements,Meaning of cash flow, Classification ofcash flows

(AS-3), Treatment of items, preparationof Cash Flow statements, calculation ofcash flow from operating activities,

calculation of cash flow from investingactivities, calculation of Financing

activities, objectives and uses of cashflow statements and its computations.

(Case study and Practicals )

2

Understand Advantages and Limitations

of Cash Flow statements, Distinctionbetween Fund Flow and Cash Flow

Statement, Preparation of Cash Flow

Statement (As per Accounting Standards3)

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Unit -6

Depreciation policy, Distinctionbetween depreciation and Amortization

(Theory)

1

Understand why businesses depreciate

assets. Understand the conceptual

difference between depreciation and cost

recovery. Prepare a depreciation schedule

using the straight-line method. And WDV

method

Unit -

7

Inventory Valuation

Methods of pricing of material issuesand its impact on profitability.

Inventory valuation method FIFO andweighted average (Case study andPracticals )

2

Understand major classification ofinventory

Distinguish between perpetual andperiodical inventory

Understand significance uses of FIFO andweighted average inventory valuation

method, understand why company selectgiven inventory method and impact toincome and financial statement

Unit -

8

Introduction to cost concepts and

cost accounting

Concept of cost, cost centre, cost unit,methods and Technique of costing,Classification o costs, Elements of

costs, Cost control and cost reduction.(Theory)

1Determine cost classifications based on

how the cost will be used Integration ofcost and financial accounting

Characteristics of good costing system.

Different types of cost.

Different methods of costing

Unit -

9

Unit Costing : Objectives, procedure

and its computation (tender and

quotations) (Case study and Practicals

)

1

Understand the unit costing,

Type of industries in which this system isused

Describe usefulness of unit costing

Why operating cost is called as servicescosting?

Cost sheet and classification cost

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Unit-

10

Overheads accounting:

Meaning and classification of

overheads, accounting for overheads,

allocation and apportionment of

overheads, Re- apportionment of

service department costs, absorption of

overheads, methods of absorptions, and

computations(only theory)

2

Steps in over heads

Allocation and Apportionment

Absorption of factory over head ,

administrative over heads, collection ofover heads

Unit -

11

Activity based costing and activitybased management (Case study and

Practicals )

1

Understanding under costing and over

costing of productsdistinguish between the traditional and theactivity-based costing approaches todesigning a costing system

Describe a four-part cost hierarchy

Cost products or services using activity-based costingUse activity-based costing systems for

activity-based management

Compare activity-based costing anddepartment-costing systemsAppreciate the significance of

organisational context issues in activity-based costing/management system design

and implementation

Unit -

12

Budgetary control:Meaning of budget, budgetary control,

objectives and advantages, limitations,

Flexible Budget and Cash Budget only

Computations (Case study and

Practicals )

2 session

Need of the budget

Objectives and Functions

Advantages and Limitations, Classification

Preparation of Cash and Flexible Budget

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Unit -

13

Standard Costing and Variance

analysis:

Meaning of Standard cost and standard

costing, Application of standard

costing, Types of standards,

VARIANCE Analysis, Material and

Labour analysis only. (Case study and

Practicals )

2 session

Understand the Standard costing andBudgetary control, Variance analysis ,utility of variance analysis, material

variance, labor variance

Unit

14

Tools for Decision Making and CVP

Analysis including Marginal costing:

Meaning of marginal cost, marginal

costing, CVP analysis and Break even

analysis, Contribution and P/V ratio,

Margin of safety, Key factorsApplication of marginal costing.

Decision making : Make or buy,

Accept or reject and Product Mix

Computation (Case study and

Practicals )

3 session

Relevance of adopting C-V-P concept inbusiness operations.

Concept of "contribution". How is itrelated to profit

Application of marginal costing, pricingdecision

Maintain desired level of profit

Accepting additional orderFixation of selling price

Key factor analysis Alternative course of

actionAlternative methods of productionSelection of suitable product mixDetermining optimum level Evaluation

of performances

Unit -15

Responsibility accounting (Onlytheory)

1 session

Concept of responsibility accounting,implementation of responsibility

accounting, centers for controllingresponsibility accounting organizational

aspect of responsibility accounting,management repost system, social reportsystem

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Prescribed Textbook

Management Accounting Text, Problems and Cases by Khan and Jain (Latest Edition) TataMcGraw-Hill Publications

Bibliographical material (including electronic resources)

Textbook:

1. Financial Reporting and Management Accounting, by William J. Bruns, Jr., CengageLearning

2. Management Accounting by Khan and Jain ISBN No 5e edition McGraw HillEducation India Pvt Ltd

3. Management Accounting By Dr. Sudhindra Bhat 1st edition Excel Books new Delhi4. Advanced Financial Management by Dr. S. N. Maheshwari Published by Sultan Chand

and Sons, 2007 edition

5. Cost and Management Accounting, by M. N. Arora, 9th Edition, Vikas Publishing House6. Annual Reports of Selected Companies7. Analysts Reports on Different Industries & Companies.

Websites:

1.2.

http://www.capitaline.com

3. http://www.indiainfoline.com4. http://www.icai.org5. http://www.mca.gov.in6. http://www.fasb.org7. http://www.ifrsaccountant.com/articles/repo-105-lehman-accounting.html

Subject Culture and Pedagogy

1. Lectures2. Student presentation and class room exercises3. Group discussion4. Case Analysis

Financial Terror on Investors: A case study on Satyam Computer Services byDr. T.N. Ravi.

Driving down the bumpy road to safety: A case study on TATA Motors by Dr.T.N. Ravi

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Implementing Activity Based Costing Model for a Financial Services Firm: Acase study on Unicon Securities Ltd. by Mr. Vishal Agarwal and Prof. Anirban

Dutta

Major Assignments:

1. Building a comprehensive report on a particular firm that would include the following:

1. Executive Summary (250 words)

2. Introduction

a. Industry Overview India (2 pages)

b. Company Overview (2 pages)3. Financial Analysis (last 5 years)

a. Analysis of long-term assets & liabilities (2 pages)

b. Analysis of working capital (2 pages)c. Analysis of profits (2 pages)

d. Analysis of cash flows (2 pages)

e. Analysis of investments (2 pages)f. Analysis of share price (BSE/NSE) (2 pages)

4. Future outlook of the company (2 pages)

5. Conclusion (500 words)6. References

2. In-depth study of manufacturing firm, covering following aspects

1. Existing cost management principles and practices of the firm2. Lean management initiatives for cost reduction and cost control3. Innovation in the fields of inventory management, employee cost management, etc.4. Identifying issues related to product cost and solutions implemented

The objective of this assignment is to have hands on knowledge of the current practices in the

industry and be abreast with the latest trends.

ASSESSMENT

Learning in this subject results primarily from in-class discussion and problem-solving as well as

out-of-class analysis. Students will be encouraged to think, analyze, evaluate, and solve

Problems that is, not memorize. Students are expected to come to class on time and be

prepared for the class (having read the assigned reading and done the assigned problems). The

final student grade will be calculated as follows:

Continuous Assessment (class individual participation) 10 grade

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Quiz Exam - 10

Written Midterm exam - 20

Case presentation or Assignment - 10

Final Examination - 50

Total 100 Grade

Scheme of Evaluation : Refer to Alliance Learning Experience Program Catalog

Grading System : Refer to Alliance Learning Experience Program Catalog