Welcome to MEEN 30140

Professional Engineering (Finance)

Course Lecturer
Michael Nelson
michael.nelson@ucd.ie

1.

For
Starters
Nelson
My name
is Michael

Contact me anytime by email:

michael.nelson@ucd.ie
(Queries, problems, or if you want to meet with me).
2. Read material on Blackboard regularly:
Course Information gives you detailed information
on course structure and format.
Course Content lecture slides for each Course
Topic will be posted here each week.
Other material will often be posted in Course Content
Topic 1 - Introduction

Professional Engineering (Finance)

Course Delivery & Assessment

Lectures:
Wednesdays Afternoons 3.00-4:50pm
Text: Accounting for non-Accounting Students

by John Dyson, Eight Edition.

(or similar but Text references in slides refer to above)

Assessments:
3 in-course assignments: 30%
End of Term Exam: 70%
Topic 1 - Introduction

Professional Engineering (Finance)

Assignments (30% total)

Students have to undertake
three in-class Assignments during the Semester.
Assignment 1: (5%)
MCQ 1: P & L and Bal. Sheet entries. (Wk 4)
Assignment 2: (10%)
MCQ 2: Progress Test 2. (Wk 7)
Assignment 3: (15%)
Mini Progress Test 3. (Wk 10)
Topic 1 - Introduction

Professional Engineering (Finance)

Important
Assignmen

ts must

be underta
ken
in the week
due.
4

And remember
If you have queries on, or need
help with any of the material or
components of this course, speak to
me before / after class times, or
contact me by email on:

michael.nelson@ucd.ie
Topic 1 - Introduction

Professional Engineering (Finance)

Engineers, Business and Finance

A high proportion of an Engineers work impacts
on the economic performance of a business.
A high proportion of an Engineers work interlinks
with other business disciplines e.g. R & D;
Operations, Projects, Marketing, etc.
A high proportion of Engineers drift into Senior Management.
Accounting is the methodology used to measure business
performance; - and Financial Management and Management
Accounting provides the techniques to help manage the
business performance.

Hence Engineers should understand

the basics of Accounting and Finance
Topic 1 - Introduction

Professional Engineering (Finance)

Engineers Ireland Accreditation

Engineers

Ireland have
recognised the need for
Accounting and Finance to be
part of a Professional Engineers training

This

Finance for Engineers module

responds to this recognised need and is a
requirement for accreditation of UCDs
Engineering Degree Programmes by
Engineers Ireland.

Topic 1 - Introduction

Professional Engineering (Finance)

Course Topics
1.

7. Contribution / Pricing Decisions

Introduction

[Text Chapters: 17 and 18]

[Text Chapters: 1 & 2]

2. Compiling Basic Accounts 1

[Text Chapters: 3, 4 & 5]

[Text Chapters: 6 & 7]

(C/A1)

5. Interpretation of Accounts
6. Costing and Pricing

[Text Chapters: 13 & 14]

Topic 1 - Introduction

9. Project Costing & Accounting

[Class Notes]

10. Project Investment Appraisal

4. Managing Liquidity

[Text Chapter: 10]

8. Engineering Economic Analysis

[Application of concepts]

3. Compiling Basic Accounts 2

[Class notes]

(C/A2)

[Text Chapter: 19]

(C/A 3)

11. Budgeting & Mangt Acctg

[Text Chapters 15 & 16]

12. Course Review and Exam

Preparation
Professional Engineering (Finance)

Any Questions?

Topic 1 - Introduction

Professional Engineering (Finance)

MEEN 30140
Professional Engineering (Finance)

Topic 1: Introduction
michael.nelson@ucd.ie

Business Types
The three most common forms of
business are:
1. Sole Trader
2. Partnership
3. Limited Company
Topic 1 - Introduction

Professional Engineering (Finance)

11

Sole Trader

One owner with total control

Proprietor must register as a Self Employed

with Revenue Commissioners

If not trading under own personal name, the

trading name must be registered (CRO)

Low costs involved in setting up the business

Business profits taxed as income

Owner fully liable for the debts of the business !

Topic 1 - Introduction

Professional Engineering (Finance)

12

Partnerships
Similar to Sole Trader

but involving more than one person.

Terms are spelled out in a
partnership agreement or subject
to the Partnership Act 1890

Topic 1 - Introduction

Professional Engineering (Finance)

13

Incorporated Limited Companies

Topic 1 - Introduction

1.

Private: (Ltd and DAC)

2.

Public: (plc)

Professional Engineering (Finance)

14

Limited Liability Company

Separate

legal entity apart from owners

May

engage in business, make

contracts, own property, pay taxes, and
sue and be sued

Governed

by the (New) Companies Act

2014 (effective from 1st June 2015). Updates
and consolidates former Acts 1963 2013

Topic 1 - Introduction

Professional Engineering (Finance)

15

Limited Liability Companies

PRIVATE Limited Company: (LTD)

Now (2015 ACT) a more simplified legal entity

requiring only one director.
Public cannot apply for shares.

PRIVATE Limited Company: (DAC)

- Designated Activity Company similar to old form of
LTD Company, with a well defined constitution.

Public cannot apply for shares.

PUBLIC Limited Company:

Public can apply for shares traded on the
Stock Exchange
Topic 1 - Introduction

Professional Engineering (Finance)

16

Limited Companies provide

Limited

liability for shareholders

Ability to attract capital
Continue beyond lives of founders
In Public Companies, Shares are
transferable on Stock Exchange
Credit more easily obtained
The main disadvantage of a Limited Company is cost
of set-up and complying with statutory requirements

Topic 1 - Introduction

Professional Engineering (Finance)

17

Business and Accounting

All citizens are required by law to pay Income-Tax;

(- usually PAYE)

People who are self-employed (Sole Traders or in

Partnership) are taxed on the net profit of their business
as if it were their earned income

Limited Companies are taxed on their Net Profit

(Corporation Profit Tax / CPT). [Those employed by a
Ltd. Co. are taxed under PAYE incl. owner-managers]
To comply with the foregoing, all businesses must compile
Annual Accounts.

Topic 1 - Introduction

Professional Engineering (Finance)

18

Note
The requirements for compilation, auditing
and filing of accounts vary across the
different business types (sole-traders,
partnerships and limited companies)
The focus on this course will be on the
accounting statements applicable to
Limited Companies
Topic 1 - Introduction

Professional Engineering (Finance)

19

Basic Accounting Rules / Focus

An Entity
Time period
Money measurement
Historic costs
Economic Realisation
Materiality
Going concern

Topic 1 - Introduction

Comparability
Dual aspect
Matching
Prudence
Conservatism
Consistency
IFRS [US GAAP]

Professional Engineering (Finance)

20

Accounting Standards
2000

+:

International Accounting Standards

Board (IASB) began issuing International
Financial Reporting Standards (IFRS).
Since 2005 these Standards must be used
when compiling accounts for plcs. (EU)
(US:

GAAP and Sarbanes-Oxley Act)

Currently, efforts being made to converge
IFRS and GAAP [Norwalk Agreement]

Topic 1 - Introduction

Professional Engineering (Finance)

21

The Accounts
Profit & Loss Account

See al
Docum so
ent on
BB

An economic statement of the transactions

of an organisation over a given period of time

Balance Sheet
A statement of an organisations Assets
and Liabilities at a specific point in time

Cash Flow Statement

Traces inflows / outflows of cash to an
organisation. (Reconciles a companys Profit and Cash)
Topic 1 - Introduction

Professional Engineering (Finance)

22

The Profit & Loss Account

Depending on type of Business, a
Profit & Loss Account may have up
to 4 components:

Manufacturing Account

Trading Account

Profit & Loss Account

P & L Appropriation Account

Topic 2 - Basic Accounts 1

Professional Engineering (Finance)

23

Manufacturing Account
A Financial Statement which collects all
the costs involved in the manufacture
of products. Comprises:Direct Production Costs (Variable)
(Materials, Labour, and other
variable costs).

Indirect Production
Costs
(Fixed)
Fixed
over a
given
level of activity
Topic 2 - Basic Accounts 1

Professional Engineering (Finance)

24

Trading Account
Determines the Gross Profit
earned from a companys Trading
Activities:Sales Revenue, LESS
Cost of Goods Sold =

Gross Profit
Topic 2 - Basic Accounts 1

Professional Engineering (Finance)

25

Profit & Loss Account

Determines a companys Net Profit (or
Loss!) by aggregating all its operating
expenses (Overheads), and deducting
them from the companys Gross Profit;
(or Fee Income).
Gross Profit (or Fee Income), LESS
Operating Expenses [aka Overheads]
= Net Profit (before tax) [aka NPBT]
Topic 2 - Basic Accounts 1

Professional Engineering (Finance)

26

P & L Appropriation Account

Shows the Appropriation (distribution)
of the Companys NPBT
May be divided into 3 elements:1. ..
2. ..
3. ..

Topic 2 - Basic Accounts 1

Professional Engineering (Finance)

27

The Balance Sheet

Essentially a Balance Sheet is a statement showing

the value of the Assets of a Company and how they
are Financed by (i) Capital & Reserves (Equity)
and (ii) Debt (Liabilities), at a given point in time.

(Total Assets) = (Equity + Liabilities)

Assets: Something Owned, and of Value
Assets are generally described as Fixed or Current
(But there are others just be aware of them )

A Balance Sheet must Balance

Topic 2 - Basic Accounts 1

Professional Engineering (Finance)

28

Fixed Assets (@NBV), plus

Balance
Sheet
Structure
Current Assets less Current Liabilities
(i.e. Net Current Assets)
= Total Net Assets
Capital, plus
Retained Profits, plus
Long Term Debt (if any)

Tot Note
al N
!
e
mus t Ass
ets
t eq
Tot
al F
ual
ina
nci
ng

= Total Financing
Topic 2 - Basic Accounts 1

Professional Engineering (Finance)

29

Summary
The most common business types include Sole Trader,
Partnerships, and Limited Companies (private or
public)
The key Financial Statements include the Profit &
Loss Account, Balance Sheet, and Funds Flow
Statement.
To provide consistency in the compilation of accounts,
there are both Norms (normative rules), and
Standards (laws), to help harmonise the compilation
of accounts Internationally.
Topic 1 - Introduction

Professional Engineering (Finance)

30

T
N
A
T
R
O
P
IM

Assignment 1

In-class Assignment - Week 4

P&L and Balance Sheet Test
The material being covered
in Weeks 2 & 3 is very
pertinent to MCQ Test 1.
(Refer to EchoTronics Exercise on BB)
Topic 2 - Basic Accounts 1

Professional Engineering (Finance)

31

Any Questions?

michael.nelson@ucd.ie
Topic 1 - Introduction

Professional Engineering (Finance)

32