...BUS5AFS ACCOUNTING AND FINANCE FOR SUSTAINABLE VALUE CREATION Topic 2: Principles of Accounting Semester 1, 2014 ACCOUNTING AND FINANCE FOR SUSTAINABLE VALUE CREATION TOPIC 2: PRINCIPLES OF ACCOUNTING La Trobe Business School BUS5AFS: Topic 2 – Principles of Accounting 1 Topic Learning Outcomes 2.1 2.2 2.3 2.4 2.5 Discuss the nature and purpose of accounting. Explain the five basic financial elements of a business. Explain the underlying concepts of recognising and measuring the financial elements. List the four basic financial statements used in business decision making. List the basic tools for analysing financial statements. BUS5AFS: Topic 2 – Principles of Accounting 2 La Trobe Business School Prescribed reading Hill, G. and Martin, T. Principles of Accounting and Finance Pearson Australia, 2014 Chapter 2 La Trobe Business School BUS5AFS: Topic 2 – Principles of Accounting 3 1.1 Discuss the nature and purpose of accounting. PURPOSE OF ACCOUNTING …….. to provide information to permit informed judgments and decisions regarding the allocation of resources, managing & directing those resources, custodianship (stewardship) & mandatory requirements …….. La Trobe Business School BUS5AFS: Topic 2 – Principles of Accounting 4 ACCOUNTING VALUE ADDS • • • • • • Improve quality and reduce costs Improve sharing knowledge Improve supply chain Improve efficiency and effectiveness Improve internal control Improve decision...
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...Statement of Accounting Concepts SAC 3 (8/90) Qualitative Characteristics of Financial Information Prepared by the Public Sector Accounting Standards Board of the Australian Accounting Research Foundation and the Accounting Standards Review Board Issued by the Australian Accounting Research Foundation on behalf of the Australian Society of Certified Practising Accountants and The Institute of Chartered Accountants in Australia and by the Accounting Standards Review Board The Australian Accounting Research Foundation was established by the Australian Society of Certified Practising Accountants and The Institute of Chartered Accountants in Australia and undertakes a range of technical and research activities on behalf of the accounting profession as a whole. A major responsibility of the Foundation is the development of Statements of Accounting Concepts and Accounting Standards. The Public Sector Accounting Standards Board is one of the boards of the Foundation. The Accounting Standards Review Board was established by the Ministerial Council for Companies and Securities. It has responsibility for the development of Approved Accounting Standards for application by companies, and for the development of Statements of Accounting Concepts and Australian Accounting Standards. Copies of this Statement are available for purchase from the offices of the Australian Accounting Research Foundation, 211 Hawthorn Road, Caulfield, Victoria 3162, Australia...
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...things that eventually expire. So, basically Expense is the amount of cost which has expired and Cost is the amount of expense which has not yet expired. Understanding Expenses Expenses are incurred, used as a measure for accounting purposes, which measure the financial performance of an organization. Accounting for expense is standardized by Generally Accepted Accounting Principles (GAAP) to provide shareholders, regulators, and management a standard and comparable view of financial information across diverse industries. Technically, an expense is a specific accounting event related to the outflow of cash reducing corporate equity. Expense simply record the event and used to understand ‘what happened’ from an accounting perspective. Understanding Costs Costs are derived, used as a measure for economic purposes, which measure the economic performance across multiple dimensions of business, (organization, product, customer, etc.). A cost is a derived value of money consumed to produce a current or future outcome; hence, costs provide management a decision supporting view to improve business economics. Costs are expressed as a value measured in relationship to a causal volume of consumption. The Difference between Cost Accounting and Financial Accounting are as follows: Cost...
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...Purpose of Managerial Accounting M B Colorado Technical University Online August 26, 2014 Purpose of Managerial Accounting The purpose of this presentation is to convey the importance and purpose of managerial accounting, how the managerial accountants support the strategic decisions, ways strategies can be implemented by management and strategy implementation steps that managers can take. As the Board of Directors you will be charged with interpretation of information provided by the accountants. As a board using the financial and managerial accountants’ reports and feedback will assist with the planning and execution of decision that will strategically allow all employees from management down to the front line to operate efficiently. The purpose of managerial accounting is to take historical information, such as financial statements, budgets and operations reports to create a plan focus inwardly within the company. Managerial accounting is a system of providing and measuring financial and operational information. The system is designed to motivate behaviors, guides managerial action, and support and create necessary cultural values needed to achieve an organization’s strategic objectives (Geense, 2005). Managerial accounting is comprised of 4 ideas that are the key to its definition. The ideas capture the purpose, scope, attributes and nature of managerial accounting. Cost and operational information, including some financial information define the scope. Reaching...
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...Others like cooperative, non-profit making etc. * Such organizations need to take different decisions for their business activities. * Financial information is needed for decision making purpose. * Book keeping and Accounting will provide such information. * Meaning of Financial Accounting * Process of identifying, measuring, classifying, recording, summarizing and interpretation of the transactions of a business in terms of money to ascertain the result and financial position of business activities of particular period. * Accounting is the art of recording, classifying and summarizing, in a significant manner and in terms of money, transactions and events which are in the part at least, of a financial character and interpreting the results there of.- AICPA * Its features are- * Financial language * Financial information * Systematic process * Functions * Information system * The Purposes of Financial Accounting The objectives of accounting are- * To maintain records- * To generate accurate and authentic information, all the financial activities needs to be remembered which will not be possible without keeping records. As accounting helps to memorize all the transactions with records, it is the objective of accounting. * To ascertain operating results- * Accounting ascertains whether the business has earned a profit or suffered a loss by preparing profit and loss statements,...
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...|FIN3024 Accounting Information Systems | |Topic |Introduction to Accounting Information Systems | |Week |1 | Chapter Overview This chapter explains some fundamentals of accounting information systems and the historical development of it until the need to have one become so essential to meet the competitive environment. In addition, it discusses the role of systems within the organizational setting as well as accountants’ roles in using, designing and auditing the accounting information systems. Learning Objectives ▪ Explain the historical development of corporate accounting information systems ▪ Explain the nature, context and purpose of corporate accounting information systems. ▪ Explain the business information support systems. ▪ Examine the role of accountants and information systems. Learning Outcomes: On successful completion of this topic students should be able to: Describe the major influences changing the nature and context of accounting information systems; Demonstrate an understanding of business information support systems. Illustrate an awareness of the role of accountants, accounting and finance...
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...Introduction Corporate financial systems represent the business analysis phase of a company. Large companies -- particularly publicly held companies -- use a financial system to help assess financial performance. In some cases, the corporate financial system is a bridge between accounting and management. Rather than focusing solely on the preparation of financial information, financial systems look to gauge performance and make forecasts. Many different financial activities fall under the corporate financial system. Budgets, sales forecasts, profitability measurements, cash flow management, financing decisions and capital structure are just a few of the most common. The department's core purpose is to measure how well the company generates cash and what financing options will result in the best opportunities for growing the business. Individual analysts often make suggestions to management on the best investment opportunities for the company. The corporate financial system often operates under the responsibility accounting theory. This dictates that a business should place individuals in charge of activities under their direct control. For example, one manager may be responsible for budgeting and cash-flow forecasting. Another manager is over capital structure and another over business valuation. This segregation allows each manager to focus on increasing the value added from their section of the department. The aggregate value added is the result of all managers working...
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...Accounting Theory Learning Objectives Definition of theory and accounting theory The needs, purposes & benefits of AT Inductive & deductive approach to construct theory Descriptive, decision usefulness & welfare approaches to the construction of AT Structure of AT Relationship between AT & AP 1 Accounting Theory Defined as: A set of broad principles that provides a general frame of reference by which accounting practice can be evaluated and guides development of new practices and procedures. (Hendrickson, 1982) or A cohesive set of conceptual, hypothetical and pragmatic propositions explaining and guiding the accountant’s action in identifying, measuring and communicating economic information. 2 Nature and Purpose of Theory Theory can be defined as a set of general propositions, used as principles of explanation of the apparent relationship among certain observed phenomena, events or things. Proposition – statements concerned with the relationship among concepts. Concepts – generalized idea or expression in words about events observed in the real world. Theory is used as basis of explanation with regard to how/why certain phenomena happens the way they do. Explanation as well as prediction offers by theory is important as it enhance our understanding of the phenomena that exist in reality Generally theory is sometimes said to deal with the creation of scheme of ideas which provide definition of the problem observed and the understanding of it. 3 Needs and Importance of...
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...INTERNATIONAL STANDARD ON AUDITING 200 OBJECTIVE AND GENERAL PRINCIPLES GOVERNING AN AUDIT OF FINANCIAL STATEMENTS (Effective for audits of financial statements for periods beginning on or after June 15, 2006)∗ CONTENTS Paragraph Introduction .................................................................................................... 1 Objective of an Audit of Financial Statements .............................................. 2-3 Ethical Requirements Relating to an Audit of Financial Statements ............. 4-5 Conduct of an Audit of Financial Statements ................................................ 6-9 Scope of an Audit of Financial Statements .................................................... 10-14 Professional Skepticism ................................................................................. 15-16 Reasonable Assurance ................................................................................... 17-21 Audit Risk and Materiality ............................................................................. 22-32 Responsibility for the Financial Statements ................................................... 33-36 Determining the Acceptability of the Financial Reporting Framework ......... 37-48 Expressing an Opinion on the Financial Statements ...................................... 49-51 Effective Date ................................................................................................ 52 ∗ ISA 315, “Understanding...
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...similarities and differences in Managerial and Financial Accounting. There a very specific differences between Managerial and Financial Accounting. The differences include the primary users of reports, types and frequency of reports, purpose of reports, content of reports, and the verification processes for each method. Users of financial reporting are external, such as stockholders, creditors, and regulators. Users of managerial reporting are internal users such as officers and managers. Financial accounting produces financial statements quarterly and annually while Managerial accounting produce internal reports as often as they are needed. The purpose of the reports that are used are of a general nature for financial reporting while managerial reporting is for specific purpose as a tool for specific decisions. The content of the reports provided by each method of accounting is also different. Financial accounting pertains to the business as a whole, is highly condensed, limited to cost data and double entry accounting, and adheres to Generally Accepted Accounting Principles (GAAP). In contrast Managerial accounting pertains to subunits within the business, is very detailed in nature, extends well beyond double entry accounting to any relevant data, and the standards applied is dependent on the relevance of the decision. Lastly, the verification process for Financial Accounting is the CPA audit while Managerial accounting does not require independent audits. After...
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...Testbank to accompany Company Accounting 10e by Ken Leo, Jeffrey Knapp, Sue McGowan & John Sweeting Prepared by Peter Baxter [pic] © John Wiley & Sons Australia, Ltd 2015 Chapter 1: Nature and regulation of companies Multiple-choice questions 1. The advantages of a company over a partnership and sole trader do not include which of the following? a. Members are able to sell their shares at any time to another person without having to obtain permission from the other members. b. Members are liable for only a limited amount of the company’s debts. c. A company has a legal existence distinct from its owners. *d. A company is only entitled to raise small amounts of cash by issuing shares. Correct answer: d Learning Objective 1.1 ~ summarise the nature and attributes of a company 2. In Australia, the Corporations Act 2001 is administered by the: a. Australian Securities Exchange. b. Australian Accounting Research Foundation. *c. Australian Securities and Investments Commission. d. Securities and Exchange Commission. Correct answer: c Learning Objective 1.1 ~ summarise the nature and attributes of a company 3. The two main types of companies permitted to be registered under the Corporations Act 2001 are a: a. private company, and a proprietary company. b. public company, and a trade union. *c. proprietary company, and a public company. d. proprietary company, and a partnership...
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...Unit I Introduction to Accounting Overview |Background |The evolution of accounting is attributed to the social and economic needs of society. As business and society | | |become more complex, accounting develops new concepts, methods and techniques to meet the ever changing and | | |increasing needs for financial information. Without the necessary information furnished by accounting, many | | |complex social programs and economic development may never have been realized. | | |Information, in any market economy, assists decision-makers in making wise choices regarding the use of limited | | |resources under their control. When decision-makers are able to make well-informed decisions, resources are | | |allocated in a manner that better meets the needs and goals of companies within the given market. | | |The Philippines, being a developing country, would need a great deal of reliable and timely information to compete| | |in the global market and accounting will play an important role in this prevailing competitive global structure of| | |the economy. Companies use accounting information to evaluate the business situations around the world...
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...1 General-purpose financial statements are the product of a. financial accounting. b. managerial accounting. c. both financial and managerial accounting. d. neither financial nor managerial accounting 2 . Users of financial reports include all of the following except a. creditors. b. government agencies. c. unions. d. All of these are users. 3 . Which of the following statements is not an objective of financial reporting? a. Provide information that is useful in investment and credit decisions. b. Provide information about enterprise resources, claims to those resources, and changes to them. c. Provide information on the liquidation value of an enterprise. d. Provide information that is useful in assessing cash flow prospects. 4 . Accrual accounting is used because a. cash flows are considered less important. b. it provides a better indication of ability to generate cash flows than the cash basis. c. it recognizes revenues when cash is received and expenses when cash is paid. d. none of the above. 5 . Which of the following (a-c) are not true concerning a conceptual framework in accounting? a. It should be a basis for standard-setting. b. It should allow practical problems to be solved more quickly by reference to it. c. It should be based on fundamental truths that are derived from the laws of nature. d. All of the above (a-c)...
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...INTERNATIONAL STANDARD ON AUDITING 620 USING THE WORK OF AN AUDITOR’S EXPERT (Effective for audits of financial statements for periods beginning on or after December 15, 2009) CONTENTS Paragraph Introduction Scope of this ISA ........................................................................................ The Auditor’s Responsibility for the Audit Opinion ................................... Effective Date ............................................................................................. Objectives .................................................................................................. Definitions .................................................................................................. Requirements Determining the Need for an Auditor’s Expert ........................................... Nature, Timing and Extent of Audit Procedures ......................................... The Competence, Capabilities and Objectivity of the Auditor’s Expert ..... Obtaining an Understanding of the Field of Expertise of the Auditor’s Expert ................................................................................................... Agreement with the Auditor’s Expert ......................................................... Evaluating the Adequacy of the Auditor’s Expert’s Work .......................... Reference to the Auditor’s Expert in the Auditor’s Report ......................... Application and Other Explanatory Material Definition of an Auditor’s...
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...Executive Memo to the Board To: Board of Directors From: UoPx CPA Auditors Subject: GAAP Requirements and Accounting Treatment for Share-Based Payment Reporting and Consolidation of Special Purpose Entity Week 6 Points to consider Memo on SPE and Share-based payments Evaluate Share-based payment reporting JJH->Share-based employee compensation awards are classified as either equity instruments or liability instruments. The measurement date for estimating the fair value of equity instruments is the grant date; the measurement date for liability instruments is the settlement date. Different rules also apply to public vs. private companies depending on the type of award instrument. (Executive summary, Paragraph 2) http://www.journalofaccountancy.com/Issues/2007/Apr/ARoadMapForShareBasedCompensation.htm Three features to help identify a share based transaction with employee program: 1. Employees that are shareholders are granted additional benefits Additional benefits indicate the entity is dealing with the individuals as employees or providers of services rather than as investors or equity holders. Examples of additional benefits include: • Employees have the right to additional shares if the business performs well (often referred to as a ratchet mechanism). • Employees’ rights depend on whether the entity floats or is sold through a trade sale (ie, in the event of a trade sale an employee may automatically get a cash payment...
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