ACC100 Introduction to Accounting

Transcription

1 ACC100 Introduction to Accounting

2 Week 1 - Introduction Study Group Australia Pty Limited, SGA1286-F2/10/12 2

3 Introduction Welcome Housekeeping Learning outcomes Assessment Study Group Australia Pty Limited, SGA1286-F2/10/12 3

4 Housekeeping Lecture Staff: Tutorial Staff Support Staff Study Group Australia Pty Limited, SGA1286-F2/10/12 4

5 Learning Outcomes On completion of this subject, you should be able to: Demonstrate an understanding and basic working knowledge of accounting concepts, principles, and terminology. Differentiate between major accounting elements such as assets, liabilities, equity, expenses and income. Demonstrate an understanding of the concepts of double entry accounting through the correct use of debits and credits in journal entries. Analyse basic transactions and prepare journal and ledger accounts to trial balance. Record the acquisition, depreciation, revaluation and disposal of fixed assets. Demonstrate the ability to complete common accounting functions such as preparing profit and loss statements and budgets, and analysing and interpreting basic financial statements. Identify and evaluate key data from financial reports in order to assist management and stakeholders. Apply accounting principles and practices to solve business problems in case studies and business scenarios. Study Group Australia Pty Limited, SGA1286-F2/10/12 5

6 Assessment Assessments Study Group Australia Pty Limited, SGA1286-F2/10/12 6

7 Week 1 Introduction To Accounting Chapter 1 - Decision making and the role of accounting Study Group Australia Pty Limited, SGA1286-F2/10/12 7

8 Learning Outcomes On completion of this week s study, you should be able to: explain the primary use of accounting reports and statements ability to outline the basic accounting process 8

9 Your Journey into Accounting Accountants Not Bean Counters or Number Crunchers Rather Problem Solvers and Decision Makers Who work in a range of organisations In a variety of roles Accounting The language of business More than just bookkeeping 9

10 What are the Uses of Accounting Information? Life is full of decisions. Decisions mean making choices: We must choose how to spend our time We must choose how to spend our resources Decisions affect the future. Good decisions require good processes. 10

11 Steps in Decision Making Goals What are we trying to achieve? Information What information do we need? Consequences Choose What are the consequences of different alternatives? Which course of action should we choose? 11

12 Economic Decisions Many decisions involve economic resources. Economic resources have a price as they are scarce. Must also consider other important non economic factors: Personal taste Social factors Environmental factors Religious and/or moral factors Government Policy 12

13 The Nature of Accounting Accounting is a service activity Its function is to provide and interpret financial information to aid (informed) decision making. Accounting is used in a range of organisations. Business Government Charities Not-for-profits 13

14 The Accounting Environment Accounting is not static Accounting evolves as society and business changes. Some of these changes include Rapid developments in information and communication technologies Increasing demand for a range of information about organisational impact Globalisation of business Development of international regulations and standards 14

15 The Accounting Process Identification Transactions Measurement Quantification in monetary terms Recording Recording; classification; summarisation Communication Accounting reports Analysis and interpretation 15

16 Who are the Users of Accounting Information? Internal users How much profit is being earned? What products should be produced? What resources are available? What is the most efficient production process? What is the cost to reduce carbon emissions? What will be the effect if we increase or decrease selling prices? How much do we owe to outsiders? Will enough cash be available to pay debts as they fall due? 16

17 Who are the Users of Accounting Information? External users Should I invest money in this business? Will the business be able to repay money lent to it? What are the business s profit prospects? Is the business financially sound? Is the business ethically sound? Is the business providing products that are socially and environmentally friendly? Am I likely to be paid my wages? 17

18 Financial Reports and Users 18

19 Using Information in Economic Decisions Consider Darren, a hard-working editor, who is ready to take on a new career. He has the opportunity to start his own gardening business. Using the decision making process already outlined he needs to decide if this is the right decision for him. 19

20 Goals Darren wants to do something different to sitting behind a desk. So clearly a gardening business will meet this goal. He also wants to be financially secure. To establish this will require additional information 20

21 Gather Information First he will need a range of equipment: Second-hand van $ Trailer Rotary lawnmower 950 Cylinder mower Chainsaw Edger 600 Hedge trimmer 700 Blower Shredder Brushcutters 800 Gardening tools, ladders etc. 850 $

22 Gather Information Estimated weekly running costs Fuels and oils, repairs and maintenance $500 Part-time employee (Sue) 300 Estimated client numbers $800 Lawn mowing and trimming 60 Gardening, with shredding if required 12 Tree-lopping and shredding 20 22

23 Gather Information Approximate charges per client Lawn mowing $ 45 Gardening $ 90 Tree-lopping $ 135 Estimated weekly receipts 5 lawns mowed on each of 6 days $ garden on each of 6 days 540 $

24 Estimate Consequences Darren would expect gross annual turnover for a 48 week year of $ (48 X $1890) This is before including additional income from treelopping. Weekly costs are $800. Assume as well a further cost of $50 per week for accounting. Revenue less costs per week would equate to $1,040 before tax. ($1890- $850) 24

25 Choose With all these factors in mind Darren can now make an informed decision about his future. Discussion What else should Darren consider in the decision? What about the equipment? How would that be paid for? How would it affect the weekly profit calculation? Non-financial factors to consider? 25

26 Accounting Information and Decisions Many decisions require significant amounts of financial information Accounting information is very important Accountants report on the past Still useful for making decisions about the future Also useful for assessing past decisions Accountants also look to the future Budgeting; strategy and planning 26

27 Management and Financial Accounting MANAGEMENT ACCOUNTING FINANCIAL ACCOUNTING Internal Focus External Focus - Planning Reporting Information - Controlling - Performance - Decision-making - Position Cost Behaviour Financing and Investing Budgeting Compliance Strategy Highly Regulated 27

28 Accounting as a Profession: Australian Perspective Self-regulated profession Similar to law and medicine Two major professional associations CPA Australia (CPA) (Certified Practising Accountant) Institute of Chartered Accountants Australia (ICAA) Membership requires Tertiary qualification Ongoing professional development 28

29 Public Accounting Public accountants work in businesses which offer services to the public for a fee. Four main speciality areas: Auditing and assurance services Taxation services Advisory services Insolvency and administration 29

30 Accounting in Commerce and Industry Accountants may be employed in business entities. Many areas of interest: General accounting Cost accounting Accounting information systems Budgeting Taxation accounting Internal auditing and audit committees 30

31 Not-For-Profit Accounting Government accounting is concerned with the efficient use of resources consistent with the law applying at federal, state and local levels. Other not-for-profit organisations include hospitals, churches, charities, clubs and private educational institutions. Profit is not the primary focus. These groups have specialised accounting needs. 31

32 Types of Business Entities Single Proprietorship or Sole Trader Owned by one person Partnership Owned by two or more partners Company or Corporation Owned by shareholders Separate legal entity Limited liability 32

33 Management Functions PLANNING What to do How to do it CONTROLLING Evaluating actual versus planned performance DECISION MAKING ORGANISING Developing the organisational structure DIRECTING Performing according to plan 33

34 Ethics and Accountants Ethics in business Important in all business dealings Ethics and professional accounting bodies Important for the standing of the profession Ethics in practice Identify the ethical issue Analyse key issues and stakeholders Select appropriate course of action (end Chapter 1) 34

35 Summary Understand the primary use of accounting reports and statements Be able to outline the basic accounting process Study Group Australia Pty Limited, SGA1286-F2/10/12 35