Set 2 Flashcards
(43 cards)
What are the learning objectives of the ACCY130 course?
Understand and explain reporting boundaries, distinguish between different organisational forms, understand assumptions for financial statements, understand NZ legislative environment, identify groups involved in setting accounting standards.
What is meant by ‘reporting boundaries’?
The extent to which accounting information should be reported, influenced by various factors including personal values, stakeholder pressure, and professional background.
What does the term ‘Entity’ refer to in accounting?
Any legal, administrative, or fiduciary arrangement with the capacity to deploy scarce resources to achieve objectives.
What are the two classifications of organisations?
- For-profit
- Not-for-profit
What is the primary objective of for-profit entities?
To generate profits for owners (shareholders).
What type of information do not-for-profit entities focus on?
Information about cash flows to manage initiatives.
Name the three broad categories of activity for profit-oriented entities.
- Service
- Merchandising
- Manufacturing
What are the three basic forms of for-profit businesses?
- Sole Trader/Proprietorship
- Partnership
- Company
What is a limited liability company?
An artificial legal person with an identity separate from its owners, typically defined by ownership interest broken down into shares.
What distinguishes listed companies from unlisted companies?
- Listed: Public sale/trade of shares, large size, many shareholders, extensive regulation
- Unlisted: No public share trade, smaller size, few shareholders, moderate regulation
What defines Public Benefit Entities (PBEs)?
Entities whose primary objective is to provide goods or services for community or social benefit, with equity provided to support that objective.
What is the public sector composed of?
Public services and public enterprises, including military, law enforcement, infrastructure, public transport, public education, and health care.
What are the main differences between PBEs and for-profit entities?
- Objective: Public benefits vs. profit motive
- Ownership: Absence of defined ownership vs. shares that can be sold
- Stakeholders: Wider group vs. limited stakeholders
- Revenues: Contributions vs. sales
- Capital Assets: Held for service vs. held for return
- Financial Performance: Driven by expenses vs. revenues
What is a ‘reporting entity’?
An entity that has users relying on its financial statements as their major source of financial information.
What are the characteristics considered when determining reporting entities?
- Separation of management from owners
- Size of the entity
- Public accountability
- Significant judgement required
What is GAAP?
Generally Accepted Accounting Practice, a set of broad rules and principles for preparing General Purpose Financial Reports.
What are the key conventions covered in the NZ Accounting Frameworks?
- Going Concern
- Historic Cost
- Accrual Accounting
What does ‘Going Concern’ assume?
The entity will continue in operation for the foreseeable future.
What does ‘Accrual Accounting’ depict?
The effects of transactions in the periods they occur, regardless of cash receipts and payments timing.
What role do financial reporting standards play?
They narrow management’s range of methods for reporting transactions, leading to greater consistency and comparability.
What is the New Zealand External Reporting Board (XRB)?
The body that prepares and issues accounting and assurance standards in New Zealand.
What legislation governs financial reporting in New Zealand?
- Companies Act 1993
- Financial Markets Conduct Act 2013
- Employment Relations Act 2000
- Income Tax Act 2007
- Health and Safety at Work Act 2015
- Fair Trading Act 1986
- Resource Management Act 1991
- Financial Reporting Act 2013
Who enforces business regulations in New Zealand?
- Financial Markets Authority (FMA)
- New Zealand Stock Exchange (NZX)
- Commerce Commission
- Chartered Accountants New Zealand and Australia (CAANZ)
- CPA Australia
What is the NZX?
The NZX is a stock exchange in New Zealand that regulates the activities of all listed companies.
