Week 1 - Intro to accounting

Question 1

Primary function of accounting

Answer 1

to provide financial information for decision making

Question 2

Management accounting

Answer 2

provides information for decision making WITHIN the business.

Question 3

Financial accounting

Answer 3

provides information to assist external users decision making

Question 4

Decisions businesses make include

Answer 4

Should funds be borrowed or raised from owners?

Buy or lease, expand into a new market, introduce new product.

Question 5

Accounting is the process of

Answer 5

1) Identifying,
2) Measuring,
3) Recording and
4) Communicating,
the economic transactions and events of a business operation.

Question 6

Transactions are

Answer 6

economic activities relevant to a particular business. They are the basic inputs to the accounting process.

eg

• sale of item to customer
• purchase of office stationery from supplier

Question 7

Accounting process - identifying, step 1

Answer 7

Taking into consideration all transactions which affect business entity.

Question 8

Accounting process - measuring, step 2

Answer 8

Quantifying in monetary terms

Question 9

Accounting process - recording, step 3

Answer 9

analysing, recording, classifying and summarising transactions

Question 10

Accounting process - communicating, step 4

Answer 10

preparing accounting reports, analysing and interpreting

Question 11

Commercial accountants

Answer 11

Work in industry & Commerce,

undertake roles such as management accounting and financial accounting

Question 12

Public accountants

Answer 12

Work for the public and work in a range of small to multinational offices.

• conduct auditing
• tax and advisory service

Question 13

Government accountants

Answer 13

employed by local councils, state government and federal government.

variety of roles inc financial accounting and auditing

Question 14

Not for profit accountants

Answer 14

work in not for profit sector

engage in planning, decision making, preparing financial and management reports, for internal and external users

Question 15

Main forms of business organisation

Answer 15

Sole Proprietorship (sole trader)
Partnership
Company

differ in no of owners, wether it is legal entity, costs to establish, maintain, liability of owners and tax reporting.

Question 16

Sole trader/proprietorship

Answer 16

owned by one person (restaurants, dentist, panel beaters etc)
more liability on owner

Question 17

Partnership

Answer 17

owned by more than one individual, eg accountants and doctors
capable f raising more funds than a sole trader

Question 18

Company

Answer 18

organised as a seperate legal entity and owner by shareholders eg BHP CSR Westpac
limited liability

Question 19

The conceptual Framework (CF)

Answer 19

Consists of a set of concepts to be followed by preparers of financial statements and standard setters.

basic guidelines are broad and general concepts relating to the preparation of financial reports

accounting standards are more specific for a particular area of accounting

Question 20

CF Provides answers to the following questions

Answer 20

• What is the purpose of financial statements
• Who are they prepared for?
• What assumptions are made in the preparation of financial statements (fs)
• What type of information should be included?
• What are the elements that make up a f/s?
  When should the elements of f/s beinlcuded?

Question 21

General Purpose Financial Reports (GPFR)

Answer 21

CF Based around this

Question 22

CF Objectives

Answer 22

Stewardship or accountability and decision making

Question 23

CF defines elements of 4 basic financial statements (fs)

Answer 23

Statement of Profit and Loss
Statement of changes in equity
Statement of financial position
Statement of cash flows

Question 24

Statement of profit and loss reports…

Answer 24

revenues less expenses for a particular period of time

Question 25

Statement of changes in equity reports

Answer 25

total comprehensive income for the period and other changes in equity

Question 26

Statement of financial position reports

Answer 26

assets, liabilities & equity at a particular point in time.

Question 27

Statement of cash flows reports

Answer 27

information, regarding cash receipts and cash payments for a particular period of time

Question 28

Primary users of GPFR

Answer 28

- equity investors - lenders - other creditors - recipients of goods and services - parties performing a review or oversight function

Question 29

GPFR For internal users

Answer 29

internal users do not reply on this as they can obtain the information they need internally managers who plan, organise and run the business

Question 30

external users have an interest in which 3 main business activities

Answer 30

Financing activities Investing activities Operating activities

Question 31

financing activities

Answer 31

- borrowing from banks | - selling shares to investors

Question 32

Investing activities

Answer 32

acquisition or sale of resources needed to operate the business

Question 33

Operating activities

Answer 33

results from operational activities undertaken to earn income revenue is less expenses = profit/loss

Question 34

Sustainability

Answer 34

making sure the social, economic and environmental needs of our community are met and kept healthy for future generations concerned with 3 main areas - economic - environmental - social

Question 35

What information would you require to set up and run your own business

Answer 35

creative ideas marketing plan information on the business environment - accounting plays a key part in the provision of financial information - the economic model

Question 36

What is the primary objective of accounting

Answer 36

provide financial information for decision making

Question 37

What are the four main areas accountants practise in | ** double check answer

Answer 37

1) Identifying, 2) Measuring, 3) Recording and 4) Communicating, the economic transactions and events of a business operation.