week 1

• what is accounting

  • the process or work of keeping financial accounts
  • the process of recording financial transactions about a business. The accounting process includes summarizing, analyzing, and reporting these transactions to oversight agencies, regulators, and tax collection entities. The financial statements used in accounting are a concise summary of financial transactions over an accounting period, summarizing a company's operations, financial position, and cash flows.
• accounting...

  • Accounting information is used to help project business outcomes, to measure performance and to facilitate growth or expansion.
  • It is used on a daily basis throughout the operating cycle of a business to ensure that cash flow is sufficient (mainly)
  • Accounting assists in decision making – by providing both financial and non-financial information.
• accounting process

  1. identifying : transactions relating to an entity
  2. measuring : quantifying in monetary terms
  3. recording : categorising into financial reports
  4. communicating: presenting information in meaningful format

  
• accounting in society

  • businesses: financial accounting and management accounting helps evaluate past performance and plan ahead
  • government: records and explains where resources have been received and used
  • individual: managing tax obligtions and transactions of small/large spendings
  • nonprofit sector: managing an organisation to achieve goals
• financial reporting for:

  • sole proprietors
  • partnerships
  • companies
• accounting and sustainability

  • Sustainability focuses on ensuring the social, economic and environmental needs of our community are met and maintained for future generations
  • accounting is the tool used to help measure and evaluate sustainability
• management accounting

  • used for internal decision making
  • involves collecting data around costing, pricing, budgeting and evaluation of projects
  • The data is analysed to provide information to guide managers in their operations.
  • Access to this type of information is restricted.


  financial accounting

  • used for external reporting and decision making
  • The format and content is guided by various regulations to ensure consistency.
  • accessible for publicly listed companies.
• management vs financial accounting

  A) users

  B) time

  C) report

  D) past

  
• internal users

  • internal - access to confidential information within the entity, as it is essential to running the business.
  • ie. directors, managers, senior executives, supervisors – those with a position of power.
  • They need to respond to risks and opportunities as they occur, so always need to be well informed.
• External users

  • either primary users or other users.
  • Users who are not in a position to access information, and must wait for the release of financial statements
  • The information is limited within these statements.
  • General purpose financial statements available to them are intended to satisfy their common information needs.
• external users - primary users

  • those who provide resources to an entity: deciding whether they should continue to proide resources or not
  • investors: stakeholders (existing and potential)
  • lenders: banks, insurance companies etc.
  • other creditors: employees, suppliers, customers
• external users - other users

  • government and regulatory agencies
  • members of the public
  • suppliers, customers and employees when not resource providers
  • eg. week1 looking at Qantas financial reports, we were other users
• users' need for information

  • the preparation of accounting info. is driven by a decision-making need
  • certain types of needs determines the information provided
  • managers: accesses info anytime and about anything
  • resource providers: accesses general purpose reports after periods