BSB110 Lecture Notes - Lecture 2: Chartered Accountants Australia And New Zealand, Cpa Australia, Management Accounting

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21 May 2018
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Week 2 Accounting lecture Notes
Regulation/ Conceptual Framework/ Accounting Equation/ Financial Statements
Accounting: The Language or Business
Communication of information.
Primary function of accounting is to provide financial information for decision
making.
Professional terminology and jargon:
o Accounting terms, concepts and symbols.
o Accounting information should be relevant and reliable.
Financial accounting provides information to assist external usersdecision making.
Management accounting provides information for internal usersdecision making
(i.e. decision making within the business itself).
The Accounting Process
Accounting is the process of identifying, measuring, recording and communicating
the economic transactions and events of a business operation
Transactions are economic activities relevant to a particular business
For example:
o Sale of item to customer
o Purchase of office stationery from supplier
Diverse Roles of Accountants
Commercial accountants
Public accountants
Government accountants
Not-for-profit accountants
The Accounting Profession: Career Opportunities
Lucrative career with many opportunities
Professionally qualified accountants pass the educational and experience
requirements of a professional body
Professional bodies recognized in Australia include
o Chartered Accountants Australia & New Zealand
o CPA Australia
o Institute of Public Accountants
o Chartered Institute of Management Accountants
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Forms of Business Organisation
Sole proprietorship (sole trader):
o Owned by one person:
e.g. restaurants, dentist, panel beaters
Partnership:
o Owned by more than one individual:
e.g. accountants, solicitors, doctors
Company:
o Organised as a separate legal entity and owned by shareholders:
e.g. BHP, CSR, Westpac, RM Williams
o Most companies have limited liability
Other forms:
o A trust is a relationship or association between 2 or more parties whereby
one party holds property in trust for the other:
Corporate trust is a popular business structure for small business
o A cooperative is member-owned, controlled and used, and must consist of 5
or more people:
e.g. Australian Forest Growers, Ballina Fishermens Co-operative Ltd
Not-for-Profit Organisations
Associations:
o Generally formed by small, non-profit, community-based groups.
o May be incorporated:
e.g. Australian Medical Association, Epilepsy Association of Australia
Government (Public Sector):
o Organisations are owned by government: federal, state or local
o Departments or segments are operated as business enterprises
Conceptual Framework
The Conceptual Framework consists of a set of concepts to be followed by preparers
of financial statements and standard setters.
Four sections:
1. Objective of general purpose financial reports
2. The Reporting Entity
3. Definition of elements of Financial Statements
4. Concepts, Principles and Qualitative Characteristics
Conceptual Framework: The Objective of General Purpose Financial Reporting (GPFR)
The objective of financial reporting is:
to provide financial information about the reporting entity that is useful to
existing and potential investors lenders and other creditors in making
decisions about providing resources to the entity
o To provide financial information about the reporting entity to the resource
providers.
o Emphasises that primary users of GPFR are existing and potential
shareholders, lenders and other creditors.
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The Objective of Financial Reporting
Providing information about financial position, financial performance and cash flows
assists users to evaluate and predict the entitys:
o Ability to generate cash in the future
o Future borrowing needs and how future profits and cash flows will be
distributed among those with an interest in the entity
o Likely success in raising further finance and meeting commitments when they
fall due
o Investing, financing and operating activities.
Conceptual Framework: The Reporting Entity
An entity in which it is reasonable to expect the existence of users who depend on
general purpose financial reports to enable them to make economic decisions.
A reporting entity must prepare external general purpose financial reports that
comply with accounting standards
Users and Uses of Financial Information
Primary users of general purpose financial reports are the resource providers:
o Equity investors contribute resources (usually cash) for a return; includes
shareholders (existing and potential), holders of partnership interests.
o Lenders contribute by lending resources for the purpose of receiving a return
in the form of interest; e.g. banks.
o Other creditors provide resources in the form of credit; e.g. suppliers,
employees
Other users:
o Recipients of goods and services:
e.g. customers, beneficiaries
o Parties performing a review or oversight function:
e.g. regulatory agencies, media, governments, trade unions, special
interest groups
Conceptual Framework Definition of Elements of Financial Statements
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Document Summary

Diverse roles of accountants: commercial accountants, public accountants, government accountants, not-for-profit accountants. The accounting profession: career opportunities: lucrative career with many opportunities, professionally qualified accountants pass the educational and experience requirements of a professional body, professional bodies recognized in australia include, chartered accountants australia & new zealand, cpa australia. Institute of public accountants: chartered institute of management accountants. Conceptual framework definition of elements of financial statements. Statement of profit or loss (income statement: purpose is to report the entity(cid:1685)s success or failure over a period time, lists the entity(cid:1685)s income (revenues and gains, lists the entity(cid:1685)s expenses. Income arising from the ordinary activities of the business: such as sale of goods, sales of service, interest revenue, fees, expenses, costs associated with earning revenue for the business, such as cost of goods sold, wages, rent, advertising. Statement of changes in equity (calculation of retained earnings) Assets: future economic benefits controlled by the entity as a result of past transactions or events.

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