ACCT1046 Lecture Notes - Lecture 1: Intellectual Capital, Sole Proprietorship, Legal Personality

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7 Jun 2018

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Module 1 topic 2

What is an organisation?

In topic 1, we considered organisational ‘responsibilities’, ‘accountability’, and ‘accounting’.

But what is an ‘accounting entity’ (with focus on the ‘accounting’) for the purposes of such

discussion? Is it:

• An entire organisation (these can take a variety of forms as we will shortly discuss)?

• A part of an organisation (such as a division)?

• A consolidated group of separate legally identified companies that might be dispersed

internationally (that is, a group of companies considered as one economic entity)?

• Simply stated, an organisation might be considered to be as a collection of people who

work toward a common goal or objective.

• Because different organisations will have different purposes or goals, and different

stakeholders who are able to affect the organisation, or those that are affected by the

organisation. As a result they can be considered to have different responsibilities.

• As we should now appreciate, different responsibilities will mean different

accountabilities, and therefore different demands on ‘accounting’.

• Some organisations might be set up to make a profit whereas others will be ‘not-forprofit’.

− This will influence the form of ‘accounting’ undertaken.

− Some information might be important to managers of a ‘not-for-profit’ but not

perceived as important by a ‘for profit’ organisation.

The reach of accounting

- When considering different organisations we also need to consider the ‘reach’ of the

accounting that we shall do. This is often referred to as considerations of the limits of the

‘accounting entity’.

- Should we only record and report information about the ownership and usage of resources

controlled by the organisation? Or should we consider impacts on the resources not controlled

by the organisation, for example, upon the ‘environment’? This is a decision to be made by

the accountant.

Sole trader

- Sole trader is where one individual controls and manages a business and is responsible for

all of its debts. Some of the features of a sole trader are:

• The owner has unlimited liability (so can potentially lose home, etc.);

• The business ceases operations on the departure of the owner;

• As there is only one person, the business may have limited skills, time, and access to

financial resources;

- If there is a loss, then one person incurs all the loss. most small shops we see are sole traders.

- In a sole trader, the owner is also typically the manager. A sole trader is not a separate legal

entity so business is not separate to the person’s non-business affairs. As such, the business is

not separately taxed but the earnings are included in the total earnings of the owner.

- A sole trader is not difficult to set up. Apart from having to comply with tax requirements,

there are generally no specific accounting requirements applying to sole traders. Sole traders

do not have to apply accounting standards and can be flexible with their reporting, but they

still need to do accounting.

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Document Summary

In topic 1, we considered organisational responsibilities", accountability", and accounting". As a result they can be considered to have different responsibilities: as we should now appreciate, different responsibilities will mean different accountabilities, and therefore different demands on accounting". Some organisations might be set up to make a profit whereas others will be not-forprofit". This will influence the form of accounting" undertaken. Some information might be important to managers of a not-for-profit" but not perceived as important by a for profit" organisation. When considering different organisations we also need to consider the reach" of the accounting that we shall do. This is often referred to as considerations of the limits of the. This is a decision to be made by the accountant. Sole trader is where one individual controls and manages a business and is responsible for all of its debts. If there is a loss, then one person incurs all the loss. most small shops we see are sole traders.

Related Questions

Discussion: you will assume the role of an entrepreneur. Youwill create a fictional organization and consider some costingconcepts as you create it.

First, compose a full paragraph that describes the organization.Be sure to include the name of your company, the product (orproducts) or services that it provides, and who your intendedcustomer base would be. Think strategically about what you canoffer that a customer base would see as valuable, and what basicbusiness model would help you to be most profitable.

1.Once you have outlined the company and its goals, pleaseconsider and answer the following questions:

2.Identify at least one fixed and one variable cost you willhave in producing your product(s) or service(s).

3.Identify at least one potential sunk cost.

4.Identify a potential relevant cost decision you would have tomake and explain which aspects of the decision might be relevantand which ones would not be relevant.

5. Explain how opportunity costs could apply to one or more ofyour products and/or services.

6. Identify at least one outsourcing decision in which you wouldâbuyâ and at least one outsourcing decision in which you wouldâmake." Keep in mind these can be not only production issues butissues related to how your business is structured. Explain theanalysis you would use in arriving at an item you would âbuyâ andthe analysis you would use in arriving at an item you wouldâmake.â

Your initial posting should be between 300 to 400 words and usea minimum of three sources (one of which may be the textbook). Citeyour sources and references using APA format (a tutorial isprovided in the Class Tutorials Section of the course).

You will use two items to complete Part II. First, go back andreview the company that you created for the Discussion. Thinkstrategically about the company, its products and services, andissues related to cost. Then, review the case study on Boeing(http://web.mit.edu/ctpid/lara/pdfs/abccasestudy.pdf) to understandhow activity-based costing and activity-based management can impactmanagerial decisions within firms. Once you have completed thesetwo activities, respond to the following questions in the spaceprovided below. You should use source materials, citations ANDreferences (in APA format) to help support your answers. Generally,3-5 sources (or more) should be used. Remember to double space youranswers as well.

Topic A (10 points) â Using the company you created in Module 2,if you were to conduct an ABCM pilot in the organization, thenwhich stakeholders would be most likely to support the project?Which stakeholders would find the project threatening orproblematic? Why?

Answer:

Topic B (10 points) â Do you believe that make-buy decisionswould be better, worse, or no different with an ABCM system inplace? Why do you reach this conclusion?

Answer:

Topic C (10 points) â Do you believe that continuous improvementefforts would be strengthened by such a system? Why or why not?

Answer:

Topic D (10 points) â Do you have enough evidence here to decidewhether you would support or oppose an ABCM initiative within yourcompany? If so, then explain. If not, then what additional data orinformation would you need?

Answer:

References: (10 points)

1. Identify the ethical issue within the scenario.

You will identify the ethical issue presented in the scenario.Explain in detail why the ethical issue exists and rules thatgovern the handling of the situation. You must use at least twocredible outside source that supports your assertion regarding theethical dilemma.

2. Answer each of the following questions: ï· Who will potentiallybe harmed? ï· Who will potentially benefit? ï· What (ifany) rights or claims will be violated?

In this section of your answer, you need to address thestakeholders involved in the situation. Then, you need to providean explanation of how those stakeholders will be affected. When youdiscuss who might be harmed by the situation, fully explain howthey will be harmed. When you discuss who will potentially benefit,also share in detail how they will benefit. When you discuss theviolation of rights and/or claims, give details about those rightsand/or claims and why the ethical issue will impact those rightsand/or claims.

3. Discuss your responsibility and obligations as an accountingprofessional.

In the concluding paragraph, discuss how the matter should behandled based on your responsibilities and obligations, as well asyour ethical convictions. Describe in detail why you would chooseto deal with the ethical issue in this manner, from the standpointof responsibility as an accounting professional and from an ethicalstandpoint.

For each scenario, you will create a document that answers each ofthe three requirements presented. You should format your documentusing Times New Roman 12 point font with 1â margins on all sides.Please double space your document. You must use correct APAformatting for all citations and include a separate Works Citedpage for each of the ethical scenarios. Any form of plagiarism withresult in a 0 for the entire Capstone Project and you will receivean F as your final grade in the course.

I would suggest separating each of the three requirements into 3different paragraphs. The key to doing well on this section isproviding detail. While you are only required to provide one pageof written material by the assignment instructions, please notethat you will be graded on content and fully answering (in detail)the three numbered requirements.

Scenario #1:

You are employed as an auditor at a CPA firm. One of your clientsis Camp Enterprises, a company who has become quite successful overthe past 4 years. Increases in earnings have averaged around 15%each year. The corporation is planning on a public offering ofstock in January 2016, which in turn would cause a sizeableincrease in fees for your employer. Furthermore, the additionalfinancing would fund an expansion that would bring new jobs for thecommunity, which would help to stimulate the local economy, andallow the company to diversify their products.

On October 31, 2015, as you are working on the audit for the fiscalyear ending June 30, 2015, an issue comes to your attention thatcould potentially have an effect on the significant increase inearnings for the fiscal year. A very large orderwas slated to be shipped FOB Shipping Point to Coral Creations onJuly
14, 2015. The order was completed and stored in the warehouse butwas not segregated. Management included the selling price andrelated expenses in the net income for the fiscal year ending June30, 2015. If the issue is handled in a way thatdecreases net income, Camp Enterprisesâ net income will be lowerthan the amount reported last year.

Scenario #2:

It is July 3, 2015, and you have just been hired on as a staffaccountant at Pace Corporation. You have been tasked on creatingthe financial statements for the 2nd quarter of the fiscal year,and as you create the balance sheet, you notice an account calledMiscellaneous Equipment in the amount of $395,000. This is arelatively large account balance compared to the other fixed assetaccounts, and you are a bit unsure how to classify the account forreporting purposes, since you havenât even found a depreciationschedule for the account.

In order to get more information, you go to the Controller, ScottSmith, and ask about the account. He replies, âThat account needsto be included under Property, Plant & Equipment. Because ourbusiness is cyclical, and we always show higher profits in thethird and fourth quarters of the year, we put all of our equipmentrepair expenses in that account and then expense them off when wehave more revenue to offset it in the last two quarters of theyear. This keeps us from having to show losses in the first andsecond quarters of the year, and makes all of our quarterly reportslook good. It really doesnât matter because our yearly totals areall the same regardless of how we report repair expenses in each ofthe quarters. Weâve done it this way for years, and that is how Iwant you to report it.â

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Question 1

Identify the item below that is not one of the four different types of data processing activities.

		deleting
		reading
		creating
		using

Question 2

All of the following are advantages of an ERP system except

		ERPs permit manufacturing plants to receive new orders in real time.
		in an ERP, data input is captured or keyed once.
		it takes considerable experience and training to use an ERP system effectively.
		ERPs permit management to gain greater visibility into every area of the enterprise.

Question 3

Sam Jones has been the controller of Downtown Tires for 25 years. Ownership of the firm recently changed hands and the new owners are conducting an audit of the financial records. The audit has been unable to reproduce financial reports that were prepared by Sam. While there is no evidence of wrongdoing, the auditors are concerned that the discrepancies might contribute to poor decisions. Which of the following characteristics of useful information is absent in the situation described above?

		relevant
		reliable
		complete
		timely
		understandable
		verifiable
		accessible

Question 4

An ERP system might facilitate the purchase of direct materials by all of the following except

		preparing a purchase order when inventory falls to reorder point.
		routing a purchase order to a purchasing agent for approval.
		communicating a purchase order to a supplier.
		selecting the best supplier by comparing bids.

Question 5

Antia Carmie is the largest collector and retailer of Japanese fans in the St. Louis area. Antia uses computer technology to provide superior customer service. The store's database system was designed to make detailed information about each Japanese fan easily accessible to her customers. Accordingly, the fan price and condition are provided for each fan, along with many pictures of each fan. In Antia's database, the price of the Japanese fans is a(n)

		entity.
		attribute.
		field.
		record.

Question 6

Which of the following is not considered a source document?

		A copy of the company's shipping document.
		A copy of the company's ledger.
		A copy of the company's sales journal.
		A copy of the company's financial statements.

Question 7

In an ERP system, the module used to record data about transactions in the disbursement cycle is called

		financial.
		order to cash.
		customer relationship management.
		purchase to pay.

Question 8

Baggins Incorporated identifies new product development and product improvement as the top corporate goals. An employee developed an innovation that will correct a shortcoming in one of the company's products. Although Baggins current Return on Investment (ROI) is 12%, the product innovation is expected to generate ROI of only 10%. As a result, awarding bonuses to employees based on ROI resulted in

		goal conflict.
		information overload.
		decreased value of information.
		goal congruence.

Question 9

________ are examples of activities that constitute inbound logistics.

		Activities that transform inputs into final products or services
		Activities that provide post-sale support to customers
		Activities that consist of receiving, storing, and distributing the materials used as inputs by the organization to create goods and/or services it sells
		Activities that help customers to buy the organization's products or services

Question 10

In which transaction cycle would information for inventory purchases be most likely to pass between internal and external accounting information systems?

		the revenue cycle
		the expenditure cycle
		the human resources / payroll cycle
		the financing cycle

Question 11

The collection of customer payment is part of which transaction cycle?

		the human resources cycle
		the production cycle
		the revenue cycle
		the expenditure cycle

Question 12

Which of the following is an example of source data automation?

		POS (point-of-sale) scanners in retail stores
		a bill of lading
		a subsidiary ledger
		a utility bill

Question 13

All of the following are guidelines for developing a good coding system except

		be as sophisticated as possible to promote usage.
		be consistent with its intended use.
		be flexible to allow for growth.
		be consistent with the company's organization structure.

Question 14

What is a key decision that needs to be made with regards to borrowing money from lenders?

		the location
		pro forma income statement
		how much capital to acquire
		job descriptions

Question 15

Identify the false statement below.

		A service company does not have an inventory system.
		Retail stores do not have a production cycle.
		Financial institutions have installment-loan cycles.
		Every organization should implement every transaction cycle module.

Question 16

The chart of accounts of a fast-food restaurant would probably include

		a list of customers.
		a list of financial statement accounts.
		a list of vendors.
		a list of employees.

Question 17

Which statement below regarding the AIS is false?

		Traditionally, most AIS have been designed so that both financial and operational data are stored in a manner that facilitates their integration in reports.
		The AIS must be able to provide managers with detailed and operational information about the organization's performance.
		Both traditional financial measures and operational data are required for proper and complete evaluation of performance.
		The AIS was often just one of the information systems used by an organization to collect and process financial and nonfinancial data.

Question 18

In Petaluma, California, electric power is provided to consumers by Pacific Power. Each month Pacific Power mails bills to 186,000 households and then processes payments as they are received. What is the best way for this business to ensure that payment data entry is efficient and accurate?

		well-designed paper forms
		turnaround documents
		source data automation
		sequentially numbered bills

Question 19

Data must be converted into information to be considered useful and meaningful for decision making. There are seven characteristics that make information both useful and meaningful. If the same information can be reproduced by two independent and knowledgeable people, it is representative of the characteristic of

		verifiability.
		truthful.
		relevance.
		reliability.

Question 20

		entity.
		attribute.
		field.
		record.

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ACCT1046 Lecture Notes - Lecture 1: Intellectual Capital, Sole Proprietorship, Legal Personality

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