ACCT10001 Chapter Notes - Chapter 1: Financial Accounting, Decision-Making, Australian Prudential Regulation Authority
22 May 2018
School
Department
Course
Professor
Identifying
-
reliably measured and recorded transactions that affect the entity's financial
position are taken into consideration
1.
Measuring
-
analysis, recording and classifying of business transactions
2.
Communicating
-
information is communicated through reports (statements of profit or loss,
balance sheets, statements of cash flows)
3.
Decision making
-
information is used for decisions by external and internal users
4.
The accounting process
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Determining appropriate sales mix and price of goods
○
Forecasting profits
○
Determining the capacity of assets
○
Make decisions about operations
-
Evaluate success in achieving objectives
-
Weigh up alternatives when investing resources
-
For internal users (owner/management)
For external users (stakeholders)
Shareholders
Determine future profitability, assess future cash flows for dividends, possibility
of capital growth of investment
Banks
Determine ability to repay loan
Suppliers
Determine ability to repay debt associated with purchases
Employees
Job security, potential to pay awards and bonuses, promotional opportunities
Consumers
Continuity of the entity, ability to provide goods and services
Gov
Determine amount of tax to be paid, future taxation liabilities/taxation assets
Regulatory bodies
Determine whether entity is abiding by regulations
Community
Determine whether entity contributes positively to general welfare and
economic growth of local community
Special interest
groups
Determine whether entity has considered environmental, social and/or
industrial aspects during its operations
Role of accounting info in decision making
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Preparation and presentation of financial information for all types of users to enable them to
make economic decisions about the entity
-
statement of cash flows reports on cash inflows and outflows
--
> operating, investing
and financing
○
balance sheet reports entity's assets and liabilities
○
statement of profit or loss reflects profit for a specified time period
○
Financial statements = statement of cash flows, balance sheet, statement of profit or loss
-
Based on historical cost (original amount paid)
-
Financial accounting:
Provides economic information for internal users
-
Formulating plans and budgets, providing information to be used in monitoring and control
-
Management accounting:
Interaction:
Management accounting provides info that is reflected in financial accounting
Financial
Management
Regulations
Bound by GAAP
Less formal, no rules
Timeliness
Often outdated by time of distribution
Historical record and projection
Level of detail
Quantitative
Quantitative and qualitative, detailed
Main users
A variety
Internal users
Financial accounting vs management accounting
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Document Summary
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