ACC100 - Topic 1

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ACC100 - Topic 1
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2015-03-19 03:57:23
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ACC100 - Topic 1 (1)
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  1. Environmental factors which shape accounting
    • The regulatory environment
    • The economic decision-making environment
    • The international environment
  2. Accounting defined
    Traditionally - The process of 'recording, classifying and reporting' the financial activities and transactions of a business enterprise.

    Now - The process of 'identifying, measuring and communicating economic information to permit informed judgements and decisions by users of this information.
  3. 3 Key Financial Statements
    • Income statement
    • Statement of financial position
    • Cash flow statement
  4. Income Statement
    Reports the income, expenses and profit that have been made during a given period.

    The statement shows how an entity's income was obtained and how the expenses were incurred.
  5. Statement of Financial Position
    Provides an important indication of the financial performance of the entity.

    Lists the assets or resources of value controlled by the enterprise, the entity's debts and the owner's claim in the entity.

    Provides an indication of the financial position of an entity at any given point in time.
  6. Accounting Entity
    The area of activity in which users of accounting information have an interest.

    May be an individual, company, company branch office, professional practice, club, government department or small business enterprise.
  7. Sole Ownership
    A business owned and operated by one person.

    Not separate legal entities from their owners and in law they remain 'unincorporated'.
  8. Partnership
    Consists or two or more individuals who join as co-owners of a business.

    Not separate legal entities from their owners and in law they remain 'unincorporated'.
  9. Company
    A business owned by people with shares in the business.

    A business becomes a company when it meets certain legal requirements.

    A company is a legal entity and, as such, it is an 'artificial person' conducting a business in its own name.
  10. Corporations Act 2001 (Cwlth)
    The highest level of regulatory authority over companies in Australia because it is a statute passed by the federal government.
  11. Accounting Regulations
    Form the rules and principles that govern the structure, content, audit and disclosure of financial information.
  12. Accounting Standards
    Provide detailed rules on how particular types of financial transactions and other events should be dealt with in an entity's accounting records.
  13. Financial Reporting Council (FRC)
    The body responsible for the accountant standard-setting process in Australia for the private and public sectors.
  14. International Accounting Standards Board (IASB)
    Sets accounting standards at the international level.
  15. Economic Decision-Making Environment
    Economic Events - Relevant Financial Statements - Decision Required - Users of Accounting Information
  16. Investors
    Are usually the shareholders or owners of the company.
  17. Lenders
    Are of various types and are usually termed creditors (entities to whom money is owed).

    May be long-term or short-term lenders and their loans may or may not carry a fixed rate of interest.
  18. 4 Factors Contributing to Differences in Accounting Regulations and Practices
    State of economic development

    State of business complexity (vary in technology and industrial know-how)

    Shade of political persuasion

    Reliance on a particular system of law (common-law or code-law, protective legislation, unfair trade and competition laws)
  19. Harmonisation
    Entails developing internationally compatible accounting standards that every country can adopt.

    Will result in business entities in different countries preparing financial statements on the same or a similar basis of accounting.
  20. Benefits of convergence and Harmonisation
    Increasing the comparability of financial statements prepared in different countries, thus, providing participants in international markets with better quality information for decision making.

    Decreasing barriers ti international capital flows and increasing the understanding by foreign investors of Australian financial statements.

    Reducing the financial reporting costs for Australian multinational companies and foreign companies operating in Australia.

    Facilitating more meaningful comparisons of the financial performance of reporting entities and the financial position of reporting entities.

    Moving financial reporting in Australia towards best international practice.
  21. Efficiency
    The performance of tasks to produce the best yield at the lowest cost from the resources available.

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