1: Acct and governance Flashcards
function of accting?
to provide financial information for decision making.
management accounting provides?
information for decision making within business
financial accounting provides?
information to assist external users’ decision making
Financial vs Management accounting main users
F: external users, who include creditors and shareholders
M: internal users, who are officers, department heads, managers in business
Financial vs Management:
types and frequency of reports
F: *Classified financial statements, *delayed, historical, *issued quarterly, half-yearly and annually
M: *Internal reports, *Current, future-oriented, *Issued as frequently as need arises
Financial vs Management:Purpose of reports
F: to provide general purpose info for all users (no clear target)
M: to provide special purpose info for a particular user for a specific reason
Financial vs Management: Contents of reports
F: *Pertains to entity as a whole and is highly aggregated; *limited to double-entry accounting system and cost data; *reporting standard is GAAP (Generally Accepted Accounting Practice)
M: *pertains to subunits of entity and may be very detailed; *may extend beyond double-entry accounting system to any type of relevant data (quantitative + qualita); *reporting standard is relevance to decision being made.
Financial vs Management : verification process
F: annual independent audit by external auditor
M: no independent audit
Management accounting - use accounting info to:
Internal users:
How much profit? What should be produced? What resources are available? How much does it cost? How much do we owe? Do we have enough cash? Are we meeting the budget?
Financial accounting: use accounting info to:
External users
Should I invest?
How solvent is the business?
Can they repay?
Will they make a profit?
Is the business producing products that are socially and environmentally friendly?
Is the business performing better this year?
what are the four roles of accountants?
- commercial
- public
- government
- not-for-profit
commercial accountant?
Work in industry and commerce.
Undertake roles such as management accounting and financial accounting.
public accountant?
Provide their professional services to the public and work in a range of offices from small to multi-national.
Auditing is a primary service.
Also taxation and advisory services.
gov accountant?
Employed by local councils, state government and federal government. Variety of roles such as financial accounting and auditing.
not-for-profit accountant?
Work in the not-for-profit sector.
Engage in planning, decision making, preparing financial and management reports for both internal and external users.
MAJOR forms of business org?
Sole proprietorship (sole trader):
Owned by one person:
E.G. RESTAURANTS, DENTIST, PANEL BEATERS.
Partnership:
Owned by more than one individual:
E.G. ACCOUNTANTS, SOLICITORS, DOCTORS.
Company:
Organised as a separate legal entity and owned by shareholders:
E.G. BHP, CSR, WESTPAC, RM WILLIAMS.
Most companies have limited liability.
what must corporations provide stakeholders with?
relevant, reliable, and timely information to maintain efficient global capital markets.
what are essential components in the flow of information to capital market participants
Accounting, auditing, and the corporate governance environment
corporate governance definition:
the system of checks and balances, both internal and external to companies, which ensures that companies discharge their accountability to all their stakeholders and act in a socially responsible way in all areas of their business activity”
accountability:
the readiness or preparedness of an organization to give an explanation and a justification to relevant stakeholders for its judgments, intentions, acts, and omissions when appropriately called upon to do so
stakeholder:
any group or individual who can affect or is affected by the achievement of the organization’s objectives”
stewardship:
financial statements show how the managers have accounted for the resources entrusted to them by the shareholders. This accountability is often called stewardship
stakeholders in the firm:
- staff/workers/trade unions
- customers
- government/regulators
- industry org
- special interest groups/NGOs
- local communities
- suppliers/business partners
- shareholders/investors
why is governance important?
Prevent organizational scandals • Enhance organizational reputation • Lower cost of capital • Protect investors’ interest and promote investors’ confidence
