1: Acct and governance

Question 1

function of accting?

Answer 1

to provide financial information for decision making.

Question 2

management accounting provides?

Answer 2

information for decision making within business

Question 3

financial accounting provides?

Answer 3

information to assist external users’ decision making

Question 4

Financial vs Management accounting main users

Answer 4

F: external users, who include creditors and shareholders
M: internal users, who are officers, department heads, managers in business

Question 5

Financial vs Management:

types and frequency of reports

Answer 5

F: *Classified financial statements, *delayed, historical, *issued quarterly, half-yearly and annually

M: *Internal reports, *Current, future-oriented, *Issued as frequently as need arises

Question 6

Financial vs Management:Purpose of reports

Answer 6

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

Question 7

Financial vs Management: Contents of reports

Answer 7

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.

Question 8

Financial vs Management : verification process

Answer 8

F: annual independent audit by external auditor

M: no independent audit

Question 9

Management accounting - use accounting info to:

Answer 9

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?

Question 10

Financial accounting: use accounting info to:

Answer 10

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?

Question 11

what are the four roles of accountants?

Answer 11

• commercial
• public
• government
• not-for-profit

Question 12

commercial accountant?

Answer 12

Work in industry and commerce.

Undertake roles such as management accounting and financial accounting.

Question 13

public accountant?

Answer 13

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.

Question 14

gov accountant?

Answer 14

Employed by local councils, state government and federal government. Variety of roles such as financial accounting and auditing.

Question 15

not-for-profit accountant?

Answer 15

Work in the not-for-profit sector.

Engage in planning, decision making, preparing financial and management reports for both internal and external users.

Question 16

MAJOR forms of business org?

Answer 16

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.

Question 17

what must corporations provide stakeholders with?

Answer 17

relevant, reliable, and timely information to maintain efficient global capital markets.

Question 18

what are essential components in the flow of information to capital market participants

Answer 18

Accounting, auditing, and the corporate governance environment

Question 19

corporate governance definition:

Answer 19

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”

Question 20

accountability:

Answer 20

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

Question 21

stakeholder:

Answer 21

any group or individual who can affect or is affected by the achievement of the organization’s objectives”

Question 22

stewardship:

Answer 22

financial statements show how the managers have accounted for the resources entrusted to them by the shareholders. This accountability is often called stewardship

Question 23

stakeholders in the firm:

Answer 23

• staff/workers/trade unions
• customers
• government/regulators
• industry org
• special interest groups/NGOs
• local communities
• suppliers/business partners
• shareholders/investors

Question 24

why is governance important?

Answer 24

Prevent organizational scandals
• Enhance organizational reputation
• Lower cost of capital
• Protect investors’ interest and promote
investors’ confidence

Question 25

Accounting is an instrument of governance:

• Accounting information is the basis for

Answer 25

decision-making

Question 26

Accounting is an instrument of governance:

it helps:

Answer 26

managers discharge accountability to stakeholders (especially shareholders).

Question 27

Accounting is an instrument of governance:

accounting tracks:

Answer 27

a company’s financial performance.

Question 28

steps in accounting:

Answer 28

1. transaction analysis
2. journalise transaction
3. post to ledger accounts
4. prepare trial balance
5. journalise and post adjusting entries
6. prepare adjusted trial balance
7. prepare financial statements
8. journalise and post closing entry
9. prepare post-closing trial balance

Question 29

prepaid expense:

Answer 29

paid but not yet incurred

Question 30

unearned revenue:

Answer 30

recieved but not yet delivered

Question 31

accrued expense:

Answer 31

incurred but not yet paid

Question 32

accrued revenue

Answer 32

earned but not yet recieved.

Question 33

closing entries:
why must income and expense account be closed at end of each period?
what do they begin and end in?
profit and loss summary is used for?

Answer 33

Income and expense accounts must be closed at the end of each period to determine the profit and loss for the period.
They begin and end each accounting period with a zero balance.
Profit and loss summary account is used to facilitate closing process and determination of profit.