Introduction - week 1

Question 1

what is the definition of accounting?

Answer 1

Concerned with collecting, analysing and communicating financial information, with the ultimate aim for the users of the information to make more informed decisions.

Question 2

What is meant by finance?

Answer 2

Concerned with the way in which funds for a business are raised and invested. ( A business exists to raise funds for investors (owners and lenders) and then to use those funds to make investments (in equipment, premises, inventories and so on) in order to create wealth.

Question 3

Who are the main users of accounting / financial information of a business?

Answer 3

Owners - plan future
Managers - control business 
lenders - is company solvent 
suppliers - will they be paid
government - assess amount of tax due
competitors
customers
employees and representatives - pay increase / employability security
community and representatives

Question 4

Why do we account information?

Answer 4

Formulate overall plans and strategies

Resource allocation

meeting external regulatory
reporting requirements

performance measurement and evalutation

Cost planning and control

Question 5

What are the three core areas of accounting?

Answer 5

Financial accounting
Financial management
Management accounting

Question 6

What is the definition of financial accounting?

Answer 6

recording and analysing the financial results of transactions as a means of arriving at a measure of the firms success and financial soundness

Question 7

What are the characteristics of financial accounting?

Answer 7

Regulated and in standardised format

Historical orientation, backward looking

high degree of precision???? text book page 14 and powerpoint slide 15 say opposite.

not normally produced quickly

formal, legal communication to outsiders

externally verified by audit

infrequent (Half / annually)

Question 8

What is the definition of management accounting?

Answer 8

The application of the principles of accounting and financial management to create, protect, preserve and increase value for the stakeholders of for - profit and not for profit enterprises in the public and private sectors

Question 9

What are the characteristics of management accounting?

Answer 9

No prescribed format: Management decides - specific purpose no standard format

Intended for internal users ONLY and often commercially confidential; more details

contains estimates and approximates because information is needed quickly

often covers segmental details as well as whole organisation

much more regular; weekly, daily, real time. (As frequently as manager needs)

often provide information concerning future performance as well past performance.

Question 10

Do a table like page 15 comparing financial and management accounting

Answer 10

.

Question 11

What are the characteristics of a competitive environment?

Answer 11

Cost efficiency and customer satisfaction

Customer focus

Continuous improvement

Total value chain analysis

Key success factors

– increasing focus on non financial measures for measuring performance

Question 12

watch two videos on slide 28

Answer 12

.

Question 13

What is the definition of financial management

Answer 13

efficient and effective management of finances to achieve the objectives of the organisation

the primary financial goal is shareholder wealth maximisation

Question 14

According to the ACCA 2010 Study, what areas of expertise for financial management are of most value?

Answer 14

Risk management control
Financial analysis for decision making
Ethics and professionalism
Taxation
Investor relations
statutory and regulatory reporting 
corporate social responsibility issues

Question 15

Slide 34

Answer 15

.

Question 16

slide 35 also contradicts text book

Answer 16

.

Question 17

what kinds of business ownership exist? Explain each one

Answer 17

Sole proprietorship; where an individual is the sole owner of a business. often quite small in terms of size however there are a lot of these businesses about

Partnership; two or more individuals carry on a business together with the intention of making a profit.

Limited company; can range in size from very small to very large. the number of individuals who subscribe capital and become the owners may be unlimited , providing the opportunity for it to become a very large scale business. the liability of owners is limited, which means that those subscribing capital are liable only for the debts incurred by the company up to the amount they have invested.

Question 18

What are the reasons for a business and its managers to be ethical?

Answer 18

to stop the following from happening ;

paying bribes to encourage employees of other businesses to reveal information that could be useful

oppressive treatment of suppliers, for example making suppliers wait excessive periods before payment.

manipulating the financial statements to mislead users of them, for example overstate profit so that senior managers become eligible for performance bonuses known as creative accounting.