Lesson 1 Flashcards
What qualities can People develop to better prepare themselves for problem-solving and decision making in today’s rapidly changing business environment?
- Lifelong learning
- Read industry and professional journals
- Network with others
- Take courses to stay up to date
Why is it necessary to have an understanding of business before trying to learn about accounting?
Accounting involves identifying, measuring, recording, summarising, and communicating economic information about a business for decision making. It focuses on the resources and activities of business. Therefore, it is important to understand businesses and the business environment in which they exist before trying to learn how to account for their resources and activities.
What factors are affecting the complexity of a changing business environment?
- Business is increasingly dynamic
- More information is being generated and becoming available
- Technology is advancing rapidly
- Technology affects both products and the way we do business
- Business activities and economies are becoming globalised.
- Number of regulations are escalating
- Business transactions are becoming more complex
- New forms of business are emerging
What are three characteristics that someone might require to become a successful businessperson in a complex business environment?
- Devoted to lifelong learning
- Tolerant of differences
- Willing to take educated and thoughtful risks
What are the three main categories of business enterprise?
- Service business
- Merchandising business
- Manufacturing business
What is a merchandising business?
A business that purchases goods (sometimes referred to as merchandise or products) for resale to its customers.
What is a manufacturing business?
A business that makes its products and then sells these products to its customers.
What are the three most common forms of business organisation and their characteristics?
- Sole proprietorship or sole trader. (Business owned by one individual who is the sole investor of capital into the business)
- Partnership (Business owned by two or more individuals who each invest capital, time and or talent into the business and share in its profits and losses.)
- Company / Corporation (A business entity that has been incorporated by the Australian Securities Commission (ASIC) under the Corporations Act 2001)
What types of regulations do businesses face?
- All businesses regardless of type, size or complexity must contend with regulatory issues.
- Numerous laws and authorities regulate businesses on issues ranging from environmental protection to taxes.
- Each local government area has its own regulations.
- Owners of businesses must learn and comply with regulations issued by the different levels of government where the businesses are located.
What is an accounting system?
An accounting system is a process used to identify, measure, record and retain information about a business’s activities so that the business can prepare it’s financial statements.
What information does the accounting system provide to support management activities?
- It supports management in the planning, operating and evaluation of the businesses activities
- It supports external decision makers such as investors, creditors, stockbrokers, financial analysts, bankers, suppliers, labour unions, customers and governments.
What reports are produced for the following management activities?
- Planning
- Operating
- Evaluating
- Budgets
- Cost analysis
- Cost reports for products / services (budget analysis)
How does accounting provide support and information to people who are external to the business when they are making decisions?
- By following agreed upon principles (GAAP)
- Businesses may publish income statement, balance sheet, cash flow statement in its annual report.
- The annual report must be a true and accurate record.
What does GAAP stand for?
Generally Accepted Accounting Principles
What roles to ethics and sustainability place in the business environment?
- Accounting information can only be relied upon if it is generated in an ethical environment.
