Need To Know

Question 1

What is the accounting process

Answer 1

Is three separate types of rand actions used to record business transactions in the accounting records this info is then aggregated into financial statements nth transaction types are:

1. The first transaction type is to ensure that reversing entries from he previous period have, in fact, been reserved.
2. The second group is comprised of the steps needed to record individual business transactions in the accounting records.
3. The third group is the period - end processing required to close the books and produce financial statements.

Question 2

Difference between accounting and bookkeeping

Answer 2

Both essential business functions required for all businesses. Bookkeeping is responsible for the recording of financial transactions. Accounting is responsible for interpreting, classifying, analysing and reporting and summarising financial data.

Question 3

What is the difference between financial and managerial accounting

Answer 3

Financial accounting has its focus on the financial statements which are distributed to stockholders, lenders, financial analysts, and others outside of the company. Courses in financial accounting cover the generally accepted accounting principles which must be followed when reporting the results of a corporation’s past transactions on its balance sheet, income statement, statement of cash flows, and statement of changes in stockholders’ equity.

Managerial accounting has its focus on providing information within the company so that its management can operate the company more effectively. Managerial accounting and cost accounting also provide instructions on computing the cost of products at a manufacturing enterprise. These costs will then be used in the external financial statements. In addition to cost systems for manufacturers, courses in managerial accounting will include topics such as cost behavior, break-even point, profit planning, operational budgeting, capital budgeting, relevant costs for decision making, activity based costing, and standard costing.

Question 4

Main sources of company regulation

Answer 4

Corporate regulation in Australia is under closer scrutiny than ever before due to many recent large-scale corporate collapses and employee fraud. The main source of company regulation is the Corporations Act, administered by the Australian Securities and Investments Commission (ASIC). The other important sources of regulation are the Listing Rules of the Australian Securities Exchange (ASX); and the accounting principles, standards, ethics and disciplinary procedures of the professional accounting associations.

Corporate regulation protects the interests of the different stakeholders and promotes confidence and investment in business and economic activities.

Question 5

The role of professional accounting in standard setting

Answer 5

The professional associations are, in Australia, CPA Australia, the Institute of Chartered Accountants in Australia, the Institute of Public Accountants and, in New Zealand, the New Zealand Institute of Chartered Accountants.

These associations provide a range of services for their respective members — including training, products and services, and the right to use the designation after their names (i.e. CPA, CA and MIPA) — and employment opportunities.

The professional associations provide feedback on exposure drafts and forward any comments to the AASB. They also inform their members of any developments in accounting standards, through newsletters and by conducting continuing professional education (CPE) sessions.

Question 6

Framework for financial reporting

Answer 6

The Conceptual Framework is designed to assist in the preparation and presentation of financial statements, to guide the standard setters in developing future accounting standards, and to help users interpret information in the financial statements.

It specifies the objective of financial statements, their desirable qualitative characteristics, and the definition and recognition of elements in the financial statements.

The two fundamental qualitative characteristics of financial statements are relevance (including materiality) and faithful representation.

The enhancing qualitative characteristics are comparability, verifiability, timeliness and understandability. Cost is a constraint on financial reporting.

Question 7

Limitations of accounting

Answer 7

1. Accounting records only those transactions which can be measured in monetary terms.
2. Accounting transactions are recorded at cost in the books.The effect of price level changes is not brought into the books with the result that comparison of the various years becomes difficult. For example, the sale to total asset in 2009 would be much higher than in 2002 due to rising prices , fixed assets being shown at the cost and not at market price.
3. Accounting statements are prepared by following basic concepts and conventions. Therefore the accounting information may not be realistic.
4. Accountant may select any method of depreciation , valuation of stock, amortization of fixed assets , treatment of deferred revenue expenditure. Therefore accounting statements are influenced by the personal judgement of the accountant.