This new accounting - Revised

Question 1

What is Management accounting?

Answer 1

Mana acc process producing reports and providing financial info for managers to help day to day operations and decision making.

Question 2

What is Financial accounting?

Answer 2

Fina acc process producing reports to be used by parties ext to entity, such as shareholders, gov, investors, owners.
Document and report every transaction of business for external analysis of its fina health

Question 3

What is External reporting?

Answer 3

Ext report enables users to assess the performance, position and liquidity of entity.
It allows custodians be acc for decisions and show compliance to legal obligations and statutory requirements.
Ext report must obey acc standards set by aus acc standards board (AASB).
SAC1 states what reporting entity is. SAC2 states what GPFR is.

Question 4

What does a GPFR allow?

Answer 4

Users assess fin performance position and liquidity of business
Users assess fina and investing decision of business
Those charged with managing an entity to show compliance with statutory requirements

Question 5

What is Internal reporting?

Answer 5

Internal reporting is process documenting and organising fina info for internal used and support business reaching goals

Question 6

Internal audit and control - the review

Answer 6

An internal audit monitors and examines the effectiveness of internal control systems and procedures.

Question 7

Purpose of Internal Audit

Answer 7

Its purpose is detect and correct errors and identify deficiencies in bus operation so improve can be made

Question 8

Other Internal audit

Answer 8

Internal audit is continual review procedures, systems and policies of bus to ensure working efficiently and effectively

Question 9

Appropriate levels of investment in non-current assets

Answer 9

Bus needs appro levels of investment in N-CA, cause those A, heart of operations, lead to future growth
- Choices: real A (ie property), fina A (shares), or intangible A
- Purchase N-CA financed by long-term debt or equity finance solutions, that need sufficient cash flow to repay debts
- Underinvestment N-CA lead stifling bus growth, inability to operate bus effectively, failure to provide for customer needs
- Overinvestment N-CA result lack of productivity, inability repay debt, poor rate return for owners

Question 10

Appropriate management of accounts receivable, inventory and cash

Answer 10

Significant cost in maintaining inventory
- If type or quantity of inventory incorrect result in slow moving items or out of date stock. To ensure good inv turnover, costs to minimum, it necessary have reorder points and quantities
- Overinv in inv lead to oppo cost, funds could better used in investmemt
- Underinv in inv lead loss of sales or disruption to pro

Question 11

Appropriate management of short and long term debt

Answer 11

Large AccRec total lead bad debts and negative effect on business liquidity
Necessary measures to manage debt collection are:
- Vetting credit cus to avoid selling to those with poor credit histories
- Identifying, through reports, who is not paying within time
- Following up slow payers with reminders, possibly leading to legal action or refusal to sell to them.