Topic 1 - An Introduction to Accounting -

Question 1

Define Accounting (Oxford basic)?

Answer 1

the process or work of keeping financial records

Question 2

Define Accounting (detailed)?

Answer 2

is a technical, social and moral practice concerned with the sustainable utilisation of resources and proper accountability to stakeholders to enable the flourishing of organisations, people and nature.

Question 3

What are the 3 main roles of accounting?

Answer 3

1. Used to help project business growth & facilitate expansion
2. Used throughout daily operations to ensure accounts etc are running smoothly
3. Assist in decision making, by giving financial and nonfinancial information

Question 4

What are the 4 aspects accounting involves?

Answer 4

1. identifying transactions/events in an entity
2. Measuring/quantifying them
3. Recording in accounting software
4. Communicating the data usefully to users

Question 5

What are the 2 main branches of accounting?

Answer 5

1. Management accounting
2. Financial accounting

Question 6

What are the 3 main aspects that management accounting is used for?

Answer 6

1. internal decision making
2. Generation of data around costing, pricing, budgeting and evaluation of projects
3. guiding the senior management team in running daily operations

Question 7

What are the 2 main users of accounting information?

Answer 7

1. Internal (directors, senior executives, supervisors)
2. External AKA primary & other users (not in a privileged postion)

Question 8

What the main difference in the information that internal users get vs external users?

Answer 8

• Internal users readily have access to confidential information of running the business that’s essential in it’s day-to-day operations
• External users only get highly summarised/generalised information from financial statements, having to wait until it’s official release

Question 9

What are the 3 key primary users?

Answer 9

1. Investors/shareholders
2. Lenders
3. Other creditors

Question 10

What’s Conceptual Framework, and what does it do?

Answer 10

1. Includes the general principles of financial reportings
2. Sets outs concepts that preparers of financial statements follow, by providing a basis for accounting standards.

Question 11

What are the 10 characteristics that included in annual reports?

Answer 11

1. Financial snapshot
2. 5 year history
3. Chairman’s message
4. Board of directors
5. Review of operations
6. Condensed Corporate Governance Statement
7. Directors’ report
8. Financial report
9. Shareholder information
10. Financial calendar

Question 12

What are the 4 main statements included in an Annual Report?

Answer 12

1. Income statement (AKA statement of profit/loss)
2. Statement of changes in equity
3. Balance sheet
4. Statement of cash flow

Question 13

What are the 3 key organisations that are applicable to companies registered in Australia?

Answer 13

1. ASIC - Australian Securities & Investments Commission
2. AASB - Australian Accounting Standards Board
3. ASX - Australian Securities Exchange

Question 14

Define financial accounting?

Answer 14

is the term used to describe the preparation & presentation of financial reports for external users

Question 15

Define management accounting?

Answer 15

the provision of accounting information within the business entity

Question 16

Define bookkeeping?

Answer 16

Identifying, measuring and recording the information of a business

Question 17

What’s the difference between investors and lenders?

Answer 17

• Investors & lenders both give resources (usually cash)
• Investors have the purpose of recieving a return, while lenders have the prurpose of recieving a return in the form of interest

Question 18

Define share capital?

Answer 18

used to describe the total amount paid in by the shareholders for the shares.

Question 19

What does ASIC do?

Answer 19

administers the Corporations Act

Question 20

What does FRC do?

Answer 20

responsible for the broad oversight of the accounting standard - setting process for the private and public sectors