Week 1 - An Intro to Accounting

Question 1

What is Accounting?

Answer 1

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

Question 2

Types of Accounting Careers

Answer 2

Examples include: Financial or Management Accountant, Financial Planner, Auditor, etc.

Question 3

Why is Accounting Important?

Answer 3

1. Helps communicate an organisation’s accountability by describing how a business has allocated scarce resources - its cash and assets.
2. As a business decision maker, it helps you make the best decisions for business, people, and the environment affected by the business’s activities.

Question 4

Accountability for Different Organisations

Answer 4

All organisations and businesses are more broadly accountable to all stakeholders, including customers, employees, government and industry regulators, the environment, and society.

Question 5

Who are “Government Agencies” Accountable to?

Answer 5

Taxpayers who fund them, and to the communities that they serve.

Question 6

Who are “Not-for-profit” Organisations Accountable to?

Answer 6

(include charities and NGOs) To their beneficiaries, donors and society in general.

Question 7

Who are “Private Businesses” Accountable to?

Answer 7

To their financial owners. [Different businesses have different ownership structure.]

Question 8

Who are “Public Companies” Accountable to?

Answer 8

Shareholders who may be millions of individuals.

Question 9

What are the THREE main Business Structures?

Answer 9

1. Sole Trader
2. Partnership
3. Company

Question 10

What is a Sole Trader?

Answer 10

One individual operates a business on their own.

Question 11

What is a Partnership?

Answer 11

Two or more individuals who contribute money, property or services to operate as co-owners of the business.

Question 12

What is a Company?

Answer 12

A legal entity in its own right and is owned by one or more shareholders who are legally distinct from the company.

Question 13

What are Financial Statements? Examples?

Answer 13

= written records that convert the business activities and the financial performance of a company.
1. Statement of Profit or Loss - also called Income Statement
2. Statement of Financial Position - also called Balance Sheet
3. Statement of Changes in Equity
4. Statement of Cash Flows

Question 14

What are Business Transactions?

Answer 14

A monetary exchange for a good or service.
Affects financial position of a business can be reliably measured and recorded.
E.g. Payment of wages

Question 15

What are the FOUR Steps of the Accounting Process?

Answer 15

1. IDENTIFY the business transaction and get information about transaction.
2. RECORDING the information in a systematic format.
3. Periodically COMMUNICATE financial info to stakeholders through reports called the financial statements.
4. DECISION MAKING. Accounting information assists different types of users in making decisions in allocation of the scarce resource of money.

Question 16

What is the Accounting Equation?

Answer 16

Assets = Liabilities + Equity

Question 17

What are Assets?

Answer 17

The economic resources ‘owned’ by the business. Such as Cash and Equipment.

Question 18

What are Liabilities?

Answer 18

Obligations ‘owed’ by the business to third parties. Such as unpaid bills and loans.

Question 19

What is Equity?

Answer 19

Made up of capital contributed and any accumulated profits of the business, which is equal to the value of assets after all liabilities are paid.