Week 1 - What is accounting

Question 1

What is accounting

Answer 1

The process of collecting, summarising, analysing and communicating information to enable users of that information to make informed decisions.

Question 2

What type of performance information is required to make informed decisions

Answer 2

1. It will depend on the decision the stakeholders wants to make.
2. And, which aspects of performance they believe is important to make a decision

Question 3

What qualitative characteristics should information have to enable effective decision making.

Answer 3

It should be based on reliable and relevant information.

Question 4

What is financial performance

Answer 4

Performance that is measured in financial terms.

example: total revenue / total cost of goods sold / total expenses / profit.

Question 5

What is social performance

Answer 5

The impacts that an organisation’s activities have on its stakeholders.
Examples: amount and type of training / staff satisfaction / WHS / implementing inclusive practises.

Question 6

What is environment performance

Answer 6

The impacts that an organisation has of the physical and natural environment.
Examples: Accounting for emissions, the use of natural resources, waste management.

Question 7

What is a stakeholder and give examples

Answer 7

Any group or individual who can affect or is affected by the achievements of an organisation.
Example: owners / investors / creditors / employees / customers / suppliers / government & local community.

Question 8

The meaning of accountability is

Answer 8

The duty to provide an account of those actions for which an organisation is deemed to be responsible. The accounts will take on various forms and would be distributed to those stakeholders the most affected by the activities.

Question 9

6 Qualitative characteristics of accounting information

Answer 9

1. Relevance - Capable of changing the decisions of those people receiving the information.
2. Reliable - Free from error, complete and balanced (neutral).\
3. Comparability - selected, complied, measured and reported in a similar way from period to period.
4. Verifiable - same results derived from the same information when a similar method is used.
5. Understandably - users understand the info and the basis on which it has been measured.
6. Timeliness - users should have access to the information so they have enough time to make decisions.

Question 10

How is the accountability model used in the accounting process

Answer 10

Information that is collected and reported will be influenced by judgements about:

1. Why they should collect and disclose the information.
2. Who are the stakeholders to whom the information will be directed.
3. What types of information the stakeholders need or expect.
4. How should the information be disclosed to meet the stakeholders needs.