Wk1 Intro to accounting and business decision making Flashcards
- Outline the importance of accounting and its role in decision making by various users - Explain the differences between financial accounting and management accounting - Explain the role of accounting information in the business planning process - Identify the sources of accounting regulation in Australia evaluate the roles of the Conceptual Framework - Give examples of the limitations of accounting information - Describe business sustainability and integrated reporting
What is accounting?
Its the process of identifying, measuring and communicating economic information about an entity to a variety of users for decision making purposes.
What is the Australian Securities and Investments Commission (ASIC)?
- Acts as the company watchdog by enforcing company and financial services laws to protect consumers, investors and creditors.
- Upholds the law regulating business activities (enforces Corporations Act 2001)
- Promotes informed participation in the capital markets
- Ensures the information about companies is publicly available
- Improve the performance of financial system
What is the Australian Stock Exchange (ASX)?
- Regulates companies through its Operating and Listing Rules
- It is the main Australian market place for trading equities, government bonds and other fixed interest securities
- Helps ensure that companies are providing adequate disclosures to various shareholders and behaving appropriately
What is the Australian Accounting Standards Board (AASB)?
Its responsible for issuing Australian versions of International Accounting Standards significantly influencing development of International Financial Reporting Standards (IFRS).
What is the Corporations Act 2001?
It stipulates that all disclosing entities must apply the accounting standards issued by the AASB in preparing their financial reports.
What is the Financial Reporting Council (FRC)?
- They oversee the accounting and auditing standard-setting process for both the public and private sectors in Australia.
- Promoted the Australian adoption of IFRS.
- Monitors the operation of the AASB to assess their relevance and effectiveness in achieving their objectives.
What is CPA Australia and Chartered Accountants of Australia and New Zealand?
- 2 professional bodies for accountants in Australia.
- Play an important role in regulating Australian companies through stringent regulation of their members and their input into the standard setting process.
What are the limitations of accounting information?
- It is historical information
- There is a time lag
- Some information may be subjective
- Comes with significant costs for the business providing information (production costs and release of competitive information)
What are the 4 stages in the accounting process?
- Identifying - Consider transactions that affect the entity’s financial position
- Measuring - Analysis, recording and classification of business transactions take place
- Communicating - Accounting info is communicated through various reports
- Decision making - Accounting info is used for a range of decisions by external and internal users.
What are general purpose financial statements (GPFS)?
A set of statements directed towards the common information needs of a wide range of users (both internal and external)
What are the differences between financial and management accounting?
Financial accounting involves the preparation and presentation of general purpose financial statements that allow various users to make economic decisions about an entity.
Whereas management accounting provides economic information for internal users about planning and decision making for future events. Core activities include formulating plans and budgets and providing information to be used in monitoring and control within the entity.
