pps t/a carnegie et al; accounting: financial and organisational decision making © 1999 mcgraw-hill...
TRANSCRIPT
![Page 1: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/1.jpg)
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1
ACCOUNTINGACCOUNTINGFinancial and Organisational Financial and Organisational
Decision MakingDecision Making
Chapter 1
The accounting environmentSlides written and designed by
Tony Van Eekelen
![Page 2: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/2.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.2
Learning ObjectivesLearning Objectives
• In this chapter you will be introduced to – the nature of accounting– the different roles and uses of accounting
information– who regulates accounting and why– the role of accounting in economic decision
making– the users of accounting information
![Page 3: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/3.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.3
Learning ObjectivesLearning Objectives
– the types of entities that use accounting information
– how the international environment affects accounting
– how pervasive accounting is in society
![Page 4: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/4.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.4
Accounting definedAccounting defined
• “Recording, classifying and reporting”– bookkeeping
• Modern definition– interpretation and analysis of accounting reports
– the design and operations of computer-based systems
– the planning and control of business activities
– the understanding of complex accounting regulations
![Page 5: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/5.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.5
Accounting defined - continuedAccounting defined - continued
• American Accounting Association– “the process of identifying, measuring and
communicating economic information to permit informed judgments and decisions by users of the information”
![Page 6: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/6.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.6
UsersUsers
• Owners or shareholders of a business entity
• People who have lent money to the entity
• Employees
• Government regulatory agencies– ATO
• Social and political interest groups
![Page 7: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/7.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.7
Key financial statementsKey financial statements
Profit and Loss Statement
Balance Sheet
Cash Flow Statement
![Page 8: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/8.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.8
Profit and Loss StatementProfit and Loss Statement
• Reports – revenues– expenses– and profit that have been made during a given
period.
• Indicates the financial performance of the entity
![Page 9: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/9.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.9
Balance SheetBalance Sheet
• Reports– assets controlled by the entity– debts– and the owner’s claim on the entity
• Indicates the financial position of the entity
![Page 10: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/10.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.10
Reading the financial statements Reading the financial statements
• Assets– in order of liquidity– items which generate revenue for the entity
• Liabilities– debts incurred by the entity– first claim on assets
• Owner’s equity– net assets = assets less liabilities
![Page 11: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/11.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.11
Reading the financial statementsReading the financial statements
Balance sheet– Assets = Liabilities + Owners’ equity
Profit and Loss Statement– Revenue Less Expenses
![Page 12: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/12.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.12
What are accounting entities?What are accounting entities?
• Separate from owners
• Users of accounting information have an interest
• Many forms– individuals, company, a professional practice,– club, government department, small business
enterprise
![Page 13: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/13.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.13
Sole proprietorshipsSole proprietorships
• Owned by one person
• Owner’s contribution = capital
• Unincorporated
• Owner liable for entity’s debts
![Page 14: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/14.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.14
PartnershipsPartnerships
• Unincorporated
• Max - 20 partners
• Personally liable for any debts
• Partnership agreement– salaries, profit sharing, contributions, interest…– Partnership Act
![Page 15: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/15.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.15
Shareholders in companiesShareholders in companies
• Incorporated as companies
• Limited by share capital - limited liability
• Companies are separate legal entities
• Proprietary Limited - Pty Ltd– privately owned– 1 to 50 shareholders– transfer of ownership restricted
![Page 16: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/16.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.16
Public CompaniesPublic Companies
• No maximum number of shareholders
• Most listed on stock exchange
• Director’s appointment on behalf of shareholders - stewardship
• Annual general meeting– election of directors– auditor appointed– determination of dividend
![Page 17: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/17.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.17
Public CompaniesPublic Companies
• Annual reports– true and fair– and not disguised to mislead the shareholders
• Decisions?– dividends?– directors appointment?
![Page 18: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/18.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.18
Public Sector ProprietorshipsPublic Sector Proprietorships• Public sector
– Federal and state governments– councils and all associated structures
• Unique reasons for reports– owners - taxpayers– not necessarily a profit motive
• Past reports were cash based• Due to accountability need for more sophisticated
reports
![Page 19: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/19.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.19
The environment of accountingThe environment of accounting
Society
Regulatoryenvironment
Economic decisionmaking environment
International environment
Figure 1.1
![Page 20: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/20.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.20
The regulatory environmentThe regulatory environment
• Form the rules and principles that govern the structure, content, audit and disclosure of financial information
• Three main sources– Company legislation– Stock Exchange listing requirements– Accounting standards
![Page 21: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/21.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.21
Requirements of companies legislationRequirements of companies legislation
• Corporations Law– passed by Federal Parliament– formation, conduct, administration and winding
up of companies
• Directors must present audited profit and loss and balance sheet at AGM
• Disclosure requirements in Schedule 5
![Page 22: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/22.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.22
Stock exchange listing requirementsStock exchange listing requirements
• Australian Stock Exchange - ASX– non-profit, private sector body
• Strict and comprehensive listing requirements
• Main emphasis is on financial disclosure
![Page 23: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/23.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.23
Accounting StandardsAccounting Standards
• Detailed rules relating to an entity’s accounting records
• Australian Accounting Standards Board– AASB
• Public Sector Accounting Standards Board– PSASB
• AASB issues Approved Australian Accounting Standards
![Page 24: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/24.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.24
Accounting StandardsAccounting Standards
• Accounting standards apply to publicly listed companies, public sector entities and not-for-profit entities
• Standards deal with disclosure and measurement in the financial statements
![Page 25: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/25.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.25
The economic decision making environmentThe economic decision making environmentF ig u re 1 .2 Th e re la tion sh ip b e tw een fin an c ia l
s ta tem en ts , econ om ic d ec is ion s an d u sers
U S E R S O F A C C O U N TIN GIN F O R M A TIO N
eg ow n ers , len d ers
D E C IS IO N R E Q U IR E Deg w h eth er to in ves t o r
len d m on ey to th e en tity
R E L E V A N T F IN A N C IA L S TA TE M E N TSeg m easu res o f ris k , re tu rn(p ro fit), resou rces ow n ed ,re levan t to u ser d ec is ion s
E C O N O M IC E V E N TSeg fin an c ia l tran sac tion s
con cern in g th e en tity
![Page 26: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/26.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.26
The economic decision making environmentThe economic decision making environment
• Investors– shareholders/owners– return = dividends + capital gain– risk vs. return problem
• Lenders– creditors
• short term• long term
![Page 27: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/27.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.27
The economic decision making environmentThe economic decision making environment
• Other external users– taxation– ratepayers– social interest groups– employees– government bodies
• economic analysis
![Page 28: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/28.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.28
The international accounting environmentThe international accounting environment
• Due to globalisation the need for an understanding of other nations accounting regulations and requirements
• Four factors for differences– state of economic development– state of business complexity– share of political persuasion– reliance on particular system of law
![Page 29: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/29.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.29
The international accounting environmentThe international accounting environment
• Four (4) models– British-American Model– Continental Model– South American Model– Mixed Economy Model
![Page 30: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/30.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.30
Accounting and SocietyAccounting and Society
• The regulatory environment and society– accounting is the road map of the corporation – accounting can analyse the management's
performance– provides information for decision making
![Page 31: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/31.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.31
Accounting and SocietyAccounting and Society
• Social equity function– employee/employer wage relations– public interest – financial distress indicators– user pays services– redistribution of wealth
![Page 32: PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.1 ACCOUNTING Financial and Organisational](https://reader035.vdocuments.site/reader035/viewer/2022062511/55146cc8550346414e8b5e9a/html5/thumbnails/32.jpg)
Chapter 1: The accounting environment
PPS t/a Carnegie et al; Accounting: Financial and Organisational Decision Making © 1999 McGraw-Hill Book Co. Aust. 1.32
Decision Making and SocietyDecision Making and Society
• The efficient use of scarce resources
• Accounting information discloses use
• Provides allocative efficiency
International Environment and Society
• Influence on foreign investment