Week 1Chapter 1

LO 1-4

An introduction to

accounting

PowerPoint presentation adapted from Anne Abraham

University of Wollongong©2009 John Wiley & Sons Australia, Ltd

Lecturer’s Name

• Consultation hours

• Location

Occupational Health & Safety

• The University is committed to providing a safe and healthy workplace

• … and that workplace includes YOU !As a student of this University you are expected to:

▪ be aware of the ‘what to do in an emergency’ maps, emergency and evacuationprocedures and be able to react to an emergency in a mature and responsible way▪ not put yourself or the health, safety and well-being of others at risk▪ be aware of and identify hazards and report them▪ cooperate with and follow the directions given by your lecturer/tutor/staff memberduring emergencies and trial building evacuations▪ report accidents, near misses, or injuries to a staff member or a precinct officer –

this includes if you are a witness to an accident, near miss etc.

For Further Information: www.usyd.edu.au/ohs

ACCT 5001 - Introduction

Why are you doing this unit?• Compulsory/elective/not sure

What accounting background do you have?• Undergrad/post-grad course/ other / none

Where are you from? • Australia / Asia / Europe / America / Other

ACCT 5001 - Introduction

What are your expectations of the unit?• Conceptual & practical & useful & lots of work

What accounting background do you have to have?• We assume none.

How much time should you spend on ACCT5001?• Including the class approximately 9-12 hours

How many classes can you attend?• Only 1 as indicated on your timetable

ACCT 5001 – Unit of Study Outline

Refer to Unit of study Outline (p.1)• Coordinator: Dr. Cornelia Beck• Senior Tutor: John Trowell• Lecturer:• HIGHLIGHT your Lecturer in the outline• Appropriate communication• Class Streams and attendance• Opportunity to change on myuni by the end of

week 2 (only if the class is not full)• Visiting another class must have valid reason

and permission from the lecturer.

Unit of Study Outline – key points

1.1 Unit description, 1.2 Aims & context: (p. 2)• What’s the unit about, what are its aims, and who is it

intended for?

2.1 Alignment of Intended learning Outcomes (p. 3)• Intended Outcomes are linked to Graduate Attributes &

Teaching & Learning activities and Assessment tasks

2.2 Learning and teaching activities (p. 2)Prescribed Textbook• What is it? Why I need it? Where to buy it

Learning & Teaching (p.2)

Lectures /classes:• What is their purpose? What do I

need to bring to class each week, Where do I find the lecture materials?

Blackboard: (on-line learning management system)

• How and when will this be used?Self-Study Questions: Why are they

set each week? When do I do them? When, where & how do I check solutions? (also see topic schedule on p.9)

• We strongly advise you attempt these each week, and before you look at the solutions!

Optional weekly reflection exercisesUseful to complete weekly Reflection, Self-evaluation and Learning Strategies exercises each week. See why

Optional consultation and/or workshopwith the Senior Tutor in Electrical Engineering, Madsen Theatre 351

– Group Consultation (Mon 9am –10am) or with any Lecturer in their consultation times.

– Workshop (Mon 10am – 11am) particularly useful if you had problems with the self study questions

Optional PASS Program What is PASS? What’s in it for me? How do I register for it?

Optional additional questions and on-line tutorials

– See blackboard for details

Assessments (p.4)

2.3 - 2.4 Assessment Tasks:1. Academic Honesty Module (compulsory)2. Group Assignment (20%)• Groups will be formed in week 3.• Information will be provided on Blackboard 3. Mid semester Quiz: (25%)• When? What will it cover? What is its format?

See Blackboard for more details.4. Final Examination: (55%) • How long is it, what will it cover? Sample exam questions

will be provided.What is the criteria to pass the unit? (see top of p.5)

Assessment (p.6)

2.5 Workload and minimum requirements• How much effort is expected of the average student to get

an average mark?• What are the recommended weekly learning activities and

process? (see summary p.6)2.6 Feedback• Where do I get formal and informal feedback on my

assessment and learning?Mid semester quiz and final exam feedback.

• How I can review my performance in these?• What is /is not the purpose of this self review?

Academic Honesty and Plagiarism

2.7 Academic honesty and plagiarism (p.7)• What does this include? Why is it wrong?

see Faculty and Uni Policies from website listed• What are the penalties? Serious!! Just don’t do it!!!!3. Student feedback and evaluation3.1 – 3.3 (pp.7-8) Feedback and improvements• How is feedback obtained from past semesters?• What improvements have come from feedback?• How will we collect feedback this semester?

University Policies & Services (p.8)

Faculty policies• See Student Administration Manual for students at website listed

eg. Special Consideration policy/rules, appeals, late submissionsSee Student Information Office for assistance(NB. it will be assumed you will know these policies)

University policies www.usyd.edu.au/policyeg. Code of Conduct See Student Affairs Unit for assistance

Links to other student services and resources• See Blackboard under student resources (e.g. group work, academic

writing, learning support, PASS, and lots more) Check it out• See Faculty Learning & Teaching website for learning support

www.econ.usyd.edu.au/business/learningeg. ‘learning support’ (e.g. guide to group work)

Access to Blackboard Faculty IT will email you on how to activate it once you have been enrolled and registered as a user of the system

•

5. Topic & Assessment Schedule (p.9)

Topics: What topics are we going to study?• Refer to week/date, Topic, relevant Learning

objectives, Textbook references, self study questions and possible demonstration questions

In-class Demo Questions and Self-study questions• What is the purpose of these?• Why is it important that self study questions, are

done, and how they are done?

Summary of the recommended weekly learning activities and processes

1. Skim read text chapter before class each weekstart with the summary of learning objectives at the end of each chapter

2. Print off the lecture notes and demo questions from Blackboard and bring them to class.

3. Attend and actively engage in the weekly class you have been assigned in your timetable.

4. Practice, practice, practice.Complete the self-study questions for the week. Refer tothe out-of-class study instructions (on blackboard) before completing the questions

5. Access the solutions to the weekly self-study questions on Blackboard and correct your answers after you’ve attempted the questions

How will you know how you are doing?

6. You can complete the weekly reflection, self-evaluation and learning strategies exercises.

7. Take actions to improve your understanding of the topic as selected for your learning strategies.

8. Ensure you understand the material for the week so you can build on your knowledge with the following week’s work.

THEN Go back to 1 and complete the cycle each week

Week 1: “An introduction to Accounting”

Text: Chapter 1, Learning Objectives 1 – 4, pp.1-14

Demonstration Questions: PSA1.1(a), PSA1.2(a)

Self-Study Questions: Q.1,2,3, E1.1; PSA1.1, PSA1.2

Outline:

A) What is ‘Accounting’?

B) The Accounting Process

C) What is the role of an accountant?

D) Business Organisations

E) Who uses accounting information?

F) Financial Statements – initial overview

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A) What is ‘Accounting’?

• Primary function of accounting is to provide financial information for decision making that is– Reliable

– Relevant

Why are these qualities necessary?

• Accounting often referred to as ‘language of business’

Suggest reasons for this analogy

18

B) The accounting process

• Accounting is the process of identifying, measuring, recording and communicating the economic transactions and events of a business operation

• Transactions are economic activities relevant to a particular businesse.g., - sale of item to customer

- purchase of office stationery from supplier

19

The accounting process continued

• Transactions are the basic inputs into the accounting process

Identifying

Taking into consideration all

transactions which affect

business entity

Measuring

Quantifying in monetary terms

Recording

Analysing, recording,

classifying and summarising transactions

Communication

Preparing accounting

reports, analysing and

interpreting

Commonly referred to as ‘bookkeeping’ 20

C) What is the role of an accountant?

• Commercial accountants– Work in industry and commerce– Undertake roles such as management

accounting and financial accounting

• Public accountants– Provide their professional services to the

public and work in a range of offices from small to multi-national

– Auditing is a primary service– Also taxation and advisory services

21

DIVERSE ROLES OF ACCOUNTANTS continued

• Government accountants– Employed by local councils, state government

and federal government– Variety of roles such as financial accounting

and auditing

• Not-for-profit accountants– Work in the not-for-profit sector– Engage in planning, decision making,

preparing financial and management reports for both internal and external users

22

D) Major Forms of Business Organisations

• Sole Proprietorship– Owned by one person– e.g. restaurants, dentist, panel beaters

• Partnership– Owned by more than one partner– e.g. accountants, solicitors, doctors

• Corporation– organised as a separate legal entity and

owned by shareholders– BHP, CSR, Westpac, RM Williams

What are the differences between a sole trader, a partnership and a company?

23

Share Capital and Retained Earnings

Separate Capital account for each partner

Capital –Owner’s name

Owner’s Equity

Dividends (per share)

As per agreementDrawingsProfit distribution

Public (share traded) or Privately owned

Private

(2 or more owners)

Private (1 owner)

Ownership

LimitedUnlimitedUnlimitedLiability

YesNoNoSeparate legal entities

YesNoNoSeparation of ownership and management

CompanyPartnershipSole Trader

24

FORMS OF BUSINESS ORGANISATION continued

• Other Forms– A trust is a relationship or association

between 2 or more parties whereby one party holds property in trust for the other

– A cooperative is member-owned, controlled and used, and must consist of 5 or more people

What issues do you consider when advising a client on the most appropriate structure for

their business?

25

Case example PSA1.1(a)

Three information systems lecturers have formed a business to improve the speed of information transfer over the Internet for stock exchange transactions.Each has contributed equal amounts of cash and knowledge to the venture. Although the approach looks promising, they are concerned about the legal liabilities that their business might confront.Required: Determine what form of organisation the business is likely to take – sole proprietorship, partnership or company. Give reasons for your choice.

What issues do you consider when advising a client on the most appropriate structure for

their business?

Possible suggestion:

The concern over legal liability would make the limited liability company form a better choice over a partnership. Also, the corporate form will allow the business to raise cash more easily which may be of importance in a rapidly growing industry.

27

NOT-FOR-PROFIT ORGANISATIONS

• Associations– Generally formed by small, non-profit,

community-based groups– May be incorporated– e.g. Australian Medical Association,

Epilepsy Association of Australia

• Government– Organisations are owned by government:

federal, state or local– Departments or segments are operated as

business enterprises28

D) Who uses financial information?

• Internal Users– Managers who plan, organise and run the

business

– e.g. production supervisors, marketing managers, and directors

29

USERS AND USES OF FINANCIAL INFORMATION continued

• External Users– Resource providers

• e.g. investors, employees, creditors

– Recipients of goods and services• e.g. customers, beneficiaries

– Parties performing a review or oversight

function• e.g. regulatory agencies, media, governments,

trade unions, special interest groups

30

ACTIVITIES OF BUSINESS ENTITIES

• Financing Activities– Outside sources of funds

• Borrowing (debt funding) from banks or investors by debt securities

– Unsecured notes

– Debentures

• Selling shares to investors– Issuing new shares

– Payments to shareholders are called dividends

31

ACTIVITIES OF BUSINESS ENTITIES continued

• Investing Activities– Acquisition or sale of resources/assets

needed to operate the business– Examples:

• Purchase or sale of property plant and equipment

• Purchase of investments

32

ACTIVITIES OF BUSINESS ENTITIES continued

• Operating Activities– Results from operational activities undertaken

to earn income:• Revenue (sale of goods, provision of services,

return from investments)LESS

• Expenses (cost of resources/assets consumed or services used)

= Profit (internal generation of funds to finance operations, invest or pay dividends)

PROFIT = Revenue - Expenses

33

E) FINANCIAL STATEMENTS (Introduction)

• Income Statement– Reports revenues less expenses for a

particular period of time

• Statement of financial position– Reports assets and claims to those assets at a

particular point in time

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FINANCIAL STATEMENTS (Introduction) - Continued

• Statement of Changes in Equity– Reports amount of profit for the period and the

changes in equity

• Statement of Cash Flows – Reports information regarding cash receipts

and cash payments for a particular period of time

Practical implications

Although the decision maker should refer to all financial statements, state whether the decision maker would be most likely to place the main emphasis on information provided by the income statement, statement of financial position or statement of cash flows. Choose one financial statement and provide a brief justification for your choice.

PSA1.2 (a)

North Sales Ltd is considering extending credit to a new customer. The terms of the credit would require the customer to pay within 30 days of receipt of the

goods.

Financial Statements for Decision Making

Possible solution:

In deciding whether to extend credit for 30 days you would be most interested in the statement of financial position because it shows the assets on hand that would be available for settlement of the debt in the near-term.

Before Week 2 Lecture

1. Read the Unit of Study Outline2. Get familiar with ACCT5001 Blackboard site3. Buy the textbook and read chapter 1; start with the summary of

Learning Objectives on page 56 (remember we have only covered Learning Objective 1-4 this week)

4. Do Week 1 – self study questions5. Check solutions on Blackboard after doing the questions

yourself6. Complete reflective, self-evaluation and learning strategies

exercise7. Obtain a copy of Week 2 lecture material from blackboard site to

bring to class