Seminar Week 1 (Lecture Slides Chapter 1)
Seminar Week 1 (Lecture Slides Chapter 1)
Seminar Week 1 (Lecture Slides Chapter 1)
Introduction to accounting
LEARNING OBJECTIVES
By the end of this section of the course, you should be able to:
1. explain what is meant by the term ‘accounting’
2. explain the difference between management accounting, financial
accounting and tax accounting
3. identify the main users of accounting information, and the main purposes for
which the information is used
4. identify the limitations of accounting information
5. discuss the factors that influence the choice of accounting systems for
different types of organisations
6. demonstrate an understanding of the regulatory and environmental
considerations that can influence accounting decisions
7. explain what is meant by the term ‘economic consequences’ and relate this
to the choice of accounting policies
8. identify career opportunities for accountants.
WHAT IS ACCOUNTING? (LO 1)
‘The process of identifying, measuring and communicating economic
information to permit informed judgement and decisions by users of the
information’.
American Accounting Association: ASOBAT, 1966: 1
Decision making
FOR WHAT PURPOSE IS ACCOUNTING
INFORMATION USED? (LO 2)
Financial accounting
• The provision of accounting information to parties
outside of the organisation:
– for example, investors, customers and employees
– financial statements to be prepared in accordance with
Generally Accepted Accounting Principles (GAAP).
Management accounting
• The provision of accounting information to parties within
the organisation – usually, managers.
WHO USES ACCOUNTING
INFORMATION? (LO 3)
Internal users
• Management
• Owner (in a small business).
External users
• Resource providers
• Recipients of goods and services
• Parties performing a review function.
WHO ARE THE USERS?
Managers need financial information
to fulfil their duties:
• stewardship Decision: How much
finance to be raised? To
• planning borrow?
• control Planning: Sales
targets?
• decision making.
Planning/decision:
What price to
maximise income?
Stewardship/control: Are Advertising strategy?
there sufficient raw
Planning: Which materials to meet the Planning: How much will it cost to
department/product is demands of production produce a particular item?
most profitable? and sufficient goods in
stock?
WHO ARE THE USERS? (CONT.)
Is the business profitable for investment?
Should we buy/sell shares?
External users:
• Should we lend money?
owners and shareholders Will the business have enough money to
• lenders pay due debts?
Economic condition
• For example, inflation and economic development.
Environmental aspects
• For example, the state, technology and labour.
ECONOMIC CONSEQUENCES (LO 7)
• Management can choose accounting policies as long as
these comply with the AASB Accounting Standards.
• The selection of policies is based on:
– the need to provide useful information to users
– economic consequences for managers and organisations.
Examples:
• Compensation plans and debt contracts tend to lead to
profit-increasing accounting policies.
• Political costs tend to lead to profit-decreasing
accounting policies.
CAREERS IN ACCOUNTING (LO 8)
• Accounting firms:
– for example, PricewaterhouseCoopers, Ernst & Young, KPMG
and Deloitte.
• Not-for-profit entities:
– for example, government, charities, business and professional
associations, and others such as religious groups.
PROFESSIONAL MEMBERSHIP