YEAR 11 NAME BUSINESS STUDIES DEPARTMENT VILLANOVA
Introduction to accounting
Accounting is that discipline which measures, records and processes financial and other information about an entity, and reports and interprets that information to interested parties to enable them to make appropriate decisions.
(from transactions and other sources)
Measured in monetary terms
(timely and accurate)
Manipulation of data into useful information
The accounting profession in Australia
Wide and varied career path
Private: work for one business as financial controller, CFO
Public: provide independent professional services to the public as an auditor, advisor
Government: prepare reports and ensure laws/regulations are followed.
2 accounting associations exist
Certified Practicing Accountants Australia (CPA)and
Institute of Chartered Accountants in Australia (CA)
Both set standards and ethical conduct for their members, represent accountants with other bodies
Both have entry qualifications and aim to keep their members up-to-date
Objectives of accounting
To provide information for decision-making
Decisions concerning the efficient acquisition and allocation of economic resources
General purpose reports (eg income statement) assist interested parties to determine continued profitability, financial stability of business.
Special purpose reports (analysis of sales by product) may help to identify poorly performing products.
Refers mainly to the accountability of the management in meeting their responsibility to owners in terms of performance, control and governance.
Also refers to employees who are accountable to management. They have a responsibility to do their jobs efficiently and honestly.
Accountants also assist organisations with their legal responsibilities.
General purpose reports allow the evaluation of management performance in using resources efficiently, earning profits, achieving financial stability.
Special purpose reports allow the performance of individuals and groups within the organisation to be evaluated by management or interested external users.
Accounting for business organisations
A one person business
Supplies most of the funds
Responsible for the debts of the business
Takes all profits/bears all losses
Owner and business are the same legal entity, ie in the eyes of the law the business and the owner are one therefore the owner has – unlimited liability – the owner bears all losses to full extent of their own private assets.
2 or more (usually not more than 20) people operate a business
Not regarded as a separate legal entity
Owners are jointly liable for the debts of the business and personal passessions may be sold to pay for such debts
Like sole traders, each partner has unlimited liability.
Bodies formed to overcome disadvantages of the sole trader and partnership
Can be formed by only one shareholder but usually have a large number of owners/shareholders
Owners of companies are regarded by the law as separate from the company.
Owners have limited liability – personal possessions are safeguarded
Owners are entitled to a share of the profits generated by the company – called dividends.
Two common types of companies are: private and public.
Private companies are generally family concerns and have Proprietary Limited (PTY LTD) after their name.
Public companies obtain share capital and loans from the public and are usually very large businesses.
Have Limited (LTD) after their name.
Organisations whose primary motive is to provide a focus and service for people with common interests eg religious, sporting
A legal arrangement whereby assets are transferred to the control of trustees to administer for the benefit of someone else, called a beneficiary .
Trustees control the assets but cannot benefit from them
Beneficiaries benefit from the assets but cannot control them