Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Why study VCE Accounting?

Why study VCE Accounting?

  • Be the first to comment

Why study VCE Accounting?

  1. 1. WHAT IS ACCOUNTING?
  2. 2.  Every business is different… WHAT IS ACCOUNTING? Who’s doing well? Who’s doing poorly? What does “well” even mean? How much profit did the business make? Does the business have enough cash? Which stock is selling well/poorly? Can the business afford to expand? Are the firm’s shares over or under- valued? What does the business own? What are the firm’s debts and when are they due? What return is the firm making on the owner’s investment? Questions?
  3. 3.  Every business tells its story with 3 bits of paper called financial reports… WHAT IS ACCOUNTING? Income Statement Balance Sheet Cash Flow Statement
  4. 4.  These financial reports are made up of financial transactions: WHAT IS ACCOUNTING? Purchases of stock Purchase of cars Loan repayments GST Investments Wages paid Cash salesLoansRent Phone bill Credit salesElectricity
  5. 5.  A business makes these 3 reports at the end of each reporting period:  1 month  3 months  6 months  12 months WHAT IS ACCOUNTING? Reporting Period Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Income Statement Balance Sheet Cash Flow Statement How much profit did the business make? Does the business have enough cash? Which stock is selling well/poorly? Can the business afford to expand? Are the firm’s shares over or under- valued? What does the business own? What are the firm’s debts and when are they due? What return is the firm making on the owner’s investment? Questions  Now we can answer these questions…
  6. 6.  These reports are prepared for several users of accounting information… Management Employees Owners Investors Tax Office CustomersSuppliers Government WHAT IS ACCOUNTING?
  7. 7.  So… what is Accounting?  Recording every individual transaction that takes place  Preparing the 3 financial reports which summarise these transactions  Interpreting and analysing these reports for users of these reports  Making decisions based on these reports WHAT IS ACCOUNTING? Users Interpret and Analyse Prepare Reports Record Transactions Make Decisions
  8. 8. VCE ACCOUNTING – SOME MYTHS
  9. 9. I need to be good at Maths to study Accounting  Accounting requires only basic arithmetic – there are no mathematical formulas or functions… VCE ACCOUNTING – SOME MYTHS You only need a basic calculator – graphics calculators are BANNED in SACs and Exams because you don’t need them
  10. 10. I need to do have studied Accounting before to do Year 12 Accounting  There is no prerequisite subject for Year 12 Accounting  But Year 12 Accounting will help if you want to study Commerce at TAFE/uni… VCE ACCOUNTING – SOME MYTHS Year 10 Year 11 Year 12 Bachelor of Commerce ACT10001 Accounting Reports and Analysis Bachelor of Commerce MAA103 Accounting for Decision-Making Bachelor of Business BUS1AFB Accounting and Finance Bachelor of Business ACCT2105 Accounting in Organisations
  11. 11. Accounting isn’t a “scoring” subject  So how is Accounting scaled? Year Mean 20 25 30 35 40 45 50 2014 31.1 20 25 31 36 41 46 50 2013 30.6 19 25 30 36 41 46 50 2012 30.5 19 24 30 35 41 46 50 2011 30.4 18 24 30 36 41 46 50 Year Mean 20 25 30 35 40 45 50 2014 31.1 20 25 31 36 41 46 50 2013 30.6 19 25 30 36 41 46 50 2012 30.5 19 24 30 35 41 46 50 2011 30.4 18 24 30 36 41 46 50 Year Mean 20 25 30 35 40 45 50 2014 31.1 20 25 31 36 41 46 50 2013 30.6 19 25 30 36 41 46 50 2012 30.5 19 24 30 35 41 46 50 2011 30.4 18 24 30 36 41 46 50 Year Mean 20 25 30 35 40 45 50 2014 31.1 20 25 31 36 41 46 50 2013 30.6 19 25 30 36 41 46 50 2012 30.5 19 24 30 35 41 46 50 2011 30.4 18 24 30 36 41 46 50 Year Mean 20 25 30 35 40 45 50 2014 31.1 20 25 31 36 41 46 50 2013 30.6 19 25 30 36 41 46 50 2012 30.5 19 24 30 35 41 46 50 2011 30.4 18 24 30 36 41 46 50 Year Mean 20 25 30 35 40 45 50 2014 31.1 20 25 31 36 41 46 50 2013 30.6 19 25 30 36 41 46 50 2012 30.5 19 24 30 35 41 46 50 2011 30.4 18 24 30 36 41 46 50 Year Mean 20 25 30 35 40 45 50 2014 31.1 20 25 31 36 41 46 50 2013 30.6 19 25 30 36 41 46 50 2012 30.5 19 24 30 35 41 46 50 2011 30.4 18 24 30 36 41 46 50 Year Mean 20 25 30 35 40 45 50 2014 31.1 20 25 31 36 41 46 50 2013 30.6 19 25 30 36 41 46 50 2012 30.5 19 24 30 35 41 46 50 2011 30.4 18 24 30 36 41 46 50 VCE ACCOUNTING – SOME MYTHS
  12. 12. Accounting is just for students who want to become Accountants  Myth – only people wanting to study Accounting at university should study VCE Accounting  Whatever profession you do, a background in Accounting and Finance is essential in many careers such as: VCE ACCOUNTING – SOME MYTHS Small business owner Banking Lawyer Stockbroker/trader Engineer Marketing and advertising Retail Sports management
  13. 13. WHAT WILL I LEARN IN VCE ACCOUNTING?
  14. 14. Accounting helps you read the 3 financial reports WHAT WILL I LEARN IN VCE ACCOUNTING? Income Statement Balance Sheet Cash Flow Statement
  15. 15. THE INCOME STATEMENT
  16. 16.  Looks at Revenues, Expenses and Net Profit…  E.g. this month the business had the following transactions… THE INCOME STATEMENT Net Profit Revenue Earned Expenses Incurred =  Sales $30,000 Phone bill $500 Advertising $1,000 Wages $10,500 Rent $8,000 $30,000 $20,000$10,000
  17. 17.  Isn’t Revenue Earned just the Cash Received by the business? NO – these are different things… E.g. three different furniture stores Business A Business B Revenue Earned Cash Received $5,000 $5,000 $5,000 $0 Business C $0 $5,000 Sells a $5,000 couch and receives cash Sells a $5,000 couch on credit with 24 months to pay Borrows $5,000 from the bank THE INCOME STATEMENT
  18. 18.  Aren’t Expenses Incurred just the Cash Paid by the business? NO – these are different things… E.g. three different furniture stores Business A Business B Expense Incurred Cash Paid $100 $100 $100 $0 Business C $0 $100 Receives a $100 phone bill and pays it in cash Receives a $100 phone bill and will pay it next month Pays back $100 off the loan to the bank THE INCOME STATEMENT
  19. 19. The Income Statement  So there’s a difference between Net Profit and Cash?  What do you pay the bills with? THE INCOME STATEMENT 440 489 493 105 703 893 979 - 100 200 300 400 500 600 700 800 900 1,000 1994 1995 1996 1997 1998 1999 2000 Enron Net Profit ($m) Went bankrupt in 2001…
  20. 20. THE BALANCE SHEET
  21. 21. THE BALANCE SHEET  The Balance Sheet is set out in a “BIG T” with 3 sections: Balance Sheet Assets Liabilities Owner’s Equity Balance Sheet Reports what the business owns and what it owes • Things the business owns are called Assets • Things the business owes are called Liabilities
  22. 22.  Example: you need $800 for a new phone but you only have $600 in your bank account  To make up the difference, your parents give you $200 as a loan to buy the phone to be repaid by the end of the year THE BALANCE SHEET How much are your Assets? Assets Liabilities Owner’s Equity $800 How much are your Liabilities? $200 $600 So how of the phone do you actually “own”?
  23. 23.  This relationship between Assets, Liabilities and Owner’s Equity is expressed as the “Accounting Equation” Assets Liabilities Owner’s Equity= + $800 $200 $600= + THE BALANCE SHEET
  24. 24.  The “Accounting Equation” also applies in your personal life… Example: you decide to buy a house worth $500,000:  You have $100,000 in cash in the bank  You will need to borrow the remaining $400,000 from the bank How much do you “own” of the house? How much does the bank “own”? $100,000 $400,000 House value $500,000 The $100,000 is your Owner’s Equity in the house The $400,000 is your Liability or how much you owe on the house Assets Liabilities Owner’s Equity= +$500,000 $400,000 $100,000 THE BALANCE SHEET
  25. 25.  The “Accounting Equation” will change over time…  This year you pay off $50,000 from the loan  Next year you pay off $70,000 from the loan $500,000 $400,000 $100,000= +$500,000 $350,000 $150,000$500,000 $280,000 $220,000 THE BALANCE SHEET
  26. 26.  How do people and businesses go broke? They end up with a negative balance in Owner’s Equity…  So being broke happens when you have Negative Owner’s Equity  In other words… Assets Liabilities Owner’s Equity= +$100,000 $110,000 —$10,000 BROKE=<Assets Liabilities THE BALANCE SHEET
  27. 27.  You buy a $900,000 house with a $800,000 loan and $100,000 cash of your own…  A year later, there’s a crash in the property market and your property is now worth only $600,000 Assets Liabilities Owner’s Equity= +$900,000 $800,000 $100,000$600,000 $800,000 —$200,000 THE BALANCE SHEET
  28. 28. THE BALANCE SHEET 1,255 975 1,699 2,369 3,260 3,941 4,192 - 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 2001 2002 2003 2004 2005 2006 2007 Lehman Brothers Net Profit ($m) Went bankrupt in 2008…
  29. 29. THE BALANCE SHEET 247,816 260,336 312,061 357,168 410,063 503,545 691,063 2001 2002 2003 2004 2005 2006 2007 Lehman Brothers - Total Assets (in $ Millions)
  30. 30. THE BALANCE SHEET247,816 260,336 312,061 357,168 410,063 503,545 691,063 239,357 251,394 298,887 342,248 393,269 484,354 668,573 2001 2002 2003 2004 2005 2006 2007 Lehman Brothers - Total Assets and Liabilities (in $ Millions) Total Assets Total Liabilities
  31. 31. THE BALANCE SHEET  By September 2008…  Lehman’s went bankrupt in one weekend in September 2008  The biggest bankruptcy in US history  How much cash did Lehman’s have? Total Liabilities $768 Billion Total Assets $639 Billion < Assets Liabilities Owner’s Equity= +$639 B $768 B —$139 B $7.3 B
  32. 32. THE CASH FLOW STATEMENT
  33. 33.  So Cash is REALLY important  But we already have a Balance Sheet that shows us how much cash a business has  Why do we need another report called the Cash Flow Statement? THE CASH FLOW STATEMENT Business A Business B Cash Balance $10,000 $10,000 Business C $10,000 Made a $10,000 sale and received cash Sold one of the firm’s delivery vans for $10,000 cash Borrowed $10,000 cash from the bank
  34. 34. THE CASH FLOW STATEMENT 3.3 6.8 12.1 21.4 52.3 81.0 143.1 - 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 2001 2002 2003 2004 2005 2006 2007 ABC Learning – Net Profit ($m) Went bankrupt in 2008…
  35. 35. THE CASH FLOW STATEMENT 52.3 81.0 143.1 45.7 88.0 123.1 - 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 2005 2006 2007 Net Profit ($m) Net Increase/ Decrease in Cash ($m)
  36. 36.  The Cash Flow Statement Is good because it not only tells us how much cash a business has but also where the money comes from THE CASH FLOW STATEMENT Operating activities • Cash made from the daily operations of the business • Selling goods and services (and paying for them too) Investing activities • Cash made from the buying and selling Non-Current Assets • E.g. property, vehicles, computers Financing activities • Cash made from borrowing money (and paying it back)
  37. 37. Cash Balance Operating Investing Financing Operating Investing Financing Operating Investing Financing Operating Investing Financing Operating Investing Financing Operating Investing Financing Operating Investing Financing Operating Investing Financing Operating Investing Financing Operating Investing Financing Operating Investing Financing Operating Investing Financing Operating Investing Financing Operating Investing Financing Cash Inflows Money comes into the business from 3 sources Cash comes in from selling goods and services: • Cash sales • Debtor collections • GST received Cash comes in from selling Non-Current Assets: • Property • Vehicles • Equipment Cash comes in from • Borrowings (loans) • Capital contributions Cash is spent on running the business on a daily basis • Wages • Creditor payments • Stock purchases • Expenses paid Cash is spent on buying Non-Current Assets • Property • Vehicles • Equipment Cash is spent on • Loan repayments • Drawings Cash Outflows Money leaves the business in 3 ways THE CASH FLOW STATEMENT
  38. 38. THE CASH FLOW STATEMENT 43.2 89.2 206.9 -454.0 -851.3 -1579.4 456.5 850.1 1495.6 -2,000.0 -1,500.0 -1,000.0 -500.0 - 500.0 1,000.0 1,500.0 2,000.0 2005 2006 2007 ABC Learning – Net Cash Flows ($m) Operating Activities ($m) Investing Activities ($m) Financing Activities ($m)
  39. 39. THE CASH FLOW STATEMENT  So together the 3 financial reports tell the full story of any business… Income Statement Balance Sheet Cash Flow Statement
  40. 40. VCE ACCOUNTING COURSE BREAKDOWN
  41. 41. COURSE BREAKDOWN • Course structure… Unit 1 – Establishing and operating a service business • Area of Study 1 – Going into business • Area of Study 2 – Recording financial data and preparing financial reports Unit 2 – Accounting for a Trading Business • Area of Study 1 – Recording financial data and preparing financial reports • Area of Study 2 – ICT in accounting • Area of Study 3 – Evaluation of business performance Unit 3 – Recording and Reporting for a Trading Business • Area of Study 1 – Recording financial data • Area of Study 2 – Balance-day adjustments and interpreting financial information Unit 4 – Control and Analysis of Business Performance • Area of Study 1 – Extension of recording and reporting • Area of Study 2 – Financial planning and decision-making
  42. 42. COURSE BREAKDOWN • Unit 3/4 structure… Unit 3 SACs, 25% Unit 4 SACs, 25% Exam, 50% 0% 50% 100%
  43. 43. • Unit 3/4 structure… Unit 3 SACs, 25% Unit 4 SACs, 25% Exam, 50% 0% 50% 100% COURSE BREAKDOWN 70% 30%
  44. 44. • Unit 3/4 structure… COURSE BREAKDOWN 70% 30% Unit 3 SACs, 25% Unit 4 SACs, 25% Exam, 50% 0% 50% 100%
  45. 45. RESOURCES
  46. 46. • Our YouTube Channel… 200+ videos RESOURCES https://www.youtube.com/c/MichaelAllisonVCEAccountingVideos
  47. 47. • Our Slideshare Channel… 200+ PowerPoints/PDFs RESOURCES http://www.slideshare.net/mjall3
  48. 48. • Any questions please contact me… Michael Allison Office R113 (between R13 and R14) allisonm@trinity.vic.edu.au 03 9854 3600 RESOURCES

    Be the first to comment

    Login to see the comments

  • Michael_Tunney

    Aug. 13, 2015
  • tulinahmet

    Jan. 5, 2018
  • DevonLawes

    May. 26, 2020

Why study VCE Accounting?

Views

Total views

1,857

On Slideshare

0

From embeds

0

Number of embeds

10

Actions

Downloads

46

Shares

0

Comments

0

Likes

3

×