ACCT1101 Worksheet Week 1
Recording 1.1: The Accounting Function
1.1 What are the first word(s) that come to mind?
Number crunching
Accountants
Bookkeeping
Reports
1.2 What are the key features of the accounting function?


The process of identifying, measuring and communicating economic information
It permits the informed judgements and decision making of the users of that
information
1.3 Both internal and external users will demand accounting information. Give examples
of internal and external users and their information needs
Internal users
External users
Managers / Directors
Employees
What resources are available
How much does it cost
Investors
Resource Providers
Recipients of goods and services
Regulatory agencies
Public
Are the assets being used efficiently
Health of the company
What type of returns on investment
Is the agency credit worthy
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1.4 Explain the differences between financial and management accounting
FINANCIAL ACC.
MANAGEMENT ACC.
Financial budgets
Balance sheet
Sales forecasts
Income statement
Performance reports
Purpose/Objectives
Statement of changes in
Cost of production reports
equity
Incremental analysis
Statement of cash flows
reports
Shareholders
Lenders
Managers
Potential investors
CEOs
Main users
Creditors
General Managers
Customers
Account Managers
Government
Sales Managers
Interest groups
Level of detail
Less detailed
More detailed
Regulation
Formals rules by the
accounting standards
No standards, internal users
Frequency of reporting
Reports at regular
On demand reports – as
intervals demanded by the
requested by management
statutory boards
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1.5 Reflect on the Cynthia example (textbook or lecture notes) and note the different
types of information Cynthia requires to inform her decision. Where will she typically
find the information?
1.6 What is the role of ethics in accounting?
1.7 Is there a conflict between profit and ethics?
The role of ethics in accounting is to prevent self interest from harming the interests of
the various stakeholders in the company.
Failure to maintain objectivity and independence
Pressure to make decisions contrary to their ethics
Failure to exercise proper professional judgement
Improper leadership and poor organizational culture
Ethics and profits do not always go hand in hand. While maintaining a high standard of
ethical behaviour is in the long-term interest of the business, it can affect short term
interests. Ethics are not a barrier to financial success but neither are they a prerequisite to
it
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Recording 1.2: Financial statements for decision making
Concept Map
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Recording 1.2: Financial statements for decision making
1.8 Briefly explain why each of the accounting assumptions are followed in accounting
reports
Accounting Entity:
Defines the entity of the entity being reported on. Separation of business and
personal expenses
Accrual Accounting:
Leads to more complete and accurate financial representation
Avoids understating profit
Going Concern:
The values of assets are measured by going concern. Deferred expenses must be
recognised
Period Assumption:
Financial statements must be comparable over reporting periods
1.9
Open HVN’s Statement of Financial Position and identify the three financial
statement elements reported in this statement
Assets
Liabilities
Equity
1.10 Express the three elements in a mathematical equation
A–L=E
1.11 Is HVN displaying its SFP in account or narrative format?
Narrative form. Shows net assets and equity on its own
1.12 Open HVN’s Income Statement and identify the two financial statement elements
reported in this statement
Income
Expense
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1.13 Did HVN report a profit or a loss for 2019?
Profit of 409 million dollars
1.14 Turn to HVN’s SOCE and note the various categories of equity items. See if you can
find the profit figure from the Income Statement
Retained profits balance
1.15 Turn to HVN’s SCF and Identify the three ‘buckets’ used to classify cash flows.
Operating activities
Investing activities
Financing activities
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1.16 Sdfsd
Bakehouse had the following transactions in the month of June.
1 June
5 June
10 June
15 June
Start-up capital was received from Mr Baker ($50 000 for shares) and a bank loan of $110 000 was secured.
Took ownership of bakery equipment. $85 000 fully installed. It was paid for in cash.
Shop fittings were completed and the final invoice was $15 000, payable on the invoice date
It was time to move out of the dining room and into a proper office. Office equipment acquired amounted to $12 500 and it was paid for
in cash
`
DATE
ASSETS
Cash at Bank
1-Jun
$160,000
5-Jun
($85,000)
10-Jun
($15,000)
15-Jun
($12,500)
Equipment
Shop Fittings
LIABILITIES
Office Equipment
EQUITY
Bank Loan
Contributed Capital
$110,000
$50,000
$85,000
$15,000
$12,500
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1.17
Name 5 :
Characteristics / advantages / disadvantages
Sole proprietorships
Partnerships
Companies
1.18 Identify factors that need to be considered in selecting an appropriate
organisational structure for Lucy’s Dog Grooming Salon
How easy to set up business?
Establishment costs?
Liability issues?
Tax?
Control?
Access to capital?
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