Accounting 100
Contact Details
Lecturer NIT China:
email:
Room :
Accounting 100
Accounting 100 will run as a 6 hour
seminar comprising lecture and tutorial
components
Responsibility for learning is yours
Best results are achieved by consistent
work throughout the semester
Accounting 100
Tutorials begin this week
Attendance at the tutorial is compulsory
Attempt the tutorial work each work
before the tutorial session
Check your answers and ask questions
at the tutorial
Text Books
Essential
Hoggett and Edwards (2003)
“Accounting in Australia 5th Edition”,
John Wiley & Sons
Essential
Hutchings G (2004) “Accounting 100 in
Practice” , John Wiley & Sons
Assessment Structure
Mid-Semester Test
Assignment One
Final Exam
25% TBA
25% TBA
50% TBA
You must achieve 40% or more in the exam to
pass the unit
What is accounting
Accounting is commonly known as the
language of business
It is the recording, reporting and analysis of
financial information and associated activities.
Completion of a Curtin degree with a major in
accounting qualifies for associate
membership of CPA Australia (Certified
Practising Accountant) or ICA (Institute of
Chartered Accountants)
Accounting
Various types of work performed by
accountants;
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Financial
Management
External Auditing
Internal Auditing
Taxation
Liquidation/Insolvency
Small Business Consultancy
Law Enforcement
What Accountants do
Bookkeepers maintain the financial
records not accountants
The accountant has a supervisory role
The accountant is typically involved in
strategic planning and analysis
An accounting background is highly
regarded when competing for executive
positions
Career prospects in
accounting
Demand is extremely high for qualified
accountants, particularly in Business
consultancy and taxation.
International opportunities. Many
aspects of accounting are common
throughout the world. Eg Australian CPA
can convert to USA CPA
Curtin double majors in
accounting
Accounting & Law
Accounting &
Taxation
Accounting &
Information Systems
Accounting and
Small Business
Etc.
Accounting &
Finance
Accounting &
Banking
Accounting &
Accounting
Technologies
Accounting &
Financial Planning
Starting a Business
Lecture Outline
Options in Starting a Small Business
Business Structures
Common Reasons for Business Failure
Getting Started
The first decision you need to make is
how you are going to enter the small
business world. You can choose from
one of three options:
1. Start your own business
2. Buy an existing business
3. Obtain a franchise
Starting your own Business
Benefits
1. Independence.
2. Lower Cost.
3. New start – no
negative sentiment
towards the
business.
Limitations
1. No relationship with


Customers
Suppliers
Business may be
slow for a while.
3. Problems
2.


New staff
New technology and
equipment.
Buying a Business
Benefits
1. Established
reputation.
2. Immediate stream
of income.
3. Easier to borrow
additional funds.
Limitations
1. May be stuck with
poor decisions
made by prior
owners(s).
Obtain a Franchise
Benefits
1. Strong Reputation.
2. Much lower risk of
failure.
3. Training and
support may be
provided by
franchise owner.
1.
Limitations
Lack of independence

2.
3.
Must conform to
franchise policies.
Fees must be paid to
franchise owner.
Damage to reputation
of franchise name.
Ownership Structure
Choose a form of business structure.
The most common are;
Sole Trader:
 Partnership:
 Company

Proprietary Limited (Pty. Ltd.)
 Public (Ltd.)

Partnership
Defined
The relationship between persons carrying on
a business in common with a view to making
a profit.
Characteristics:
Two or more partners
Not a separate legal entity

But treated as a separate accounting entity.
Written or verbal Partnership Agreement
Partnership Agreement
A partnership agreement should
contain:
1.
2.
3.
4.
5.
Partnership Name and names of partners.
Information on how profits & losses are to be
shared.
Conduct of the partnership affairs.
Authority of each partner in contractual situations.
Procedures to be followed in the event of dispute.
Legal Status
Partnership (Not a Separate Legal Entity)
Partners/Business
Company (A Separate Legal Entity)
Owners
Company
Partnership
Major Benefits
1. Easy to form
2. Minimal cost to
establish
3. Limited rules and
regulations
Major Limitations
1. Unlimited Liability
Proprietary Company
Minimum – 1 Person
Maximum 50
shareholders
Separate legal entity
Usually a family
business that has
been incorporated to
obtain the benefits
of limited liability.
Starting your own Business
Companies
Major Benefits
1. Limited liability
2. Ability to raise
more money.
Major Limitations
1. Highly regulated.
Introduction
Rate of new business failure is
extremely high.
50% of new businesses will fail in the
first year, whilst 75% will fail in the first 5
years.
Failure as a % of start ups.
Year 1
32.3%
Year 2
16.5%
Year 3
10.3%
Year 4
6.8%
Year 5
4.5%
Reasons for Business Failure
Economic Environment
In most cases, an economic downturn
merely exposes entities which are over
leveraged (ie have too much debt) or
poorly managed.
More businesses collapse during
economic booms than during economic
downturns.
Reasons for Business Failure
The overwhelming reason for business
collapse is poor management.
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Lack of Internal Controls
No Strategic Plan
Inadequate Pricing Structures
Poor Management Decisions
Lack of Budgetary Control
Overleveraged
(Topic 1)
(Topic 1)
(Topic 2)
(Topics 2 & 3)
(Topic 4)
(Topic 4)
Reasons for Business Failure
Lack of Internal Controls
Internal Control
Comprises all the methods and
measures established to safeguard
assets, ensure reliability of records,
promote operational efficiency and
encourage adherence to prescribed
managerial policies.
Internal Controls
Examples of internal controls:
Separation of duties.
2. Clearly established lines of responsibility.
3. Internal auditing.
4. Mechanical and electronic devises.
1.
•
Refer to pages 405-407 of “Accounting
in Australia – 5th Edition”.
Reasons for Business Failure
Lack of Internal Controls
Failure to implement and/or regulate
internal control policies can be fatal.

Barings Bank
Barings Bank
Leeson (novice trader) posted to Singapore in
July 1992
Acted beyond his authority
By 31/12/94 had accumulated losses of
£208M through unauthorized trades
Represented that he was making a profit
Perceived as a “Star Performer”
By 27/2/95 accumulated losses of £830M
Discovered 23/2/95 – Barings Collapses
Barings Bank
The BOE report into the collapse stated:
(a) the losses were incurred by reason of
unauthorized and concealed trading by
Leeson
(b) the true position was not noticed earlier by
reason of a serious failure of internal controls
and managerial confusion within Barings;
(c) the true position had not been detected
prior to the collapse by the external auditors,
supervisors or regulators of Barings.
Barings Bank Collapse
“The Bank regarded the controls in
Barings as informal but effective. It had
confidence in Baring's senior
management, many of whom were longstanding Barings' employees.”
Extract from the conclusion of the
Bank Of England Report on the Collapse of Barings
Reasons for Business Failure
No Strategic Plan
Strategic Plan Defined
A blueprint for developing a business and
provides a basis for measuring progress
towards the achievement of goals.
Consists of several basic steps:
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Mission Statement
Objectives
SWOT Analysis
Reasons for Business Failure
No Strategic Plan
Strategic Plan Defined
A blueprint for developing a business and
provides a basis for measuring progress
towards the achievement of goals.
Consists of three basic steps:



Mission Statement
Objectives
SWOT Analysis
Strategic Plan
Mission Statement
The mission statement should focus on
the one, possibly two, feature(s) that
distinguishes your business from your
competitors.
It is designed to motivate employees so
it should be brief so that employees are
able to memorise the statement.
Generic Mission Statement
Our mission is to provide the highest
quality product at the lowest price
and to provide outstanding service
within an aesthetically pleasing
environment.
Strategic Plan
Objectives
Characteristics (SMART)
1. Specific – Clear & Precise
2. Measurable
3. Achievable
4. Relevant
5. Time frame in which objectives should
be achieved.
Examples of Objectives
Example of a SMART objective;
We will increase sales of computers by
10% within 12 months.
Example of an objective that is not
SMART – Why??
We will increase customer satisfaction
by 10%.
Objectives
Not SMART because;
No time frame – when will it happen?
Not specific or measurable – What is
customer satisfaction & how would we
precisely measure it at low cost?
Strategic Plan
SWOT Analysis
Strengths & Weaknesses (Internal Analysis)
Reviews the way in which a business
operates.


Management Style
Resources
What internal factors (over which a manager
does have control) represent strengths and
weaknesses.
Curtin Business School
1.
2.
3.
4.
5.
Strengths
‘Curtin’ brand
EQUIS
accreditation
Well Resourced.
Diversity of double
majors.
Diversity of
students.
Weaknesses
1. Parking.
2. Absence from
campus.
Strategic Plan
SWOT Analysis
Opportunities & Threats (External Analysis)
Review of external environment


Market Regulation
Competitors
What external factors (over which your entity
has no control) represent a threat or an
opportunity.
Strategic Plan
SWOT Analysis
Threats
By identifying potential threats you can take
action now to minimise or avoid these threats.
Opportunities
By identifying potential opportunities you can
take action now to ensure that you profit from
the opportunity.
Curtin Business School
Opportunities
1. China Market
Threats
1. Reduction in govt.
funding.
2. Online degrees
from international
universities.
Lecture summary
You should be able to now;
Name and explain 3 business structures
Explain the causes of business failure
Explain the importance of a business
plan
List & define the elements of a business
plan