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Accounting in Organisations and Society (acct1046).

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Accounting in Organisations and Society (ACCT1046)

Topic 1 Notes

  • What is Accounting?

The provision of information about the use of resources and resulting performance of an entity, to stakeholders – both internal and external, (anyone with a vested interest in a business)

  • Provision of Information, Accounting Information may be:
  • Financial or non-financial
  • Objective or Subjective
  • About the entity’s internal activities and processes
  • About the entity’s customers, suppliers, competitors
  • Future focused
  • Reflect an entity’s past operation

  • Use of resources and entities:

The factors an entity uses to undertake its business activities and processes

Resources are either owned or controlled by an entity

Entities use resources as inputs to performance

Eg. Money, people, machines/equipment, natural materials (land, water)

  • Performance: Can be defined as the outcome of using resources to undertake business activities and processes
  • Financial Performance
  • Customer Performance
  • Employee Performance
  • Supplier Performance
  • Social Performance
  • Environment Performance

  • Entity: A person, partnership, organisation or business that has a legal and separately identifiable existence.
  • Stakeholders: Stakeholders affect or are affected by the organisations actions, objectives and policies.

Internal Stakeholders

External Stakeholders

  • Employees
  • Managers
  • Owners
  • Suppliers
  • Society
  • Government
  • Creditors
  • Shareholders
  • Customers

  • What is the role of accounting?

Essentially, the role of accounting is to help stakeholders make better business decisions by providing them with useful information.

Internal Stakeholders

External Stakeholders

Types of Decisions:

  • Day-to-day operational decisions about the activities and resource usage of the business
  • Strategic decisions: longer term, more complex decisions that affect the future direction of a business

Types of Decisions:

  • Generally make decisions about whether to deal with/continue to deal with the entity

Information requirements:

  • Generally require specific, detailed, information about current and future operations of the business

Information requirements:

  • Require a summary information about past operations of the entity.
  • i.e entities financial position, performance and changes during the financial year

  • The distinction between internal and external stakeholders leads us to see accounting as having to broad streams

Management Accounting

Financial Accounting

Provides information primarily for internal stakeholders

Provides information primarily for external stakeholders

Eg. Managers, employees

Eg. Creditors, Shareholders, etc.

  • Accounting for different types of stakeholders – Management and Financial accounting

Management Accounting

Financial Accounting

Users

Internal External

External External

Purpose

Provision of info to support internal decision making

Provision of info that communicates entities Performance and Financial Position

Rules for

info provision?

No

Yes – E.g.

Australian Accounting

Standards Board (AASB)

Australian Taxation Office

Time focus of info

Current and Future – focus is on aiding future decisions

Past (historical) focus is on communication of financial performance and position

Primary info

characteristics

Relevant, timely to the decisions it is supporting

Reliable, objective, unbiased

verifiable

Frequency of  

info provision

As needed for decision making

At regular intervals – i.e. annually, quarterly

Level of detail of info

Specific to the decision being made.

Detailed.

Aggregated, summarised

Presentation of info

Many types (no regulation or rules)

  • Budgets
  • Forecasts
  • Sales Reports
  • Cost Reports
  • Income Statements
  • Cashflow Statements

Four primary types (content

And form is regulated)

  • Income statement
  • Balance Sheet
  • Statement of cashflows
  • Statement of Changes

in Equity

...

...

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