Title | ACCT1006 S2 2020 Lecture Week 1 |
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Author | Jayden Trinh |
Course | Accounting and Financial Management |
Institution | University of Sydney |
Pages | 50 |
File Size | 1.4 MB |
File Type | |
Total Downloads | 553 |
Total Views | 636 |
ACCT1006: Accounting and Financial ManagementTimothy Ganghua WangWeek 1: An Introduction to AccountingIntroduction and communication with staff My name is Timothy Ganghua Wang E-mail: [email protected] Office: Rm 328, Codrington Building H Consultation times for myself and other staff can be found ...
ACCT1006: Accounting and Financial Management Week 1: An Introduction to Accounting Timothy Ganghua Wang
Introduction and communication with staff – My name is Timothy Ganghua Wang – E-mail: [email protected] - Office: Rm 328, Codrington Building H69 – Consultation times for myself and other staff can be found on canvas under the “Consultation Times” module. – There are about many students in ACCT1006, please use canvas discussion forum for ALL communication except private matters.
The University of Sydney
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Unit Outline – available on canvas Please read the Unit of Study Outline and Frequently Asked Questions (FAQ’s) on canvas carefully – Teaching Staff – Unit of study information – Learning aims and outcomes – Assessment – Text and resources – Topic schedule – Homework questions and solutions
The University of Sydney
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Assessment
Final Examination - This assessment is listed as MANDATORY which means you must undertake the assessment and achieve at least 45% of the available marks in that assessment
NOTE DATES IN YOUR DIARY The University of Sydney
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Lecture Notes/Tutorials – Lecture notes (complete) will be available on canvas before the release of lecture recording - Please bring a copy while listening to the lecture recording. – Online Tutorial Work 12 online submissions using Canvas Quiz worth 1 mark each (best 10 out of 12) = 10 marks. – Tutorial Participation worth 0.5 mark each (completion of written tutorial homework, being part of group discussion and making a good attempt at the unseen questions in the tutorial) (best 10 out of 12)= 5marks – Perdisco Practice set = 10 marks – Total 25 Marks The University of Sydney
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Learning Partnerships Teaching staff want you to succeed – Learning partnership between teachers and students – Teacher’s commitment provide quality resources, learning support, engaging lectures and tutorials as well as assessment tasks that support your learning. – Student’s commitment actively engage with the course both outside of class and inside of class. – HOW?
The University of Sydney
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Purpose of Teaching and Learning Components – Pre-reading: before lecture skim read text to familiarise yourself with topic and new terms – Lecture recording: inspire interest, introduce and overview a topic and provide some worked examples where relevant – Homework: read text carefully, understand concepts/theories and practice worked examples by doing assigned questions – Tutorial: actively participate/get feedback by asking questions/ engaging with activities to consolidate understanding – Assessment: check your understanding and provide feedback to support further learning The University of Sydney
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Managing your expectations: purpose of lecture – Lecture recording only 1.5 hours – Inspire interest – Introduce/overview a topic – Some worked examples – You have ≈ 5-8 out of class hours per week to develop & consolidate understanding
The University of Sydney
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Importance of each component for learning Pre-reading Lecture recording 1 hr / week 1.5 hrs / week Online Homework (via Canvas Quiz) and Written Homework Exam Study / Practice Set (20hrs) Average: 5-8 hrs out of class work per week Tutorial 1.5 hrs / week
The University of Sydney
Exams 3.5 hrs
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Feedback – Encouraging active participation in class to help students to measure their knowledge and understanding on key topics – Answering questions: class, canvas, consultations – Solutions to tutorial work – Providing extra self-study practice questions and solutions on canvas – Providing feedback on mid semester exam Refer to Student Feedback on Canvas for more details
The University of Sydney
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Peer Assisted Study Sessions
International Award-W ward-Wiinning Prog Program ram You learn from our VERY best students in PASS, top-achieving, experienced students help you- these students are most often our TOP BUSINESS SCHOOL students The atmosphere in PASS is relaxed and friendly You decide what goes on in PASS bring the questions you have about your coursework & the group will work together to solve the problems In PASS, you talk about the material and solve problems interactively PASS is confidential what happens in PASS stays in PASS
REGISTRATIONS OPEN IN WEEK 1 https://sydney.edu.au/students/pass/eligibility-registration.html Get in quick before places run out! The University of Sydney
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Learning Objectives/Outcomes 1. Introduce the generally accepted accounting principles (GAAP). Revision of accounting basics from BUSS1030: 2. Identify the elements of each of the four main financial statements 3. Revise the accounting concepts and principles 4. Review debits & credits, journals, posting to ledger and trial balance. 5. Overview ratio analysis for evaluating an entity’s profitability, liquidity and solvency. › Readings: Ch1 & Ch2
The University of Sydney
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Introduction,GAAP&BusinessEntities AccountingConcepts&TransactionAnalysis BUSS1030 ExternalUserFocus TransactionAnalysis&Basic Dr/Cr
Cash
ACCT1006
FinancialAccounting RecordingTransactions InternalControl
FinancialStmts– mainly concernedwithsummary dataandhowtousethedata
Statement ofProfitor Loss
Stmtof Financial Position
Statement of CashFlows
Oneweek
FinancialStatementAnalysis
PreparerFocus Morecomplextransactions Completingtheaccounting cycle,adj&closingentries AllSystems
Concernedwithpreparation andeachelementinFin Stmts
Externaluserfocus Integratedthroughoutunit
Introduction,GAAP&Revision AccrualAccountingConcepts
RecordingTransactions
Merchandising AccountingSubsystems Receivables Non‐currentAssets Liabilities Equity
Statementof ProfitorLoss Statementof Financial Position Statementof CashFlows
FinancialStatementAnalysis
InternalControl
FinancialAccounting
Learning Tip – Active Learning – Active learning promotes understanding and improves recall – Active learning includes: – Pre-reading before class – Listening – Note taking – Practicing examples – Asking questions – Discussing with or teaching others – Reflecting, connecting and thinking about – When you see this The University of Sydney
it is your turn Page 15
Reflect on your learning You record transactions and prepare financial statements How do you know: – Which economic events were accounting transactions? – How to record transactions? – When to record revenues and expenses? – Who you were reporting to? – What to report? – Answer to all those questions is: GAAP: – Generally Accepted Accounting Principles • Accounting standards (optional in this unit, required in advanced accounting units) • The Conceptual Framework • Accounting concepts & principles The University of Sydney
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L01 The Conceptual Framework for Financial Reporting (CF) A bit of history – Prior to 1970s, no GAAP – Resulted in inconsistencies between accounting standards and practices – As a result, US, UK, NZ, Australia started developing a normative theory of financial accounting – Prior to 2005, the CF in Australia was developed by AASB and AARF – From 1 Jan 2005, Australian standards converged with international accounting standards – Following Sep 2010, the IASB issued its CF but Australia continued to use a mixture of this new CF and Australia’s own CF – IASB issued a revised conceptual framework in 2018 and this has been adopted by the AASB in May 2019, effective for annual reporting periods beginning on or after 1 January 2020. The University of Sydney
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L01 Conceptual Framework for Financial Reporting 2018 The Conceptual Framework (CF) describes the objective of and concepts for financial reporting. The purpose of the CF is to: (a) assist the IASB to develop Standards that are based on consistent concepts; (b) assist preparers to develop consistent accounting policies when no Standard applies to a particular transaction or event; and (c) assist all parties to understand and interpret the Standards However, the CF is not a Standard but guides the preparation of Accounting Standards – requirements of accounting standards override the CF. If there are inconsistencies the requirements of accounting standards override the CF. The University of Sydney
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L01 Generally Accepted Accounting Principles
Conceptual Framework
Accounting standards
Gives general guidance on
Gives specific guidance on
Record transactions and prepare general purpose financial reports The University of Sydney
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The Conceptual Framework 2018 – – – – – – – – –
The conceptual framework in Australia has 8 chapters: [1] the objective of general purpose financial reporting [2] qualitative characteristics of useful financial information [3] financial statements and the reporting entity, [4] the elements of financial statements [5] recognition and derecognition [6] measurement [7] presentation and disclosure [8] concepts of capital and capital maintenance
– In ACCT1006 we focus mainly on 1-5 The University of Sydney
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The Conceptual Framework 2018 – Set of concepts defining the nature, purpose and content of general purpose financial reporting – Used by preparers and standard setters
Impacts the way we view, interpret and report the economic World – a frame of reference
The University of Sydney
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Objective of General Purpose Financial Reporting – OBJECTIVE: foundation of the CF defined in para.1.2 – To provide financial information about the reporting entity useful to existing and potential equity investors, lenders and other creditors in making decisions relating to providing resources to the entity. – Users also want to assess how efficiently and effectively management has discharged its responsibilities to use the entity’s economic resources (stewardship) – Information that is useful should be based on ethical accounting practices by ethical accountants (Tute 12 Wk12) – Information based on ethical accounting practices typically possesses a number of qualitative characteristics. The University of Sydney
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The Reporting Entity › REPORTING ENTITY: defined in paragraph 3.10 of CF › an entity that is required, or chooses, to prepare financial statements. A reporting entity can be a single entity or a portion of an entity or can comprise more than one entity. A reporting entity is not necessarily a legal entity
The University of Sydney
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Qualitative Characteristics Relevance Faithful representation Comparability Verifiability Timeliness Understandability Constraint Benefits > costs
Refer to chapter 1 of text The University of Sydney
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Qualitative characteristics – Identify whether the qualitative characteristics are fundamental (F) or enhancing (E): Qualitative Characteristics
Fundamental or Enhancing
Relevance
F
Comparability
E
Verifiability
E
Understandability
E
Timeliness
E
Faithful Representation
F
The University of Sydney
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Conceptual Framework
Definitions and recognition criteria will be explored further in the coming weeks NB: these definitions have been revised in the 2018 CF
The University of Sydney
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Definition, recognition and measurement of elements in financial reports – The elements of financial statements include: – assets – liabilities – equity – income – expenses. – The Conceptual Framework defines each element and sets out the criteria for their recognition.
The University of Sydney
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Assets – definition The CF 2018 para. 4.3 - 4.4 defines assets as: a present economic resource controlled by the entity as a result of past events An economic resource is defined as: - a right that has the potential to produce economic benefits Rights can take many forms, e.g.: – rights to receive cash; – rights to receive goods or services; or – rights over physical objects, such as property, plant and equipment or inventories The University of Sydney
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Assets – definition 3 essential characteristics of an asset: 1. An asset is an economic resource controlled by the entity. 2. An asset exists as a result of past events. 3. The right has the potential to produce economic benefits. Control relates to the capacity of a reporting entity to benefit from an asset, and to deny or regulate the access of others to that benefit. This does not necessarily mean ‘ownership’. E.g. finance lease where legal ownership of the leased asset remains with the lessor.
The University of Sydney
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Liabilities – definition The CF 2018 para. 4.26 defines a liability as: – a present obligation of the entity to transfer an economic resource as a result of past events. An obligation is defined in the CF as – a duty or responsibility that the entity has no practical ability to avoid 3 essential characteristics of a liability: 1. A liability represents a present obligation of the entity. 2. The obligation exists as a result of a past event. 3. The obligation is to transfer an economic resource. This will reduce the entity’s future cash flows, e.g. paying cash, providing goods/services, or issuing another liability. The University of Sydney
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Equity – definition The CF 2018 para. 4.63 defines equity as: the residual interest in the assets of the entity after deducting all its liabilities – Cannot be independently defined (residual) as it is directly dependent on the definition of assets and liabilities. – From basic accounting equation: Equity = Assets – Liabilities
The University of Sydney
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Income – definition The CF 2018 para. 4.68 defines income as: increases in assets, or decreases in liabilities, that result in increases in equity, other than those relating to contributions from holders of equity claims Income includes: 1. Revenue: increases in economic benefits arising in the course of ordinary activities, e.g. sales revenue, rent, dividends. 2. Gains: other increases in economic benefits that do not arise from ordinary course of business., e.g. gains from the sale of non-current assets.
Definition of income is linked to the definitions of assets and liabilities. The University of Sydney
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Expenses – definition The CF 2018 para. 4.69 defines expenses as: decreases in assets, or increases in liabilities, that result in decreases in equity, other than those relating to distributions to holders of equity claims Expenses include: 1. Expenses: decreases in economic benefits that arise in the ordinary activities of the entity, e.g. cost of sales, salaries. 2. Losses: expenses that do not necessarily arise in the ordinary course of business, e.g. loss from natural disasters.
Like the definition of income, definition of expenses is also linked to the definitions of assets and liabilities. The University of Sydney
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Recognition criteria Recognition is: the process of capturing for inclusion in the financial statements an item that meets the definition of an asset, a liability, equity, income or expenses Recognition criteria CF para 5.7: Recognition is appropriate if it results in both – relevant (may be affected by low probability of an inflow/outflow of economic benefits and existence uncertainty) information about assets, liabilities, equity, income and expenses and a – faithful representation of those items (may be affected by measurement uncertainty) because the aim is to provide information that is useful to investors, lenders and other creditors Cost constrains recognition decisions, just as it constrains other financial reporting decisions The University of Sydney
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Measurement of the elements of financial reports Elements recognised in financial statements are quantified in monetary terms. This requires the selection of a measurement basis, CF chapter 6. Once we determine an asset or liability element should be recognised, we then need to determine how to measure it (this also creates a basis for measuring any related income or expense): – Historical cost (most commonly used) – Current value includes: fair value, value in use (assets), fulfilment value (liabilities) and current cost The factors to be considered when selecting a measurement basis are relevance and faithful representation, because the aim is to provide information that is useful to investors, lenders and other creditors - cost constraint. The University of Sydney
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LO2 Financial Statements and Elements › Statement of Profit or Loss * - Reports PROFIT / (LOSS) = revenues less expenses for a particular period of time - Purpose is to report success or failure of the entity’s operations for a period of time - Main Elements: Income (revenues & gains), Expenses (expenses and losses) *For external reports statement called Statement of Profit or Loss and other Comprehensive Income (Illustrated in chapter 10).
› Statement of Financial Position - Reports assets and claims on those assets at a specific point in time - Based on the basic accounting equation - Main Elements: Assets, Liabilities, Equity The University of Sydney
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Financial Statements › Statement of Changes in Equity (wk 9) Reports total comprehensive income for the period and the changes in equity Elements: profit, retained earnings, dividends, capital contributions, reserves › Statement of Cash Flows (wks 10 & 11) Reports net cash provided/used during period - Elements: cash receipts and cash payments
The University of Sydney
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Revision: Concepts and principles › These principles and assumptions have been developed over many years and are generally accepted by accountants as representing appropriate practice: › Monetary principle › Accounting entity concept › Accounting period concept › Going concern principle › Cost principle › Full disclosure principle › Materiality
The University of Sydney
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Concepts and principles Identify True or False for the following statements: A. The accounting period concept states that the life of a business can be divided into periods to more accurately reflect profits and smooth out seasonal fluctuations. B. The full disclosure principle requires that any information that may be of interest to users should be disclosed in the financial statements C. The going concern principle states that financial statements should be prepared on a going concern basis unless the entity will cease trading or go into liquidation. D. The accounting entity concept states that owners personal transactions should not be accounted for in business records unless they are a sole trader or partnership as they are not separate legal entities. The University of Sydney
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Concepts and principles SOLUTION True or False to the following statements: False The accounting period concept states that the life of a business can be divided into periods to more accurately reflects ...