Who Keeps An Oversight Of Business Activities

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INTRODUCTION TO ACCOUNTING

1

Overview of Semester Work

BUSINESS
ACTIVITIES

BUSINESS PLANNING

BUSINESS
RECORDING TRANSACTIONS &
REPORTING

BUSINESS
PERFORMANCE EVALUATION

2

1

Starting a business
Sole proprietor – the business is owned and usually managed by one person, a sole proprietor has unlimited liability and is not a separate legal entity

Partnership –
2 or more people who agree to conduct a business together (not considered in this unit), unlimited liability, mutual agency, not a separate legal entity

Company – (public and private) a business that is a distinct legal entity, separate from its owners (called shareholders), and which is managed by a board of directors elected by the shareholders. Shareholders cannot be required to meet the debts of a company from personal assets
(limited liability). Perpetual succession.

3

Objective – profit maximisation
Investors/Owners

Return on Investment

How to assess?
=> need for measurement

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2

Who keeps an oversight of business’ activities?
Australian Securities Investments Commission (ASIC) acts as a company watchdog, enforcing Company and financial services law
(Corporations Act 2001 (Cwlth)) in order to protect consumers, investors and creditors by ensuring the Australian capital market is fair and transparent

Australian Stock Exchange (ASX)
Via its licence it monitors specific aspects of the businesses of other organisations
(for example, the governance of listed companies and the on-exchange or onmarket trade execution by brokers).

Australian Competition and Consumer Commission (ACCC) primary role to protect consumer by ensuring that individuals and businesses comply with the Commonwealth competition, fair trading and consumer protection laws. APRA – Australian Prudential Regulation Authority
Enforces capital adequacy ratios for ADI’s (authorised deposit taking institution) to ensure they have the necessary capital to support risks associated with their activities 5

role of accounting
“…the process of identifying, measuring, and communicating economic information about an entity to a variety of different users for decision-making purposes….”

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3

How does accounting support the business?
BUSINESS
ACTIVITIES
Planning business activities/setting objectives Preparation of budgets/financial plans

Business activities take place
Recording actual $ in accounting system and reports prepared Evaluating business activities
Assessment of actual $ against budget
Assessment of actual outcome against targets

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Major Areas of Accounting
Management accounting
Management accounting is a field of accounting that provides economic information for internal users. Core activities include: formulating plans and budgets providing information to monitor and control different parts of the entity
Forward looking – uses forecasts/estimates
Financial accounting
Financial accounting is the preparation and presentation of financial reports (bounded by Generally Accepted Accounting Principles GAAP) for all types of users (both internal and external) to enable them to make economic decisions regarding the firm. It uses historical costs
8

4

Who wants to know about the business – financials and operating activities?
Internal Users
Owners, Managers, Operational
Personnel
External Users (stakeholders)
Shareholders in listed company customers and suppliers
Regulatory bodies lenders government departments employees investment analysts community representatives

9

General Purpose Financial Reports (GPFR)
Prepared to meet the information needs common to users who are unable to command reports to suit their own needs; and to show accountability of management for the resources entrusted to it. Such reports are publicly available

Special Purpose Financial Reports (SPFR)
As some users have specialised needs (e.g. tax authorities,
banks
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