Year 11 Accounting

Quote of the Day "If you don't have daily objectives, you qualify as a dreamer.” Zig Ziglar

Your Goal… Each chapter has learning objectives (these are your goals) You need to do a minimum five exercises at the end of each chapter Don’t just do the first five – mix them up Then, if you keep it up, SUCCESS!!

The Plan… Refer to the Study Design We need to do one chapter per week - that way there will be enough time for revision There will be a letter sent home too. This is only to make your parents aware of what you are in for later so that can support you better. Please give me feedback as time goes on. Every class is different and I need to know what suits you best.

Funnies!

Chapter One The Nature & Role of Accounting in Small Business Avoiding business failure

Reasons Insufficient capital Financial mismanagement Incompetent management Staffing problems Ineffective marketing General economic conditions

What may also contribute… Insufficient sales Poor location Slow moving stock Poor staff and/or customer relations Lack of product knowledge Being let down by suppliers (or franchisor)

Why? Why is business planning so important? ‘Businesses do not plan to fail, they fail to plan’. What does this mean? It takes hard work, persistence, adequate resources and, MOST OF ALL, continual planning to be successful.

The Business Plan A business plan is essential, whether you are starting out or expanding a business It outlines a purpose (mission statement), goals, management, finance, marketing & human resources If you need to borrow money, the lenders will want to see a business plan

Users of Accounting Info (otherwise known as ‘stakeholders’) Debtors and other customers Creditors and other suppliers Banks (& other financial institutions) Employees Prospective owners Australian Taxation Office (ATO)

Financial Data vs. Financial Information Financial data Raw facts & figures upon which information is based Financial information Financial data which has been sorted, classified & summarised into a more usable and understandable form

The Accounting Process Source docs RecordsReportsAdvice

1. Collecting Source Docs The pieces of paper that provide both evidence that a transaction occurred and the details of the transaction itself Example are: Receipts Cheque butts Invoices Memos

Remember… As far as the Accounting process is concerned, if it isn’t written down, it didn’t happen!

2. Recording Sorting, classifying and summarising the information contained in the source documents so it is more usable Common records include Journals (which record daily transactions of a common type) Ledgers (which record the effect of each transaction on the items in the firm’s accounting reports) Stock cards (which record movement of stock in & out)

3. Reporting The preparation of financial statements that communicate financial information to the owner. The three general purpose reports are: Cash Flow Statement (which reports the firm’s cash inflows & outflows and the change in the cash balance over the period) Profit & Loss Statement (which reports on the firm’s ability to earn a profit over a period) Balance Sheet (which reports on the firm’s assets & liabilities at a particular point in time)

4. Advice The provision to the owner of a range of options appropriate to their aims/objectives, and recommendations as to their suitability.

Andrew’s

This is important! Accounting principles & qualitative characteristics needs to be remembered. I mean literally! I will provide ‘posters’ that I want put up on your toilet door! I am not kidding!

Accounting Principles The generally accepted rules that govern the way accounting information is recorded. 1.Entity: The business is assumed to be separate from the owner and other businesses, and its assets should be kept on this basis. 2.Going Concern: The life of the business is assumed to be continuous, and its records are kept on that basis. 3.Reporting Period: The life of the business must be divided into periods of time to allow reports to be prepared, and the accounting records should reflect the reporting period in which the transaction occurs.

Accounting Principles 4.Historical Cost: Transactions should be recorded at their original cost or value, as this value is verifiable by reference to the source document. 5.Conservatism: Losses should be recorded when probable, but gains only when certain so that liabilities and expenses are not understated and assets & revenues are not overstated. 6.Consistency: Accounting methods should be applied in a consistent manner to ensure that reports are comparable between periods.

Accounting Principles 7.Monetary Unit: All items must be recorded and reported in the currency of the country of location.

Qualitative Characteristics Qualitative characteristics set out the broad concepts that underpin the preparation of the financial reports and defines the items that will be reported in each report. The Qualitative characteristics are basically the qualities we would like our accounting information to possess.

Qualitative Characteristics Relevance Relevance states that reports should include all information that is useful for decision making, and exclude information that is not. This information should be up-to-date, and appropriate to the decision at hand. Reliability Reliability states that reports should contain information that is free from bias, and thus can be relied upon for its accuracy.

Qualitative Characteristics Comparability Comparability states that reports should be comparable over time, and between different companies, through the use of consistent accounting procedures. Understandability Understandability states that reports should be presented in a manner that makes it easy for the user to comprehend their meaning.

Summary In summary, accountants are guided by: 1.Accounting principles, which govern the way accounting information is recorded. 2.Qualitative characteristics, which inform the way accounting reports are prepared. Principles apply mainly to records, and qualities apply to reports.

You! Finish note taking. Read Summary. Do a minimum of five exercises at the end of the chapter (don’t just do the first five).

EXCELLENT!

Quote of the Day "Inspiration exists, but it has to find us working.” Pablo Picasso

Funnies!