1 Accounting Rules Qualitative characteristics and Accounting principles

2 SAC3 Qualitative Characteristics Nationally and internationally accepted rules worked out by accountants. Designed so all accountant do the same thing.

3 Comparability Reports are made on the changes in the performance of a business over a number of years. The same accounting methods are used each year to make it easy to compare this year to last year. Then accurate decisions can be made.

4 Comparability A football coach has to choose a team and he wants to know: –Who kick the most goals? –Who took the most possessions? –Who assisted with the play? But the coach is too busy playing on Saturday to notice how well any one else is playing… and the trainer only recorded the final score and cannot remember how well the players performed.

5 Comparability The coach prepares a grid for the trainer to fill in for every match. During the next game, the trainer records every thing but the coach still has nothing to compare it to. After the next few game, the coach has the right information and in a form that he can use to make decisions.

6 Relevance The information used to make decisions must be relevant. All significant items must be reported in accounting reports. However, if they do not affect any decision when left out, they can be ignored.

7 Relevance If the coach is given a list of food eaten by the team’s players, it will not help him select a team so he will ignore what is not relevant or significant. He needs to know more relevant details like how well they played over the last few games.

8 Reliability Any information used in accounting report must be able to be check or verified using source documents e.g. receipts, cheque butts or invoices.

9 Reliability If the coach and the trainer were away from a match, how reliable is the report from the club president who socialized all afternoon, took no notes and who wants his 16 year old son to play in the seniors. The coach has no way of checking because there was no grid filled out. The president’s opinion is not reliable.

10 Understandability Accounting reports must be prepared so members of the public can understand them easily and make accurate decisions.

11 Understandability If the coach makes his reports to the committee full of useless, distracting or misleading information, the committee can’t make accurate decisions about continuing his contract next season.

12 Accounting Principles Basic rules which have become accepted over time.

13 Accounting Entity Principle The personal transactions of the owner/s must be kept separate from the business.

14 Accounting Entity principle What the coach does during the week at work has nothing to do with his ability to coach the football team on the weekend. His paid job as a teacher and coaching job are two separate things.

15 Monetary Unit Principle Accounting reports are expressed are in Australian dollars $AUD.

16 Monetary Unit Principle The coach is paid in Aussie dollars – not American.

17 Conservatism Principle Accountants are cautious. Losses are recognised immediately or even before they occur. Gains are not reported until after they happen.

18 Conservatism Principle The coach does not play his star forward until that player has fully recovered from his injuries and is fit. But the coach is happy to play the Under 17 who has been playing brilliantly over the passed few weeks.

19 Historical Cost Principle All transactions are recorded at their original value.

20 Historical Cost Principle If the Club purchased a new tractor to mow the grass, its value in the Club’s records would be at what it was purchased for.

21 Going concern principle A business can last forever. This allows long term or non current assets to be reported in the Balance Sheet instead of being written off as expenses as soon as they are purchased. Also allows for transactions that take longer than one year e.g. Prepaid Insurance for 18 months.

22 Going Concern Principle The team will continue to play year after year even though the members of the team and the coach retire or are replaced by younger members.

23 Reporting Period Principle If a business can last for ever, how does the owner find out how much profit has been made? Selling up will show this but setting up again is costly and inefficient. So the life of the business is divided into reporting periods e.g. one year.

24 Reporting Period Principle Each football season last for six months and finishes with a grand final. Everyone knows how well the team did by the end of the season.

25 Matching Process Revenue earned less expenses incurred equals profit for a reporting period.

26 Matching Process The coach must look at the points scored by the home team less the points scored by the opposition to work out the winning or losing margin.

27 Consistency Principle Accounting methods used are applied consistently from one year to the next.

28 Consistency Principle The coach times the players at training over 100 metre sprint every week to judge their fitness. He does not vary the length of the sprint.

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