BU1002_Topic01_Tutorial_Questions_2021

docx

School

James Cook University *

*We aren’t endorsed by this school

Course

1002

Subject

Accounting

Date

Apr 3, 2024

Type

docx

Pages

Uploaded by DeaconDragonMaster1101

BU1002/BU1902 – Accounting for Decision Making Tutorial Questions – Topic 1, 2021 Topic 1 Chapter 1 – Introduction to Accounting and Business Decision Making Questions from Chapter 1 1.2 Differentiate between financial and management accounting. Give an example of how management accounting reports would be incorporated into financial accounting reports. Financial accounting is the preparation of financial statements to allow external users to make economic decisions about the company. Management accounting provides economic information for internal users that is then reflected in financial accounting statements (for external users). In management accounting, one could formulate a plan or a budget for an entity, that a stakeholder could use to analyse how the company is doing and whether they want to invest in it or not. In differentiating between financial accounting and management accounting it is important to consider the users of financial information — both internal and external users. Financial accountants prepare and report information for external users (for example prospective investors or the tax office) and as such are subjected to regulation from GAAP, the Corporations Act and in some cases the ASX through their Listing Rules. Management accountants are concerned with the effective use of an entity’s resources, and in so doing assist the manager/s (i.e. internal users) of the entity in achieving their goal of enhancing customer and shareholder value. Therefore the management reports generated need to be up to date to be effective. Regulation in management accounting is much less formal and in some areas rules are basically nonexistent. Ultimately there will be interaction between the financing accounting and management accounting areas. The information provided by management accountants will provide information for internal users that will be reflected in the financial reports used by the external users. See Table 1.3, for a detailed list of the differences between financial and management accounting 1.3 Describe how accounting information helps shareholders and lenders to make decisions concerning the operations and performance of an entity. Users of accounting information (both internal and external) require accounting information to assist them in the decision-making process. External users such as investors, employees, banks, suppliers and government agencies (e.g. ATO) all have their own specific information needs. A potential investor will require past profits and future profit projections, as well as future growth prospects, to determine if the entity is a good investment proposition or not. Lenders will be seeking details of the level of risk it is exposing itself to by lending money to the entity plus the prospects of the entity repaying its debt. 1.6 List five stakeholders of accounting information. Describe the information requirements for each one; for example, lenders would need information regarding the business's ability to repay debt and service a loan. STAKEHOLDERS INFORMATION NEEDS: Managers require information to determine make or buy decisions or whether to expand or close down or whether to change banks. Investors seek information on capital growth 1

BU1002/BU1902 – Accounting for Decision Making Tutorial Questions – Topic 1, 2021 prospects and future dividend payments. Lenders need information on the ability of the entity to repay its loans. Suppliers want to know if the entity can pay for its supply purchases. Consumers are interested in the life expectancy of the entity and the entity’s ability to provide appropriate goods and services. Government agencies for example, ATO require information to determine the amount of tax liability of the entity. Regulatory bodies for example, ASX and ASIC need to know whether the entity is following the ASX listing rules and the rules and regulations of the Corporations Act. 2.14 What are the four key responsibilities of business? Do you think an entity should consider discretionary responsibilities? Why or why not? According to Carroll, there are four key responsibilities of business which are economic, legal, ethical and discretionary. Organisations have an economic responsibility to provide goods and services at a fair price, to repay their creditors and to seek a reasonable return for their shareholders. Legally, they are required to uphold the laws of government and are ethically responsible to act the way society would expect. Discretionary responsibilities are carried out voluntarily. For instance, there may be no laws relating to the maximum volume of effluent discharge, but a company may choose to monitor and limit its discharge because society expects it to. It is an ethical responsibility. However, the firm may also choose to change equipment and processes so that there is no discharge at all and this would be classed as a discretionary responsibility. Over time, discretionary responsibilities may become ethical responsibilities or even legal responsibilities. If organisations don’t address their pollution problems, the government will step in and regulate it. Whether or not you feel that firms should consider discretionary responsibilities depends on your view as to the objective of a firm. As discussed in the chapter, some believe that a firm only has a duty to its shareholders, while others believe that a firm has a wider responsibility to all stakeholders. Some reasons put forward why firms consider social and environmental issues are: • economically in their best interest (has a benefit to the bottom-line profit) • to minimize government interference • enlightened self interest • genuinely want to do the right thing. So, what you believe will determine whether or not a firm has a responsibility to consider discretionary responsibilities. 2

BU1002/BU1902 – Accounting for Decision Making Tutorial Questions – Topic 1, 2021 2.23 What is an IFRS and how does it impact on standard setting in Australia? Australia adopted Australian equivalents to International Financial Reporting Standards (IFRS), from 1 January 2005. The adoption of IFRS helps ensure compliance with internationally agreed principles, standards and codes of best practice. The adoption of IFRS also reduces the amount of standard setting in Australia by the Australian Accounting Standards Board (AASB), which allows the AASB to focus on providing expert advice on some of the International Accounting Standards Board future projects and interpreting issues arising out of the adoption of IFRS. In Class Questions: 1.4 Provide an example each of a company that would produce a GPFS and a company that would produce a special purpose financial statement. Who are the likely stakeholders of both types of entities? An example of a company who would produce a GPFS would be Qantas Group. Qantas Group has various stakeholders such as investors, employees, customers, supplies, banks and regulatory bodies that would all require important information from the Qantas annual report. A company that would prepare a special purpose financial statement could be an entity such as a local government association. This type of entity would provide a set of financial statements in accordance with the local government code of accounting practice and financial reporting and relevant Australian accounting standards. The association would not have a diverse range of stakeholders and a special purpose financial statement would fit the requirement of its stakeholders such as lenders and regulatory bodies. 1.5 One of the new opportunities for accounting graduates is forensic accounting. What does forensic accounting entail? Provide an example of a position as a forensic accountant. Forensic accounting involves accountants helping to solve crimes such as computer hacking and the theft of large amounts of money through hoax schemes on the internet. In recent years, several Australian banks have been the targets of this type of crime, where customers have been sent an email supposedly from the bank, requesting them to provide confidential personal banking details. Some of these customers have been misled and supplied personal details, resulting in unauthorised individuals accessing their personal funds. Some examples of positions advertised for a forensic accountant include the following. • Data Analytics Manager at NAB in Melbourne — advertised through JORA in November 2018. • Forensic accountant at Pilot Partners in Brisbane — advertised through SEEK in November 2018. • Graduate accountant at Jardine Lloyd Thompson Pty Ltd to joint their Sydney JLT Forensic team — advertised through SEEK in October 2018. • Forensic technology graduate at Genius People at Melbourne — advertised through SEEK in October 2018. • Forensic personal injury accountant for Vincents Chartered Accountants in Brisbane — advertised through SEEK in October 2018. • Forensic accountant for Hamilton York in Sydney — advertised through SEEK in October 2018. 3

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

BU1002/BU1902 – Accounting for Decision Making Tutorial Questions – Topic 1, 2021 1.35 Refer to the latest financial statements for JB Hi-Fi Ltd (the notes to the 2018 consolidated financial statements of JB Hi-Fi Ltd appear in the appendix to this text and the statements are available online at http://investors.jbhifi.com.au). For each of the following stakeholders, give an illustration of a report or a note that would be useful for decision-making purposes, state why the information is useful and give an example of how that information would be used. a. Prospective shareholders g. Australian Taxation Office b. Customers c. Employees d. Suppliers to JB Hi-Fi Ltd e. Auditors f. Charity organisations a. JB Hi-Fi Ltd’s prospective shareholders. All financial statements, auditor’s report and directors’ report. This information would be useful to help them assess the performance and position of the entity at the end of the financial period and what their future potential investment opportunities are. b. Customers. Statement of profit or loss, notes on income and also notes on provisions such as warranties. This information can assist in determining the profitability of the business and by looking in the notes, the main sources of income for the business. Product warranty information may provide them with estimates on the percentage of products returned to the entity. c. Employees of JB Hi-Fi Ltd. All financial statements. Employees are going to be interested in future profitability and cash flow. Job security and promotional opportunities will be of interest to employees. They will also seek information on remunerations such as employee share based plans. d. Suppliers of JB Hi-Fi Ltd. Suppliers would be interested in the statement of profit or loss, statement of financial position and notes to the financial reports to determine the entity’s ability to meet future cash obligations. They would be concerned with repayment and the business meeting any interest charges. They would also like information to enable the calculation of certain ratios such as liquidity and financial structure ratios to determine what the debt situation currently is for JB Hi-Fi Ltd. e. Deloitte (auditors). All financial statements and accompanying notes on policies. Auditors need to closely scrutinise the financial statements and the notes on accounting policies to determine what policies the firm has implemented during the period, which accounting standards have been early adopted (if any) and this combined will allow them to assess the accuracy of the amounts disclosed in the financial statements. f. Charity organisations. The sustainability report. The sustainability report discusses the voluntary initiatives and charitable associations that the entity is involved in. This information would provide charity groups with information to ascertain whether JB Hi-Fi Ltd is a good corporate citizen. g. Australian Taxation Office. The ATO would be interested in the statement of profit or loss of the company, the statement of financial position, statement of cash flows and the associated notes to determine what the obligations of JB Hi-Fi Ltd are in relation to tax. 2.8 Discuss whether an accountant should take on an appointment outside their area of expertise. 4

BU1002/BU1902 – Accounting for Decision Making Tutorial Questions – Topic 1, 2021 The APES 110: Code of Ethics for Professional Accountants requires an accountant to perform professional services with due care, competence and diligence. This includes ensuring that they possess a level of technical and professional skills to take on appointments. It is clear, therefore, that an accountant should not take on an appointment outside their area of expertise. 2.13 Describe the major purpose of the ASX. What types of information does it provide for a novice investor? The Australian Stock Exchange (ASX) assists in regulating companies through its market and listing rules. This ensures that trading takes place in an orderly and fair manner. The ASX oversees the operations and behaviour of those companies listed on the ASX and helps ensure that companies are providing true and fair accounting information to various stakeholders such as a novice investor. A novice investor can refer to the ASX to get information about shares, bonds and other securities of a listed company in order to make appropriate investing decisions. 5