Accounting

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Western Sydney University *

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200972

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Accounting

Date

May 22, 2024

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docx

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1.1 - What is a business transaction and how does it relate to the accounting process? Illustrate the concept of a business transaction with five examples relating to an SME such as a provider of Chinese therapeutic massages. A business transaction is an event that affects the financial position of an entity and can be reliably measured and recorded. E.g. withdrawals and purchases. Accounting is the process of identifying, measuring and communicating economic information about an entity for decision making by a variety of users. A business transaction has an effect on the accounting elements such as assets, liabilities, capital, income, and expense. 5 examples relating to an SME (small-medium size enterprises) are -Purchase of inventory -Borrowing of cash from other entities -Sale of good or services -Payment of wages and salaries -Contract with a supplier 1.2 - Differentiate between financial accounting and management accounting. Provide an example of how a management accounting report would be incorporated into financial accounting reports. Financial accounting is the preparation and presentation of financial information for all types of users to enable them to make economic decisions regarding the entity, while management accounting is a field of accounting that provides economic information for internal users. Eg. the owner and management. Management accounting reports would be incorporated into financial accounting reports in operating segment reporting. Management accounting determines the operating segments and financial accounting reports these operating segments to the various users of financial statements. A. Provide an example of the different types of activities that would be performed by a management accountant and a financial accountant for a large public company listed on the ASX. Different types of activities that would be performed by a management accountant working in a large public company listed on the ASX including the generation of reports for the various owners of the company. As it is a listed company there are many shareholders who jointly own the company who require financial reports that will be generated by managerial accountants to evaluate their investment. The managerial accountant would also provide reports for the board and executive C level employees of the business so that they can make decisions based on financial factors. A financial accountant in a large public firm would be more concerned with providing reports for government authorities like ASIC and also providing financial statements to suppliers and banks.

Week 2 1.35 http://investors.jbhifi.com.au Refer to the latest financial statements for JB Hi-Fi Ltd. 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 The annual report, CEO’s report and the financial report are some of the reports which prospective shareholders could use in their decision making. These reports are useful as they provide in-depth and extensive information on how JB Hi-Fi Ltd is performing year by year and what the company’s plans are for the future. Furthermore, the profits in these reports can also help in informing the prospective shareholders if there are any potential investment opportunities available for them. B. Customers JB Hi-Fi Ltd’s profit and loss statement, and their clauses such as warranties/ consumer guarantees and insurance replacement can help customers in their decision making. Information on the profit and loss statement can assist in assessing the company's productivity as this will assure consumers that JB Hi-Fi Ltd is a reliable business and can be dependable when purchasing a product from one of their stores. Clauses such as warranties/ consumer guarantees are also useful as they can allow customers to exchange a product if it is faulty, damaged or if the consumer is unsatisfied with the product. C. Employees The financial statements, specifically the income statement, will be very useful for the employees’ decision-making. By looking at JB HI-FI’s financial statements, they will be able to make a decision for whether or not it is reasonable staying as an employee or finding a new business to work for. The employees can decide by looking at the profits and the wages paid by JB HI-FI in previous years to see if they are financially able to pay their wages. In 2019, JB made over a billion dollars in profits in Australia alone. This will let all JB HI-FI employees in Australia know that the business is more than likely financially viable to pay their wages, helping with the decision-making of the employees. D. Suppliers to JB Hi-Fi Ltd The latest financial statements of JB HI-FI are extremely important for their suppliers to help with the decision-making. Suppliers need financial statements to determine whether the business they are supplying is liquid by assessing their credit score. Suppliers must know if they are going to be repaid prior to making a decision to supply goods. Overall, a supplier will use previous financial statements to identify the risks associated with supplying a business with goods. For example, Apple, a major supplier of JB HI-FI, can view and assess the credit score of JB to make a conclusion on whether JB is financially viable to stay liquid and continue to pay off any supplier fees. E. Auditors The financial half and full year reports of JB Hi Fi Ltd are very important to an auditor’s decision making. This is the case as they can help the auditors to determine if JB Hi Fi Ltd has complied with the laws and regulations, and have obeyed the generally accepted accounting principles (GAAP). When making an audit or report on a company, auditors use the financial report for decision making choices to check

things such as: the company’s cash flow, inventory, fixed assets, debt and expenses in their annual reports. F. Charity organisations Over the past eleven years, JB Hi-Fi has raised over $20 million for our charity partners via their “helping hands” charity foundation. This money has gone to help those who are less fortunate or struggling with illness. JB has over 6,000 staff members contributing to the program each week, which is 76% of our workforce nationally. Since 2016, the decision for the Helping Hands program has resulted poaitively for JB in that they have received six Workplace Giving awards, including Best Overall Program and Most Innovative Charity / Employer Partnership. G. Australian Taxation Office For most depreciating assets , decision makers use the ATO's determinations of effective life , published in taxation rulings. Government Authorities such as the Australian Taxation Office (ATO) will be interested in the reported profit for the year. In JB’s case the reported profit for the year 2019 totalled to $442.7 million and the associated GST paid. In order to calculate the amount of tax to be paid or refunded in a particular financial year regulatory bodies such as the Australian Securities and Investments Commission (ASIC) will seek to identify whether the business has complied with the requirements of the Corporations Act 2001 (Cwlth) for example, whether a disclosing entity has complied with the Australian Accounting Standards. 1.37: Summarise the main features of ‘Tableau Desktop’ and how it can assist accountants in their daily tasks. www.tableau.com - ‘products’ - ‘ Tableau Desktop’ Tableau is an american company which was founded in 2003 that offers software for the purpose of business analytics. The Tableau Desktop software allows the viewing of analytic data in real time. It creates graphs with an accessible interface allowing users to develop relevant data into reliable and easy to use graphs. The software allows data to be delved into in order to recognise patterns and trends. The software also has a feature that predicts future performance depending on the trends in the data. The main selling point of the software is that you can “answer questions at the speed of thought” which is achieved through the simple and easy to use interface and quick generation of graphs. Data visualisation software allows businesses to witness valuable insights into their processes in order to evaluate how the day to day running of the business is achieving its short and long term goals. It can assist accountants in the recognition of what areas of the business are less profitable. The main advantage for an accountant is that they can turn raw data into accessible visuals for other sections of the business not as versed in analysing financial data. With the data management is able to make decisions about business operations including the setting of the price of their product. The software can also assist

shareholders decide on different potential investments assessing if they are worth the money as well as the amount of risk involved. External shareholders will also use the data displayed by the software to evaluate the performance of the management team in achieving the objectives of the business. Tableau also allows accountants to share their data easily which is helpful when a specific piece of data is required by another member of the business, especially if that person is located in a different area. The main benefit to accountants is if someone who is looking at the data doesn't particularly understand it in its current format they are able to “drag and drop” to create a whole new perspective that might resonate on a higher level to the person viewing it. Another innovative feature of the software is the built in ability to place the data on specific geographic locations. For a transnational company this is obviously a valuable tool as it simply shows what areas of the world their product is performing well in as well as where the product could be potentially lacking as far as profit and loss gos. One last innovative benefit of Tableau is that accountants can submit pre-made excel and various other spreadsheets with raw data allowing them to use older information to examine trends when compared against more recent data they have obtained since using the programme. Week 3 Group Homework CQ 2.10 What is the difference between the revised Conceptual Framework’s fundamental qualitative characteristics of relevance and faithful representation? Can you think of any trade-offs between relevance and faithful representation? Relevance implies that the information should have predictive and confirmatory value for users making and evaluating economic decisions. Faithful representation implies that the information fully represents the phenomena it purports to represent. This means that the financial information will be complete, neutral and free from error. A trade-off can occur between relevance and faithful representation. An illustration of this would be the accounting practice of estimating doubtful debt expenses. The process of estimating doubtful debts expense is relevant to the decision making process. It is necessary to determine an estimate so that revenues for the period can be appropriately matched with the expenses for the period. However, if you estimate doubtful debts expense the estimate that you use does not faithfully represent the actual amount of bad debts expense i.e. is

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