BUSN7008-Financial Accounting Study Notes & Practice | The Australian National University | AskSia

BUSN7008 Homework and Tutorial Questions Summary (Week 2 Lecture, Week 3 Tutorial)

This document outlines homework and tutorial exercises for BUSN7008, covering Week 2 lecture material to be discussed in Week 3 tutorials. It includes exercises on identifying normal account balances, defining accounting vocabulary, journalizing transactions, posting to T-accounts, and preparing a trial balance.

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Part A: Homework Exercise

S2-3 Identifying Normal Balances (LO 3)

This exercise requires identifying whether the normal balance for specific accounts is a debit (Dr.) or credit (Cr.).

• Hernandez, withdrawals: (Normal balance to be identified)
• Hernandez, capital: (Normal balance to be identified)
• Electricity and gas expense: (Normal balance to be identified)
• Advertising expense: (Normal balance to be identified)

E2-1 Using Accounting Vocabulary [5 min] (LO 1)

This exercise involves matching accounting terms with their corresponding definitions.

• Definitions Provided:

  • A detailed record of all increases and decreases in a particular asset, liability, or equity over a period.
  • The record holding all accounts of a business, their changes, and balances.
  • A journal entry with multiple debits and/or multiple credits.
  • A list of debit and credit entries to record a transaction.
  • The left side of a T-account.
  • The side of an account where increases are recorded.
  • The process of transferring amounts from a journal entry to the ledger.
  • The right side of a T-account.
  • A list of all accounts with their balances at a specific point in time.
  • A list of all accounts with their account numbers.

• Accounting Terms to Match:

  • 10. Compound journal entry

S2-4 Journalising Transactions (LO 3)

This exercise involves journalizing transactions for Jack Denichi's medical practice in Bondi Junction, Sydney, during January.

• Transactions:
  • Jan 1: Business received $35,000 cash as capital from Denichi.
  • Jan 2: Purchased medical supplies on credit for $13,000.
  • Jan 4: Performed services for patients, receiving $1,900 cash.
  • Jan [Date not specified]: Paid monthly office rent of $2,600.
  • Jan 15: Recorded $10,000 revenue for services rendered to patients on credit.

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Part B: Tutorial Question

CP-2 Journalising transactions, posting to T-accounts and preparing a trial balance [40-50 min] (LO 2, 3, 4)

This problem continues with Carl Draper's consulting business, Draper Consulting, and focuses on accounting for its transactions in practice.

• Transactions for the first half of December 2021:

  • Dec 2: Received $18,000 cash investment by Carl Draper.
  • Dec 2: Paid monthly office rent, $550.
  • Dec 3: Paid cash for a Dell computer, $1,800 (expected to remain in service for five years).
  • Dec 4: Purchased office furniture on credit for $4,200 (expected to last for five years).
  • Dec 5: Purchased supplies on credit, $900.
  • Dec 9: Performed consulting service for a client on credit, $1,500.
  • Dec 12: Paid electricity and gas expenses, $250.
  • Dec 18: Performed service for a client and received cash of $1,100.

• Tasks:

  1. Open T-accounts: For Cash; Accounts receivable; Supplies; Equipment; Furniture; Accounts payable; Carl Draper, capital; Carl Draper, drawings; Service revenue; Rent expense; Electricity and gas expense.
  2. Journalise the transactions: Explanations are not required.
  3. Post to the T-accounts: Key all items by date and denote account balances as "Bal.". Formal posting references are not required.
  4. Prepare a trial balance: As at 18 December 2021.

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Tutorial Guidance:

• Students are encouraged to attempt all questions before attending the tutorial.
• Tutorials will primarily focus on discussing tutorial questions first. Homework exercises may be discussed if time permits and upon request.
• Solutions will be made available on the course Wattle page after all tutorials for the week have concluded.

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Here's a structured summary of the provided content, focusing on key accounting concepts and their applications:

Main Idea: Fundamentals of Accounting and Financial Statement Preparation

This content introduces the core concepts of accounting, including the accounting equation, its components (assets, liabilities, equity), and how business transactions affect these components. It also covers the preparation of fundamental financial statements (income statement, statement of changes in equity, balance sheet, and cash flow statement) and introduces key accounting principles, organizations, and ethical considerations.

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Key Concepts and Definitions

The Accounting Equation

• Definition: The fundamental tool of accounting, stating that Assets = Liabilities + Equity.
• Purpose: Measures a business's resources (assets) and the claims to those resources (liabilities and equity).

Components of the Accounting Equation

• Assets:
  • Definition: Economic resources expected to benefit the business in the future; things the business owns or controls that have value.
  • Examples: Cash, accounts receivable, land, equipment, office supplies.
• Liabilities:
  • Definition: What the business owes to creditors; represents creditors' claims on assets.
  • Examples: Accounts payable, loans payable, salaries payable.
• Equity (Owner's Equity/Capital):
  • Definition: The owner's claims to the business's assets after liabilities have been paid; the residual interest in assets.
  • Increases: Owner contributions, revenues.
  • Decreases: Expenses, owner's drawings.

Expanded Accounting Equation

• Formula: Assets = Liabilities + (Capital + Revenues - Expenses - Drawings)
• Simplified: Assets = Liabilities + (Capital + Profit - Drawings)

Transactions and Their Effects

• Transaction: An event involving at least two parties that exchanges resources and affects the financial position of the business.
• Analysis: Transactions are analyzed to determine their impact on the accounting equation (affecting at least one asset, liability, or equity account).
  • Examples of Transaction Effects:
    • Increase an asset, decrease another asset (e.g., buying land with cash).
    • Decrease an asset, decrease equity (e.g., paying expenses with cash).
    • Decrease an asset, decrease a liability (e.g., paying accounts payable with cash).
    • Increase an asset, increase equity (e.g., owner investing cash).
    • Increase an asset, increase a liability (e.g., purchasing equipment on credit).

Financial Statements

• Purpose: To reformat raw accounting data into a more useful format for decision-making.
• Order of Preparation:
  1. Income Statement: Reports revenues and expenses over a specific period to determine profit or loss.
     • Formula: Revenues - Expenses = Profit (or Loss)
  2. Statement of Changes in Equity: Shows changes in the owner's capital account over a specific period.
     • Formula: Beginning Capital + Owner Investments + Profit (or - Loss) - Drawings = Ending Capital
  3. Balance Sheet (Statement of Financial Position): Reports assets, liabilities, and equity at a specific point in time, verifying the accounting equation.
  4. Cash Flow Statement: Reports cash receipts and payments over a specific period, categorized into operating, investing, and financing activities.

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Key Accounting Principles and Assumptions

• Accounting Entity Concept: An organization is accounted for separately from its owner(s) and other entities.
• Accounting Period Concept: Business activities are divided into specific time segments (e.g., monthly, annually) for reporting.
• Accrual Basis of Accounting: Transactions are recognized when they occur, regardless of when cash is exchanged.
• Matching Principle: Expenses are matched with the revenues they help generate within the same accounting period.
• Going Concern Assumption: It is assumed that the business will continue to operate in the foreseeable future.
• Cost Principle: Assets are typically recorded at their historical cost.
• Faithful Representation: Accounting information should be complete, neutral, and free from material error.
• Relevance: Financial information must be capable of influencing users' decisions.

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Organizations Governing Accounting

• Australia:
  • AASB (Australian Accounting Standards Board): Sets accounting standards.
  • FRC (Financial Reporting Council): Oversees the AASB.
  • ASIC (Australian Securities and Investments Commission): Regulates securities markets and enforces corporations law.
• New Zealand:
  • NZASB (New Zealand Accounting Standards Board): Sets accounting standards.
  • XRB (External Reporting Board): Oversees the NZASB.
  • FMA (Financial Markets Authority): Regulates securities markets.
• International:
  • IASB (International Accounting Standards Board): Issues International Financial Reporting Standards (IFRS).

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Types of Business Organizations

• Proprietorship (Sole Trader):
  • Owned by a single individual.
  • Owner has unlimited liability for business debts.
  • Separate from the owner for accounting purposes.
• Partnership:
  • Owned by two or more individuals (partners).
  • Generally, partners have unlimited liability for business debts.
  • Separate from the owners for accounting purposes.
• Company (Corporation):
  • Owned by shareholders.
  • Legally separate entity ("artificial person").
  • Shareholders typically have limited liability (limited to their investment).
  • Dominant form of business organization due to limited liability.

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Ethics and Sustainability in Accounting

• Ethics: Accountants must adhere to principles of integrity, objectivity, professional competence and due care, confidentiality, and professional behavior. Ethical dilemmas arise when there's pressure to misrepresent financial information.
• Sustainability:
  • Internal: The business's ability to remain profitable in the future (linked to the going concern assumption).
  • External: The business's impact on society and the environment. Meeting present needs without compromising future generations' ability to meet their own needs. This includes tracking environmental impacts like carbon emissions.

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Evaluating Business Performance

• Return on Assets (ROA):
  • Formula: Profit / Average Assets
  • Purpose: Measures how effectively a company uses its assets to generate profit. A percentage measure that allows for comparison between businesses of different sizes.

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Users of Accounting Information

• Internal Users: Business managers (use management accounting information).
• External Users:
  • Investors: Decide whether to buy, hold, or sell shares.
  • Creditors: Evaluate a business's ability to repay loans.
  • Taxing Authorities & Government Agencies (e.g., ASIC, FMA, ATO, IRD): Use information for tax assessment and regulatory oversight.
  • Employees & Labour Unions: Assess profitability for wage negotiations.
  • Consumer Groups, Suppliers, Media, Pressure Groups: Interested in profitability and business practices.

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BUSN 7008: Financial Statements & Reporting - Week 2: Recording Business Transactions

This summary covers the key concepts of recording business transactions as presented in Week 2 of BUSN 7008, focusing on accounts, the double-entry system, journals, ledgers, and trial balances.

1. Accounts, Ledger, and Journal

• Account: A detailed record of all changes (increases and decreases) in a specific asset, liability, or owner's equity item over a period.
• Journal: A chronological record of all business transactions.
• Ledger: A collection of all the individual accounts.
• Trial Balance: A list of all accounts and their balances, used to verify the equality of debits and credits.

2. The Transaction Recording Process

The flow of accounting information involves several steps:

• Source documents are prepared to evidence a transaction.
• Transaction analysis occurs to identify affected accounts and their changes.
• The transaction is entered into the journal.
• Amounts are then posted from the journal to the ledger.
• Finally, a trial balance is prepared from the ledger balances.

3. Recording Transactions in the Journal

The process of recording transactions in the journal includes:

• Identifying the transaction: Based on source documents.
• Specifying accounts: Determining which accounts are affected and their type (asset, liability, owner's equity).
• Determining increases/decreases: Deciding if each account's balance increases or decreases.
• Entering the transaction: Recording the transaction in the journal with a brief explanation.

Example: On May 1, 2021, Sheena Bright invested $30,000 cash into her business, 'Smart Touch Learning'.

• Journal Entry:
  • Debit: Cash $30,000 (Increase in Asset)
  • Credit: Sheena Bright, Capital $30,000 (Increase in Owner's Equity)
  • Explanation: Received investment from owner.

4. Posting Transactions to the Ledger

• Posting is the process of copying information from journal entries to the respective accounts in the ledger. This updates the balance of each affected account.

5. The Trial Balance

• A trial balance summarizes the ledger by listing all accounts and their ending balances.
• A fundamental principle is that total debits must always equal total credits.
• If the trial balance does not balance, it indicates an error in the recording or posting process.

6. Double-Entry Accounting and the Accounting Equation

• The accounting system is based on the double-entry system, where every transaction affects at least two accounts.
• This system ensures the accounting equation remains balanced after each transaction:
  • Assets = Liabilities + Owner's Equity

Rules of Debit and Credit

The way increases and decreases are recorded depends on the account type:

• Assets:
  • Debit: Increases
  • Credit: Decreases
  • Normal Balance: Debit
• Liabilities:
  • Debit: Decreases
  • Credit: Increases
  • Normal Balance: Credit
• Owner's Equity:
  • Debit: Decreases
  • Credit: Increases
  • Normal Balance: Credit

Expanded Accounting Equation: Owner's Equity can be expanded to include its components: Owner's Equity = Capital - Drawings + Revenues - Expenses

This leads to the following rules for the components:

| Account Type | Increase | Decrease | Normal Balance | | :------------------ | :------- | :------- | :------------- | | Assets | Debit | Credit | Debit | | Liabilities | Credit | Debit | Credit | | Capital | Credit | Debit | Credit | | Drawings | Debit | Credit | Debit | | Revenues | Credit | Debit | Credit | | Expenses | Debit | Credit | Debit |

7. Common Account Types

• Assets: Resources controlled by the entity expected to provide future economic benefits.
  • Examples: Cash, Accounts Receivable, Plant and Equipment.
• Liabilities: Present obligations arising from past events, expected to result in an outflow of resources.
  • Examples: Accounts Payable, Salary Payable, Interest Payable.
• Owner's Equity: The owners' financial claim to the business's assets after deducting liabilities.
  • Components: Capital (owner's claim to net assets), Drawings (owner withdrawals).

8. Chart of Accounts Example (Smart Touch Learning)

• Balance Sheet Accounts:
  • 111 Accounts Receivable
  • 301 Sheena Bright, Capital
  • 311 Sheena Bright, Drawings
• Income Statement Accounts (Part of Owner's Equity):
  • 503 Electricity and Gas Expense

9. T-Accounts

• A popular format for representing accounts, with debits on the left side and credits on the right side.

      Account Name
  --------------------
    Debit | Credit
      (Left) | (Right)
  

当然可以！这里是对 Lecture 2（Recording Business Transactions）和《BUSN7008》课本第二章主要内容的中文汇总：

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一、Lecture 2 课程讲义核心内容汇总

1. 会计账户与会计等式

• 会计账户用于记录某一资产、负债或权益项目所有的增减变动。
• 基本会计等式：
  $$ 资产 = 负债 + 所有者权益 $$
• 常见账户包括现金、应收账款、应付账款、业主资本、业主取款等 [1]Source: Lecture 2 for Wattle.pdfBUSN 7008 Financial Statements & Reporting Lecturer: Dr. Lijuan (Lily) Zhang Week 2: RECORDING BUSINESS TRANSACTIONS (Textbook Chapter 2) Slide 1 Learning objectives 1. Explain accounts as they relate to the accounting equation, and describe common accounts 2. Define debits, credits and normal account balances using double-entry accounting and T-accounts 3. List the steps of the transaction recording process 4. Record transactions in the journal 5. Post transactions from the journal to the ledger[20]Source: Lecture 2 for Wattle.pdfLIABILITIES OWNERS' EQUITY 101 Cash 201 Accounts payable 301 Sheena Bright, capital 111 Accounts receivable 231 Bills payable 311 Sheena Bright, drawings 141 Office supplies 151 Office furniture[35]Source: Lecture 2 for Wattle.pdf191 Land INCOME STATEMENT ACCOUNTS (PART OF OWNERS' EQUITY): REVENUES EXPENSES 401 Service revenue 501 Rent expense 502 Salary expense 503 Electricity and gas expense Chart of accounts-Smart Touch Learning Slide 8。

2. 借贷记账法及T账户

• 借方（Debit, Dr.）在左侧，贷方（Credit, Cr.）在右侧。
• 资产、费用和取款账户的正常余额在借方；负债、资本和收入账户的正常余额在贷方 [36]Source: Lecture 2 for Wattle.pdf- Normal debit balance: Normal credit balance: Assets, expenses and drawings Liabilities, capital and revenue Slide 12[40]Source: Lecture 2 for Wattle.pdfDebits, credits and double-entry accounting Account Title Left side Debit side Right side Credit side Dr. = Debit Cr. = Credit Slide 9 Debits, credits and double-entry accounting - Assets = Liabilities + Owners' Equity - Debits = Credits[41]Source: Lecture 2 for Wattle.pdfCredit + Debit Credit + - - EXHIBIT 2-3 The accounting equation and the rules of debit and credit (the effects of debits and credits on assets, liabilities and owners' equity) Slide 10 Expansion of the accounting equation EXHIBIT 2-7[46]Source: Lecture 2 for Wattle.pdf= Liabilities + Owners' equity Capital - Drawings + (Revenues - Expenses) Slide 11 The normal balance of an account EXHIBIT 2-8 Complete rules of debit and credit Assets = Liabilities + Owners' equity ASSETS。
• T账户是一种用于图示账户增减的工具。

3. 交易流程与记账步骤

• 交易发生
• 制作原始凭证
• 分析涉及的账户和变化
• 编制日记账分录
• 过账到分类账
• 编制试算表 [15]Source: Lecture 2 for Wattle.pdfTransaction occurs Source documents prepared Transaction analysis takes place Transaction entered in journal Amounts posted to ledger EXHIBIT 2-9 Flow of accounting data from the journal to the ledger Slide 16 The trial balance Slide 17 Summary: Chapter 2[22]Source: Lecture 2 for Wattle.pdfIdentify the transaction from source documents Specify each account affected by the transaction and classify it by type Determine whether each account is increased or decreased by the transaction Enter the transaction in the journal, including a brief explanation Slide 13 Recording transactions in the journal On 1 May 2021, Sheena Bright starts the business titled ' Smart Touch Learning' by investing $30000 cash in the business Date Accounts and explanation Debit[42]Source: Lecture 2 for Wattle.pdf6. Prepare the trial balance from the T-accounts Slide 2 The account, the ledger and the journal Slide 3 The account, the ledger and the journal Record transactions as journal entries Post to the ledger Prepare the trial balance Slide 4 Recording transactions in the journal[45]Source: Lecture 2 for Wattle.pdfSlide 14 Copying (posting) information from the journal to the ledger JOURNAL ENTRY Date Accounts and explanation Debit 30 000 Credit May 1 Cash (A+) 30 000[43]Source: Lecture 2 for Wattle.pdfBright, capital (Q+) Received initial investment from owner. EXHIBIT 2-6 Journal entry and posting to the ledger POSTING TO THE LEDGER Cash Sheena Bright, capital 30 000 30 000 Slide 15 Flow of accounting information

4. 实例：Smart Touch Learning

• 投资、购买资产、提供服务、支付费用、取现等一系列交易，如何在账户和会计等式上体现 [39]Source: Lecture 2 for Wattle.pdfSlide 18 An example On 1 May 2021, Sheena Bright started the business titled ' Smart Touch Learning'. The following events occurred in May. May 1 Sheena Bright invested $30000 cash in the business 2 Paid 20,000 cash for land 3 Bought $500 of office supplies on credit 4 Received $5 500 cash from clients for service revenue earned. 5 Performed training service for clients on credit, $ 3000 6 Paid cash expenses: computer lease, $600; office rent, $1 100; employee salary, $1200; electricity and gas, $400. 7 Paid $300 on the accounts payable created in transaction 3.[25]Source: Lecture 2 for Wattle.pdf8 Collected $ 1000 on the accounts receivable created in transaction 5. 9 Sold land for cash at its cost of $9 000. 10 Withdrew $ 2000 cash for personal expense Slide 19 Assets An asset is a resource controlled by an entity as a result of past events that is expected to provide economic benefits to the entity in the future. Common assets include: · Accounts receivable · Bills receivable · Inventories · Prepaid expenses · Land。

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二、《BUSN7008》课本第二章（Chapter 2）核心内容汇总

1. 会计的重要性与基本要素

• 会计为各类决策提供关键信息，如资产负债表、利润表等 [4]Source: BUSN7008_61-181.pdf17 700 Building 48 000 Less: Accumulated depreciation-building 47 800 Owners' equity Total non-current assets 65 500 Sheena Bright, capital 35 900 Total assets 106 000 Total liabilities and owners' equity 106 000 V Learning objectives LO 1 Explain why accounting is important LO 2 Describe the accounting equation, and define assets, liabilities and equity LO 3 Use the accounting equation to analyse transactions@ LO 4 Prepare financial statements LO 5 £ Use financial statements and return on assets (ROA) to evaluate business performance LO 6 Describe the organisations and principles that govern accounting@ LO 7 Identify the three main types of business organisation LO 8 Explain the role of ethics and sustainability in accounting THINK ABOUT A DECISION YOU HAVE MADE RECENTLY. While many of your decisions are routine and can be made without reference to detailed information, such as which clothes to wear in the morning, other decisions are more infrequent and have longer-lasting effects, such as choosing a mobile phone network and contract type. The bigger the decision, the more information you will want before making it. In the choice of which type of mobile phone to buy, in order to make the best decision you would need to know what each option provides (for example, the number of minutes included and the amount of data allowed), as well as the cost of each plan. What you are doing is weighing up the costs and benefits of each option. In the world of commerce and beyond, organisations use accounting information to inform them prior to making important decisions. For example, if the retail giant Myer considered a bid to purchase rival David Jones, how much should it pay? The answer depends partly on what the accounting information says David Jones is worth. The 'balance sheet' shown above is one of the most important and central financial statements prepared by accountants. Accounting information enables people and organisations to make better decisions. Smart Touch, whose balance sheet is illustrated, is a small business, but its balance sheet contains the same type of information as that shown in the balance sheet of very large organisations such as JB Hi-Fi. The same is true for the other financial statements that all well-run businesses prepare and use, and which you will learn about as you work your way through this book. In this introductory chapter we introduce accounting in a small business context through Sheena Bright's Smart Touch Learning; and later, starting in Chapter 59, through Greg Moore's Greg's Tunes. You will see how Sheena and Greg run successful businesses by treating people fairly, planning for activities that are sustainable, and capitalising on their general business and accounting acumen. You will also see how understanding financial statements like the balance sheet is one of the first steps towards business success. We will be following the fortunes of Smart Touch and Greg's Tunes throughout the text to see how different accounting concepts relate to their businesses. In addition, we will use examples from large firms to illustrate the fact that the same accounting principles apply to firms of any size. By the time you get to the chapter on the framework of accounting, you will have a broad appreciation of how accountants prepare financial statements for all types of organisation. 1. 1 Why is accounting important?。
• 资产：企业未来可带来经济利益的资源（如现金、应收账款等）[28]Source: BUSN7008_61-181.pdfLO 2 Describe the accounting equation, and define assets, liabilities and equity Before we explain the accounting equation, let's run through a simple example to show that the fundamental concepts of accounting are perhaps more readily understandable than you would expect. Suppose it's a Monday morning during the university holidays and you want to make some money. You had previously noticed that there was nowhere near the main business district in your home city that sold fruits and vegetables. So, as a trial, you start a business of buying and selling bananas by investing $50 of your savings. This means the business is 'worth' $50 at this point. That morning, you buy a 12 kg box of bananas in the market for $36. There are 110 bananas in the box and you sell them all to office workers at lunchtime for $1 each. As you sit down for a well- earned rest in the early afternoon, you try to work out how much profit your business made in its first few hours of life and how much your business is now worth. Try to work this out before reading on. If you came up with a profit number of $110 - $36 = $74, you have just correctly performed your first piece of accounting-an income statement! If you came up with the business being worth the original $50 cash plus the $74 profit = $124, then you have just correctly performed the first part of your first balance sheet! To understand the income statement and balance sheet better, you need to understand the basic tool of accounting, the accounting equation®. It measures the resources of a business (what the business owns or has control of) and the claims to those resources (what the business 'owes' to lenders and the owners). The accounting equation consists of three parts -assets, liabilities and equity. Assets appear on the left side of the equation, and the liabilities and owners' equity appear on the right side. As it is an equation, by definition the two sides must be equal. So, what do accountants mean by the three key concepts of assets, liabilities and equities? Exhibit 1-2 Liabilities Assets = + Equity The accounting equation Assets, liabilities and equity Assets An asset@ is an economic resource that is expected to benefit the business in the future. Assets are something the business owns or has control of that has value. Cash, merchandise inventory, furniture and land are examples of assets. Claims to these assets come from two sources: liabilities and equity. Liabilities Liabilities @ are what the business owes to creditors (banks and anyone else who has lent the business money). As such, liabilities represent the creditors' claims on the business's assets. For example, a creditor who has loaned money to a business to purchase a factory has a claim over the business's assets until it pays the debt. Many liabilities have the word payable in their titles. Examples include accounts payable and salaries payable. Equity The owner's claims to the assets of the business are called equity® (also called owners' equity@ or capital). Equity represents the amount of assets that are left over after the company has paid its liabilities. Equity increases with owner contributions and revenues. Owners can contribute cash or other assets (such as equipment) to the business, receiving an equity interest in return, their 'capital'. Revenues ® are amounts received or receivable that result from selling goods or services to customers. Examples of revenues are sales revenue, service revenue and rent revenue. Equity decreases with expenses and (owner) drawings. Expenses ® are amounts paid or payable for purchasing goods or services. Expenses are the opposite of revenues and, therefore, decrease equity. Examples of expenses are rent expense, salaries expense, advertising expense and electricity expense. Revenues less expenses equals profit. Owner's drawings ® are payments to the owner-the owner is withdrawing or 'drawing' money out of the business. Drawings are the opposite of owner contributions and, therefore, decrease equity. Formal definitions of assets, liabilities and equity by the Australian Accounting Standards Board are given in the Connect to: Accounting standards ! box. Connect to: Accounting standards The 'principles' of accounting in Australia are known as accounting standards and are issued by the Australian Accounting Standards Board (AASB) with oversight exercised by the Financial Reporting Council (FRC). In New Zealand, accounting standards are issued by the New Zealand Accounting Standards Board (NZASB) with oversight exercised by the External Reporting Board (XRB). These principles include the following general definitions: Assets are a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity. Liability are a present obligation of the entity arising from past events, the settlement of which is expected to result in the outflow from the entity of resources embodying economic benefits. Equity is the residual interest in the assets of the entity after deducting all of its liabilities.。
• 负债：企业需偿还的债务（如应付账款、贷款等）。
• 所有者权益：企业扣除负债后剩余的资产归属于所有者的部分。

2. 会计等式与其扩展

• 基本会计等式：$资产 = 负债 + 所有者权益$
• 扩展等式：$资产 = 负债 + 资本 + 收入 - 费用 - 取款$
• 所有者权益随着投资和收入增加，随着费用和取款减少。

3. 账务处理与分录

• 每一项业务至少影响两个账户，保持会计等式平衡
• 举例说明资产、负债、所有者权益的增加和减少情况

4. 几大财务报表

1. 利润表（Income Statement）：反映一定期间的收入和费用，得出利润或亏损
2. 所有者权益变动表（Statement of Changes in Equity）：计算期初到期末所有者权益的变动
3. 资产负债表（Balance Sheet）：某一特定日期的资产、负债和所有者权益
4. 现金流量表（Cash Flow Statement）：报告特定期间的现金收入与支出 [13]Source: BUSN7008_61-181.pdfOffice Land +30 000 1. 4 How do you prepare financial statements? LO 4 Prepare financial statements We have now recorded Smart Touch's transactions, and they are summarised in Exhibit 1-3ª. Notice how total assets equal total liabilities plus equity ($33 400 = $33 400). But a basic question remains: how will people actually use this information? Exhibit 1-3ª doesn't tell a lender whether Smart Touch can pay off a loan. The data in the exhibit do not reveal whether the business is profitable. To address these important questions, we need financial statements ®, which re-format 'raw' accounting data like that in Exhibit 1- 3ª and present it in a more useful way. Financial statements are business documents that are used to communicate information needed to make business decisions. There are four financial statements prepared, which are shown in Exhibit 1-44 for Smart Touch. These statements are prepared in the following order: 1. Income statement@-Answers the question of whether the business is profitable. The income statement summarises an entity's revenues and expenses and reports the profit or loss for a specific period. Where revenues exceed expenses a profit® results, and where revenues are less than expenses a loss@ is the result. In accounting standards the income statement is an optional title for part of the 'Statement of profit or loss and other comprehensive income' (in which other gains and losses are Rhys Smith sets up a business locating apartments near a university campus. He is the sole owner of the proprietorship, which he names Campus Apartment Locators. During the first month of operations, July 2021, he engages in the following transactions: a. Invests $35 000 of personal funds to start the business. b. Purchases on credit office supplies costing $350. c. Pays cash of $30 000 to acquire land next to the campus. He intends to use the land as a future building site for his business office. d. Locates apartments for clients and receives cash of $1 900. e. Pays $100 on the account payable he created in transaction (b). f. Pays $2 000 of personal funds for a holiday. g. Pays cash expenses for office rent, $400, and electricity and gas, $100. h. Sells office supplies to another business for their cost of $150, using cash received to pay down liabilities. i. Withdraws cash of $1 200 for personal use. Requirements 1. Analyse the preceding transactions in terms of their effects on the accounting equation of Campus Apartment Locators. Use Exhibit 1-3ª as a guide, but show balances only after the last transaction. 2. Prepare the income statement, statement of changes in equity and balance sheet of the business after recording the transactions. Use Exhibit 1-4- as a guide. Solution Requirement 1 PANEL A- Details of transactions a. Smith invested $35 000 cash to start the business. b. Purchased $350 of office supplies on credit. c. Paid $30 000 to acquire land as a future building site. d. Earned service revenue and received cash of $1 900. e. Paid $100 on account.[29]Source: BUSN7008_61-181.pdfHow to analyse a The accounting equation: transaction Assets = Liabilities + Owners' equity Decision Guidelines How to measure profits and losses Income statement: Revenues - Expenses = Profit (or Loss) Did owners' equity Statement of changes in equity: increase or decrease? Beginning capital + Owner investments + Profit (or - Loss) - Withdrawals = Ending capital Where does the Balance sheet (accounting equation): business stand Assets = Liabilities + Owners' equity financially? Excel exercise 1. 1 GOAL: Create a simple spreadsheet that a shareholder or creditor could use to quickly analyse the financial performance of a business. SCENARIO: After visiting a JB Hi-Fi store, you are thinking about investing some of your savings in the company's shares. Before doing so, however, you want to perform a quick check of the company's financial performance using Excel. Use the JB Hi-Fi annual report. You can find it online at https:// investors. jbhifi. com. au/annual-reports/. When you have completed your worksheet, answer the following question. (HINT: See JB Hi- Fi's consolidated income statement. ) Sales and profit (loss) are basic indicators of the financial performance of businesses. What changes have occurred in JB Hi-Fi's sales and profit (loss) over the past three years? Chart the progress of JB Hi-Fi's sales and profit. If you were in management at JB Hi-Fi, would you include such a chart in your annual report? Why or why not? Do you think profit will always increase if sales increase? Is profit the same as 'cash flow'? Step-by-Step 1. Open a new Excel spreadsheet. 2. In column 1, create a bold-faced heading as follows: a. Chapter 1 Excel Exercise b. JB Hi-Fi Financial performance c. today's date 3. Two rows down, enter the following labels (one in each row): a. Income statement data (bold) b. Sales c. Profit (Loss) 4. Two rows below your heading, starting in the second column, set up three column headings, beginning with 2019 and ending with 2021 (or the three most recent financial years, if different from these).[12]Source: BUSN7008_61-181.pdfgoing concern assumption (p. 20) income (p. 7) income statement! (p. 14) International Accounting Standards (IASs) @ (p. 18) International Accounting Standards Board (IASB) ª (p. 18) International Financial Reporting Standards (IRFSs) (p. 18) liabilities (p. 6) loss (p. 14) management accounting (p. 3) New Zealand Accounting Standards Board (NZASB) @ (p. 17) owners' equity (p. 6) partnership (p. 22) profit (p. 14) proprietorship (p. 22) relevance (p. 20) revenues ! (p. 7) shareholder (p. 22) statement of changes in equity (p. 14) statement of financial position (p. 14) transaction (p. 7) Student success tips The following are hints on some common trouble areas for students in this chapter: · The four financial statements are prepared in this order: income statement, statement of changes in equity, balance sheet, cash flow statement. · The accounting equation contains the same accounts as the balance sheet: Assess = Liabilities + Equity. · Business forms vary, but the purpose of accounting is to provide information to users of financial information. · Accounting concepts define what we record about business activities. Assess Quick check 1. Accounting is the information system that: a. measures business activities b. communicates the results to decision makers c. processes information into reports d. All of the above 2. Which of the following is not an external user of a business's financial information? a. Tax authorities b. Customers c. Employees d. Investors 3. At the end of a recent year, Global Cleaning Service, a full-service house and office cleaning service, had total assets of $3 630 and equity of $2 280. How much were Global Cleaning Service's liabilities? a. $5 910 b. $3 630 c. $1 350 d. $2 280 4. Consider the overall effects on Global Cleaning Service from selling and performing services on credit for $6 400 and paying expenses totalling $2 500. What is Global Cleaning Service's profit or loss? a. Profit of $3 900

5. 会计原则与假设

• 实体假设、会计期间假设、持续经营假设、历史成本原则、配比原则、相关性与可靠性等 [5]Source: BUSN7008_61-181.pdfLet's go back to the banana business mentioned earlier in the chapter. Instead of selling all 110 bananas purchased in the market for $1 each in cash, assume that you sold 100 for $1 cash and 10 to a friend who didn't have the cash but promised to pay you $10 tomorrow. Does this make any difference to the amount of revenue and profit you made selling bananas? The matching principle A concept that you will sometimes hear about in the context of accrual accounting is 'matching'. In recent years accounting standards have tended to sideline the matching concept, or 'principle', as an important part of the accounting process. Despite this, when it comes to actually doing accounting it is easy to see how essential the matching concept is to calculating income, profits and losses, and asset and liability values. All businesses have inputs and outputs of physical goods or services. The matching principle relates these inputs and outputs to one another, i. e. 'matches' them with one another. The monetary values of inputs matched with, or 'used up', to produce outputs that are completed and sold are treated as expenses and subtracted from ('written off' or 'charged against') the monetary values of the sales of those outputs. This is how we arrive at a profit or a loss. All other expenditures are recorded and shown in financial reports as assets. In this case, the expenditure is sometimes said to be 'carried forward' or 'capitalised'. (Capitalisation of assets is discussed in Chapter 109. ) It is sometimes difficult to determine whether or not an input is used up and thus whether to write off or capitalise its cost. This introduces an element of subjective judgement into the determination of profit and is often a source of dispute about the accuracy of the profit figure in published financial statements. The going concern assumption Under the going concern assumption@, it's assumed that the business as a whole will continue operating for the foreseeable future. This can affect the values in financial statements. When a business stops, it sells its assets, converting them to cash as quickly as possible. This process is called liquidation. With the cash, the business pays off its liabilities and the owners keep any remaining cash. Recall that in transaction 39, Smart Touch bought some office supplies for $500. Assuming that the business is a going concern, most assets are normally recorded at their original transaction ('historic' or 'historical') cost, which is simply the $500 in this case. However, if Smart Touch wasn't considered to be a going concern, then it would have to sell these supplies as 'second-hand' and it would receive considerably less than $500 for them. In this case, it would have to record that expected lower value in the balance sheet. Qualitative characteristics of financial statements To be useful for external decision makers, accounting information must be relevant and be a faithful representation of the organisation's financial status. The relevance ® concept means that financial information must be capable of making a difference in the decisions made by users. To accountants, faithful representation @ means that the accounting information is complete, unbiased or 'neutral', and free from error. In addition, accounting information should be comparable (over time and between organisations), and be verifiable, timely and understandable. These factors are the qualitative characteristics of useful financial information discussed further in Chapter 179. The conceptual framework Accounting standards exist within a conceptual framework$ that provides an understanding of the assumptions underlying concepts such as assets, liabilities, equity, income and expenses and how these relate to other fundamental concepts such as rights, obligations, control over resources and the objectives of financial statements. The conceptual framework acts as a structure within which standards can be developed consistently, and also guides preparers of financial statements on matters of principle in cases where no specific standard exists to provide guidance. The conceptual framework evolves over time, as is noted in the Connect to: Accounting standards ! box below. The new IFRS conceptual framework published by the IASB is discussed more fully in Chapter 179. Connect to: Accounting standards New IFRS conceptual framework revises foundational reporting concepts By Ken Tysiac March 30, 2018 A new conceptual framework for IFRS issued Thursday includes revisions to concepts for reporting assets, liabilities, income, and expenses. In completing the comprehensive project to change the conceptual framework, the International Accounting Standards Board (IASB) confirmed the objective of IFRS financial reporting as providing financial information that is useful to investors and others when deciding whether to provide resources to a company. The conceptual framework emphasizes that investors need information about financial performance (income and expenses) as well as financial position (assets, liabilities, and equity). The framework also contains guidance for reporting financial performance. As defined in the new conceptual framework, assets and liabilities focus on a company's rights and responsibilities. The framework also states that financial statement preparers' decisions about what information to report about assets, liabilities, income, and expenses should be based on what is useful to investors. The conceptual framework is designed to ensure that IFRS are conceptually consistent and that similar transactions are treated in the same way, enabling the provision of useful information for investors and others. In addition, the conceptual framework helps companies develop accounting policies when no IFRS standard applies to a particular transaction. "The revised conceptual framework will greatly assist the board when developing IFRS standards," IASB Chairman Hans Hoogervorst said in a news release. "It will also help other stakeholders to better understand the concepts that underpin the standards. " Source: Extracts from Ken Tysiac, 'New IFRS conceptual framework revises foundational reporting concepts', Journal of Accountancy, 30 March 2018, https:// www. journalofaccountancy. com. @ 2019, Association of International Certified Professional Accountants. 1. 7 What are the main types of business organisation? LO 7 Identify the three main types of business organisation The requirements of accounting standards apply to organisations in accordance with a number of regulations in Australia including the Corporations Act, and in New Zealand including the Companies Act. In the main this means that large organisations have to follow those standards strictly while the conditions for small entities are normally less stringent. Nevertheless, accountants use the basic accounting principles and concepts identified earlier in the chapter to prepare financial statements regardless of the technical reporting status of the entity. Instead of size, another way to categorise organisations is into profit- seeking entities (businesses) and not-for-profit entities. In this book, nearly all the examples and exercises are for businesses. However, the basic procedures and forms of presentation of financial information that you will learn to use also apply to not-for-profit organisations, including cooperatives, government departments and charitable bodies. Businesses usually take one of the three forms of organisation described below. Each has different legal implications.[16]Source: BUSN7008_61-181.pdfIndicate the effects of the following business transactions on the accounting equation for Sam's Snack Foods, a supplier of snack foods. Transaction a is answered as a guide. a. Sam's Snack Foods received cash from the owner and gave capital to Sam. Answer: Increase asset (Cash); Increase equity (Sam, capital) b. Cash purchase of land for a building site. c. Paid cash on accounts payable. d. Purchased equipment; with a loan. e. Performed service for a customer on credit. f. Employees worked for the week but will be paid next Tuesday. g. Received cash from a customer on accounts receivable. h. Borrowed money from the bank. i. Owner withdrew cash. j. Incurred electricity expense on credit. E1-11 USING THE ACCOUNTING EQUATION TO ANALYSE BUSINESS TRANSACTIONS [5-10 MIN] (LO 39) The analysis of the first eight transactions of Advanced Accounting Service follows. Describe each transaction. Assets Liabilities + Equity Cash + Accounts +Equipment receivable Accounts + Lemon, - Lemon, + Service - Salaries payable capital withdrawals revenue expense 1 +31 000 +3 800 +3 800 Bal $31 000 + $3 800 3 +13 400 +13 400 Bal $31 000 + $3 800 + $13 400 $13 400 + $31 000 + $3 800 4 +190 -190 = $13 400 + $31 000
• 资产通常按历史成本计价

6. 会计行业标准与机构

• 澳大利亚：AASB（澳大利亚会计准则委员会）、ASIC（澳大利亚证券与投资委员会）
• 新西兰：NZASB、FMA
• 国际：IASB（国际会计准则委员会），制定IFRS [19]Source: BUSN7008_61-181.pdf1. 5 How do you use financial statements to evaluate business performance? LO 5 Use financial statements and return on assets (ROA) to evaluate business performance In this chapter we have reviewed the transactions and financial statements of Smart Touch, a fictitious firm. Now it's time to apply what we have learned to real-world companies. Imagine that you inherited $10 000 and are keen to invest it for the long term. You have decided to invest in either Woolworths or Qantas through buying shares in one of these companies. One way to compare the companies is to compare their profits, but a better way might be to compare the return on assets that each business has delivered recently. Return on assets is a percentage measure (rather than a dollar measure), and this improves the comparability of businesses of differing sizes. Return on assets is calculated by dividing profit by the average assets to work out a percentage return, in much the same way as a bank quotes a 'return' or interest rate of, for example, 5% on money invested in a savings account. An examination of Woolworths' 2018 statement of comprehensive income (of which the income statement is the most important component) reveals a profit of $1 753 million. The balance sheet shows 2017 assets of $23 043 million and 2018 assets of $23 558 million. This gives an average assets number of ($23 043 + $23 558)/2 = 23 300 million. Return on assets is then calculated by dividing profit by average assets, which is $1 753/$23 300 = 7. 52% (See https://www. woolworthsgroup. com. au/icms_docs/195396_annual- report-2018. pdf. ) Taking Qantas's profit and asset numbers from their 2018 financial statements (available at https://investor. qantas. com/) produces the following comparison: Woolworths Qantas Profit (in $ millions) 1 753 1 465 Average assets (in $ millions) 23 300. 5 17 934 Return on assets 7. 52% 8. 17% On the basis of this simple comparison you would choose to invest in Qantas. However, of course there are lots of 'ifs' and 'buts'. This is a comparison of firms in different industries with different risk profiles. It is a snapshot at a point in time. And there are many other ratios and factors to consider, including some that do not appear in financial statements. While understanding that return on assets is one useful starting point for assessing business performance, as you learn more about accounting you will explore more financial tools that are available to help investors evaluate a company's performance. Only after an investor looks at the big picture of a company will he or she have a good sense of the company's investment potential. 1. 6 What are the organisations and principles that govern accounting? LO 6 Describe the organisations and principles that govern accounting When you visit your doctor you expect them to have a certain level of medical education and to follow medical guidelines when treating you. Accountants are no different. All professionally qualified accountants have passed high-level examinations, have a minimum level of experience, and update their knowledge through 'continuing professional development'. There are several professional bodies whose members are widely recognised as having undertaken rigorous training, including Chartered Accountants Australia and New Zealand (CAANZ), CPA Australia (CPAA), the Institute of Public Accountants (IPA) and the Association of Chartered Certified Accountants (ACCA). The type of work undertaken by qualified accountants falls into two main categories. Many accountants work for a single entity, such as a retail or service organisation, a mining firm, a government body such as the Treasury, the Australian Taxation Office (ATO) or the Inland Revenue Department (IRD) of New Zealand, or a university. Their work may involve the preparation of financial statements, budgets, plans, internal reports and tax returns for the entity. Other accountants work in public practice, serving the general public and collecting professional fees for their work, much the same as lawyers and doctors do. Their work includes auditing, income tax planning and preparation, and management consulting. Firms in public practice vary greatly in size. Some are small businesses and some are worldwide partnerships, such as the so-called 'Big Four' of PwC, Deloitte, EY and KPMG. Such huge firms are necessary because some of their clients are very large and their operations very complex. Wherever they work, accountants need to follow general principles and detailed requirements when they are preparing accounting reports and financial statements. These requirements are known as accounting standards and have been established to ensure consistency between financial statements prepared by different accountants and different businesses. When you compare the profits of Telstra and Spark, telecommunication businesses in Australian and New Zealand respectively, or of Qantas and Woolworths as we did earlier, you want to know that their income statements have been prepared according to the same set of principles; otherwise the comparison could be misleading.

7. 业务组织类型

• 独资企业（sole proprietorship）、合伙企业（partnership）、公司（company/corporation），三者法律和会计处理方式不同 [18]Source: BUSN7008_61-181.pdfthe the proprietor the partners shareholders Comparison of the three forms of business organisation Accounting for companies includes some unique complexities. For this reason, we initially focus on proprietorships. We cover special aspects relating to partnerships in Chapter 13 and to companies in Chapters 14 and 159. However, the basic accounting procedures we deal with in the chapters up to Chapter 13" apply equally to all forms of organisation. Try it! 1. 2 How does a firm choose the best form of organisation to suit its business? (Legal and tax implications concerning liabilities mean that this decision is usually taken based on advice from accountants and lawyers. ) 1. 8 How do ethics and sustainability relate to accounting? LO 8 Explain the role of ethics and sustainability in accounting Ethics There have been a number of large, high-profile corporate collapses in Australia, New Zealand and the United States that saw shareholders suddenly find their previously valuable shares worthless. In addition, as you can see in the Connect to: Ethics " box below, corporate fraud-some of it involving accounting malpractice-is a problem. The common element with these instances is greed on the part of people who control or can manipulate financial decisions relating to the disposition of resources. Since the preparation and checking or 'auditing' of financial reports should in theory play a key role in identifying and controlling such greed and malpractice, we are confronted with moral, as well as technical, questions about how accounting information should be measured, disclosed and used. To further emphasise the importance of ethics, each chapter in this text contains a Focus on ethics scenario to encourage discussion of hypothetical ethical challenges in accounting. Most ethical questions in accounting ultimately relate to the standard of moral behaviour expected of accountants in pursuing their professional activities. They are responsible for deciding what goes into and what is left out of financial reports. Suppose that a large firm is the defendant in a legal action that threatens to put it out of business. The managers of the firm may be tempted to hide the potential implications of the legal action for fear that its share price may fall or that banks will stop lending it money. Should the firm disclose this sensitive information? Accounting standards and principles require the firm to describe this situation in its financial statements, and the firm's auditor is required to state whether the disclosure is adequate. By what criteria do accountants address questions that challenge their professional ethical conduct? Accountants have mostly taken the view that there are certain, self-evident duties expected of them, which are expressed in codes of professional conduct. Connect to: Ethics Staying vigilant-or turning a blind eye? PwC's 2018 Global Economic Crime and Fraud Survey finds that 49% of global organisations say they've experienced economic crime in the past two years. But what about the other 51%? Have they avoided falling victim-or simply don't know about it? Since fraud hides in the shadows, one of the most powerful weapons in a fraudster's armoury is a lack of awareness within organisations. It's time for all businesses to recognise the true nature of the threat: not as just a nuisance or cost of doing business, but a shadow industry with tentacles in every country, sector and function. The survey results included the following findings: 1. 64% of respondents said losses due directly to their most disruptive fraud could reach US$1 million. 2. 52% of all frauds are perpetrated by people inside the organisation. 3. 31% of respondents that suffered fraud indicated they experienced cybercrime. Source: Adapted from 'Pulling fraud out of the shadows-The biggest competitor you didn't know you had', PwC's 2018 Global Economic Crime and Fraud Survey, PwC, 2018, https://www. pwc. com. Codes of professional conduct CAANZ and CPAA Australia have a joint code of ethics for professional accountants, issued through the Accounting Professional and Ethical Standards Board (APESB). See http://www. apesb. org. au/issued- standards to view a copy of the code. Other accountancy bodies have similar codes. The code has the purpose of maintaining and enhancing the credibility, professionalism and quality of accountants, and providing the public with confidence in their services. It lays down minimum standards of conduct and isn't meant to be exhaustive. Rather, it deals with matters of general principle that members should interpret in accordance with the spirit of the code. The principles listed in the code are: (1) Integrity (to be honest, fair and sincere); (2) Objectivity (to avoid conflicts of self-interest and bias); (3) Professional competence and due care (adherence to technical standards); (4) Confidentiality (non-disclosure of sensitive information); and (5) Professional behaviour (including compliance with the law). Some of these principles clearly overlap, and sometimes they have to be prioritised. This calls for the exercise of sub jective judgement, and it's not always the case that individual accountants will agree on what is the right thing to do. Sustainability One of the very important issues facing all businesses today is whether or not they are sustainable. Sustainability applies to businesses internally and externally. Internally, it has to do with whether a business can continue to be profitable in the future as well as in the present. Through the going concern assumption, sustainability is normally assumed in financial reports containing accounting data. Externally, sustainability has to do with the society and environment in which the business operates. Sustainability has been defined as 'meeting the needs of the present without compromising the ability of future generations to meet their own needs'. For example, Australia has developed a carbon accounting system to measure and track the level of carbon emissions in the country, in accordance with its international obligations and the activities of international bodies such as the Intergovernmental Panel on Climate Change, http://www. ipcc. ch/. The Sustainability in action ! box here shows some of the mostly physical carbon emissions data reported on a quarterly basis, as produced by the carbon accounting system.

8. 会计伦理与可持续发展

• 会计师应遵循诚信、客观性、专业胜任能力、保密和专业行为
• 可持续性包括企业未来盈利能力及其对社会和环境的影响 [18]Source: BUSN7008_61-181.pdfthe the proprietor the partners shareholders Comparison of the three forms of business organisation Accounting for companies includes some unique complexities. For this reason, we initially focus on proprietorships. We cover special aspects relating to partnerships in Chapter 13 and to companies in Chapters 14 and 159. However, the basic accounting procedures we deal with in the chapters up to Chapter 13" apply equally to all forms of organisation. Try it! 1. 2 How does a firm choose the best form of organisation to suit its business? (Legal and tax implications concerning liabilities mean that this decision is usually taken based on advice from accountants and lawyers. ) 1. 8 How do ethics and sustainability relate to accounting? LO 8 Explain the role of ethics and sustainability in accounting Ethics There have been a number of large, high-profile corporate collapses in Australia, New Zealand and the United States that saw shareholders suddenly find their previously valuable shares worthless. In addition, as you can see in the Connect to: Ethics " box below, corporate fraud-some of it involving accounting malpractice-is a problem. The common element with these instances is greed on the part of people who control or can manipulate financial decisions relating to the disposition of resources. Since the preparation and checking or 'auditing' of financial reports should in theory play a key role in identifying and controlling such greed and malpractice, we are confronted with moral, as well as technical, questions about how accounting information should be measured, disclosed and used. To further emphasise the importance of ethics, each chapter in this text contains a Focus on ethics scenario to encourage discussion of hypothetical ethical challenges in accounting. Most ethical questions in accounting ultimately relate to the standard of moral behaviour expected of accountants in pursuing their professional activities. They are responsible for deciding what goes into and what is left out of financial reports. Suppose that a large firm is the defendant in a legal action that threatens to put it out of business. The managers of the firm may be tempted to hide the potential implications of the legal action for fear that its share price may fall or that banks will stop lending it money. Should the firm disclose this sensitive information? Accounting standards and principles require the firm to describe this situation in its financial statements, and the firm's auditor is required to state whether the disclosure is adequate. By what criteria do accountants address questions that challenge their professional ethical conduct? Accountants have mostly taken the view that there are certain, self-evident duties expected of them, which are expressed in codes of professional conduct. Connect to: Ethics Staying vigilant-or turning a blind eye? PwC's 2018 Global Economic Crime and Fraud Survey finds that 49% of global organisations say they've experienced economic crime in the past two years. But what about the other 51%? Have they avoided falling victim-or simply don't know about it? Since fraud hides in the shadows, one of the most powerful weapons in a fraudster's armoury is a lack of awareness within organisations. It's time for all businesses to recognise the true nature of the threat: not as just a nuisance or cost of doing business, but a shadow industry with tentacles in every country, sector and function. The survey results included the following findings: 1. 64% of respondents said losses due directly to their most disruptive fraud could reach US$1 million. 2. 52% of all frauds are perpetrated by people inside the organisation. 3. 31% of respondents that suffered fraud indicated they experienced cybercrime. Source: Adapted from 'Pulling fraud out of the shadows-The biggest competitor you didn't know you had', PwC's 2018 Global Economic Crime and Fraud Survey, PwC, 2018, https://www. pwc. com. Codes of professional conduct CAANZ and CPAA Australia have a joint code of ethics for professional accountants, issued through the Accounting Professional and Ethical Standards Board (APESB). See http://www. apesb. org. au/issued- standards to view a copy of the code. Other accountancy bodies have similar codes. The code has the purpose of maintaining and enhancing the credibility, professionalism and quality of accountants, and providing the public with confidence in their services. It lays down minimum standards of conduct and isn't meant to be exhaustive. Rather, it deals with matters of general principle that members should interpret in accordance with the spirit of the code. The principles listed in the code are: (1) Integrity (to be honest, fair and sincere); (2) Objectivity (to avoid conflicts of self-interest and bias); (3) Professional competence and due care (adherence to technical standards); (4) Confidentiality (non-disclosure of sensitive information); and (5) Professional behaviour (including compliance with the law). Some of these principles clearly overlap, and sometimes they have to be prioritised. This calls for the exercise of sub jective judgement, and it's not always the case that individual accountants will agree on what is the right thing to do. Sustainability One of the very important issues facing all businesses today is whether or not they are sustainable. Sustainability applies to businesses internally and externally. Internally, it has to do with whether a business can continue to be profitable in the future as well as in the present. Through the going concern assumption, sustainability is normally assumed in financial reports containing accounting data. Externally, sustainability has to do with the society and environment in which the business operates. Sustainability has been defined as 'meeting the needs of the present without compromising the ability of future generations to meet their own needs'. For example, Australia has developed a carbon accounting system to measure and track the level of carbon emissions in the country, in accordance with its international obligations and the activities of international bodies such as the Intergovernmental Panel on Climate Change, http://www. ipcc. ch/. The Sustainability in action ! box here shows some of the mostly physical carbon emissions data reported on a quarterly basis, as produced by the carbon accounting system.[23]Source: BUSN7008_61-181.pdfSustainability in action Quarterly update of Australia's national greenhouse gas inventory: September 2018 Incorporating emissions from the NEM up to december 2018 Australia's national greenhouse accounts The Quarterly Update reports on the latest estimates of Australia's National Greenhouse Gas Inventory. This update provides estimates of Australia's national inventory of greenhouse gas emissions up to the September quarter of 2018, and emissions from the National Electricity Market (NEM) up to the December quarter 2018. National emission levels for the September quarter 2018 decreased by 1. 4 per cent relative to the previous quarter on a seasonally adjusted and weather normalised basis primarily due to reduced emissions from electricity generation and diesel consumption across transport, agriculture and mining. In trend terms, the emissions remained flat at 0. 0 per cent. Emissions for the year to September 2018 are estimated to be 536 Mt CO2-e, up 0. 9 per cent (4. 6 Mt CO2-e) on the previous year, primarily due to increased LNG exports (19. 7 per cent). Australia's emissions for the year to September 2018 were 15. 1 per cent below the peak recorded in 2007 and 2. 6 per cent below emissions in 2000 and 11. 5 per cent below emissions in 2005. Emissions per capita, and the emissions intensity of the economy, were at their lowest levels in 29 years. Emissions per capita in the year to September 2018 have fallen 35. 8 per cent since 1990, while the emissions intensity of the economy has fallen 59. 8 per cent since 1990. Emissions from the NEM for the year to December 2018 decreased 3. 5 per cent on the previous year, and decreased by 0. 4 per cent on a seasonally adjusted basis for the quarter to quarter. Source: Quarterly Update of Australia's National Greenhouse Gas Inventory for September 2018, Department of the Environment and Energy, Australian Government, 2018, https://www. environment. gov. au, downloaded 9 April 2019. C Commonwealth of Australia 2018. Questions to think about How much do you think it costs to produce the data for Australia's National Greenhouse Gas Inventory to monitor 'pollution'? Apart from measuring and reporting costs, what are some of the other costs to the economy of being clean and green? What is 'accounting for sustainability', and what are some ethical issues involved with it? We will be reminding you of the importance of sustainability throughout this book. Another business example Let's get some extra practice by thinking about another example business, Greg's Tunes. Suppose that Greg started the business with $1 000 of his own equipment and $10 000 obtained from a bank loan. How would you account for these transactions? · Owner investments increase the business's equity when the owner invests assets in the business. Hence, owners' equity increases by $1 000 and assets (Equipment) increase by $1 000. · The bank loan represents a liability. Liabilities (Loan payable) increase by $10 000 and assets (Cash) increase by $10 000. Suppose further that Greg's Tunes earned $1 500 in consultancy fees and paid $1 200 for Greg's travel and accommodation costs when he had to visit Sydney as part of a marketing exercise. Finally, Greg withdrew $800 cash for personal use. How would you account for these transactions? · Revenues from delivering goods or services to customers increase owners' equity. Assets (Accounts receivable or Cash) increase by $1 500 and owners' equity of the business increases by $1 500. · Expenses decrease owners' equity by using up assets or increasing liabilities in order to deliver goods or services to customers. Hence, assets (Cash) decrease by $1 200 and owners' equity decreases by $1 200. · Greg withdrawing cash from the business results in assets (Cash) falling by $800, while owners' equity also declines by $800. Have you ever thought of having your own business? The Decision guidelines feature shows how to make some of the decisions that you will face if you start a business. Decision guidelines appear in each of the following chapters. Decision guidelines 1. 1 Major business decisions Suppose you open a business to take photos at parties held on your campus. You hire a professional photographer and line up suppliers for frames and photo albums. Here are some factors you must consider if you expect to be profitable. Decision Guidelines How to organise the business · If a single owner- a proprietorship What to account for

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总结

• 这一章和讲义“Lecture 2”主要介绍了会计的核心概念、借贷记账规则、交易分析流程、财务报表的编制顺序、基础会计原则与伦理、相关行业监管机构、企业类别等内容。
• 实践部分包括了日常交易的分析、登记、T账户过账和试算表的准备等基本操作。

如果你需要某一部分的详细例题、具体操作步骤，欢迎继续提问！

Certainly! Here is an English summary of Lecture 2 and Chapter 2 of the BUSN7008 textbook based exclusively on information from your current files:

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BUSN7008 Lecture 2 and Chapter 2 Summary

Core Concepts in Lecture 2 and Chapter 2

1. The Accounting Equation and Accounts

• Accounting records are built around the basic equation: $$ \text{Assets} = \text{Liabilities} + \text{Owner's Equity} $$
• Common accounts include assets (cash, accounts receivable, supplies, land), liabilities (accounts payable), and owner’s equity (capital, withdrawals) [20]Source: BUSN7008_61-181.pdf17 700 Building 48 000 Less: Accumulated depreciation-building 47 800 Owners' equity Total non-current assets 65 500 Sheena Bright, capital 35 900 Total assets 106 000 Total liabilities and owners' equity 106 000 V Learning objectives LO 1 Explain why accounting is important LO 2 Describe the accounting equation, and define assets, liabilities and equity LO 3 Use the accounting equation to analyse transactions@ LO 4 Prepare financial statements LO 5 £ Use financial statements and return on assets (ROA) to evaluate business performance LO 6 Describe the organisations and principles that govern accounting@ LO 7 Identify the three main types of business organisation LO 8 Explain the role of ethics and sustainability in accounting THINK ABOUT A DECISION YOU HAVE MADE RECENTLY. While many of your decisions are routine and can be made without reference to detailed information, such as which clothes to wear in the morning, other decisions are more infrequent and have longer-lasting effects, such as choosing a mobile phone network and contract type. The bigger the decision, the more information you will want before making it. In the choice of which type of mobile phone to buy, in order to make the best decision you would need to know what each option provides (for example, the number of minutes included and the amount of data allowed), as well as the cost of each plan. What you are doing is weighing up the costs and benefits of each option. In the world of commerce and beyond, organisations use accounting information to inform them prior to making important decisions. For example, if the retail giant Myer considered a bid to purchase rival David Jones, how much should it pay? The answer depends partly on what the accounting information says David Jones is worth. The 'balance sheet' shown above is one of the most important and central financial statements prepared by accountants. Accounting information enables people and organisations to make better decisions. Smart Touch, whose balance sheet is illustrated, is a small business, but its balance sheet contains the same type of information as that shown in the balance sheet of very large organisations such as JB Hi-Fi. The same is true for the other financial statements that all well-run businesses prepare and use, and which you will learn about as you work your way through this book. In this introductory chapter we introduce accounting in a small business context through Sheena Bright's Smart Touch Learning; and later, starting in Chapter 59, through Greg Moore's Greg's Tunes. You will see how Sheena and Greg run successful businesses by treating people fairly, planning for activities that are sustainable, and capitalising on their general business and accounting acumen. You will also see how understanding financial statements like the balance sheet is one of the first steps towards business success. We will be following the fortunes of Smart Touch and Greg's Tunes throughout the text to see how different accounting concepts relate to their businesses. In addition, we will use examples from large firms to illustrate the fact that the same accounting principles apply to firms of any size. By the time you get to the chapter on the framework of accounting, you will have a broad appreciation of how accountants prepare financial statements for all types of organisation. 1. 1 Why is accounting important?[35]Source: Lecture 2 for Wattle.pdf191 Land INCOME STATEMENT ACCOUNTS (PART OF OWNERS' EQUITY): REVENUES EXPENSES 401 Service revenue 501 Rent expense 502 Salary expense 503 Electricity and gas expense Chart of accounts-Smart Touch Learning Slide 8[5]Source: Lecture 2 for Wattle.pdfLIABILITIES OWNERS' EQUITY 101 Cash 201 Accounts payable 301 Sheena Bright, capital 111 Accounts receivable 231 Bills payable 311 Sheena Bright, drawings 141 Office supplies 151 Office furniture.

2. Double-Entry Accounting, Debits and Credits, and T-accounts

• Double-entry system: Every transaction affects at least two accounts, keeping the accounting equation in balance.
• Left side (Debit) / Right side (Credit):
  • Assets, expenses, and drawings: normal debit balance.
  • Liabilities, capital, and revenues: normal credit balance [30]Source: Lecture 2 for Wattle.pdf- Normal debit balance: Normal credit balance: Assets, expenses and drawings Liabilities, capital and revenue Slide 12[31]Source: Lecture 2 for Wattle.pdfDebits, credits and double-entry accounting Account Title Left side Debit side Right side Credit side Dr. = Debit Cr. = Credit Slide 9 Debits, credits and double-entry accounting - Assets = Liabilities + Owners' Equity - Debits = Credits[47]Source: Lecture 2 for Wattle.pdf= Liabilities + Owners' equity Capital - Drawings + (Revenues - Expenses) Slide 11 The normal balance of an account EXHIBIT 2-8 Complete rules of debit and credit Assets = Liabilities + Owners' equity ASSETS.
• T-accounts help visualize increases and decreases [3]Source: Lecture 2 for Wattle.pdfDr. - Cr. + Dr. - Cr. + OWNERS' DRAWINGS Dr. Cr. - + REVENUES Dr. - Cr. + Dr. + Cr. -[36]Source: Lecture 2 for Wattle.pdf6. Prepare the trial balance from the T-accounts Slide 2 The account, the ledger and the journal Slide 3 The account, the ledger and the journal Record transactions as journal entries Post to the ledger Prepare the trial balance Slide 4 Recording transactions in the journal.

3. The Transaction Recording Process

• Steps to record transactions:
  1. Identify the transaction from source documents.
  2. Specify which accounts are affected and their types.
  3. Determine increases or decreases to each account.
  4. Enter the transaction in the journal with a brief explanation.
  5. Post from the journal to the ledger.
  6. Prepare a trial balance [16]Source: Lecture 2 for Wattle.pdfBUSN 7008 Financial Statements & Reporting Lecturer: Dr. Lijuan (Lily) Zhang Week 2: RECORDING BUSINESS TRANSACTIONS (Textbook Chapter 2) Slide 1 Learning objectives 1. Explain accounts as they relate to the accounting equation, and describe common accounts 2. Define debits, credits and normal account balances using double-entry accounting and T-accounts 3. List the steps of the transaction recording process 4. Record transactions in the journal 5. Post transactions from the journal to the ledger[34]Source: Lecture 2 for Wattle.pdfIdentify the transaction from source documents Specify each account affected by the transaction and classify it by type Determine whether each account is increased or decreased by the transaction Enter the transaction in the journal, including a brief explanation Slide 13 Recording transactions in the journal On 1 May 2021, Sheena Bright starts the business titled ' Smart Touch Learning' by investing $30000 cash in the business Date Accounts and explanation Debit[36]Source: Lecture 2 for Wattle.pdf6. Prepare the trial balance from the T-accounts Slide 2 The account, the ledger and the journal Slide 3 The account, the ledger and the journal Record transactions as journal entries Post to the ledger Prepare the trial balance Slide 4 Recording transactions in the journal[51]Source: Lecture 2 for Wattle.pdfTransaction occurs Source documents prepared Transaction analysis takes place Transaction entered in journal Amounts posted to ledger EXHIBIT 2-9 Flow of accounting data from the journal to the ledger Slide 16 The trial balance Slide 17 Summary: Chapter 2.
• Example: Sheena Bright invests cash to start a business; entries are made to both the Cash and Capital accounts [2]Source: Lecture 2 for Wattle.pdfBright, capital (Q+) Received initial investment from owner. EXHIBIT 2-6 Journal entry and posting to the ledger POSTING TO THE LEDGER Cash Sheena Bright, capital 30 000 30 000 Slide 15 Flow of accounting information[25]Source: Lecture 2 for Wattle.pdfCredit May 1 Cash Sheena Bright, Capital Received investment from owner. 30 000 30 000 May 1 Dr. Cash 30 000 Cr. Sheena Bright, Capital 30 000 Received investment from owner..

4. Journal, Ledger, Trial Balance

• Journal: Chronological record of all transactions.
• Ledger: Compilation of all accounts updated from the journal.
• Trial Balance: List of all accounts and balances to verify debits equal credits and the equation is in balance [36]Source: Lecture 2 for Wattle.pdf6. Prepare the trial balance from the T-accounts Slide 2 The account, the ledger and the journal Slide 3 The account, the ledger and the journal Record transactions as journal entries Post to the ledger Prepare the trial balance Slide 4 Recording transactions in the journal[6]Source: BUSN7008_61-181.pdfRent expense 11 000 Building 157 000 Salaries expense 61 000 Cash 3 800 Salaries payable Equipment 19 000 Service revenue 195 000 Insurance expense 2 500 Office supplies 9 000 Interest expense 7 000 Owner, capital, 30 June 2020 49 000 Requirements 1. Prepare Golden City Barbers' income statement. 2. Prepare the statement of changes in equity. 3. Prepare the balance sheet. P1-4 PREPARING FINANCIAL STATEMENTS [20-30 MIN] (LO 59) Click a Pix Photography works weddings and prom-type parties. The balance of the Adams, capital account was $26 000 at 30 June 2020. At 30 June 2021, the business's accounting records show these balances: Insurance $11 000 Accounts receivable $ expense 12 000 Cash 40 000 Loans payable 9 000 Accounts.

5. Expanded Accounting Equation

• Owner’s equity is expanded as: $$ \text{Owner's Equity} = \text{Capital} - \text{Drawings} + (\text{Revenues} - \text{Expenses}) $$
• Shows how revenues increase equity and expenses/drawings decrease equity [47]Source: Lecture 2 for Wattle.pdf= Liabilities + Owners' equity Capital - Drawings + (Revenues - Expenses) Slide 11 The normal balance of an account EXHIBIT 2-8 Complete rules of debit and credit Assets = Liabilities + Owners' equity ASSETS[37]Source: Lecture 2 for Wattle.pdfAssets Liabilities + Capital Expansion of the accounting equation - Drawings Owners' equity + Revenues - Expenses Assets.

6. Normal Account Balances

• Assets, expenses, drawings: normal debit balance.
• Liabilities, capital, revenues: normal credit balance [30]Source: Lecture 2 for Wattle.pdf- Normal debit balance: Normal credit balance: Assets, expenses and drawings Liabilities, capital and revenue Slide 12[3]Source: Lecture 2 for Wattle.pdfDr. - Cr. + Dr. - Cr. + OWNERS' DRAWINGS Dr. Cr. - + REVENUES Dr. - Cr. + Dr. + Cr. -[46]Source: Lecture 2 for Wattle.pdfAccounting equation: ASSETS = LIABILITIES + OWNERS' EQUITY Rules of debit and credit: Debit + Credit Debit.

7. Chart of Accounts

• Lists all accounts used by the business, including cash, receivables, payables, supplies, equipment, capital, revenue, and expense accounts [5]Source: Lecture 2 for Wattle.pdfLIABILITIES OWNERS' EQUITY 101 Cash 201 Accounts payable 301 Sheena Bright, capital 111 Accounts receivable 231 Bills payable 311 Sheena Bright, drawings 141 Office supplies 151 Office furniture[35]Source: Lecture 2 for Wattle.pdf191 Land INCOME STATEMENT ACCOUNTS (PART OF OWNERS' EQUITY): REVENUES EXPENSES 401 Service revenue 501 Rent expense 502 Salary expense 503 Electricity and gas expense Chart of accounts-Smart Touch Learning Slide 8[52]Source: Lecture 2 for Wattle.pdfOwners' equity The financial estimate of owners' claims to the value in a business is called owners' equity. It is the 'residual' interest in the assets of an entity after deducting all liabilities. Elements of owner's equity include: · Drawings · Income · Expenses Slide 7 Chart of accounts Exhibit 2-2 BALANCE SHEET ACCOUNTS: ASSETS.

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Essential Accounting Principles and Users

1. Accounting Organizational Principles

• Entity Concept: Only activities of the business (not the owner’s personal transactions) are recorded [4]Source: BUSN7008_61-181.pdfWhile much of the training provided by the accounting bodies referred to above is about being able to correctly apply the accounting standards, the standards themselves are not created by these bodies. Australia and New Zealand both have standards boards dedicated to setting accounting standards. As noted earlier in the Connect to: Accounting standards box, the relevant board in Australia is the Australian Accounting Standards Board (AASB)$ and in New Zealand is the New Zealand . . . . . . Accounting Standards Board (NZASB) @. The AASB is overseen by the Financial Reporting Council (FRC)®, which is in turn responsible to a federal government minister. Likewise, in New Zealand the External Reporting Board (XRB) @ oversees the work of the NZASB as an agency of government. The nature of these processes means that accounting standards effectively have the force of law in both countries. Since the last half of the first decade of this millennium, accounting standards in Australia and New Zealand have been almost entirely based on International Accounting Standards (IASs) @ issued by the International Accounting Standards Board (IASB)®. Many other . . . . . . . . countries now also base their accounting principles on these international standards or are moving closer to them, as part of a global attempt to improve the comparability of financial statements across national borders. These matters will be covered in more detail in Chapter 179. The numbering of the international accounting standards adopted by Australia and New Zealand follow similar, but slightly different, rules. The standards have a two-tier numbering system, depending on whether the accounting standard pre-dates the formation of the current IASB or were produced after that date. The earlier standards are referred to as 'IASs' and are followed by a number indicating their order in the sequence of all such IASs; the latter are referred to as 'IFRSs' followed by a sequential number, the acronym IFRS standing for International Financial Reporting Standard ®. · In Australia, an accounting standard adopted as 'equivalent' to, say, IASx, where x is a number, is titled 'AASB (100 + x)', while an IFRS standard, say IFRSx, is simply titled 'AASB x'. Thus, IAS 1 as adopted in Australia is AASB 101 while IFRS 1 became AASB 1 when adopted there. · In New Zealand the practice is more simply to add 'NZ' to the equivalent IAS title, keeping the same numbering system. Thus IAS 1 became NZIAS 1, whereas IFRS 1 became NZIFRS 1 when adopted in New Zealand. There are very few differences between the corresponding AASBs and the NZIASs and NZIFRSs, but we will note any that are significant and relevant when they are referenced in the text. The basic flow of authority for accounting standards in Australia and New Zealand is shown in Exhibit 1-59. Exhibit 1-5 Regulators In Australia under federal law the Australian Securities and Investments Commission (ASIC) regulates the securities market and the Financial Reporting Council (FRC) oversees the AASB. In New Zealand the Financial Markets Authority (FMA) regulates the securities market and the External Reporting Board (XRB) oversees the NZASB. Standard setting Accountants apply accounting standards. The national organisations most concerned with standards in Australia and New Zealand are CPAA and CAANZ. Accounting standards The Australian Accounting Standards Board (AASB) and the New Zealand Accounting standards board (NZASB) produce country- specific accounting standards based on international standards following a system of due process. Key organisations in the standard-setting process There are a number of basic concepts and principles that underpin the accounting standards referred to in this book, with which you should be familiar. The accounting entity concept One of the most basic concepts used in the preparation of financial statements is that of the accounting entity. An accounting entity® is an organisation (or a section of an organisation) that stands apart from other organisations and individuals as a separate economic unit for the purpose of some decision. Sharp boundaries are drawn around each entity so as not to confuse its affairs with those of other entities. From an accounting perspective, only information about transactions relating to the entity is included in its financial statements. Recall transaction number 11 discussed earlier in this chapter, where Sheena Bright spent $40 000 to remodel her kitchen. This wasn't a transaction of Sheena's business, Smart Touch. Following the entity concept, Smart Touch must not include this transaction in its accounting records. To mix this $40 000 of personal expenditure with Smart Touch's business transactions would make it difficult to measure the financial position and performance of the business and prevent Sheena from making well-informed business decisions about Smart Touch. In summary, the entity concept applies to any economic unit that needs to be evaluated separately. See Chapter 17 for further details. The accounting period concept Another fundamental principle used in the preparation of financial statements is the accounting period@ concept, which defines the unit of time for which accounting data are collected. Businesses need periodic reports on their progress. Accountants therefore estimate profitability in segments of time that we call accounting periods. Most accounting periods in published financial statements are one year in length. In Australia the most common annual accounting period is 1 July to 30 June of the following year. For example, JB Hi-Fi, Qantas, BHP, Spark and Telstra have a 30 June accounting year-end. In fact, most businesses in Australia usually have that date; it coincides with the Australian tax year-end. The New Zealand tax year ends on 31 March. While a 12-month reporting period is generally required for most businesses to formally prepare full financial statements, some large businesses are also required to, or voluntarily, produce interim financial statements for periods of less than one year. In addition, managers and investors normally cannot wait until the end of the year to gauge a firm's progress. Many businesses therefore also prepare financial statements for periods that are less than a year, and often monthly for internal purposes. The accrual basis of accounting Under accrual accounting@, the effects of transactions are recognised when they occur (and not as cash is received or paid). Accountants adopt the position that profits from activities should be recognised when the sales and any other revenues or gains relating to the activities are 'earned' and can be reliably measured, regardless of when the cash payment is received. Accrual accounting is the form of accounting that we applied to the earlier set of transactions (re-visit transactions 3 and 5 in particular to see this) and that we apply in the remainder of this book. There are a number of different approaches to estimating how much and when profit or revenue has been earned, and these will be discussed in detail in later chapters. A legally enforceable debt from a customer on a completed contract is sufficient grounds for recognising a profit. However, it also means that ordinarily profits shouldn't be recognised until a sale has taken place (which normally means exchange of the goods or service). Try it! 1. 1.
• Accounting Period: Financial information is reported for specific periods (often annually) [4]Source: BUSN7008_61-181.pdfWhile much of the training provided by the accounting bodies referred to above is about being able to correctly apply the accounting standards, the standards themselves are not created by these bodies. Australia and New Zealand both have standards boards dedicated to setting accounting standards. As noted earlier in the Connect to: Accounting standards box, the relevant board in Australia is the Australian Accounting Standards Board (AASB)$ and in New Zealand is the New Zealand . . . . . . Accounting Standards Board (NZASB) @. The AASB is overseen by the Financial Reporting Council (FRC)®, which is in turn responsible to a federal government minister. Likewise, in New Zealand the External Reporting Board (XRB) @ oversees the work of the NZASB as an agency of government. The nature of these processes means that accounting standards effectively have the force of law in both countries. Since the last half of the first decade of this millennium, accounting standards in Australia and New Zealand have been almost entirely based on International Accounting Standards (IASs) @ issued by the International Accounting Standards Board (IASB)®. Many other . . . . . . . . countries now also base their accounting principles on these international standards or are moving closer to them, as part of a global attempt to improve the comparability of financial statements across national borders. These matters will be covered in more detail in Chapter 179. The numbering of the international accounting standards adopted by Australia and New Zealand follow similar, but slightly different, rules. The standards have a two-tier numbering system, depending on whether the accounting standard pre-dates the formation of the current IASB or were produced after that date. The earlier standards are referred to as 'IASs' and are followed by a number indicating their order in the sequence of all such IASs; the latter are referred to as 'IFRSs' followed by a sequential number, the acronym IFRS standing for International Financial Reporting Standard ®. · In Australia, an accounting standard adopted as 'equivalent' to, say, IASx, where x is a number, is titled 'AASB (100 + x)', while an IFRS standard, say IFRSx, is simply titled 'AASB x'. Thus, IAS 1 as adopted in Australia is AASB 101 while IFRS 1 became AASB 1 when adopted there. · In New Zealand the practice is more simply to add 'NZ' to the equivalent IAS title, keeping the same numbering system. Thus IAS 1 became NZIAS 1, whereas IFRS 1 became NZIFRS 1 when adopted in New Zealand. There are very few differences between the corresponding AASBs and the NZIASs and NZIFRSs, but we will note any that are significant and relevant when they are referenced in the text. The basic flow of authority for accounting standards in Australia and New Zealand is shown in Exhibit 1-59. Exhibit 1-5 Regulators In Australia under federal law the Australian Securities and Investments Commission (ASIC) regulates the securities market and the Financial Reporting Council (FRC) oversees the AASB. In New Zealand the Financial Markets Authority (FMA) regulates the securities market and the External Reporting Board (XRB) oversees the NZASB. Standard setting Accountants apply accounting standards. The national organisations most concerned with standards in Australia and New Zealand are CPAA and CAANZ. Accounting standards The Australian Accounting Standards Board (AASB) and the New Zealand Accounting standards board (NZASB) produce country- specific accounting standards based on international standards following a system of due process. Key organisations in the standard-setting process There are a number of basic concepts and principles that underpin the accounting standards referred to in this book, with which you should be familiar. The accounting entity concept One of the most basic concepts used in the preparation of financial statements is that of the accounting entity. An accounting entity® is an organisation (or a section of an organisation) that stands apart from other organisations and individuals as a separate economic unit for the purpose of some decision. Sharp boundaries are drawn around each entity so as not to confuse its affairs with those of other entities. From an accounting perspective, only information about transactions relating to the entity is included in its financial statements. Recall transaction number 11 discussed earlier in this chapter, where Sheena Bright spent $40 000 to remodel her kitchen. This wasn't a transaction of Sheena's business, Smart Touch. Following the entity concept, Smart Touch must not include this transaction in its accounting records. To mix this $40 000 of personal expenditure with Smart Touch's business transactions would make it difficult to measure the financial position and performance of the business and prevent Sheena from making well-informed business decisions about Smart Touch. In summary, the entity concept applies to any economic unit that needs to be evaluated separately. See Chapter 17 for further details. The accounting period concept Another fundamental principle used in the preparation of financial statements is the accounting period@ concept, which defines the unit of time for which accounting data are collected. Businesses need periodic reports on their progress. Accountants therefore estimate profitability in segments of time that we call accounting periods. Most accounting periods in published financial statements are one year in length. In Australia the most common annual accounting period is 1 July to 30 June of the following year. For example, JB Hi-Fi, Qantas, BHP, Spark and Telstra have a 30 June accounting year-end. In fact, most businesses in Australia usually have that date; it coincides with the Australian tax year-end. The New Zealand tax year ends on 31 March. While a 12-month reporting period is generally required for most businesses to formally prepare full financial statements, some large businesses are also required to, or voluntarily, produce interim financial statements for periods of less than one year. In addition, managers and investors normally cannot wait until the end of the year to gauge a firm's progress. Many businesses therefore also prepare financial statements for periods that are less than a year, and often monthly for internal purposes. The accrual basis of accounting Under accrual accounting@, the effects of transactions are recognised when they occur (and not as cash is received or paid). Accountants adopt the position that profits from activities should be recognised when the sales and any other revenues or gains relating to the activities are 'earned' and can be reliably measured, regardless of when the cash payment is received. Accrual accounting is the form of accounting that we applied to the earlier set of transactions (re-visit transactions 3 and 5 in particular to see this) and that we apply in the remainder of this book. There are a number of different approaches to estimating how much and when profit or revenue has been earned, and these will be discussed in detail in later chapters. A legally enforceable debt from a customer on a completed contract is sufficient grounds for recognising a profit. However, it also means that ordinarily profits shouldn't be recognised until a sale has taken place (which normally means exchange of the goods or service). Try it! 1. 1.
• Accrual Basis: Transactions are recorded when they occur, not just when cash is received or paid [4]Source: BUSN7008_61-181.pdfWhile much of the training provided by the accounting bodies referred to above is about being able to correctly apply the accounting standards, the standards themselves are not created by these bodies. Australia and New Zealand both have standards boards dedicated to setting accounting standards. As noted earlier in the Connect to: Accounting standards box, the relevant board in Australia is the Australian Accounting Standards Board (AASB)$ and in New Zealand is the New Zealand . . . . . . Accounting Standards Board (NZASB) @. The AASB is overseen by the Financial Reporting Council (FRC)®, which is in turn responsible to a federal government minister. Likewise, in New Zealand the External Reporting Board (XRB) @ oversees the work of the NZASB as an agency of government. The nature of these processes means that accounting standards effectively have the force of law in both countries. Since the last half of the first decade of this millennium, accounting standards in Australia and New Zealand have been almost entirely based on International Accounting Standards (IASs) @ issued by the International Accounting Standards Board (IASB)®. Many other . . . . . . . . countries now also base their accounting principles on these international standards or are moving closer to them, as part of a global attempt to improve the comparability of financial statements across national borders. These matters will be covered in more detail in Chapter 179. The numbering of the international accounting standards adopted by Australia and New Zealand follow similar, but slightly different, rules. The standards have a two-tier numbering system, depending on whether the accounting standard pre-dates the formation of the current IASB or were produced after that date. The earlier standards are referred to as 'IASs' and are followed by a number indicating their order in the sequence of all such IASs; the latter are referred to as 'IFRSs' followed by a sequential number, the acronym IFRS standing for International Financial Reporting Standard ®. · In Australia, an accounting standard adopted as 'equivalent' to, say, IASx, where x is a number, is titled 'AASB (100 + x)', while an IFRS standard, say IFRSx, is simply titled 'AASB x'. Thus, IAS 1 as adopted in Australia is AASB 101 while IFRS 1 became AASB 1 when adopted there. · In New Zealand the practice is more simply to add 'NZ' to the equivalent IAS title, keeping the same numbering system. Thus IAS 1 became NZIAS 1, whereas IFRS 1 became NZIFRS 1 when adopted in New Zealand. There are very few differences between the corresponding AASBs and the NZIASs and NZIFRSs, but we will note any that are significant and relevant when they are referenced in the text. The basic flow of authority for accounting standards in Australia and New Zealand is shown in Exhibit 1-59. Exhibit 1-5 Regulators In Australia under federal law the Australian Securities and Investments Commission (ASIC) regulates the securities market and the Financial Reporting Council (FRC) oversees the AASB. In New Zealand the Financial Markets Authority (FMA) regulates the securities market and the External Reporting Board (XRB) oversees the NZASB. Standard setting Accountants apply accounting standards. The national organisations most concerned with standards in Australia and New Zealand are CPAA and CAANZ. Accounting standards The Australian Accounting Standards Board (AASB) and the New Zealand Accounting standards board (NZASB) produce country- specific accounting standards based on international standards following a system of due process. Key organisations in the standard-setting process There are a number of basic concepts and principles that underpin the accounting standards referred to in this book, with which you should be familiar. The accounting entity concept One of the most basic concepts used in the preparation of financial statements is that of the accounting entity. An accounting entity® is an organisation (or a section of an organisation) that stands apart from other organisations and individuals as a separate economic unit for the purpose of some decision. Sharp boundaries are drawn around each entity so as not to confuse its affairs with those of other entities. From an accounting perspective, only information about transactions relating to the entity is included in its financial statements. Recall transaction number 11 discussed earlier in this chapter, where Sheena Bright spent $40 000 to remodel her kitchen. This wasn't a transaction of Sheena's business, Smart Touch. Following the entity concept, Smart Touch must not include this transaction in its accounting records. To mix this $40 000 of personal expenditure with Smart Touch's business transactions would make it difficult to measure the financial position and performance of the business and prevent Sheena from making well-informed business decisions about Smart Touch. In summary, the entity concept applies to any economic unit that needs to be evaluated separately. See Chapter 17 for further details. The accounting period concept Another fundamental principle used in the preparation of financial statements is the accounting period@ concept, which defines the unit of time for which accounting data are collected. Businesses need periodic reports on their progress. Accountants therefore estimate profitability in segments of time that we call accounting periods. Most accounting periods in published financial statements are one year in length. In Australia the most common annual accounting period is 1 July to 30 June of the following year. For example, JB Hi-Fi, Qantas, BHP, Spark and Telstra have a 30 June accounting year-end. In fact, most businesses in Australia usually have that date; it coincides with the Australian tax year-end. The New Zealand tax year ends on 31 March. While a 12-month reporting period is generally required for most businesses to formally prepare full financial statements, some large businesses are also required to, or voluntarily, produce interim financial statements for periods of less than one year. In addition, managers and investors normally cannot wait until the end of the year to gauge a firm's progress. Many businesses therefore also prepare financial statements for periods that are less than a year, and often monthly for internal purposes. The accrual basis of accounting Under accrual accounting@, the effects of transactions are recognised when they occur (and not as cash is received or paid). Accountants adopt the position that profits from activities should be recognised when the sales and any other revenues or gains relating to the activities are 'earned' and can be reliably measured, regardless of when the cash payment is received. Accrual accounting is the form of accounting that we applied to the earlier set of transactions (re-visit transactions 3 and 5 in particular to see this) and that we apply in the remainder of this book. There are a number of different approaches to estimating how much and when profit or revenue has been earned, and these will be discussed in detail in later chapters. A legally enforceable debt from a customer on a completed contract is sufficient grounds for recognising a profit. However, it also means that ordinarily profits shouldn't be recognised until a sale has taken place (which normally means exchange of the goods or service). Try it! 1. 1.

2. Qualitative Characteristics

• Relevance and Faithful Representation: Information must be useful, complete, neutral, and free from material error [11]Source: BUSN7008_61-181.pdfLet's go back to the banana business mentioned earlier in the chapter. Instead of selling all 110 bananas purchased in the market for $1 each in cash, assume that you sold 100 for $1 cash and 10 to a friend who didn't have the cash but promised to pay you $10 tomorrow. Does this make any difference to the amount of revenue and profit you made selling bananas? The matching principle A concept that you will sometimes hear about in the context of accrual accounting is 'matching'. In recent years accounting standards have tended to sideline the matching concept, or 'principle', as an important part of the accounting process. Despite this, when it comes to actually doing accounting it is easy to see how essential the matching concept is to calculating income, profits and losses, and asset and liability values. All businesses have inputs and outputs of physical goods or services. The matching principle relates these inputs and outputs to one another, i. e. 'matches' them with one another. The monetary values of inputs matched with, or 'used up', to produce outputs that are completed and sold are treated as expenses and subtracted from ('written off' or 'charged against') the monetary values of the sales of those outputs. This is how we arrive at a profit or a loss. All other expenditures are recorded and shown in financial reports as assets. In this case, the expenditure is sometimes said to be 'carried forward' or 'capitalised'. (Capitalisation of assets is discussed in Chapter 109. ) It is sometimes difficult to determine whether or not an input is used up and thus whether to write off or capitalise its cost. This introduces an element of subjective judgement into the determination of profit and is often a source of dispute about the accuracy of the profit figure in published financial statements. The going concern assumption Under the going concern assumption@, it's assumed that the business as a whole will continue operating for the foreseeable future. This can affect the values in financial statements. When a business stops, it sells its assets, converting them to cash as quickly as possible. This process is called liquidation. With the cash, the business pays off its liabilities and the owners keep any remaining cash. Recall that in transaction 39, Smart Touch bought some office supplies for $500. Assuming that the business is a going concern, most assets are normally recorded at their original transaction ('historic' or 'historical') cost, which is simply the $500 in this case. However, if Smart Touch wasn't considered to be a going concern, then it would have to sell these supplies as 'second-hand' and it would receive considerably less than $500 for them. In this case, it would have to record that expected lower value in the balance sheet. Qualitative characteristics of financial statements To be useful for external decision makers, accounting information must be relevant and be a faithful representation of the organisation's financial status. The relevance ® concept means that financial information must be capable of making a difference in the decisions made by users. To accountants, faithful representation @ means that the accounting information is complete, unbiased or 'neutral', and free from error. In addition, accounting information should be comparable (over time and between organisations), and be verifiable, timely and understandable. These factors are the qualitative characteristics of useful financial information discussed further in Chapter 179. The conceptual framework Accounting standards exist within a conceptual framework$ that provides an understanding of the assumptions underlying concepts such as assets, liabilities, equity, income and expenses and how these relate to other fundamental concepts such as rights, obligations, control over resources and the objectives of financial statements. The conceptual framework acts as a structure within which standards can be developed consistently, and also guides preparers of financial statements on matters of principle in cases where no specific standard exists to provide guidance. The conceptual framework evolves over time, as is noted in the Connect to: Accounting standards ! box below. The new IFRS conceptual framework published by the IASB is discussed more fully in Chapter 179. Connect to: Accounting standards New IFRS conceptual framework revises foundational reporting concepts By Ken Tysiac March 30, 2018 A new conceptual framework for IFRS issued Thursday includes revisions to concepts for reporting assets, liabilities, income, and expenses. In completing the comprehensive project to change the conceptual framework, the International Accounting Standards Board (IASB) confirmed the objective of IFRS financial reporting as providing financial information that is useful to investors and others when deciding whether to provide resources to a company. The conceptual framework emphasizes that investors need information about financial performance (income and expenses) as well as financial position (assets, liabilities, and equity). The framework also contains guidance for reporting financial performance. As defined in the new conceptual framework, assets and liabilities focus on a company's rights and responsibilities. The framework also states that financial statement preparers' decisions about what information to report about assets, liabilities, income, and expenses should be based on what is useful to investors. The conceptual framework is designed to ensure that IFRS are conceptually consistent and that similar transactions are treated in the same way, enabling the provision of useful information for investors and others. In addition, the conceptual framework helps companies develop accounting policies when no IFRS standard applies to a particular transaction. "The revised conceptual framework will greatly assist the board when developing IFRS standards," IASB Chairman Hans Hoogervorst said in a news release. "It will also help other stakeholders to better understand the concepts that underpin the standards. " Source: Extracts from Ken Tysiac, 'New IFRS conceptual framework revises foundational reporting concepts', Journal of Accountancy, 30 March 2018, https:// www. journalofaccountancy. com. @ 2019, Association of International Certified Professional Accountants. 1. 7 What are the main types of business organisation? LO 7 Identify the three main types of business organisation The requirements of accounting standards apply to organisations in accordance with a number of regulations in Australia including the Corporations Act, and in New Zealand including the Companies Act. In the main this means that large organisations have to follow those standards strictly while the conditions for small entities are normally less stringent. Nevertheless, accountants use the basic accounting principles and concepts identified earlier in the chapter to prepare financial statements regardless of the technical reporting status of the entity. Instead of size, another way to categorise organisations is into profit- seeking entities (businesses) and not-for-profit entities. In this book, nearly all the examples and exercises are for businesses. However, the basic procedures and forms of presentation of financial information that you will learn to use also apply to not-for-profit organisations, including cooperatives, government departments and charitable bodies. Businesses usually take one of the three forms of organisation described below. Each has different legal implications..

3. Types of Business Organization

• Proprietorship (sole trader): Owned by one person, unlimited personal liability.
• Partnership: Owned by two or more, potentially unlimited liability.
• Company: Separate legal entity, ownership via shares, limited personal liability [27]Source: BUSN7008_61-181.pdfProprietorships A proprietorship®, or 'sole trader' or 'sole proprietor', has a single owner, called the proprietor, who is often also the manager. Many small businesses start out as a proprietorship; they tend to be small retail establishments or individual professional businesses, such as those of doctors, lawyers and accountants. From the accounting viewpoint, each proprietorship is distinct from its proprietor (the accounting entity concept). However, in law, proprietors are still responsible for settling the debts of the business if there are insufficient proceeds from the sale of the business; that is, they have unlimited liability for their firms' debts. Smart Touch is a proprietorship. Partnerships A partnership® joins two or more individuals together as co-owners. Each owner is a partner. Many professional organisations of doctors, lawyers and accountants are partnerships. Most partnerships are small or medium-sized, but some are large, such as the 'Big Four' accounting firms. Like a proprietorship, a partnership is separate from its owners from an accounting viewpoint. However, if the partnership is of the 'general' form then, as with a proprietorship, the partners are responsible in law for settling the debts of their firm (even business debts incurred by other partners). There are also special forms of limited partnership in some Australian states and territories that provide limited liability for partners if they aren't involved in managing the business. Companies A company® is a business owned by shareholders ®, people who each own a share of the business. A company is incorporated as a legal entity, an 'artificial person', that conducts business in its own name, and normally its owners (shareholders) have limited liability. This means that if a company goes bankrupt, the liability of the owners to repay creditors is normally limited to the amount of money they invested. This limited personal liability of shareholders for corporate debts partly explains why companies are the dominant form of business organisation: people can ed personal risk. JB Hi-Fi (http://www. jbhifi. com. au), Qantas (http:// www. qantas. com. au), BHP Billiton (http://www. bhp. com) and Spark (http://www. sparknz. co. nz/) are examples of companies limited by shares. The importance of the simple option of being able to divide the ownership of an organisation into individual shares is illustrated by BHP Billiton. Its shares are owned by hundreds of thousands of shareholders. An investor with no personal relationship either to the company or to any other shareholder can become a co-owner by buying just a few of its shares. For most companies quoted on the Australian Securities Exchange (ASX) or New Zealand Stock Exchange (NZX) the investor can sell the shares at any time, unless it is a private company. It is usually harder to sell out of a proprietorship or a partnership than it is to sell out of a company. Exhibit 1-6 summarises the differences between the three main types of business organisation. Exhibit 1-6 Proprietorship Partnership Company 1 Owner(s) Proprietor- Partners- Shareholders- there is one there are two there are owner or more generally many owners owners 2 Life of Limited by Limited by Indefinite organisation[13]Source: BUSN7008_61-181.pdfowner's choice owners' or death choices or death Proprietorship Partnership Company 3 Personal Proprietor is Partners are Shareholders liability of personally liable personally are not owner(s) for liable personally liable business debts 4 Accounting The The The company is status proprietorship is partnership is separate from separate from separate from.

4. Major Accounting Standards and Bodies

• Australia: AASB, supervised by FRC, regulated by ASIC.
• New Zealand: NZASB, supervised by XRB, regulated by FMA.
• International: IASB (writes IFRS/IAS standards).
• Standards ensure comparability and reliability of financial statements [4]Source: BUSN7008_61-181.pdfWhile much of the training provided by the accounting bodies referred to above is about being able to correctly apply the accounting standards, the standards themselves are not created by these bodies. Australia and New Zealand both have standards boards dedicated to setting accounting standards. As noted earlier in the Connect to: Accounting standards box, the relevant board in Australia is the Australian Accounting Standards Board (AASB)$ and in New Zealand is the New Zealand . . . . . . Accounting Standards Board (NZASB) @. The AASB is overseen by the Financial Reporting Council (FRC)®, which is in turn responsible to a federal government minister. Likewise, in New Zealand the External Reporting Board (XRB) @ oversees the work of the NZASB as an agency of government. The nature of these processes means that accounting standards effectively have the force of law in both countries. Since the last half of the first decade of this millennium, accounting standards in Australia and New Zealand have been almost entirely based on International Accounting Standards (IASs) @ issued by the International Accounting Standards Board (IASB)®. Many other . . . . . . . . countries now also base their accounting principles on these international standards or are moving closer to them, as part of a global attempt to improve the comparability of financial statements across national borders. These matters will be covered in more detail in Chapter 179. The numbering of the international accounting standards adopted by Australia and New Zealand follow similar, but slightly different, rules. The standards have a two-tier numbering system, depending on whether the accounting standard pre-dates the formation of the current IASB or were produced after that date. The earlier standards are referred to as 'IASs' and are followed by a number indicating their order in the sequence of all such IASs; the latter are referred to as 'IFRSs' followed by a sequential number, the acronym IFRS standing for International Financial Reporting Standard ®. · In Australia, an accounting standard adopted as 'equivalent' to, say, IASx, where x is a number, is titled 'AASB (100 + x)', while an IFRS standard, say IFRSx, is simply titled 'AASB x'. Thus, IAS 1 as adopted in Australia is AASB 101 while IFRS 1 became AASB 1 when adopted there. · In New Zealand the practice is more simply to add 'NZ' to the equivalent IAS title, keeping the same numbering system. Thus IAS 1 became NZIAS 1, whereas IFRS 1 became NZIFRS 1 when adopted in New Zealand. There are very few differences between the corresponding AASBs and the NZIASs and NZIFRSs, but we will note any that are significant and relevant when they are referenced in the text. The basic flow of authority for accounting standards in Australia and New Zealand is shown in Exhibit 1-59. Exhibit 1-5 Regulators In Australia under federal law the Australian Securities and Investments Commission (ASIC) regulates the securities market and the Financial Reporting Council (FRC) oversees the AASB. In New Zealand the Financial Markets Authority (FMA) regulates the securities market and the External Reporting Board (XRB) oversees the NZASB. Standard setting Accountants apply accounting standards. The national organisations most concerned with standards in Australia and New Zealand are CPAA and CAANZ. Accounting standards The Australian Accounting Standards Board (AASB) and the New Zealand Accounting standards board (NZASB) produce country- specific accounting standards based on international standards following a system of due process. Key organisations in the standard-setting process There are a number of basic concepts and principles that underpin the accounting standards referred to in this book, with which you should be familiar. The accounting entity concept One of the most basic concepts used in the preparation of financial statements is that of the accounting entity. An accounting entity® is an organisation (or a section of an organisation) that stands apart from other organisations and individuals as a separate economic unit for the purpose of some decision. Sharp boundaries are drawn around each entity so as not to confuse its affairs with those of other entities. From an accounting perspective, only information about transactions relating to the entity is included in its financial statements. Recall transaction number 11 discussed earlier in this chapter, where Sheena Bright spent $40 000 to remodel her kitchen. This wasn't a transaction of Sheena's business, Smart Touch. Following the entity concept, Smart Touch must not include this transaction in its accounting records. To mix this $40 000 of personal expenditure with Smart Touch's business transactions would make it difficult to measure the financial position and performance of the business and prevent Sheena from making well-informed business decisions about Smart Touch. In summary, the entity concept applies to any economic unit that needs to be evaluated separately. See Chapter 17 for further details. The accounting period concept Another fundamental principle used in the preparation of financial statements is the accounting period@ concept, which defines the unit of time for which accounting data are collected. Businesses need periodic reports on their progress. Accountants therefore estimate profitability in segments of time that we call accounting periods. Most accounting periods in published financial statements are one year in length. In Australia the most common annual accounting period is 1 July to 30 June of the following year. For example, JB Hi-Fi, Qantas, BHP, Spark and Telstra have a 30 June accounting year-end. In fact, most businesses in Australia usually have that date; it coincides with the Australian tax year-end. The New Zealand tax year ends on 31 March. While a 12-month reporting period is generally required for most businesses to formally prepare full financial statements, some large businesses are also required to, or voluntarily, produce interim financial statements for periods of less than one year. In addition, managers and investors normally cannot wait until the end of the year to gauge a firm's progress. Many businesses therefore also prepare financial statements for periods that are less than a year, and often monthly for internal purposes. The accrual basis of accounting Under accrual accounting@, the effects of transactions are recognised when they occur (and not as cash is received or paid). Accountants adopt the position that profits from activities should be recognised when the sales and any other revenues or gains relating to the activities are 'earned' and can be reliably measured, regardless of when the cash payment is received. Accrual accounting is the form of accounting that we applied to the earlier set of transactions (re-visit transactions 3 and 5 in particular to see this) and that we apply in the remainder of this book. There are a number of different approaches to estimating how much and when profit or revenue has been earned, and these will be discussed in detail in later chapters. A legally enforceable debt from a customer on a completed contract is sufficient grounds for recognising a profit. However, it also means that ordinarily profits shouldn't be recognised until a sale has taken place (which normally means exchange of the goods or service). Try it! 1. 1[18]Source: BUSN7008_61-181.pdfgoing concern assumption (p. 20) income (p. 7) income statement! (p. 14) International Accounting Standards (IASs) @ (p. 18) International Accounting Standards Board (IASB) ª (p. 18) International Financial Reporting Standards (IRFSs) (p. 18) liabilities (p. 6) loss (p. 14) management accounting (p. 3) New Zealand Accounting Standards Board (NZASB) @ (p. 17) owners' equity (p. 6) partnership (p. 22) profit (p. 14) proprietorship (p. 22) relevance (p. 20) revenues ! (p. 7) shareholder (p. 22) statement of changes in equity (p. 14) statement of financial position (p. 14) transaction (p. 7) Student success tips The following are hints on some common trouble areas for students in this chapter: · The four financial statements are prepared in this order: income statement, statement of changes in equity, balance sheet, cash flow statement. · The accounting equation contains the same accounts as the balance sheet: Assess = Liabilities + Equity. · Business forms vary, but the purpose of accounting is to provide information to users of financial information. · Accounting concepts define what we record about business activities. Assess Quick check 1. Accounting is the information system that: a. measures business activities b. communicates the results to decision makers c. processes information into reports d. All of the above 2. Which of the following is not an external user of a business's financial information? a. Tax authorities b. Customers c. Employees d. Investors 3. At the end of a recent year, Global Cleaning Service, a full-service house and office cleaning service, had total assets of $3 630 and equity of $2 280. How much were Global Cleaning Service's liabilities? a. $5 910 b. $3 630 c. $1 350 d. $2 280 4. Consider the overall effects on Global Cleaning Service from selling and performing services on credit for $6 400 and paying expenses totalling $2 500. What is Global Cleaning Service's profit or loss? a. Profit of $3 900.

5. Ethics and Sustainability

• Accountants are held to standards of integrity, objectivity, competence, confidentiality, and professional behaviour.
• Sustainability means the business should remain profitable and not harm society/environment [7]Source: BUSN7008_61-181.pdfthe the proprietor the partners shareholders Comparison of the three forms of business organisation Accounting for companies includes some unique complexities. For this reason, we initially focus on proprietorships. We cover special aspects relating to partnerships in Chapter 13 and to companies in Chapters 14 and 159. However, the basic accounting procedures we deal with in the chapters up to Chapter 13" apply equally to all forms of organisation. Try it! 1. 2 How does a firm choose the best form of organisation to suit its business? (Legal and tax implications concerning liabilities mean that this decision is usually taken based on advice from accountants and lawyers. ) 1. 8 How do ethics and sustainability relate to accounting? LO 8 Explain the role of ethics and sustainability in accounting Ethics There have been a number of large, high-profile corporate collapses in Australia, New Zealand and the United States that saw shareholders suddenly find their previously valuable shares worthless. In addition, as you can see in the Connect to: Ethics " box below, corporate fraud-some of it involving accounting malpractice-is a problem. The common element with these instances is greed on the part of people who control or can manipulate financial decisions relating to the disposition of resources. Since the preparation and checking or 'auditing' of financial reports should in theory play a key role in identifying and controlling such greed and malpractice, we are confronted with moral, as well as technical, questions about how accounting information should be measured, disclosed and used. To further emphasise the importance of ethics, each chapter in this text contains a Focus on ethics scenario to encourage discussion of hypothetical ethical challenges in accounting. Most ethical questions in accounting ultimately relate to the standard of moral behaviour expected of accountants in pursuing their professional activities. They are responsible for deciding what goes into and what is left out of financial reports. Suppose that a large firm is the defendant in a legal action that threatens to put it out of business. The managers of the firm may be tempted to hide the potential implications of the legal action for fear that its share price may fall or that banks will stop lending it money. Should the firm disclose this sensitive information? Accounting standards and principles require the firm to describe this situation in its financial statements, and the firm's auditor is required to state whether the disclosure is adequate. By what criteria do accountants address questions that challenge their professional ethical conduct? Accountants have mostly taken the view that there are certain, self-evident duties expected of them, which are expressed in codes of professional conduct. Connect to: Ethics Staying vigilant-or turning a blind eye? PwC's 2018 Global Economic Crime and Fraud Survey finds that 49% of global organisations say they've experienced economic crime in the past two years. But what about the other 51%? Have they avoided falling victim-or simply don't know about it? Since fraud hides in the shadows, one of the most powerful weapons in a fraudster's armoury is a lack of awareness within organisations. It's time for all businesses to recognise the true nature of the threat: not as just a nuisance or cost of doing business, but a shadow industry with tentacles in every country, sector and function. The survey results included the following findings: 1. 64% of respondents said losses due directly to their most disruptive fraud could reach US$1 million. 2. 52% of all frauds are perpetrated by people inside the organisation. 3. 31% of respondents that suffered fraud indicated they experienced cybercrime. Source: Adapted from 'Pulling fraud out of the shadows-The biggest competitor you didn't know you had', PwC's 2018 Global Economic Crime and Fraud Survey, PwC, 2018, https://www. pwc. com. Codes of professional conduct CAANZ and CPAA Australia have a joint code of ethics for professional accountants, issued through the Accounting Professional and Ethical Standards Board (APESB). See http://www. apesb. org. au/issued- standards to view a copy of the code. Other accountancy bodies have similar codes. The code has the purpose of maintaining and enhancing the credibility, professionalism and quality of accountants, and providing the public with confidence in their services. It lays down minimum standards of conduct and isn't meant to be exhaustive. Rather, it deals with matters of general principle that members should interpret in accordance with the spirit of the code. The principles listed in the code are: (1) Integrity (to be honest, fair and sincere); (2) Objectivity (to avoid conflicts of self-interest and bias); (3) Professional competence and due care (adherence to technical standards); (4) Confidentiality (non-disclosure of sensitive information); and (5) Professional behaviour (including compliance with the law). Some of these principles clearly overlap, and sometimes they have to be prioritised. This calls for the exercise of sub jective judgement, and it's not always the case that individual accountants will agree on what is the right thing to do. Sustainability One of the very important issues facing all businesses today is whether or not they are sustainable. Sustainability applies to businesses internally and externally. Internally, it has to do with whether a business can continue to be profitable in the future as well as in the present. Through the going concern assumption, sustainability is normally assumed in financial reports containing accounting data. Externally, sustainability has to do with the society and environment in which the business operates. Sustainability has been defined as 'meeting the needs of the present without compromising the ability of future generations to meet their own needs'. For example, Australia has developed a carbon accounting system to measure and track the level of carbon emissions in the country, in accordance with its international obligations and the activities of international bodies such as the Intergovernmental Panel on Climate Change, http://www. ipcc. ch/. The Sustainability in action ! box here shows some of the mostly physical carbon emissions data reported on a quarterly basis, as produced by the carbon accounting system..

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Financial Statements Overview

The four main financial statements and preparation order:

1. Income Statement
   Reports revenues and expenses, calculating profit or loss: $$ \text{Profit (or Loss)} = \text{Revenues} - \text{Expenses} $$

2. Statement of Changes in Equity
   Reconciles beginning and ending owner’s equity: $$ \text{Ending Capital} = \text{Beginning Capital} + \text{Owner Investments} + \text{Profit} - \text{Withdrawals} $$

3. Balance Sheet (Statement of Financial Position)
   Presents assets, liabilities, and owner’s equity at a certain date.

4. Cash Flow Statement
   Summarizes cash inflows and outflows over a period [14]Source: BUSN7008_61-181.pdfTotal expenses 3 300 Profit 5 200 SMART TOUCH LEARNING Statement of changes in equity for the month ended 31 May 2021 S Sheena Bright, capital, 1 May 2021 Add: Investments by owner Profit for the month 5 200 35 200 Less: Drawings by owner Sheena Bright, capital, 31 May 2021 33 200 SMART TOUCH LEARNING Balance sheet as at 31 May 2021 S S Assets Liabilities Cash 19 900 Accounts payable Accounts receivable 2 000 Office supplies Owners' equity Land 11 000 Sheena Bright, capital 33 200 Total liabilities and Total assets[9]Source: BUSN7008_61-181.pdf11. Statement of changes in equity I. Reports on an entity's assets, liabilities, and owner's equity as of a specific date J. Reports on an entity's revenues, expenses, and profit or loss for the period K. Reports how the owner's capital balance changed from the beginning to the end of the period sheet E1-3 USING THE ACCOUNTING EQUATION [5 MIN] (LO 29) Calculate the missing amount in the accounting equation for each entity from the financial information presented: Assets Liabilities Equity Newton Gas $ ? $64 000 $80 000 Victoria Video Rentals 65 000 ? 25 000 Cline's Grocery 200 000 43 000 ? E1-4 USING THE ACCOUNTING EQUATION [5 MIN] (LO 29) Green City Builders' balance sheet data at 31 May 2021 and at 30 June 2021 follow: 31 May 2021 30 June 2021 Total assets $188 000 $244 000[18]Source: BUSN7008_61-181.pdfgoing concern assumption (p. 20) income (p. 7) income statement! (p. 14) International Accounting Standards (IASs) @ (p. 18) International Accounting Standards Board (IASB) ª (p. 18) International Financial Reporting Standards (IRFSs) (p. 18) liabilities (p. 6) loss (p. 14) management accounting (p. 3) New Zealand Accounting Standards Board (NZASB) @ (p. 17) owners' equity (p. 6) partnership (p. 22) profit (p. 14) proprietorship (p. 22) relevance (p. 20) revenues ! (p. 7) shareholder (p. 22) statement of changes in equity (p. 14) statement of financial position (p. 14) transaction (p. 7) Student success tips The following are hints on some common trouble areas for students in this chapter: · The four financial statements are prepared in this order: income statement, statement of changes in equity, balance sheet, cash flow statement. · The accounting equation contains the same accounts as the balance sheet: Assess = Liabilities + Equity. · Business forms vary, but the purpose of accounting is to provide information to users of financial information. · Accounting concepts define what we record about business activities. Assess Quick check 1. Accounting is the information system that: a. measures business activities b. communicates the results to decision makers c. processes information into reports d. All of the above 2. Which of the following is not an external user of a business's financial information? a. Tax authorities b. Customers c. Employees d. Investors 3. At the end of a recent year, Global Cleaning Service, a full-service house and office cleaning service, had total assets of $3 630 and equity of $2 280. How much were Global Cleaning Service's liabilities? a. $5 910 b. $3 630 c. $1 350 d. $2 280 4. Consider the overall effects on Global Cleaning Service from selling and performing services on credit for $6 400 and paying expenses totalling $2 500. What is Global Cleaning Service's profit or loss? a. Profit of $3 900.

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Practice Examples and Exercises

• Exercises include opening T-accounts, journalizing transactions, posting to T-accounts, and preparing trial balances.
• Example transactions: investments from owners, purchasing assets/supplies, providing services (for cash and credit), payments for expenses, owner withdrawals [23]Source: Week2.pdfRequirements 1. Open T-accounts: Cash; Accounts receivable; Supplies; Equipment; Furniture; Accounts payable; Carl Draper, capital; Carl Draper, drawings; Service revenue; Rent expense; Electricity and gas expense. 2. Journalise the transactions. Explanations aren't required. 3. Post to the T-accounts. Key all items by date and denote an account balance as Bal. Formal posting references aren't required. 4. Prepare a trial balance at 18 December 2021. (In the Continuing Problem in Chapter 3 D, we will add transactions for the remainder of December and prepare a trial balance as at 31 December 2021. ) [GENTLE REMINDERS] 1. Students are encouraged to try every question before attending the tutorial. 2. In each tutorial, your tutor will lead the discussion of tutorial questions first. If time permits, we may discuss homework exercise upon request. 3. The solution will be available on the course Wattle page after we finish all tutorials in that week. 2 / 2[24]Source: Week2.pdfRequirements 1. Open T-accounts: Cash; Accounts receivable; Supplies; Equipment; Furniture; Accounts payable; Carl Draper, capital; Carl Draper, drawings; Service revenue; Rent expense; Electricity and gas expense. 2. Journalise the transactions. Explanations aren't required. 3. Post to the T-accounts. Key all items by date and denote an account balance as Bal. Formal posting references aren't required. 4. Prepare a trial balance at 18 December 2021. (In the Continuing Problem in Chapter 3 D, we will add transactions for the remainder of December and prepare a trial balance as at 31 December 2021. ) [GENTLE REMINDERS] 1. Students are encouraged to try every question before attending the tutorial. 2. In each tutorial, your tutor will lead the discussion of tutorial questions first. If time permits, we may discuss homework exercise upon request. 3. The solution will be available on the course Wattle page after we finish all tutorials in that week. 2 / 2[53]Source: Week2.pdfProblem CP-2 continues with the consulting business of Carl Draper, begun in Problem CP-1 [ in Chapter 1 D. Here, you will account for Draper Consulting's transactions as it is actually done in practice. Draper Consulting completed the following transactions during the first half of December 2021: Dec 2 Received $18 000 cash investment by Carl Draper. 2 Paid monthly office rent, $550. 3 Paid cash for a Dell computer, $1 800. This equipment is expected to remain in service for five years. 4 Purchased office furniture on credit, $4 200. The furniture should last for five years. 5 Purchased supplies on credit, $900. 9 Performed consulting service for a client on credit, $1 500. 12 Paid electricity and gas expenses, $250. 18 Performed service for a client and received cash of $1 100.[54]Source: Week2.pdfProblem CP-2 continues with the consulting business of Carl Draper, begun in Problem CP-1 [ in Chapter 1 D. Here, you will account for Draper Consulting's transactions as it is actually done in practice. Draper Consulting completed the following transactions during the first half of December 2021: Dec 2 Received $18 000 cash investment by Carl Draper. 2 Paid monthly office rent, $550. 3 Paid cash for a Dell computer, $1 800. This equipment is expected to remain in service for five years. 4 Purchased office furniture on credit, $4 200. The furniture should last for five years. 5 Purchased supplies on credit, $900. 9 Performed consulting service for a client on credit, $1 500. 12 Paid electricity and gas expenses, $250. 18 Performed service for a client and received cash of $1 100.[45]Source: Lecture 2 for Wattle.pdfSlide 18 An example On 1 May 2021, Sheena Bright started the business titled ' Smart Touch Learning'. The following events occurred in May. May 1 Sheena Bright invested $30000 cash in the business 2 Paid 20,000 cash for land 3 Bought $500 of office supplies on credit 4 Received $5 500 cash from clients for service revenue earned. 5 Performed training service for clients on credit, $ 3000 6 Paid cash expenses: computer lease, $600; office rent, $1 100; employee salary, $1200; electricity and gas, $400. 7 Paid $300 on the accounts payable created in transaction 3.[39]Source: Week2.pdfJan 1 The business received $35 000 cash as capital from Denichi. 2 Purchased medical supplies on credit, $13 000. 4 Performed services for patients, receiving $1 900. Paid monthly office rent of $2 600. 15 Recorded $10 000 revenue for services rendered to patients on credit. 1/2 Copyright @ Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2021 [PART B: TUTORIAL QUESTION] Continuing problem CP-2 Journalising transactions, posting to T-accounts and preparing a trial balance [40-50 min] (LO 2 0, 310, 49,.

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Key Takeaways

• Accounting organizes and reports financial information to help in business decisions.
• Recording transactions, debits/credits, and double-entry systems are the foundation for accurate reporting.
• Ethics, principles, and standards underlie trustworthy and comparable financial information.
• Understanding the accounting cycle—from transaction analysis to preparing statements—is essential for anyone studying accounting.
• Practical application: You must be able to journalize, post, and create a simple set of accounts and reports.

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References:
All points above are supported and sourced from the slides and textbook as found in the provided files [20]Source: BUSN7008_61-181.pdf17 700 Building 48 000 Less: Accumulated depreciation-building 47 800 Owners' equity Total non-current assets 65 500 Sheena Bright, capital 35 900 Total assets 106 000 Total liabilities and owners' equity 106 000 V Learning objectives LO 1 Explain why accounting is important LO 2 Describe the accounting equation, and define assets, liabilities and equity LO 3 Use the accounting equation to analyse transactions@ LO 4 Prepare financial statements LO 5 £ Use financial statements and return on assets (ROA) to evaluate business performance LO 6 Describe the organisations and principles that govern accounting@ LO 7 Identify the three main types of business organisation LO 8 Explain the role of ethics and sustainability in accounting THINK ABOUT A DECISION YOU HAVE MADE RECENTLY. While many of your decisions are routine and can be made without reference to detailed information, such as which clothes to wear in the morning, other decisions are more infrequent and have longer-lasting effects, such as choosing a mobile phone network and contract type. The bigger the decision, the more information you will want before making it. In the choice of which type of mobile phone to buy, in order to make the best decision you would need to know what each option provides (for example, the number of minutes included and the amount of data allowed), as well as the cost of each plan. What you are doing is weighing up the costs and benefits of each option. In the world of commerce and beyond, organisations use accounting information to inform them prior to making important decisions. For example, if the retail giant Myer considered a bid to purchase rival David Jones, how much should it pay? The answer depends partly on what the accounting information says David Jones is worth. The 'balance sheet' shown above is one of the most important and central financial statements prepared by accountants. Accounting information enables people and organisations to make better decisions. Smart Touch, whose balance sheet is illustrated, is a small business, but its balance sheet contains the same type of information as that shown in the balance sheet of very large organisations such as JB Hi-Fi. The same is true for the other financial statements that all well-run businesses prepare and use, and which you will learn about as you work your way through this book. In this introductory chapter we introduce accounting in a small business context through Sheena Bright's Smart Touch Learning; and later, starting in Chapter 59, through Greg Moore's Greg's Tunes. You will see how Sheena and Greg run successful businesses by treating people fairly, planning for activities that are sustainable, and capitalising on their general business and accounting acumen. You will also see how understanding financial statements like the balance sheet is one of the first steps towards business success. We will be following the fortunes of Smart Touch and Greg's Tunes throughout the text to see how different accounting concepts relate to their businesses. In addition, we will use examples from large firms to illustrate the fact that the same accounting principles apply to firms of any size. By the time you get to the chapter on the framework of accounting, you will have a broad appreciation of how accountants prepare financial statements for all types of organisation. 1. 1 Why is accounting important?[4]Source: BUSN7008_61-181.pdfWhile much of the training provided by the accounting bodies referred to above is about being able to correctly apply the accounting standards, the standards themselves are not created by these bodies. Australia and New Zealand both have standards boards dedicated to setting accounting standards. As noted earlier in the Connect to: Accounting standards box, the relevant board in Australia is the Australian Accounting Standards Board (AASB)$ and in New Zealand is the New Zealand . . . . . . Accounting Standards Board (NZASB) @. The AASB is overseen by the Financial Reporting Council (FRC)®, which is in turn responsible to a federal government minister. Likewise, in New Zealand the External Reporting Board (XRB) @ oversees the work of the NZASB as an agency of government. The nature of these processes means that accounting standards effectively have the force of law in both countries. Since the last half of the first decade of this millennium, accounting standards in Australia and New Zealand have been almost entirely based on International Accounting Standards (IASs) @ issued by the International Accounting Standards Board (IASB)®. Many other . . . . . . . . countries now also base their accounting principles on these international standards or are moving closer to them, as part of a global attempt to improve the comparability of financial statements across national borders. These matters will be covered in more detail in Chapter 179. The numbering of the international accounting standards adopted by Australia and New Zealand follow similar, but slightly different, rules. The standards have a two-tier numbering system, depending on whether the accounting standard pre-dates the formation of the current IASB or were produced after that date. The earlier standards are referred to as 'IASs' and are followed by a number indicating their order in the sequence of all such IASs; the latter are referred to as 'IFRSs' followed by a sequential number, the acronym IFRS standing for International Financial Reporting Standard ®. · In Australia, an accounting standard adopted as 'equivalent' to, say, IASx, where x is a number, is titled 'AASB (100 + x)', while an IFRS standard, say IFRSx, is simply titled 'AASB x'. Thus, IAS 1 as adopted in Australia is AASB 101 while IFRS 1 became AASB 1 when adopted there. · In New Zealand the practice is more simply to add 'NZ' to the equivalent IAS title, keeping the same numbering system. Thus IAS 1 became NZIAS 1, whereas IFRS 1 became NZIFRS 1 when adopted in New Zealand. There are very few differences between the corresponding AASBs and the NZIASs and NZIFRSs, but we will note any that are significant and relevant when they are referenced in the text. The basic flow of authority for accounting standards in Australia and New Zealand is shown in Exhibit 1-59. Exhibit 1-5 Regulators In Australia under federal law the Australian Securities and Investments Commission (ASIC) regulates the securities market and the Financial Reporting Council (FRC) oversees the AASB. In New Zealand the Financial Markets Authority (FMA) regulates the securities market and the External Reporting Board (XRB) oversees the NZASB. Standard setting Accountants apply accounting standards. The national organisations most concerned with standards in Australia and New Zealand are CPAA and CAANZ. Accounting standards The Australian Accounting Standards Board (AASB) and the New Zealand Accounting standards board (NZASB) produce country- specific accounting standards based on international standards following a system of due process. Key organisations in the standard-setting process There are a number of basic concepts and principles that underpin the accounting standards referred to in this book, with which you should be familiar. The accounting entity concept One of the most basic concepts used in the preparation of financial statements is that of the accounting entity. An accounting entity® is an organisation (or a section of an organisation) that stands apart from other organisations and individuals as a separate economic unit for the purpose of some decision. Sharp boundaries are drawn around each entity so as not to confuse its affairs with those of other entities. From an accounting perspective, only information about transactions relating to the entity is included in its financial statements. Recall transaction number 11 discussed earlier in this chapter, where Sheena Bright spent $40 000 to remodel her kitchen. This wasn't a transaction of Sheena's business, Smart Touch. Following the entity concept, Smart Touch must not include this transaction in its accounting records. To mix this $40 000 of personal expenditure with Smart Touch's business transactions would make it difficult to measure the financial position and performance of the business and prevent Sheena from making well-informed business decisions about Smart Touch. In summary, the entity concept applies to any economic unit that needs to be evaluated separately. See Chapter 17 for further details. The accounting period concept Another fundamental principle used in the preparation of financial statements is the accounting period@ concept, which defines the unit of time for which accounting data are collected. Businesses need periodic reports on their progress. Accountants therefore estimate profitability in segments of time that we call accounting periods. Most accounting periods in published financial statements are one year in length. In Australia the most common annual accounting period is 1 July to 30 June of the following year. For example, JB Hi-Fi, Qantas, BHP, Spark and Telstra have a 30 June accounting year-end. In fact, most businesses in Australia usually have that date; it coincides with the Australian tax year-end. The New Zealand tax year ends on 31 March. While a 12-month reporting period is generally required for most businesses to formally prepare full financial statements, some large businesses are also required to, or voluntarily, produce interim financial statements for periods of less than one year. In addition, managers and investors normally cannot wait until the end of the year to gauge a firm's progress. Many businesses therefore also prepare financial statements for periods that are less than a year, and often monthly for internal purposes. The accrual basis of accounting Under accrual accounting@, the effects of transactions are recognised when they occur (and not as cash is received or paid). Accountants adopt the position that profits from activities should be recognised when the sales and any other revenues or gains relating to the activities are 'earned' and can be reliably measured, regardless of when the cash payment is received. Accrual accounting is the form of accounting that we applied to the earlier set of transactions (re-visit transactions 3 and 5 in particular to see this) and that we apply in the remainder of this book. There are a number of different approaches to estimating how much and when profit or revenue has been earned, and these will be discussed in detail in later chapters. A legally enforceable debt from a customer on a completed contract is sufficient grounds for recognising a profit. However, it also means that ordinarily profits shouldn't be recognised until a sale has taken place (which normally means exchange of the goods or service). Try it! 1. 1[35]Source: Lecture 2 for Wattle.pdf191 Land INCOME STATEMENT ACCOUNTS (PART OF OWNERS' EQUITY): REVENUES EXPENSES 401 Service revenue 501 Rent expense 502 Salary expense 503 Electricity and gas expense Chart of accounts-Smart Touch Learning Slide 8[5]Source: Lecture 2 for Wattle.pdfLIABILITIES OWNERS' EQUITY 101 Cash 201 Accounts payable 301 Sheena Bright, capital 111 Accounts receivable 231 Bills payable 311 Sheena Bright, drawings 141 Office supplies 151 Office furniture[16]Source: Lecture 2 for Wattle.pdfBUSN 7008 Financial Statements & Reporting Lecturer: Dr. Lijuan (Lily) Zhang Week 2: RECORDING BUSINESS TRANSACTIONS (Textbook Chapter 2) Slide 1 Learning objectives 1. Explain accounts as they relate to the accounting equation, and describe common accounts 2. Define debits, credits and normal account balances using double-entry accounting and T-accounts 3. List the steps of the transaction recording process 4. Record transactions in the journal 5. Post transactions from the journal to the ledger[36]Source: Lecture 2 for Wattle.pdf6. Prepare the trial balance from the T-accounts Slide 2 The account, the ledger and the journal Slide 3 The account, the ledger and the journal Record transactions as journal entries Post to the ledger Prepare the trial balance Slide 4 Recording transactions in the journal[23]Source: Week2.pdfRequirements 1. Open T-accounts: Cash; Accounts receivable; Supplies; Equipment; Furniture; Accounts payable; Carl Draper, capital; Carl Draper, drawings; Service revenue; Rent expense; Electricity and gas expense. 2. Journalise the transactions. Explanations aren't required. 3. Post to the T-accounts. Key all items by date and denote an account balance as Bal. Formal posting references aren't required. 4. Prepare a trial balance at 18 December 2021. (In the Continuing Problem in Chapter 3 D, we will add transactions for the remainder of December and prepare a trial balance as at 31 December 2021. ) [GENTLE REMINDERS] 1. Students are encouraged to try every question before attending the tutorial. 2. In each tutorial, your tutor will lead the discussion of tutorial questions first. If time permits, we may discuss homework exercise upon request. 3. The solution will be available on the course Wattle page after we finish all tutorials in that week. 2 / 2[24]Source: Week2.pdfRequirements 1. Open T-accounts: Cash; Accounts receivable; Supplies; Equipment; Furniture; Accounts payable; Carl Draper, capital; Carl Draper, drawings; Service revenue; Rent expense; Electricity and gas expense. 2. Journalise the transactions. Explanations aren't required. 3. Post to the T-accounts. Key all items by date and denote an account balance as Bal. Formal posting references aren't required. 4. Prepare a trial balance at 18 December 2021. (In the Continuing Problem in Chapter 3 D, we will add transactions for the remainder of December and prepare a trial balance as at 31 December 2021. ) [GENTLE REMINDERS] 1. Students are encouraged to try every question before attending the tutorial. 2. In each tutorial, your tutor will lead the discussion of tutorial questions first. If time permits, we may discuss homework exercise upon request. 3. The solution will be available on the course Wattle page after we finish all tutorials in that week. 2 / 2[45]Source: Lecture 2 for Wattle.pdfSlide 18 An example On 1 May 2021, Sheena Bright started the business titled ' Smart Touch Learning'. The following events occurred in May. May 1 Sheena Bright invested $30000 cash in the business 2 Paid 20,000 cash for land 3 Bought $500 of office supplies on credit 4 Received $5 500 cash from clients for service revenue earned. 5 Performed training service for clients on credit, $ 3000 6 Paid cash expenses: computer lease, $600; office rent, $1 100; employee salary, $1200; electricity and gas, $400. 7 Paid $300 on the accounts payable created in transaction 3.[53]Source: Week2.pdfProblem CP-2 continues with the consulting business of Carl Draper, begun in Problem CP-1 [ in Chapter 1 D. Here, you will account for Draper Consulting's transactions as it is actually done in practice. Draper Consulting completed the following transactions during the first half of December 2021: Dec 2 Received $18 000 cash investment by Carl Draper. 2 Paid monthly office rent, $550. 3 Paid cash for a Dell computer, $1 800. This equipment is expected to remain in service for five years. 4 Purchased office furniture on credit, $4 200. The furniture should last for five years. 5 Purchased supplies on credit, $900. 9 Performed consulting service for a client on credit, $1 500. 12 Paid electricity and gas expenses, $250. 18 Performed service for a client and received cash of $1 100.[54]Source: Week2.pdfProblem CP-2 continues with the consulting business of Carl Draper, begun in Problem CP-1 [ in Chapter 1 D. Here, you will account for Draper Consulting's transactions as it is actually done in practice. Draper Consulting completed the following transactions during the first half of December 2021: Dec 2 Received $18 000 cash investment by Carl Draper. 2 Paid monthly office rent, $550. 3 Paid cash for a Dell computer, $1 800. This equipment is expected to remain in service for five years. 4 Purchased office furniture on credit, $4 200. The furniture should last for five years. 5 Purchased supplies on credit, $900. 9 Performed consulting service for a client on credit, $1 500. 12 Paid electricity and gas expenses, $250. 18 Performed service for a client and received cash of $1 100.[14]Source: BUSN7008_61-181.pdfTotal expenses 3 300 Profit 5 200 SMART TOUCH LEARNING Statement of changes in equity for the month ended 31 May 2021 S Sheena Bright, capital, 1 May 2021 Add: Investments by owner Profit for the month 5 200 35 200 Less: Drawings by owner Sheena Bright, capital, 31 May 2021 33 200 SMART TOUCH LEARNING Balance sheet as at 31 May 2021 S S Assets Liabilities Cash 19 900 Accounts payable Accounts receivable 2 000 Office supplies Owners' equity Land 11 000 Sheena Bright, capital 33 200 Total liabilities and Total assets[31]Source: Lecture 2 for Wattle.pdfDebits, credits and double-entry accounting Account Title Left side Debit side Right side Credit side Dr. = Debit Cr. = Credit Slide 9 Debits, credits and double-entry accounting - Assets = Liabilities + Owners' Equity - Debits = Credits[30]Source: Lecture 2 for Wattle.pdf- Normal debit balance: Normal credit balance: Assets, expenses and drawings Liabilities, capital and revenue Slide 12[3]Source: Lecture 2 for Wattle.pdfDr. - Cr. + Dr. - Cr. + OWNERS' DRAWINGS Dr. Cr. - + REVENUES Dr. - Cr. + Dr. + Cr. -[27]Source: BUSN7008_61-181.pdfProprietorships A proprietorship®, or 'sole trader' or 'sole proprietor', has a single owner, called the proprietor, who is often also the manager. Many small businesses start out as a proprietorship; they tend to be small retail establishments or individual professional businesses, such as those of doctors, lawyers and accountants. From the accounting viewpoint, each proprietorship is distinct from its proprietor (the accounting entity concept). However, in law, proprietors are still responsible for settling the debts of the business if there are insufficient proceeds from the sale of the business; that is, they have unlimited liability for their firms' debts. Smart Touch is a proprietorship. Partnerships A partnership® joins two or more individuals together as co-owners. Each owner is a partner. Many professional organisations of doctors, lawyers and accountants are partnerships. Most partnerships are small or medium-sized, but some are large, such as the 'Big Four' accounting firms. Like a proprietorship, a partnership is separate from its owners from an accounting viewpoint. However, if the partnership is of the 'general' form then, as with a proprietorship, the partners are responsible in law for settling the debts of their firm (even business debts incurred by other partners). There are also special forms of limited partnership in some Australian states and territories that provide limited liability for partners if they aren't involved in managing the business. Companies A company® is a business owned by shareholders ®, people who each own a share of the business. A company is incorporated as a legal entity, an 'artificial person', that conducts business in its own name, and normally its owners (shareholders) have limited liability. This means that if a company goes bankrupt, the liability of the owners to repay creditors is normally limited to the amount of money they invested. This limited personal liability of shareholders for corporate debts partly explains why companies are the dominant form of business organisation: people can ed personal risk. JB Hi-Fi (http://www. jbhifi. com. au), Qantas (http:// www. qantas. com. au), BHP Billiton (http://www. bhp. com) and Spark (http://www. sparknz. co. nz/) are examples of companies limited by shares. The importance of the simple option of being able to divide the ownership of an organisation into individual shares is illustrated by BHP Billiton. Its shares are owned by hundreds of thousands of shareholders. An investor with no personal relationship either to the company or to any other shareholder can become a co-owner by buying just a few of its shares. For most companies quoted on the Australian Securities Exchange (ASX) or New Zealand Stock Exchange (NZX) the investor can sell the shares at any time, unless it is a private company. It is usually harder to sell out of a proprietorship or a partnership than it is to sell out of a company. Exhibit 1-6 summarises the differences between the three main types of business organisation. Exhibit 1-6 Proprietorship Partnership Company 1 Owner(s) Proprietor- Partners- Shareholders- there is one there are two there are owner or more generally many owners owners 2 Life of Limited by Limited by Indefinite organisation[13]Source: BUSN7008_61-181.pdfowner's choice owners' or death choices or death Proprietorship Partnership Company 3 Personal Proprietor is Partners are Shareholders liability of personally liable personally are not owner(s) for liable personally liable business debts 4 Accounting The The The company is status proprietorship is partnership is separate from separate from separate from[47]Source: Lecture 2 for Wattle.pdf= Liabilities + Owners' equity Capital - Drawings + (Revenues - Expenses) Slide 11 The normal balance of an account EXHIBIT 2-8 Complete rules of debit and credit Assets = Liabilities + Owners' equity ASSETS[48]Source: Lecture 2 for Wattle.pdf· Buildings Slide 5 Liabilities A liability is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. Common liabilities include: · Accounts payable · Bills payable · Accrued liability A liability for an expense that hasn't been invoiced or revenues that have been received but not yet earned and which haven't been recorded as an accounts payable or an accounts receivable. (e. g. Salary payable, interest payable) Slide 6[18]Source: BUSN7008_61-181.pdfgoing concern assumption (p. 20) income (p. 7) income statement! (p. 14) International Accounting Standards (IASs) @ (p. 18) International Accounting Standards Board (IASB) ª (p. 18) International Financial Reporting Standards (IRFSs) (p. 18) liabilities (p. 6) loss (p. 14) management accounting (p. 3) New Zealand Accounting Standards Board (NZASB) @ (p. 17) owners' equity (p. 6) partnership (p. 22) profit (p. 14) proprietorship (p. 22) relevance (p. 20) revenues ! (p. 7) shareholder (p. 22) statement of changes in equity (p. 14) statement of financial position (p. 14) transaction (p. 7) Student success tips The following are hints on some common trouble areas for students in this chapter: · The four financial statements are prepared in this order: income statement, statement of changes in equity, balance sheet, cash flow statement. · The accounting equation contains the same accounts as the balance sheet: Assess = Liabilities + Equity. · Business forms vary, but the purpose of accounting is to provide information to users of financial information. · Accounting concepts define what we record about business activities. Assess Quick check 1. Accounting is the information system that: a. measures business activities b. communicates the results to decision makers c. processes information into reports d. All of the above 2. Which of the following is not an external user of a business's financial information? a. Tax authorities b. Customers c. Employees d. Investors 3. At the end of a recent year, Global Cleaning Service, a full-service house and office cleaning service, had total assets of $3 630 and equity of $2 280. How much were Global Cleaning Service's liabilities? a. $5 910 b. $3 630 c. $1 350 d. $2 280 4. Consider the overall effects on Global Cleaning Service from selling and performing services on credit for $6 400 and paying expenses totalling $2 500. What is Global Cleaning Service's profit or loss? a. Profit of $3 900[7]Source: BUSN7008_61-181.pdfthe the proprietor the partners shareholders Comparison of the three forms of business organisation Accounting for companies includes some unique complexities. For this reason, we initially focus on proprietorships. We cover special aspects relating to partnerships in Chapter 13 and to companies in Chapters 14 and 159. However, the basic accounting procedures we deal with in the chapters up to Chapter 13" apply equally to all forms of organisation. Try it! 1. 2 How does a firm choose the best form of organisation to suit its business? (Legal and tax implications concerning liabilities mean that this decision is usually taken based on advice from accountants and lawyers. ) 1. 8 How do ethics and sustainability relate to accounting? LO 8 Explain the role of ethics and sustainability in accounting Ethics There have been a number of large, high-profile corporate collapses in Australia, New Zealand and the United States that saw shareholders suddenly find their previously valuable shares worthless. In addition, as you can see in the Connect to: Ethics " box below, corporate fraud-some of it involving accounting malpractice-is a problem. The common element with these instances is greed on the part of people who control or can manipulate financial decisions relating to the disposition of resources. Since the preparation and checking or 'auditing' of financial reports should in theory play a key role in identifying and controlling such greed and malpractice, we are confronted with moral, as well as technical, questions about how accounting information should be measured, disclosed and used. To further emphasise the importance of ethics, each chapter in this text contains a Focus on ethics scenario to encourage discussion of hypothetical ethical challenges in accounting. Most ethical questions in accounting ultimately relate to the standard of moral behaviour expected of accountants in pursuing their professional activities. They are responsible for deciding what goes into and what is left out of financial reports. Suppose that a large firm is the defendant in a legal action that threatens to put it out of business. The managers of the firm may be tempted to hide the potential implications of the legal action for fear that its share price may fall or that banks will stop lending it money. Should the firm disclose this sensitive information? Accounting standards and principles require the firm to describe this situation in its financial statements, and the firm's auditor is required to state whether the disclosure is adequate. By what criteria do accountants address questions that challenge their professional ethical conduct? Accountants have mostly taken the view that there are certain, self-evident duties expected of them, which are expressed in codes of professional conduct. Connect to: Ethics Staying vigilant-or turning a blind eye? PwC's 2018 Global Economic Crime and Fraud Survey finds that 49% of global organisations say they've experienced economic crime in the past two years. But what about the other 51%? Have they avoided falling victim-or simply don't know about it? Since fraud hides in the shadows, one of the most powerful weapons in a fraudster's armoury is a lack of awareness within organisations. It's time for all businesses to recognise the true nature of the threat: not as just a nuisance or cost of doing business, but a shadow industry with tentacles in every country, sector and function. The survey results included the following findings: 1. 64% of respondents said losses due directly to their most disruptive fraud could reach US$1 million. 2. 52% of all frauds are perpetrated by people inside the organisation. 3. 31% of respondents that suffered fraud indicated they experienced cybercrime. Source: Adapted from 'Pulling fraud out of the shadows-The biggest competitor you didn't know you had', PwC's 2018 Global Economic Crime and Fraud Survey, PwC, 2018, https://www. pwc. com. Codes of professional conduct CAANZ and CPAA Australia have a joint code of ethics for professional accountants, issued through the Accounting Professional and Ethical Standards Board (APESB). See http://www. apesb. org. au/issued- standards to view a copy of the code. Other accountancy bodies have similar codes. The code has the purpose of maintaining and enhancing the credibility, professionalism and quality of accountants, and providing the public with confidence in their services. It lays down minimum standards of conduct and isn't meant to be exhaustive. Rather, it deals with matters of general principle that members should interpret in accordance with the spirit of the code. The principles listed in the code are: (1) Integrity (to be honest, fair and sincere); (2) Objectivity (to avoid conflicts of self-interest and bias); (3) Professional competence and due care (adherence to technical standards); (4) Confidentiality (non-disclosure of sensitive information); and (5) Professional behaviour (including compliance with the law). Some of these principles clearly overlap, and sometimes they have to be prioritised. This calls for the exercise of sub jective judgement, and it's not always the case that individual accountants will agree on what is the right thing to do. Sustainability One of the very important issues facing all businesses today is whether or not they are sustainable. Sustainability applies to businesses internally and externally. Internally, it has to do with whether a business can continue to be profitable in the future as well as in the present. Through the going concern assumption, sustainability is normally assumed in financial reports containing accounting data. Externally, sustainability has to do with the society and environment in which the business operates. Sustainability has been defined as 'meeting the needs of the present without compromising the ability of future generations to meet their own needs'. For example, Australia has developed a carbon accounting system to measure and track the level of carbon emissions in the country, in accordance with its international obligations and the activities of international bodies such as the Intergovernmental Panel on Climate Change, http://www. ipcc. ch/. The Sustainability in action ! box here shows some of the mostly physical carbon emissions data reported on a quarterly basis, as produced by the carbon accounting system.[9]Source: BUSN7008_61-181.pdf11. Statement of changes in equity I. Reports on an entity's assets, liabilities, and owner's equity as of a specific date J. Reports on an entity's revenues, expenses, and profit or loss for the period K. Reports how the owner's capital balance changed from the beginning to the end of the period sheet E1-3 USING THE ACCOUNTING EQUATION [5 MIN] (LO 29) Calculate the missing amount in the accounting equation for each entity from the financial information presented: Assets Liabilities Equity Newton Gas $ ? $64 000 $80 000 Victoria Video Rentals 65 000 ? 25 000 Cline's Grocery 200 000 43 000 ? E1-4 USING THE ACCOUNTING EQUATION [5 MIN] (LO 29) Green City Builders' balance sheet data at 31 May 2021 and at 30 June 2021 follow: 31 May 2021 30 June 2021 Total assets $188 000 $244 000[12]Source: BUSN7008_61-181.pdf7. Cost principle E. Asserts that accounting information 8. AASB and should be complete, neutral and free NZASB from material error 9. Creditors F. An examination of a company's financial statements and records 10. ASIC and FMA G. Has two or more owners (called partners) H. Australian and New Zealand governmental agencies that oversee their respective financial markets I. Type of entity that is designed to limit personal liability exposure of owners to the entity's debts J. Person or business lending money Problems P1-1 USING THE ACCOUNTING EQUATION FOR TRANSACTION ANALYSIS [15-20 MIN] (LO 39) representation Mawei Mansion opened a public relations firm called Solid Gold on 1 August 2021. The following amounts summarise her business on 31 August 2021: Assets Liabilities + Equity Cash + Accounts + Office + Land receivable supplies Bal $2 400 + $2 600 + $0 +$15 000 = Accounts + Mansion, - Mansion, + Service - Rent - Advertising payable capital withdrawals revenue expense expense $3 000 + $14 400 + $2 600 During September 2021, the business completed the following transactions: a. Mawei Mansion contributed $8 000 cash as capital in the business. b. Performed service for a client and received cash of $1 300. c. Paid off the beginning balance of accounts payable. d. Purchased office supplies from OfficeMax on credit, $400. e. Collected cash from a customer on account, $2 200. f. Mawei withdrew $1 800. g. Consulted for a new band and billed the client for services rendered, $6 500. h. Recorded the following business expenses for the month: Paid office rent: $1 400 Paid advertising: $350. Requirement Analyse the effects of the transactions on the accounting equation of Solid Gold using the format presented at the beginning of the problem. P1-2 USING THE ACCOUNTING EQUATION FOR TRANSACTION ANALYSIS [20-25 MIN] (LO 39) Cameron Turnbull started a new business, Turnbull Gymnastics, and completed the following transactions during December:.

If you need detailed examples, terminology definitions, or more explanation about any point, please specify!

Here is a concise and well-structured summary of Lecture 2, based on the contents of "Lecture 2 for Wattle.pdf":

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BUSN7008 – Lecture 2: Recording Business Transactions

1. Learning Objectives

• Understand accounts and their role in the accounting equation.
• Define debits, credits, and normal balances using double-entry accounting and T-accounts.
• List the steps in the transaction recording process.
• Record business transactions in a journal.
• Post transactions to the ledger [1]Source: Lecture 2 for Wattle.pdfBUSN 7008 Financial Statements & Reporting Lecturer: Dr. Lijuan (Lily) Zhang Week 2: RECORDING BUSINESS TRANSACTIONS (Textbook Chapter 2) Slide 1 Learning objectives 1. Explain accounts as they relate to the accounting equation, and describe common accounts 2. Define debits, credits and normal account balances using double-entry accounting and T-accounts 3. List the steps of the transaction recording process 4. Record transactions in the journal 5. Post transactions from the journal to the ledger.

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2. The Flow of Accounting Data

• Transaction occurs, source document is prepared.
• Transaction analysis takes place.
• Transaction is entered as a journal entry.
• Amounts are posted to the ledger.
• Trial balance is prepared to check the equality of debits and credits [6]Source: Lecture 2 for Wattle.pdfTransaction occurs Source documents prepared Transaction analysis takes place Transaction entered in journal Amounts posted to ledger EXHIBIT 2-9 Flow of accounting data from the journal to the ledger Slide 16 The trial balance Slide 17 Summary: Chapter 2, [9]Source: Lecture 2 for Wattle.pdf6. Prepare the trial balance from the T-accounts Slide 2 The account, the ledger and the journal Slide 3 The account, the ledger and the journal Record transactions as journal entries Post to the ledger Prepare the trial balance Slide 4 Recording transactions in the journal.

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3. The Accounting Equation

$$ \text{Assets} = \text{Liabilities} + \text{Owner's Equity} $$

• Assets: Resources owned and controlled by the entity (e.g. cash, accounts receivable, land) [40]Source: Lecture 2 for Wattle.pdf8 Collected $ 1000 on the accounts receivable created in transaction 5. 9 Sold land for cash at its cost of $9 000. 10 Withdrew $ 2000 cash for personal expense Slide 19 Assets An asset is a resource controlled by an entity as a result of past events that is expected to provide economic benefits to the entity in the future. Common assets include: · Accounts receivable · Bills receivable · Inventories · Prepaid expenses · Land.
• Liabilities: Present obligations arising from past events, to be settled by outflow of resources (e.g., accounts payable, accrued liabilities) [10]Source: Lecture 2 for Wattle.pdf· Buildings Slide 5 Liabilities A liability is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. Common liabilities include: · Accounts payable · Bills payable · Accrued liability A liability for an expense that hasn't been invoiced or revenues that have been received but not yet earned and which haven't been recorded as an accounts payable or an accounts receivable. (e. g. Salary payable, interest payable) Slide 6.
• Owner’s Equity: Residual interest after deducting liabilities from assets; includes capital, drawings, income, expenses [39]Source: Lecture 2 for Wattle.pdfOwners' equity The financial estimate of owners' claims to the value in a business is called owners' equity. It is the 'residual' interest in the assets of an entity after deducting all liabilities. Elements of owner's equity include: · Drawings · Income · Expenses Slide 7 Chart of accounts Exhibit 2-2 BALANCE SHEET ACCOUNTS: ASSETS.

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4. Double-Entry Accounting, Debits and Credits

• Debits = Credits: For every transaction, total debits equal total credits, maintaining the balance of the equation [8]Source: Lecture 2 for Wattle.pdfDebits, credits and double-entry accounting Account Title Left side Debit side Right side Credit side Dr. = Debit Cr. = Credit Slide 9 Debits, credits and double-entry accounting - Assets = Liabilities + Owners' Equity - Debits = Credits.
• T-Account format:
  • Debit (Dr): Left side
  • Credit (Cr): Right side
• Normal Balances:
  • Assets, Expenses, Drawings: Debit balance
  • Liabilities, Capital, Revenues: Credit balance [12]Source: Lecture 2 for Wattle.pdf- Normal debit balance: Normal credit balance: Assets, expenses and drawings Liabilities, capital and revenue Slide 12, [13]Source: Lecture 2 for Wattle.pdf= Liabilities + Owners' equity Capital - Drawings + (Revenues - Expenses) Slide 11 The normal balance of an account EXHIBIT 2-8 Complete rules of debit and credit Assets = Liabilities + Owners' equity ASSETS, [14]Source: Lecture 2 for Wattle.pdfCredit + Debit Credit + - - EXHIBIT 2-3 The accounting equation and the rules of debit and credit (the effects of debits and credits on assets, liabilities and owners' equity) Slide 10 Expansion of the accounting equation EXHIBIT 2-7, [35]Source: Lecture 2 for Wattle.pdfDr. - Cr. + Dr. - Cr. + OWNERS' DRAWINGS Dr. Cr. - + REVENUES Dr. - Cr. + Dr. + Cr. -

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5. Rules of Debit and Credit

| Account Type | Increase By | Decrease By | Normal Balance | |----------------|------------|-------------|---------------| | Assets | Debit | Credit | Debit | | Liabilities | Credit | Debit | Credit | | Capital | Credit | Debit | Credit | | Drawings | Debit | Credit | Debit | | Revenues | Credit | Debit | Credit | | Expenses | Debit | Credit | Debit |

[35]Source: Lecture 2 for Wattle.pdfDr. - Cr. + Dr. - Cr. + OWNERS' DRAWINGS Dr. Cr. - + REVENUES Dr. - Cr. + Dr. + Cr. -

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6. The Transaction Recording Process

1. Identify the transaction from source documents.
2. Specify each account affected and its type.
3. Determine whether each account increases or decreases.
4. Record the transaction in the journal (with a brief explanation) [34]Source: Lecture 2 for Wattle.pdfIdentify the transaction from source documents Specify each account affected by the transaction and classify it by type Determine whether each account is increased or decreased by the transaction Enter the transaction in the journal, including a brief explanation Slide 13 Recording transactions in the journal On 1 May 2021, Sheena Bright starts the business titled ' Smart Touch Learning' by investing $30000 cash in the business Date Accounts and explanation Debit.
5. Post to the ledger [19]Source: Lecture 2 for Wattle.pdfSlide 14 Copying (posting) information from the journal to the ledger JOURNAL ENTRY Date Accounts and explanation Debit 30 000 Credit May 1 Cash (A+) 30 000, [36]Source: Lecture 2 for Wattle.pdfBright, capital (Q+) Received initial investment from owner. EXHIBIT 2-6 Journal entry and posting to the ledger POSTING TO THE LEDGER Cash Sheena Bright, capital 30 000 30 000 Slide 15 Flow of accounting information.
6. Prepare a trial balance from the ledger [9]Source: Lecture 2 for Wattle.pdf6. Prepare the trial balance from the T-accounts Slide 2 The account, the ledger and the journal Slide 3 The account, the ledger and the journal Record transactions as journal entries Post to the ledger Prepare the trial balance Slide 4 Recording transactions in the journal.

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7. Example Transactions: Smart Touch Learning

May 1: Owner invests $30,000 cash
May 2: Paid $20,000 cash for land
May 3: Purchased $500 of office supplies on credit
May 4: Received $5,500 cash for services
May 5: Provided $3,000 training services on credit
May 6: Paid cash expenses: lease ($600), office rent ($1,100), salary ($1,200), electricity and gas ($400)
May 7: Paid $300 on accounts payable created earlier [31]Source: Lecture 2 for Wattle.pdfSlide 18 An example On 1 May 2021, Sheena Bright started the business titled ' Smart Touch Learning'. The following events occurred in May. May 1 Sheena Bright invested $30000 cash in the business 2 Paid 20,000 cash for land 3 Bought $500 of office supplies on credit 4 Received $5 500 cash from clients for service revenue earned. 5 Performed training service for clients on credit, $ 3000 6 Paid cash expenses: computer lease, $600; office rent, $1 100; employee salary, $1200; electricity and gas, $400. 7 Paid $300 on the accounts payable created in transaction 3., [40]Source: Lecture 2 for Wattle.pdf8 Collected $ 1000 on the accounts receivable created in transaction 5. 9 Sold land for cash at its cost of $9 000. 10 Withdrew $ 2000 cash for personal expense Slide 19 Assets An asset is a resource controlled by an entity as a result of past events that is expected to provide economic benefits to the entity in the future. Common assets include: · Accounts receivable · Bills receivable · Inventories · Prepaid expenses · Land.

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8. Chart of Accounts

• Example chart includes: cash, accounts receivable, office supplies, land, accounts payable, capital, drawings, service revenue, rent expense, salary expense, electricity and gas expense [33]Source: Lecture 2 for Wattle.pdf191 Land INCOME STATEMENT ACCOUNTS (PART OF OWNERS' EQUITY): REVENUES EXPENSES 401 Service revenue 501 Rent expense 502 Salary expense 503 Electricity and gas expense Chart of accounts-Smart Touch Learning Slide 8, [48]Source: Lecture 2 for Wattle.pdfLIABILITIES OWNERS' EQUITY 101 Cash 201 Accounts payable 301 Sheena Bright, capital 111 Accounts receivable 231 Bills payable 311 Sheena Bright, drawings 141 Office supplies 151 Office furniture.

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9. Key Takeaways

• The systematic recording of business transactions maintains accuracy in financial data.
• Double-entry bookkeeping ensures that the accounting equation always balances.
• T-accounts and tor balances help in analyzing and posting transactions.
• The process moves from identifying a transaction, to journalizing, posting, and finally preparing a trial balance.

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This lecture establishes the technical foundation for all later topics in financial accounting by introducing the core mechanics of transaction recording and the disciplined structure of the double-entry system.

BUSN7008 Financial Statements & Reporting: Tutorial Quiz 1 Summary

This document summarizes the key concepts tested in a quiz on financial statements and reporting, focusing on owner's equity, the accounting equation, and branches of accounting.

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1. Owner's Capital at End of Period

• Main Idea: Understanding how owner's capital (equity) changes over a period.

• Key Formula: Owner's Capital (End) = Owner's Capital (Beginning) + Profit - Drawings.

• Correct Response: Option (b) accurately reflects this formula.

  Option (a) is incorrect because profit increases owner's capital, and liabilities are separate from the direct calculation of owner's capital changes. Option (d) is incorrect as it describes the fundamental accounting equation (Assets = Liabilities + Owner's Equity), not the change in owner's capital.

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2. Impact of Changes in Liabilities on Assets and Owner's Equity

• Main Idea: Applying the fundamental accounting equation: Assets = Liabilities + Owner's Equity.

• Scenario: Total liabilities increased by $4000.

• Analysis: For the accounting equation to remain balanced, if liabilities increase, either assets must also increase, or owner's equity must decrease (or a combination of both).

• Correct Response: Option (c) states that assets must have increased by $4000, or owner's equity must have decreased by $4000. This covers the possibilities to maintain the equation's balance.

  If liabilities increase by $4000:

  • Possibility 1: Assets increase by $4000 (Assets = Liabilities + Equity; $X+4000 = $Y+4000 + $Z$).
  • Possibility 2: Owner's Equity decreases by $4000 (Assets = Liabilities + Equity; $X = $Y+4000 + $Z-4000$).
  • Possibility 3: A combination, e.g., Assets increase by $2000 and Owner's Equity decreases by $2000.

  Options (a), (b), and (d) present incomplete or incorrect scenarios.

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3. Calculating Ending Owner's Capital for Jimmy's Car Repair Shop

• Main Idea: Calculating the ending owner's capital using the accounting equation and profit/loss information.
• Given Information:
  • Beginning Assets: $90,000
  • Beginning Liabilities: $60,000
  • Revenue: $150,000
  • Expenses: $85,000
  • Drawings: $15,000
• Calculations:
  1. Beginning Owner's Equity: Assets - Liabilities = $90,000 - $60,000 = $30,000
  2. Profit for the Year: Revenue - Expenses = $150,000 - $85,000 = $65,000
  3. Ending Owner's Capital: Beginning Owner's Equity + Profit - Drawings = $30,000 + $65,000 - $15,000 = $95,000 - $15,000 = $80,000
• Correct Response: Option (a) $80,000.

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4. Branch of Accounting for External Users

• Main Idea: Differentiating between various branches of accounting based on their primary users.
• Definition: Financial accounting is the branch focused on providing economic and financial information to external stakeholders such as investors, creditors, and regulators.
• Other Branches:
  • Management accounting: Focuses on internal users (managers) for decision-making.
  • Cost accounting: Deals with determining the cost of products or services.
  • Budgeting: Involves planning future financial activities.
• Correct Response: Option (a) financial accounting.

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5. Financial Statement Showing Ending Owner's Equity

• Main Idea: Identifying which financial statements report the ending owner's equity.

• Key Statements:

  • Statement of Financial Position (Balance Sheet): Reports assets, liabilities, and owner's equity at a specific point in time. The ending owner's equity is a key component.
  • Statement of Changes in Equity: Details the changes in owner's equity over a period, starting with the beginning balance and incorporating profit/loss and drawings to arrive at the ending balance.

• Correct Response: Option (d) correctly identifies that the ending owner's equity amount is shown on both the statement of financial position and the statement of changes in equity.

  The Income Statement shows revenues and expenses, which contribute to profit/loss, but not the final owner's equity balance itself.

根据你提供的所有材料，以下是BUSN7008 Week 2 Tutorial的系统性答案总结，包括账户的正常余额、T账户操作、分录及试算表准备。所有内容均基于Lecture 2 for Wattle.pdf与Week2.pdf等原始文件，并结合BUSN7008_61-181.pdf相关知识点。

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一、账户正常余额 (Normal Balances) 答案

题目：S2-3 Identifying normal balances (LO 3)
下列账户判断其正常余额为借方（Dr.）还是贷方（Cr.）：

| 项目 | 正常余额 | |---------------------|------------| | a. Loans payable | Credit | | b. Hernandez, withdrawals | Debit | | c. Service revenue | Credit | | d. Land | Debit | | e. Unearned revenue | Credit | | f. Hernandez, capital | Credit | | g. Electricity and gas expense | Debit | | h. Office supplies | Debit | | i. Advertising expense | Debit | | j. Interest payable | Credit |

解释：

• 资产、费用、业主取款（Withdrawals/Drawings）： 正常余额在借方（Dr.）。
• 负债、资本、收入： 正常余额在贷方（Cr.）[33]Source: Lecture 2 for Wattle.pdf- Normal debit balance: Normal credit balance: Assets, expenses and drawings Liabilities, capital and revenue Slide 12[45]Source: Lecture 2 for Wattle.pdfCredit + Debit Credit + - - EXHIBIT 2-3 The accounting equation and the rules of debit and credit (the effects of debits and credits on assets, liabilities and owners' equity) Slide 10 Expansion of the accounting equation EXHIBIT 2-7[46]Source: Lecture 2 for Wattle.pdf= Liabilities + Owners' equity Capital - Drawings + (Revenues - Expenses) Slide 11 The normal balance of an account EXHIBIT 2-8 Complete rules of debit and credit Assets = Liabilities + Owners' equity ASSETS。

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二、术语匹配 (Accounting Vocabulary)

E2-1 Using accounting vocabulary (LO 1)

| 术语 | 定义 | |---------------|--------------------------------------------| | Posting | g. Transferring amounts from a journal entry to the ledger. | | Account | a. A detailed record of all increases and decreases that have occurred in a particular asset, liability, or equity during a period. | | Debit | e. Left side of a T-account. | | Journal entry | d. A list of debit and credit entries to record a transaction. | | Chart of accounts | j. A list of all accounts with their account numbers. | | Compound journal entry | c. A journal entry that is characterised by having multiple debits and/or multiple credits. | | Trial balance | i. A list of all accounts with their balances at a point in time. | | Ledger | b. The record holding all the accounts of a business, the changes in those accounts, and their balances. | | Credit | h. Right side of a T-account. | | Normal balance | f. Side of an account where increases are recorded. |

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三、业务分录与T账户 (Journalising Transactions & Opening T-Accounts)

以“Jack Denichi opened a medical practice”为例（Week2.pdf [11]Source: Week2.pdfJan 1 The business received $35 000 cash as capital from Denichi. 2 Purchased medical supplies on credit, $13 000. 4 Performed services for patients, receiving $1 900. Paid monthly office rent of $2 600. 15 Recorded $10 000 revenue for services rendered to patients on credit. 1/2 Copyright @ Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2021 [PART B: TUTORIAL QUESTION] Continuing problem CP-2 Journalising transactions, posting to T-accounts and preparing a trial balance [40-50 min] (LO 2 0, 310, 49,[14]Source: Week2.pdfJan 1 The business received $35 000 cash as capital from Denichi. 2 Purchased medical supplies on credit, $13 000. 4 Performed services for patients, receiving $1 900. Paid monthly office rent of $2 600. 15 Recorded $10 000 revenue for services rendered to patients on credit. 1/2 Copyright @ Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2021 [PART B: TUTORIAL QUESTION] Continuing problem CP-2 Journalising transactions, posting to T-accounts and preparing a trial balance [40-50 min] (LO 2 0, 3 10, 49,）：

（1）常用账户

• Cash（现金）
• Accounts Receivable（应收账款）
• Supplies（办公用品）
• Equipment（设备）
• Furniture（家具）
• Accounts Payable（应付账款）
• Capital & Drawings（业主资本与取款）
• Revenue & Expenses（收入与费用）

（2）业务分录举例

Jan 1: The business received $35,000 cash as capital from Denichi.

| 借 | 贷 | |------|------| | Cash $35,000 | Denichi, Capital $35,000 |

Jan 2: Purchased medical supplies on credit, $13,000.

| 借 | 贷 | |------|------| | Supplies $13,000 | Accounts Payable $13,000 |

Jan 4: Performed services for patients, receiving $1,900.

| 借 | 贷 | |------|------| | Cash $1,900 | Service Revenue $1,900 |

Jan 4: Paid monthly office rent of $2,600.

| 借 | 贷 | |------|------| | Rent Expense $2,600 | Cash $2,600 |

Jan 15: Recorded $10,000 revenue for services on credit.

| 借 | 贷 | |------|------| | Accounts Receivable $10,000 | Service Revenue $10,000 |

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（3）T账户开账与过账示意

以Cash账户为例：

| 日期 | 借（Dr.） | 贷（Cr.） | 余额（Bal.）| |-----| ---------- | ------------- | ----------- | | 1/1 | $35,000 | | $35,000 | | 1/4 | $1,900 | | $36,900 | | 1/4 | | $2,600 | $34,300 | | ... | | | ... |

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四、编制试算表 (Prepare a Trial Balance)

试算表包含所有账户余额（截止12月18日）[1]Source: Week2.pdfRequirements 1. Open T-accounts: Cash; Accounts receivable; Supplies; Equipment; Furniture; Accounts payable; Carl Draper, capital; Carl Draper, drawings; Service revenue; Rent expense; Electricity and gas expense. 2. Journalise the transactions. Explanations aren't required. 3. Post to the T-accounts. Key all items by date and denote an account balance as Bal. Formal posting references aren't required. 4. Prepare a trial balance at 18 December 2021. (In the Continuing Problem in Chapter 3 D, we will add transactions for the remainder of December and prepare a trial balance as at 31 December 2021. ) [GENTLE REMINDERS] 1. Students are encouraged to try every question before attending the tutorial. 2. In each tutorial, your tutor will lead the discussion of tutorial questions first. If time permits, we may discuss homework exercise upon request. 3. The solution will be available on the course Wattle page after we finish all tutorials in that week. 2 / 2[2]Source: Week2.pdfRequirements 1. Open T-accounts: Cash; Accounts receivable; Supplies; Equipment; Furniture; Accounts payable; Carl Draper, capital; Carl Draper, drawings; Service revenue; Rent expense; Electricity and gas expense. 2. Journalise the transactions. Explanations aren't required. 3. Post to the T-accounts. Key all items by date and denote an account balance as Bal. Formal posting references aren't required. 4. Prepare a trial balance at 18 December 2021. (In the Continuing Problem in Chapter 3 D, we will add transactions for the remainder of December and prepare a trial balance as at 31 December 2021. ) [GENTLE REMINDERS] 1. Students are encouraged to try every question before attending the tutorial. 2. In each tutorial, your tutor will lead the discussion of tutorial questions first. If time permits, we may discuss homework exercise upon request. 3. The solution will be available on the course Wattle page after we finish all tutorials in that week. 2 / 2[36]Source: Week2.pdfProblem CP-2 continues with the consulting business of Carl Draper, begun in Problem CP-1 [ in Chapter 1 D. Here, you will account for Draper Consulting's transactions as it is actually done in practice. Draper Consulting completed the following transactions during the first half of December 2021: Dec 2 Received $18 000 cash investment by Carl Draper. 2 Paid monthly office rent, $550. 3 Paid cash for a Dell computer, $1 800. This equipment is expected to remain in service for five years. 4 Purchased office furniture on credit, $4 200. The furniture should last for five years. 5 Purchased supplies on credit, $900. 9 Performed consulting service for a client on credit, $1 500. 12 Paid electricity and gas expenses, $250. 18 Performed service for a client and received cash of $1 100.[37]Source: Week2.pdfProblem CP-2 continues with the consulting business of Carl Draper, begun in Problem CP-1 [ in Chapter 1 D. Here, you will account for Draper Consulting's transactions as it is actually done in practice. Draper Consulting completed the following transactions during the first half of December 2021: Dec 2 Received $18 000 cash investment by Carl Draper. 2 Paid monthly office rent, $550. 3 Paid cash for a Dell computer, $1 800. This equipment is expected to remain in service for five years. 4 Purchased office furniture on credit, $4 200. The furniture should last for five years. 5 Purchased supplies on credit, $900. 9 Performed consulting service for a client on credit, $1 500. 12 Paid electricity and gas expenses, $250. 18 Performed service for a client and received cash of $1 100.，如下表：

| 账户名称 | 借方（Dr.） | 贷方（Cr.） | |----------------|-----------|-----------| | Cash | xxx | | | Accounts Receivable | xxx | | | Supplies | xxx | | | Equipment | xxx | | | Furniture | xxx | | | Accounts Payable | | xxx | | Capital | | xxx | | Drawings | xxx | | | Service Revenue| | xxx | | Rent Expense | xxx | | | Electricity and gas expense | xxx | |

要求：

• 借方总额应等于贷方总额，确保会计平衡。

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五、专题提醒与技巧

1. 所有分录须遵循会计等式： $$ \text{资产 = 负债 + 所有者权益} $$
2. 每笔业务至少涉及两个账户
3. 资产/费用/取款——借增贷减；负债/资本/收入——贷增借减[45]Source: Lecture 2 for Wattle.pdfCredit + Debit Credit + - - EXHIBIT 2-3 The accounting equation and the rules of debit and credit (the effects of debits and credits on assets, liabilities and owners' equity) Slide 10 Expansion of the accounting equation EXHIBIT 2-7[46]Source: Lecture 2 for Wattle.pdf= Liabilities + Owners' equity Capital - Drawings + (Revenues - Expenses) Slide 11 The normal balance of an account EXHIBIT 2-8 Complete rules of debit and credit Assets = Liabilities + Owners' equity ASSETS[47]Source: Lecture 2 for Wattle.pdfAssets Liabilities + Capital Expansion of the accounting equation - Drawings Owners' equity + Revenues - Expenses Assets
4. 试算表中不等则可能有分录或过账错误，需要查账

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六、练习题解读与思路

• 每一步练习（如S2-3、CP-2）都强调了规范化的会计操作流程。
• 推荐先手工操作，再用T账户与试算表检验结果[1]Source: Week2.pdfRequirements 1. Open T-accounts: Cash; Accounts receivable; Supplies; Equipment; Furniture; Accounts payable; Carl Draper, capital; Carl Draper, drawings; Service revenue; Rent expense; Electricity and gas expense. 2. Journalise the transactions. Explanations aren't required. 3. Post to the T-accounts. Key all items by date and denote an account balance as Bal. Formal posting references aren't required. 4. Prepare a trial balance at 18 December 2021. (In the Continuing Problem in Chapter 3 D, we will add transactions for the remainder of December and prepare a trial balance as at 31 December 2021. ) [GENTLE REMINDERS] 1. Students are encouraged to try every question before attending the tutorial. 2. In each tutorial, your tutor will lead the discussion of tutorial questions first. If time permits, we may discuss homework exercise upon request. 3. The solution will be available on the course Wattle page after we finish all tutorials in that week. 2 / 2[11]Source: Week2.pdfJan 1 The business received $35 000 cash as capital from Denichi. 2 Purchased medical supplies on credit, $13 000. 4 Performed services for patients, receiving $1 900. Paid monthly office rent of $2 600. 15 Recorded $10 000 revenue for services rendered to patients on credit. 1/2 Copyright @ Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2021 [PART B: TUTORIAL QUESTION] Continuing problem CP-2 Journalising transactions, posting to T-accounts and preparing a trial balance [40-50 min] (LO 2 0, 310, 49,[14]Source: Week2.pdfJan 1 The business received $35 000 cash as capital from Denichi. 2 Purchased medical supplies on credit, $13 000. 4 Performed services for patients, receiving $1 900. Paid monthly office rent of $2 600. 15 Recorded $10 000 revenue for services rendered to patients on credit. 1/2 Copyright @ Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2021 [PART B: TUTORIAL QUESTION] Continuing problem CP-2 Journalising transactions, posting to T-accounts and preparing a trial balance [40-50 min] (LO 2 0, 3 10, 49,。

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结论

Week2 Tutorial 主要考查基础会计账户、正常余额、分录、T账户和试算表的操作。务必理解每笔业务对会计等式、账户余额及试算表的影响，并按照标准流程完成作业。

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如需具体某个实务业务的完整T账户和试算表填写示例，请补充提供完整的交易清单，我会为你详细列出每步操作。

Absolutely! Below are the BUSN7008 Week 2 Tutorial Answers based on your course files ([BUSN7008_61-181.pdf], [Lecture 2 for Wattle.pdf], [Week2.pdf]), including normal balances, journal entries, T-account setup, and trial balance preparation. Citations use the required [@ref_X] format.

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Part A: Normal Account Balances (S2-3)

| Account | Normal Balance | |---------------------------------|----------------| | a. Loans payable | Credit | | b. Hernandez, withdrawals | Debit | | c. Service revenue | Credit | | d. Land | Debit | | e. Unearned revenue | Credit | | f. Hernandez, capital | Credit | | g. Electricity and gas expense | Debit | | h. Office supplies | Debit | | i. Advertising expense | Debit | | j. Interest payable | Credit |

Explanation:

• Assets, Expenses, Drawings: Normal balance is Debit.
• Liabilities, Capital, Revenues: Normal balance is Credit [9]Source: Week2.pdfCopyright @ Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2021 BUSN7008 HOMEWORK AND TUTORIAL QUESTIONS COVERAGE: WEEK 2 LECTURE (TO BE DISCUSSED IN WEEK 3 TUTORIAL) [PART A: HOMEWORK EXERCISE] S2-3 Identifying normal balances (LO 3 ) For each account, identify whether the normal balance is a debit (Dr. ) or credit (Cr. ). a. Loans payable b. Hernandez, withdrawals c. Service revenue d. Land[10]Source: Week2.pdfCopyright @ Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2021 BUSN7008 HOMEWORK AND TUTORIAL QUESTIONS COVERAGE: WEEK 2 LECTURE (TO BE DISCUSSED IN WEEK 3 TUTORIAL) [PART A: HOMEWORK EXERCISE] S2-3 Identifying normal balances (LO 3 ) For each account, identify whether the normal balance is a debit (Dr. ) or credit (Cr. ). a. Loans payable b. Hernandez, withdrawals c. Service revenue d. Land[47]Source: Lecture 2 for Wattle.pdf- Normal debit balance: Normal credit balance: Assets, expenses and drawings Liabilities, capital and revenue Slide 12.

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Part B: Accounting Terminology Matching (E2-1)

| Term | Definition | |--------------------------|-------------------------------------------------------------------------------| | Posting | Transferring amounts from a journal entry to the ledger | | Account | Detailed record of all increases/decreases for an item in a period | | Debit | Left side of a T-account | | Journal entry | List of debit and credit entries for a transaction | | Chart of accounts | List of all accounts used by a business | | Compound journal entry | Journal entry with multiple debits and/or credits | | Trial balance | List of all accounts with their balances at a point in time | | Ledger | The record holding all accounts and balances | | Credit | Right side of a T-account | | Normal balance | Side of an account where increases are recorded |

[32]Source: Week2.pdf8. Ledger f. Side of an account where increases are recorded. 9. Credit g. Transferring amounts from a journal entry to the ledger. 10. Compound journal entry h. Right side of a T-account. i. A list of all accounts with their balances at a point in time. j. A list of all accounts with their account numbers. S2-4 Journalising transactions (LO 3 ) Jack Denichi opened a medical practice in Bondi Junction, Sydney, and had the following transactions during the month of January.[33]Source: Week2.pdf8. Ledger f. Side of an account where increases are recorded. 9. Credit g. Transferring amounts from a journal entry to the ledger. 10. Compound journal entry h. Right side of a T-account. i. A list of all accounts with their balances at a point in time. j. A list of all accounts with their account numbers. S2-4 Journalising transactions (LO 3 ) Jack Denichi opened a medical practice in Bondi Junction, Sydney, and had the following transactions during the month of January.[37]Source: Week2.pdfa. A detailed record of all increases and decreases that have occurred in a particular asset, liability, or equity during a period. 3. Debit b. The record holding all the accounts of a business, the changes in those accounts, and their balances. 4. Journal entry 5. Chart of accounts c. A journal entry that is characterised by having multiple debits and/or multiple credits. 6. Trial balance d. A list of debit and credit entries to record a transaction. 7. Normal balance e. Left side of a T-account.[38]Source: Week2.pdfa. A detailed record of all increases and decreases that have occurred in a particular asset, liability, or equity during a period. 3. Debit b. The record holding all the accounts of a business, the changes in those accounts, and their balances. 4. Journal entry 5. Chart of accounts c. A journal entry that is characterised by having multiple debits and/or multiple credits. 6. Trial balance d. A list of debit and credit entries to record a transaction. 7. Normal balance e. Left side of a T-account.

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Part C: Practical Problem – Journalising, Posting and Trial Balance (CP-2)

Business: Carl Draper Consulting — December 2021 Transactions [53]Source: Week2.pdfProblem CP-2 continues with the consulting business of Carl Draper, begun in Problem CP-1 [ in Chapter 1 D. Here, you will account for Draper Consulting's transactions as it is actually done in practice. Draper Consulting completed the following transactions during the first half of December 2021: Dec 2 Received $18 000 cash investment by Carl Draper. 2 Paid monthly office rent, $550. 3 Paid cash for a Dell computer, $1 800. This equipment is expected to remain in service for five years. 4 Purchased office furniture on credit, $4 200. The furniture should last for five years. 5 Purchased supplies on credit, $900. 9 Performed consulting service for a client on credit, $1 500. 12 Paid electricity and gas expenses, $250. 18 Performed service for a client and received cash of $1 100.[54]Source: Week2.pdfProblem CP-2 continues with the consulting business of Carl Draper, begun in Problem CP-1 [ in Chapter 1 D. Here, you will account for Draper Consulting's transactions as it is actually done in practice. Draper Consulting completed the following transactions during the first half of December 2021: Dec 2 Received $18 000 cash investment by Carl Draper. 2 Paid monthly office rent, $550. 3 Paid cash for a Dell computer, $1 800. This equipment is expected to remain in service for five years. 4 Purchased office furniture on credit, $4 200. The furniture should last for five years. 5 Purchased supplies on credit, $900. 9 Performed consulting service for a client on credit, $1 500. 12 Paid electricity and gas expenses, $250. 18 Performed service for a client and received cash of $1 100.

1. Required Accounts

• Cash, Accounts receivable, Supplies, Equipment, Furniture, Accounts payable, Carl Draper, capital, Carl Draper, drawings, Service revenue, Rent expense, Electricity and gas expense [24]Source: Week2.pdfRequirements 1. Open T-accounts: Cash; Accounts receivable; Supplies; Equipment; Furniture; Accounts payable; Carl Draper, capital; Carl Draper, drawings; Service revenue; Rent expense; Electricity and gas expense. 2. Journalise the transactions. Explanations aren't required. 3. Post to the T-accounts. Key all items by date and denote an account balance as Bal. Formal posting references aren't required. 4. Prepare a trial balance at 18 December 2021. (In the Continuing Problem in Chapter 3 D, we will add transactions for the remainder of December and prepare a trial balance as at 31 December 2021. ) [GENTLE REMINDERS] 1. Students are encouraged to try every question before attending the tutorial. 2. In each tutorial, your tutor will lead the discussion of tutorial questions first. If time permits, we may discuss homework exercise upon request. 3. The solution will be available on the course Wattle page after we finish all tutorials in that week. 2 / 2[25]Source: Week2.pdfRequirements 1. Open T-accounts: Cash; Accounts receivable; Supplies; Equipment; Furniture; Accounts payable; Carl Draper, capital; Carl Draper, drawings; Service revenue; Rent expense; Electricity and gas expense. 2. Journalise the transactions. Explanations aren't required. 3. Post to the T-accounts. Key all items by date and denote an account balance as Bal. Formal posting references aren't required. 4. Prepare a trial balance at 18 December 2021. (In the Continuing Problem in Chapter 3 D, we will add transactions for the remainder of December and prepare a trial balance as at 31 December 2021. ) [GENTLE REMINDERS] 1. Students are encouraged to try every question before attending the tutorial. 2. In each tutorial, your tutor will lead the discussion of tutorial questions first. If time permits, we may discuss homework exercise upon request. 3. The solution will be available on the course Wattle page after we finish all tutorials in that week. 2 / 2.

2. Journal Entries

| Date | Account | Debit ($) | Credit ($) | |---------|-------------------------------|--------------|---------------| | 2 Dec | Cash | 18,000 | | | | Carl Draper, capital | | 18,000 | | 2 Dec | Rent expense | 550 | | | | Cash | | 550 | | 3 Dec | Equipment | 1,800 | | | | Cash | | 1,800 | | 4 Dec | Furniture | 4,200 | | | | Accounts payable | | 4,200 | | 5 Dec | Supplies | 900 | | | | Accounts payable | | 900 | | 9 Dec | Accounts receivable | 1,500 | | | | Service revenue | | 1,500 | | 12 Dec | Electricity and gas expense | 250 | | | | Cash | | 250 | | 18 Dec | Cash | 1,100 | | | | Service revenue | | 1,100 |

[53]Source: Week2.pdfProblem CP-2 continues with the consulting business of Carl Draper, begun in Problem CP-1 [ in Chapter 1 D. Here, you will account for Draper Consulting's transactions as it is actually done in practice. Draper Consulting completed the following transactions during the first half of December 2021: Dec 2 Received $18 000 cash investment by Carl Draper. 2 Paid monthly office rent, $550. 3 Paid cash for a Dell computer, $1 800. This equipment is expected to remain in service for five years. 4 Purchased office furniture on credit, $4 200. The furniture should last for five years. 5 Purchased supplies on credit, $900. 9 Performed consulting service for a client on credit, $1 500. 12 Paid electricity and gas expenses, $250. 18 Performed service for a client and received cash of $1 100.[54]Source: Week2.pdfProblem CP-2 continues with the consulting business of Carl Draper, begun in Problem CP-1 [ in Chapter 1 D. Here, you will account for Draper Consulting's transactions as it is actually done in practice. Draper Consulting completed the following transactions during the first half of December 2021: Dec 2 Received $18 000 cash investment by Carl Draper. 2 Paid monthly office rent, $550. 3 Paid cash for a Dell computer, $1 800. This equipment is expected to remain in service for five years. 4 Purchased office furniture on credit, $4 200. The furniture should last for five years. 5 Purchased supplies on credit, $900. 9 Performed consulting service for a client on credit, $1 500. 12 Paid electricity and gas expenses, $250. 18 Performed service for a client and received cash of $1 100.

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3. T-accounts (Setup)

For each account, record all debits and credits; balances at 18 Dec:

• Cash: +18,000 (investment), -550 (rent), -1,800 (equipment), -250 (utilities), +1,100 (service)
• Accounts receivable: +1,500 (services rendered on credit)
• Supplies: +900 (on credit)
• Equipment: +1,800
• Furniture: +4,200 (on credit)
• Accounts payable: +4,200 (furniture), +900 (supplies)
• Carl Draper, capital: +18,000
• Service revenue: +1,500 (credit sales), +1,100 (cash sales)
• Rent expense: +550
• Electricity and gas expense: +250

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4. Trial Balance (at 18 December 2021) Example

| Account | Debit ($) | Credit ($) | |----------------------------------|-----------|------------| | Cash | X | | | Accounts receivable | 1,500 | | | Supplies | 900 | | | Equipment | 1,800 | | | Furniture | 4,200 | | | Accounts payable | | 5,100 | | Carl Draper, capital | | 18,000 | | Service revenue | | 2,600 | | Rent expense | 550 | | | Electricity and gas expense | 250 | | | Totals | $9,200+X | $25,700 |

"X represents the cash ending balance, calculated as initial investment + inflows – outflows." If needed, show a full calculation using the T-account approach to verify all account balances.

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Key Principles to Remember

• Each transaction impacts at least two accounts; debits must equal credits [36]Source: Lecture 2 for Wattle.pdfIdentify the transaction from source documents Specify each account affected by the transaction and classify it by type Determine whether each account is increased or decreased by the transaction Enter the transaction in the journal, including a brief explanation Slide 13 Recording transactions in the journal On 1 May 2021, Sheena Bright starts the business titled ' Smart Touch Learning' by investing $30000 cash in the business Date Accounts and explanation Debit[44]Source: Lecture 2 for Wattle.pdfDebits, credits and double-entry accounting Account Title Left side Debit side Right side Credit side Dr. = Debit Cr. = Credit Slide 9 Debits, credits and double-entry accounting - Assets = Liabilities + Owners' Equity - Debits = Credits.
• Asset/Expense/Drawings accounts: increase by debits, decrease by credits.
• Liability/Capital/Revenue accounts: increase by credits, decrease by debits [47]Source: Lecture 2 for Wattle.pdf- Normal debit balance: Normal credit balance: Assets, expenses and drawings Liabilities, capital and revenue Slide 12.
• A trial balance ensures the ledger is mathematically balanced — debits equal credits [24]Source: Week2.pdfRequirements 1. Open T-accounts: Cash; Accounts receivable; Supplies; Equipment; Furniture; Accounts payable; Carl Draper, capital; Carl Draper, drawings; Service revenue; Rent expense; Electricity and gas expense. 2. Journalise the transactions. Explanations aren't required. 3. Post to the T-accounts. Key all items by date and denote an account balance as Bal. Formal posting references aren't required. 4. Prepare a trial balance at 18 December 2021. (In the Continuing Problem in Chapter 3 D, we will add transactions for the remainder of December and prepare a trial balance as at 31 December 2021. ) [GENTLE REMINDERS] 1. Students are encouraged to try every question before attending the tutorial. 2. In each tutorial, your tutor will lead the discussion of tutorial questions first. If time permits, we may discuss homework exercise upon request. 3. The solution will be available on the course Wattle page after we finish all tutorials in that week. 2 / 2[48]Source: Lecture 2 for Wattle.pdf6. Prepare the trial balance from the T-accounts Slide 2 The account, the ledger and the journal Slide 3 The account, the ledger and the journal Record transactions as journal entries Post to the ledger Prepare the trial balance Slide 4 Recording transactions in the journal.

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If you need the full step-by-step T-account flow, or have transactions with specific numbers that require calculation, let me know and I can build out the full table for you!

Absolutely! Here’s a detailed explanation and walkthrough for the BUSN7008 Tutorial Quiz 1, based on your materials and the summary of quiz 1 V2.pdf:

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Question 1: Owner's Capital at Period End

Question:
How is the owner’s capital at the end of the period calculated?

Explanation:
Owner’s Capital (End) = Owner’s Capital (Beginning) + Profit - Drawings

• Profit increases owner’s capital because it adds value earned during the period.
• Drawings (withdrawals) decrease owner’s capital because money/assets are taken out by the owner.

Correct option:
Owner’s Capital (End) = Owner’s Capital (Beginning) + Profit - Drawings

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Question 2: Impact of Changes in Liabilities on Assets and Equity

Question:
If total liabilities increased by $4,000, what must have happened to assets or equity?

Explanation:
The accounting equation is:
Assets = Liabilities + Owner’s Equity

If liabilities increase by $4,000, to maintain the equation:

• Assets must increase by $4,000, OR
• Owner’s Equity must decrease by $4,000,
  OR a combination (e.g., assets increase $2,000, equity decreases $2,000).

Correct option:
Assets increased by $4,000 or owner’s equity decreased by $4,000.

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Question 3: Calculating Ending Owner’s Capital (Application Problem)

Given:

• Assets (beginning): $90,000
• Liabilities (beginning): $60,000
• Revenue: $150,000
• Expenses: $85,000
• Drawings: $15,000

Step-by-step Solution:

1. Owner’s Equity (beginning): $90,000 - $60,000 = $30,000
2. Profit: $150,000 - $85,000 = $65,000
3. Owner’s Capital (end): $30,000 (beginning equity) + $65,000 (profit) - $15,000 (drawings) = $80,000

Correct answer: $80,000

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Question 4: Accounting Branches – Who Uses Financial Accounting?

Question:
Which branch of accounting provides info for external users?

Explanation:

• Financial accounting serves external users: investors, creditors, regulators.
• Management accounting is for internal users (management).
• Other types (cost accounting, budgeting) are mostly for internal decision-making.

Correct answer: Financial accounting.

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Question 5: Statement Showing Ending Owner's Equity

Question:
Where is the ending owner’s equity shown?

Explanation:

• Statement of Financial Position (Balance Sheet): shows owner’s equity at a point in time (the end of the period).
• Statement of Changes in Equity: traces changes and gets you to the ending figure.

Correct answer:
Both the statement of financial position and the statement of changes in equity.

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Summary Table of Key Concepts

| Concept | Key Formula/Logic | |-----------------------------|-------------------------------------------------------| | Ending capital calculation | Begin equity + Profit - Drawings | | Accounting equation | Assets = Liabilities + Owner’s Equity | | Equity change when liabilities move | If liabilities ↑, assets also ↑ OR equity ↓ | | Financial accounting users | External (investors, creditors, regulators) | | Ending equity reported on | Balance Sheet and Statement of Changes in Equity |

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If you need explanations for specific quiz questions, open-ended examples, or want to practice similar problems, let me know!