1.1 What is Accounting?
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VCE Accounting Unit 3. Video of this presentation can be found on my YouTube channel here https://www.youtube.com/channel/UCf5jyuJoYwie8tWfvjEc0zg.
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1.1 What is Accounting?
- 2. Video of this presentation at… YouTube Channel for VCE Accounting
- 3. © Michael Allison. Author’s permission required for external use. What is Accounting? 1.1 WHAT IS ACCOUNTING? Users of Accounting Info Recording and reporting Transactions “Accounting is the process of recording, reporting, analysing and interpreting financial data and accounting information which is then communicated to internal and external users of this information” (VCAA Study Design) Analysis and interpretation Accounting
- 4. © Michael Allison. Author’s permission required for external use. Every business has an accountant. Why? 1.1 WHAT IS ACCOUNTING? Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction Transaction User of Accounting Info • How do I make sense of all this data? • How much cash do I have? • How much profit or loss did I make? • How much money do I owe? When is it due? Accountant Income Statement Cash Flow Statement Balance Sheet Tax Return
- 5. © Michael Allison. Author’s permission required for external use. Who are the users of accounting information? Owner/manager of the business Prospective owners of the business Banks/lenders Suppliers of goods or materials Government Employees/unions Customers 1.1 WHAT IS ACCOUNTING?
- 6. © Michael Allison. Author’s permission required for external use. Balance Sheets for three companies… 1.1 WHAT IS ACCOUNTING? Apple Balance Sheet Current Assets 57,653 Current Liabilities 38,542 Non Current Assets 118,411 Non- Current Liabilities 19,312 Owner’s Equity 118,210 176,064 176,064 Virgin Media Balance Sheet Current Assets 844 Current Liabilities 1,278 Non Current Assets 7,096 Non- Current Liabilities 6,022 Owner’s Equity 640 7,940 7,940 USA company Qantas Balance Sheet Current Assets 5,641 Current Liabilities 6,235 Non Current Assets 15,217 Non- Current Liabilities 8,472 Owner’s Equity 6,151 20,858 20,858 UK company AUS company Accountants in three separate countries prepared these reports: • In the exact same format • Treating transactions the same way • How does this happen? • How do accountants in all towns, states and countries know what to do?
- 7. © Michael Allison. Author’s permission required for external use. The Rules of Accounting These rules tell an Accountant what to do in a certain situation You MUST know these rules as they will affect every topic studied and are directly examinable 1.1 WHAT IS ACCOUNTING?
- 8. © Michael Allison. Author’s permission required for external use. 1.1 WHAT IS ACCOUNTING? The Rules of Accounting Relevance Reliability Comparability Understandability Entity Historical cost Going concern Reporting period Monetary unit Conservatism Consistency Qualitative Characteristics Accounting Principles
- 9. © Michael Allison. Author’s permission required for external use. TASK In-class Homework SQ1 X SQ2 X