ACCG106 TUTORIAL 1 HOMEWORK/ DISCUSSION

Chapter 1: Introduction to accounting DQ: 1.13:

As summarized in AICPA ch.1, an excerpt from the Jerkins Report, An effective allocation process is critical to a healthy economy that promotes productivity, encourages innovation, and provides an efficient and liquid market for buying ad selling securities and obtaining and granting credit. This is significantly tied in with accounting information needed by various stakeholders; this includes individuals and entities, as it assists them in making decisions relating to the allocation of scarce resources. Just like individuals, entities also need accounting information in order to make decisions about risks and returns of investment opportunities. Accounting information is extremely valuable to an entitys management (internal users), as it is used to help managers achieve the following: Make decisions concerning the operations of the business entity. As managers require detailed information in which will help them, help the business progress, which they use throughout the management planning process. This includes determining the appropriate sales mix and price of goods, forecasting profits, and determining the capacity of assets. Evaluate the success of the business entity in achieving its objectives. Mangers achieve this by comparing the performance of the business entity against formulated budgets and how well employees have achieved their set targets.

Accounting information helps managers to achieve their entitys maximum operations and performance potential, as it indicates the aspects of their entity; which is successful & unsuccessful, thus where to improve the operations and performance.

CS1.2 (give 2 examples of the listing rules only): a.

ASX Listing - This is the main admission category. Within this category, you must meet the assets test or the profit test. The assets test is met by satisfying either the net tangible assets requirement or the market capitalisation requirement. ASX Debt Listing - This category is for the admission of entities seeking quotation of debt securities only.

b. To protect market integrity, Ingrid is required to comply with the ongoing requirements contained in the ASX Listing Rules. These are based on listing principles; which include the following. Timely disclosure of information; which may affect security values or investment decisions, and information in which security holders, investors and ASX have a legitimate interest. Practices must be adopted and pursued which protect the interests of security holders, including ownership interests and the right to vote. Security holders must be consulted on matters of significance. Market transactions must be commercially certain.

CS1.4:
a) JB HI-Fi Ltd.s shareholders: Income statement- to view the total revenue earned and the total expenses they incurred, thus the businesss gross profit, profit for the year, and the earnings per share. All financial statements, auditors report, and directors report This information would be useful to help them assess the performance and position of the entity of the financial period and what their future prospects are.

b) Australian Banks: Cash flow statement- to view the businesses transactions, and whether or not they are able to afford loan repayments. Balance sheet This information will allow them to determine the financial structure of the entity and calculate the ratios \ such as liquidity, financial structure. They also assess the entitys ability. c) Customer purchasing plasma or LCD television: Cash flow statement as if the business is not performing as well the price of there goods and services may also increase. d) Employees of JB HI-Fi Ltd: Balance sheet As employee wages/salaries are both current & non-current liabilities of a business. e) Financial analysts: Cash flow statement to view the success or failure of a business in regards to their performance, operations & efficiency. All financial statement and segment report Financial analysts are interested in any financial statements providing them with information to help determine future profitability, cash flows and share price. Segment data will allow them to assess the relative risks and returns of the different line of business and geographic segments that the entity operates in. f) Deloitte (auditors): Cash flow statement- requires these statements for investment, financial and tax purposes. All financial statements and accompanying notes on policies. Auditors need to closely scrutinise the financial statements and notes on accounting policies to determine what policies the firm has implemented during the period, which accounting standards have been early adopted (if any) and this combined will allow them to access the accuracy of the amounts disclosed in the financial statements.

g) Australian environmental groups: Cash flow statement as it displays the tax the business pay in operating their business, this includes paying a price for any damage the business has caused in producing their goods and services. Environmental statement The environmental statement discusses the voluntary initiatives that the entity is involved.

Chapter 2: Business Structures E2.12: a) Partnership b) Sole Trader c) Company d) Partnership e) Company f) Trust

E2.16: a) The major difference between the formats of the balance sheet on pages 56 to 57 is that in the equity section of the statement it says issued capital and a balance sheet of a sole trader would say owners equity, and a partnership would say

partners equity. Eg. This section of JB HI-Fi contains a number of items including issued capital, reserves, and retained earnings. Additionally, a company profit is reported under retained earnings, whereas for a sole trader or partnership the profit will be added to the owners equity account. b) The purpose of the note column in JB HI-Fi income statement is indicate where you can find additional information on a certain figure which appears on the statement. c) Equity holders of the parent: Stakeholders who have money invested in the business. d) The purpose of providing different profit figures in various statements is to provide various indicators of the performance and operation of the business as to how much profit is received by the business, the expenses they have incurred, and where the funds are coming from. This helps the business determine parts of the business in which should be improve. e) Consolidated financial statement: A financial statement that shows all the assets, liabilities, and operating accounts of a parent company and its subsidiaries. E2.17: A. b. Assets Inventories- for JB Hi-Fi Ltd these are the finished goods that are available for sale. Cash and cash equivalents these are typically cash on hand, cash at bank, highly liquid investments that can be quickly converted into cash such as treasury bills. Liabilities Trade and other payables - for JB Hi-Fi Ltd these are creditors for inventory, other creditors accruals such as accrued wages, deferred income and GST payable. Borrowings for JB HI-Fi Ltd these are made up of hire purchase lease liabilities, bank overdraft and bank loans, which are secured by the assets, leased or owned by the business.

c. Retained earning: are the accumulated earnings of the company. They take into consideration the previous retained earnings balance; less any dividends paid during the period and add (subtract) the profit (loss) for the period. d. Creditors and shareholders can obtain a range of different information from these reports including: The entitys ability to pay debts Ability to generate cash flows to service loans and knowledge what security is available to the creditors. Ability of the entity to generate profits which allow for distribution as dividends or create capital appreciation in share price.