ACN3101 Accounting Chapter 1 Quiz

Course Information

• Course title: ACN3101 Accounting & Financial Information
• Lecturer: Dr. Zaidi Mat Daud
• Contact information:
  • Room: A218
  • Tel: 016-6647500
  • Email: [email protected]

Topic 1: Accounting in the Business

• Learning Outcomes:
  • Understand the role of accounting
  • Understand the forms of business entity
  • Understand the types of business entity

Roles of Accounting

• Accounting uses words and symbols to communicate financial information for decision-making by internal and external users.
• Terminology and symbols are developed to communicate effectively.

Slide 3 Simplify Technique

• Accounting shares information using simple language and symbols (like numbers and terms) to tell the financial story of a business.
• This information helps people inside and outside the business, such as managers, investors, and banks make decisions.
• The language and symbols used are easy to understand, designed to make the financial picture clear.
• Example: Walmart's earnings reports use accounting terms like "revenue" and "expenses" to show how well the company is doing financially.

Accountability and Control

• Accountability: Management is responsible for preparing and presenting accounting reports to show how well the business is performing.  Reports must adequately reflect performance and position.
• Controlling: Controlling limited economic resources by reviewing the financial structure.

Information System

• Accounting is an information system that measures, processes, and communicates financial information about an identified economic entity.
• Accounting provides information to help decision-makers make reasoned choices regarding scarce resources in business and economic activities.

K.I.S.S.USB (Detailed)

• Accounting collects, processes, and shares information about a business's money and resources to assist in planning and decision-making.
• It helps managers and decision-makers to make smart choices about how to use limited resources efficiently.
• Example: Amazon uses accounting information to make smart choices with its money and resources globally.

Information System in Accounting

• Accounting is an information system that gathers, processes, and shares financial data for a business.
• The information helps people make smart choices about limited resources.
• Example: Tesla uses accounting information to decide where to spend, save, or expand, such as developing new models or increasing production.

Management Information System, Accounting Information System, Transaction Processing System

• Management Information System (MIS) uses data from Accounting Information System (AIS) to provide a broader view of the business.
• AIS processes transaction data from the Transaction Processing System (TPS) into meaningful reports for finance and accounting.
• TPS is like a digital record-keeper, accurately tracking transactions like customer purchases in real-time.

Forms of Business Entity

• Sole Proprietorship: Owned and operated by one person (e.g., restaurants, mini markets).
• Partnership: Owned by two or more people (e.g., accounting firms, legal firms, clinics).
• Company: A separate legal entity, owned by shareholders (e.g., BHP, Coles Myer, CSR, Westpac).

K.I.S.S.USB (Detailed)

• Sole Proprietorship– Owned and operated by one person. Simple to start, with the owner receiving all profits but taking all risks.
• Partnership - Two or more people share profits and responsibilities, each partner brings skills or money to help the business grow.
• Company - A separate legal entity owned by the shareholders. Profits are given to shareholders; the company debts do not affect their personal finance.

Business Stakeholders

• A stakeholder is a person or entity with an interest in a business's economic performance.
• Their report interest is on the report produced by a business to make sound decisions.

Types of Reports from Accounting Information

• Internal Reports (Management Accounting): Used by management for planning, implementing plans, controlling costs, and decision-making.
• External Reports (Financial Accounting): Used by external parties who have an economic interest in the firm; includes the balance sheet, income statement, and statement of cash flows.

Financial Accounting vs Management Accounting

• Financial Accounting: Provides financial information about a business's performance (e.g., profit and loss account), targeted at external users (e.g., shareholders). 
• Management Accounting: Meets a business’s internal needs (e.g., for costing, decision-making).

User Information Requirements

• Internal Users (e.g., management, employees): Need information for costing, planning, decision-making, and job security.
• External Users (e.g., shareholders, lenders): Need information about assets, company cash position, business prospects, and governmental planning.

Test your understanding of the fundamentals of accounting and its role in business. This quiz covers the different types of business entities and how accounting communicates financial information for decision-making. Assess your knowledge to ensure you're ready for more advanced concepts.