Week 2

Question 1

What is meant by reporting boundaries

Answer 1

Judgements that have been made by an organisation’s managers in respect of how far the responsibilities of the organisation have been extended……
In terms of who (which stakeholders) and what (what info should be reported)

Question 2

What is the accounting entity concept

Answer 2

Financial effects of transactions and events of the business are kept quite separate from the personal transactions of the owner.

Question 3

What is a subsidiary and how should they be measured?

Answer 3

A subsidiary is an organisation that is controlled by another organisation.
The accounting entity might be comprised of both organisations consolidated together.
When the financial reports are combined they would be referred to as “consolidated financial statements”

Question 4

What is sustainability reporting

Answer 4

Also known as social responsibility reporting.
It takes into account how the organisations impacts on various community & environment.
The reporting boundaries would extend beyond the organisation and it’s subsidaries.

Question 5

What is generally considered a resource for an organisation?

Answer 5

Something that has a value, in the sense that it allows an organisation to undertake an activity so as to enable it to achieve a desired outcome.

Question 6

What are controlled resources

Answer 6

Anything an organisation can deny or regulate access of other people to.

Question 7

What is meant by other resources

Answer 7

Resources not owned or controlled by the organisation.

Question 8

What is a cost and how is it measured?

Answer 8

It is a measure that is either expressed in financial or non-financial terms.
It is the value of the resource consumed or impacted as a result of an organisation operation.

Question 9

What/who are externalities

Answer 9

Impacts that an entity has on parties external to the organisation.
Where parties are not the buyer or seller (of the goods/services), or did not agree to take part in the activities.

Question 10

What are the outputs an organisation could create?

Answer 10

Outputs is something being generated.
Examples: goods & services / educated people (from universities) / healthy people (from hospitals) / Waste/rubbish / emissions/pollution.

Question 11

What are inputs and give examples?

Answer 11

Inputs are resources being used…

Example: Raw materials / labour / water / Energy / Research & development.

Question 12

What is management accounting?

Answer 12

Information is produced for internal decision making.
Financial and non-financial information used by managers for planning, monitoring and controlling an organisation.
Mostly unregulated.

Question 13

What is financial accounting?

Answer 13

Generates financial reports for use by people outside the organisation.
Heavily regulated.

Question 14

What is the difference between a For-profit and not-for-profit organisation

Answer 14

The main objectives of a for-profit organisation is to generate a profit for owner or shareholders.
But the main objective of a not-for-profit organisation is to satisfy a particular need. The focus is not on profit.

Question 15

What is a sole trader and how do they function?

Answer 15

1. One individual owns a business and is responsible for all its debt.
2. Sole trader is not a separate legal entity. They have unlimited liability (if the business fails than the sole traders personal assets may be used to repay debt).
3. It is easy to set up and their is no specific accounting requirements.
4. Reporting will focus on financial performance.
5. The business will cease to exist if the owner dies.

Question 16

What is a partnership and how do they function?

Answer 16

1. Two or more people come together with a common purpose (generally to make a profit).
2. Easy to set up, with no specific accounting requirements. But reports will generally be on financial performance.
3. For legal purposes a partnership is NOT considered a separate legal entity.
4. Unlimited liability - if the business fails then the partners’ personal assets can be used to repay debt.
5. Mutual agency and the sharing of risk & debt.
6. The partnership will cease when on partner leaves or dies.

Question 17

What is meant by mutual agency

Answer 17

Each partner is responsible for the actions & decisions undertaken by other partners.

Question 18

What are companies and how do they function?

Answer 18

1. An owner of a company owns shares.
2. It has a separate legal identity from its owners (shareholders).
3. Limited liability - owners have no responsibility for the companies debt beyond the cost of their shares.
4. There is generally a separation of owner (shareholder) and management (running of the company).
5. Financial reporting is heavily regulated.

Question 19

What is the difference between a private and public company?

Answer 19

Private companies have Pty Ltd within their name. They are not permitted to offer shares to the public and are restricted to the number of shareholders (50 in Australia).
Whereas public companies have Ltd within their name. offer shares to the public, typically on the securities exchange (ASX).