Department of Accounting and Finance

AFW1000
Principles of accounting
and finance

Mode: On-campus

Semester 2

Unit Coordinator: Ravi Narayanan

This unit is taught at the following Monash

campuses: Berwick, Peninsula, Sunway
and also at Singapore through TMC
Educational Group.

These campuses and institutions have their

own lecturer in charge of teaching and
administering the unit. These campus
based lecturers should be the first contact
point for students who are enrolled at their
campus. You will be advised, via on-
campus lectures, memo or Blackboard, at
the commencement of semester, the
names of the teaching staff involved and
their contact information and consultation
availability.
Table of Contents
1. UNIT INTRODUCTION ................................................................................................................................2

2. RESOURCES AND REQUIREMENTS .......................................................................................................4

3. PROGRAM ..................................................................................................................................................6

4. ASSESSMENT ............................................................................................................................................9

HEALTH, WELLBEING AND DEVELOPMENT CONTRIBUTES TO THE UNIVERSITY'S GOALS BY

PROVIDING SUPPORT AND ADVICE TO STUDENTS AND STAFF ON EMOTIONAL,
PSYCHOLOGICAL, HEALTH, FINANCIAL, ACCOMMODATION, RELIGIOUS/SPIRITUAL,
EDUCATIONAL, CHILD CARE AND PHYSICAL PROBLEMS IN ORDER TO ENHANCE THEIR
ACADEMIC PERFORMANCE AND THE UNIVERSITY COMMUNITY LIFE.
HTTP://ADM.MONASH.EDU.AU/COMMUNITY-SERVICES/ABOUT-US.HTML.........................................17

9431/1
1. Unit Introduction
Unit synopsis

This unit is an introduction to basic concepts in accounting and the application of these concepts for decision-
making by a wide range of potential users (e.g., shareholders, investment analysts, lenders, managers etc.).
This unit should benefit students who wish to specialise in accounting, and will also be of value to students
whose primary interest lies elsewhere in the field of business. On completion, students should have a clear
understanding of the accounting process and the language of accounting to enable communication with an
accounting professional, understand the relevance of accounting information for informed decision-making by a
wide range of potential users, and have the ability to analyse and interpret accounting information.
Topics covered include the accounting equation, general purpose financial reports, cash and accrual
accounting, adjustments, financial statement analysis, interpreting information for managers to use in planning,
decision-making and control, financial maths, capital budgeting and investments.

Unit objectives

The learning goals associated with this unit are to:

1. describe the elements of financial reports, apply double entry recording and prepare basic financial reports
2. analyse and interpret financial reports and explain their use for decision-making
3. interpreting information (financial and non-financial) for managers to use in planning, decision-making and
control
4. understand how to make capital budgeting and investment decision using ‘Net Present Value’
5. apply critical thinking, problem solving and presentation skills to individual and/or group activities dealing with
introductory accounting.

Time commitment

This unit is worth six (6) credit points. This equates to 12 hours per week of which three are in class.
The total time commitment expected for this unit is 156 hours. In addition to the 39 hours of class contact, you
should plan to spend an additional 117 hours during the semester in study for this unit. This includes time spent
in preparing for and completing assessment tasks, together with time spent in general study, revision, and
examination preparation.

Teaching and learning approach

This unit is divided into 12 topics spread over a 13-week teaching period.
A week by week timetable has been provided to guide your study program and also to indicate assignment due
dates and non-teaching periods. The topics listed in the week by week program will be covered in on campus
lectures and tutorials, which are available via Blackboard. A specifically prepared unit guide is also available on
Blackboard.
At Monash students are responsible for taking their own notes from the prescribed texts. On completion of the
required reading, students should attempt the set of tutorial and assignment questions. All answers to tutorial
questions will appear on Blackboard. Students should ensure answers are included in notes for each topic to
assist with revision of the unit.

Important changes to terminology with new accounting standards

Some of you may have acquired previous accounting knowledge and may be use to certain accounting
terminology. Accounting standard changes occur each year, and from 1 January 2005 Australia has adopted
International Accounting Standards some with an Australian revision.
The following new terminology will be used throughout this unit. Please acquaint yourself with the terms and
use them correctly in your assignments.

2
 Previous Terminology New Terminology

Profit and loss statement; Operating statement; Income statement

Statement of financial performance

Statement of financial position Balance sheet

Intangibles Intangible assets

Accounts payable Payables

Borrowings Interest-bearing borrowings

Issued capital, units on issue Contributed capital

Revenue Income

SAC 3 and SAC 4 The framework

Tutorial allocation

All students must enrol themselves in a tutorial group using Allocate +: For information please go to:
http://allocate.cc.monash.edu.au/

Blackboard

All the study materials for AFW1000 may be accessed online.

The following briefly describes some of the information available on the site:

 The Unit Material — Unit Guide, Assignments and Unit Outline can be downloaded and saved to your own
computer. Please note that downloadable material is often saved as either a PDF file that can be opened
in Adobe Acrobat (a viewer version of this software can be downloaded for free from your “My Monash
Portal”) or as a rich text file, which can be opened in any word processing package.
 The unit provides weekly lecture notes that are usually saved as PowerPoint files. If you do not have a copy
of PowerPoint, there is a link on your My Monash Portal page to download a viewer version of the software
for free. Some academic staff may prefer to save lecture files as PDF; these files can be accessed using
Adobe Acrobat.
 The main communication tool for student use is the bulletin board. The bulletin board is a tool to enable you
to communicate with other students and discuss certain issues similar to the classroom situation.
Academic staff can also be contacted using the bulletin board; however, to promote student discussion,
the academic staff will tend to be ‘lurkers’ and will answer email questions/discussions where students get
on the wrong track or are covering a particularly difficult issue. The academic staff would prefer students to
use the bulletin board as a facility to answer each others’ questions rather than expect the academic staff
to provide all the answers. Remember that as university students you are expected to be independent
learners and this tool will enable you to develop the skills required for independent learning while working
as a group, across many campuses and even countries.

3
  Another communication tool is the calendar. Both academic staff and students can make entries on
the calendar, such as assignment due dates, or meeting dates for an online chat session. You can
also make personalised notations and use the calendar similar to a diary to highlight important
personal dates that you have in the future.

The central university systems will automatically create a Blackboard account for you if the unit you have
enrolled in has Blackboard support. If you have made a change to your enrolment, the change will be
processed as soon as possible and may take a couple of days to be reflected in Blackboard.
Before you can access Blackboard you will need the following information:
1. Your Authcate user name. This can be obtained from the Monash Computer Centre if you do not have one. It
is the user name you will use to access the computer labs on campus and the online electronic databases
in the Monash Library. If you do not know your Authcate username, it can be obtained from the following
address: www.monash.edu.au/students/computer
2. Your password for your Authcate username. If you have forgotten your Authcate password, it can be
obtained from: https://mdsadmin.monash.edu.au/cgi-bin/changepwd?forgotten
3. A list of the units that you will be studying during the current semester. Note that not all of the units you are
enrolled in will have a Blackboard site for you to access.

How can you get access to Blackboard?

The site can be accessed under the “blackboard” tab in your My.Monash Portal at: https://my.monash.edu.au/

2. Resources and Requirements

Unit requirements

There are no prerequisites for AFW1000. The unit covers basic accounting concepts and assumes no
background knowledge.

Prescribed text(s)

Carey, P. (2009). Principles of accounting and finance, Brisbane, QLD, John Wiley, Australia
NB: Available through the campus bookshops

Other introductory accounting Text Books

There are many other introductory accounting texts in the library which you can consult if you have difficulties
understanding a particular topic. Some of the introductory texts currently available from the library are listed below:
Bazley, M., & Hancock, P. (2007). Contemporary accounting (6th edition). Nelson Australia Pty Ltd
Horngren, C.T. et al. (2006). Accounting (5th edition). NSW, Pearson Education, Australia
Peirson, G. & Ramsay, A. (2006). Financial accounting: An introduction (4th edition), French Forest, NSW,
Pearson Education, Australia
Trotman, K., & Gibbins, M. (2005). Financial accounting: An integrated approach (3rd edition). Thompson, Australia
Chalmers, K., et al. (2007). Principles of Financial Accounting (1st edition), Milton, QLD, John Wiley & Sons, Australia
Check with your campus lecturer, for other textbooks, or if you find a useful one not on the list. Please feel free to place
a notice on the bulletin board alerting other students.

Q Manual

The Q Manual is a student guide for producing quality work on time. Printed copies are available at the
bookshops or online at:
http://www.buseco.monash.edu.au/publications/qmanual/qmanual.pdf.

4
Examinations – use of calculators

Programmable calculators, graphics calculators and calculators that have the capability to communicate with
other devices are NOT permitted in tests and exams in the Faculty of Business and Economics. Calculators
MUST be identified with an “approved for use” label which can be obtained from the School of Business and
Economics

Student Feedback and Support Services

Feedback to Students
Students will receive feedback on work in the following ways:
• individual feedback on assignments
• in class discussions
• problem solving in tutorials
Feedback on work helps students understand the unit’s academic expectations and progress towards these
expectations. The expectations are presented in the unit objectives and assessment criteria.
Students are strongly encouraged to take note of, and act on, the individual and class feedback.
In regards to the types of feedback on assessment:
- students may be provided with opportunities to answer questions in lectures and tutorials – obtaining
feedback on the understanding of key points;
- students may have set theory and practical work which are discussed in tutorials enabling them to gain
feedback on their own perceptions, as well as their tutor’s and peers, and to promote discussion and
common understandings;
- students may be provided with assignment feedback sheets that provide them with advice about seeking
additional help to develop their writing (CALT) or research skills (library);
- students may also be provided with model answers or feedback on their general performance on common
tasks;
- students may also be regularly provided with verbal feedback on important issues to be noted from teaching
and learning materials;
Feedback from Students
At Monash formal feedback from students is sought via a variety of surveys, including on-line/hard copy unit
evaluations. Two major surveys might be conducted each semester.
• Unit evaluation surveys enable students to provide feedback on features of units, with a view to
obtaining consistent and quality information. Features include content, workload, reference material
and overall satisfaction of the unit.
• The MonQueST questionnaire is structured to enable student feedback to be obtained on specific
aspects of an individual’s teaching, with the feedback being given to the lecturers so that they can
make improvements to their teaching methods.

For details see URL: http://www.adm.monash.edu.au/cheq/evaluations/.

Student Support
Students are able to access academic support provided by CALT (Centre for the Advancement of Learning and
Teaching). All students are welcome to attend classes, workshops and drop-in centres run by CALT Learning
Support staff. Currently, individual consultations are available for intensive work on approaches to study or
English language skills for the following students:
• Referred by Academic Progress Committee hearing
• Received an early warning letter
• Failed an assignment or unit and have a signed referral form from lecturer, tutor, or other support
service personnel
• Referred by lecturer, tutor, or other support service personnel and have a signed referral form
• Attended a 15 minute drop-in session, or seen a CALT Learning Support staff member and identified as
needing intensive support.
5
Further information about student support services, including advice on Student Rights Assistance, is available
at:
http://www.adm.monash.edu.au/community-services/

3. Program
The lecture and tutorial program outlines the broad topics to be covered. Students are requested to come to
tutorials with prepared answers to be discussed (see Tutorial Program). All answers to tutorial questions will be
available on Blackboard on the Friday of that week.

6
Lecture program

Date Topic Required Readings

July 20 1. Introduction to Accounting Carey, P. (2009). Chapter 1

July 27 2. Cash and Accrual Accounting and Statement of Carey, P. (2009). Chapter 2
Cash Flows

Aug 3 3. The Recording Process. Carey, P. (2009), Chapter 3

Concentrating on posting general Journal entries to

the Ledger and Trial Balance

Aug 10 4. Adjusting the Accounts Carey, P. (2009), Chapter 4

Aug 17 5. General Purpose Accounting Reports Carey, P. (2009), Chapter 5

Aug 24 6. Financial Statement Analysis Carey, P. (2009), Chapter 6

Aug 31 7. Performance Measurement Carey, P. (2009), Chapter 7

Sept 7 8. Cost Information for Internal Decision-Making Carey, P. (2009), Chapter 8

Sept 14 9. Budgeting and the Behavioural Implication of Carey, P. (2009), Chapter 9

Accounting Information

Sept 21 10 Introduction to finance and financial mathematics 1 Carey, P. (2009), Chapter 10

Sept 28 NON-TEACHING WEEK

Oct 5 11 Financial mathematics 2 Carey, P. (2009), Chapter 10

Oct 12 12. Financing the Business Carey, P. (2009), Chapter 11

Oct 19 UNIT REVISION

Oct 26 SWOT VAC

Oct 29- EXAMS BEGIN

20 Nov

7
Tutorial Program
Date Topic Required Preparation
(Carey, P., 2009)
July 20 Orientation No Work Preparation required
July 27 1. Introduction to Accounting Chapter 1: Questions 1, 3, 13, 16, 18, 19.
Brief Exercises: 1-1, 1-3, 1-4, 1-7,1-10
Aug 3 2. Cash and Accrual Accounting and Chapter 2: Questions 1, 3, 7, 12, 14.
Statement of Cash Flows Brief Exercises: 2.4
Exercises: 2-1, 2-3.
Problems: 2.1
Aug 10 3. The Recording Process. Chapter 3: Questions 2, 5, 6, 8, 20.
Brief Exercises: 3-2, 3.3, 3-5, 3-9, 3.10
Concentrating on posting general Exercises: 3-1, 3.3, 3-8, 3.14.
Journal entries to the Ledger and Trial
Balance
Aug 17 4. Adjusting the Accounts Chapter 4: Questions: 1, 2, 4, 7, 10, 15, 16.
Brief Exercises: 4-3, 4-7
Exercises: 4-3, 4-4.
Problems: 4.1, 4.2.
Chapter 3: Problem 3.6
Aug 24 5. General Purpose Accounting Reports Chapter 5: Questions 3, 4, 6, 12, 13, 15
Brief Exercises: 5-2, 5-6.
Exercises: 5-4, 5-5. 5.8
Problems: 5.1, 5.5.
Aug 31 6. Financial Statement Analysis Chapter 6: Questions 2, 3, 4, 7, 10, 11
Brief Exercises: 6-1, 6-2, 6-8
Exercises: 6-4, 6-7
Problems: 6-1, 6.2.
Sept 7 7. Performance Measurement Chapter 7: Questions 1, 2, 3,8,10,13,15,17.
Sept 14 8. Cost Information for Internal Decision- Chapter 8: Questions 1, 2, 5, 7, 9, 12, 13,
Making 18.
Sept 21 9. Budgeting and the Behavioural Chapter 9: Questions 1, 2, 7, 8, 9.
Implication of Accounting Information
Sept 28 NON-TEACHING WEEK
Oct 5 10 Introduction to finance and financial Chapter 10: Questions 1, 3, 5, 6, 17, 23,
mathematics 1 24, 25, 27, 28.
Oct 12 11 Financial mathematics 2 Chapter 10: Questions 37, 38, 41, 42, 43,
48, 49, 50.
Oct 19 12. Financing the Business Chapter 11: Questions 3, 5, 10.
Exercises: 11-1, 11-2, 11-5
Problems: 11-8, 11.11
UNIT REVISION

Students should note that the lecture and tutorial programs outlined above are a guide to the material
to be covered in this unit and not a definitive statement of when that material will be covered. Specific
details relating to the timing will be discussed in lectures and tutorials, and posted on Blackboard unit
website.

8
4. Assessment
Assessment Summary
Assessment Task Due Date Value

Assignment 1 Due Monday 7th Sept, 2009 before 5PM 15%

(Week 7)
Requires application of
materials covered in lectures
Weeks 1-5

(Unit Objectives 1 and 2)

Assignment 2 Due Friday 2nd Oct. 2009 before 5PM (Week 15%
10)
Requires application of
materials covered in lectures
Weeks 7-9

(Unit Objectives 3 and 4)

Tutorial Participation & Student presentations (5%) will be graded 10%

Presentations by tutors for presentation from Week 2-13.
See list of presentation topics below.

Participation and preparation (5%) will be

graded by tutors and communicated to
students by tutors in week 13

Final Examination (Unit Official Examination Period is between 29th 60%

Objectives 1, 2, 3, and 4) October to 20th November 2009

Total
100%

Hurdle requirement
Your final mark will be the sum of the marks gained in all pieces of assessment, except that to pass this unit you
must achieve at least 50% in the final examination. Where you achieve from 40% to 49% in the final examination
your maximum final mark for the unit will be 45%. Where you achieve less than 40% in the final examination,
your maximum final mark for the unit will be 43%.

Note: If your final mark is from 45% to 49% then the Board of Examiners may award a Near Pass (NP). For more
information on the NP policy please refer to the following link:

See: http://www.buseco.monash.edu.au/secretariat/policies/near-pass-fb-0507.html.

Second marking
Where a written work submitted for assessment is given a Fail grade by an examiner, that piece of work will be
marked again by a second examiner who will independently evaluate the work, and consult with the first marker.
No student will be awarded a Fail grade for an assessment task or unit without a second examiner confirming
the result.
Note: Exceptions to this are pieces of work contributing no more than 10% of the final mark, unless the total of
such pieces exceeds 30% of the final mark.

Final marks and grades

Faculty policy states that 'the final mark that a student receives for a unit will be determined by the
Board of Examiners on the recommendation of the Chief Examiner taking into account all aspects of
assessment'.

9
Assessment Details
The two Assignments have been specified in section 5 of this outline

These tasks are for an individual

No provision is made for students to resubmit work for higher assessment. It is a student’s right to seek
clarification of their assignment grade with their Lecturer or Tutor on campus. In the event that this proves to be
unsatisfactory they may approach the Chief Examiner for assistance.

Instructions to students
Students are required to retain a copy of their assignment(s) until results are finalised.
You are advised to use computers when preparing the first assignment. In this day of technology all students
should have computer access and are expected to make use of computers. When using continuous feed paper,
please trim tractor edge.

Faculty Style Guide

Work submitted for this assessment must follow the Faculty Style as outlined in the Faculty Q Manual. Copies
of this Manual can be obtained at the bookshop or on line at:
http://www.buseco.monash.edu.au/publications/qmanual/

Submission instructions
Submission date and time
Assignment 1: Sept. 7, 2009. 17:00 - to be submitted in your respective campus drop-box provided
Assignment 2: Oct. 2, 2009. 17:00 - to be submitted in your respective campus drop-box provided

Applications for extension of time

All applications for an extension of the time allocated to an assessment task must be made in writing to the Unit
Leader on the appropriate campus. Approval, if granted, will be in writing and will be recorded on the Faculty
Assignment cover sheet accompanying the assessment task by the responsible lecturer/tutor. See
http://www.buseco.monash.edu.au/student/forms/application-for-extension%20for-submission-of-
assessment.pdf

Penalties for late lodgement

A maximum penalty of 10 per cent of the mark allocated to this assessment task will be deducted for each day
that the assessment is late.

Assignment Cover Sheets

Work submitted for assessment must be accompanied by a completed copy of the Assignment cover sheet
which has been signed by the student. NO assignment will be accepted or marked if it is not accompanied
by a signed Assignment cover sheet.
You will receive your assignment cover sheets with your off campus materials.

Return of Marked Assignments

Marked assignments will be returned to students within 3 weeks.

Marking guide
See the marking rubric (back page of the Unit Outline) as a guide for the awarding of grades throughout the
Faculty.

Final Examination

10
Marks available will be marked out of 100%. The examination is closed book and will comprise a combination of
multiple choice questions, theory and practical questions. The exam will contribute 60% of the final grade in the
unit. More information regarding exam format will be available towards the end of the semester. Practice exam
questions with solutions will be made available on the unit Blackboard for revision purposes towards the end of
the semester.

Examination date and location

This examination will be held during the official examination period. The examination timetable which provides
full details of the examination schedule can be accessed through the my.monash portal.

Examination Duration
This will be a 3 hour examination.

Return of Final Marks for the Unit

The final mark for this unit will be released by the Board of Examiners on the date nominated in the Faculty
Calendar. Student results will be accessible through the my.monash portal.

Special Consideration
A student whose work during a teaching period, and attendance, performance in a semester test, class
presentation, assignment or final exam has been affected by illness or other serious cause may apply for
special consideration.
Details regarding eligibility, closing dates, supporting documentation requirements and an application form can
be found at URL: http://www.buseco.monash.edu.au/student/exams/.

Collusion, Collaboration, Plagiarism and Cheating

The submission of written work such as essays and assignments is an essential part of the learning process
and a vital way of assessing students' understanding of an area of study. Submitted work must therefore be a
student's own work. This does not mean that students may not make use of the work of others. However, in
quoting or paraphrasing material from other sources, those sources must be acknowledged in full.
For more information please refer to URL: http://www.monash.edu.au/teaching/academic-
integrity/student/res_student2.html.

11
5. Assessment Details

Assignment 1 - 15%

This is a task for each individual student.

Assignment 1 integrates topics 1 to 5 of this unit. This assessment is designed to test your achievement of
Objectives 1 and 2. This will require you to demonstrate your ability to prepare a 10 column worksheet and
financial statements from a list of transactions entered into by a business using both manual and
computerized accounting systems. Marks will be awarded based on transaction processing, format and
the presentation and accuracy of the financial statements.
Each student’s assignment will contain a unique series of business transactions generated by a computer
program. Each assignment is numbered, with a record being kept of which numbered assignment you
receive. You will receive your assignment via email in Week 3 of the semester. To receive this email you
must be officially enrolled in this unit before the end of Week 2. If you are late to enrol, please contact your
Lecturer in the week you enrol to receive your assignment.

Using the unique series of business transactions (data) students will be required to record the transactions
through the general journal and general ledger, prepare balance day adjustments, closing entries, financial
statements and a worksheet.

Assignment 2 - 15%

This is a task for each individual student. Students are required to answer the following questions from their
textbook (chapters 7, 8, & 9)
Chapter 7: questions 5 & 16
Chapter 8: questions 3 & 6
Chapter 9: question 4

Faculty Style Guide

Work submitted for this assessment must follow the Faculty Style as outlined in the Faculty Q
Manual. Copies of this Manual can be obtained at the bookshop or on line at:
http://www.buseco.monash.edu.au/publications/qmanual/.

Presentation and Participation (ON-CAMPUS STUDENTS ONLY) – 10%

Marks available

Students will be required to complete one class presentation which contributes 5% toward the final grade
in the subject.
Students will be graded using a 5 point scale (1 = Low, 5 = High) on the following criteria: Knowledge and
understanding of content; Audience interest and response; Appropriate use of body language (inc. eye
contact); Fluency (speed, volume and pronunciation); Timing, Design and use of visual aids; Ability to
work as a team.
Students will be awarded a maximum of 5 marks by their tutor for participation (Contributing 5% to final
grade). Participation will be judged by the tutor based on participation in tutorial discussion (2.5 marks)
and evidence that students have attempted tutorial problems before class (2.5 marks).

12
Date, time and location
Presentation dates will be allocated by individual tutors. Presentations will be in groups of two students
during tutorials in weeks 2 to 13 of semester. There will only be one presentation per tutorial each week.

Time allocated
Students will have a ten minute time limit for their presentations (i.e., 5 minutes for each student).

Technology requirements
Students may present using an overhead projector (where available), or the white board.

Instructions to students
If you have a preference regarding a presentation partner, please form a group of two in advance and
inform your tutor in week one

Return of Marks
Students will be given written feedback on their presentation in the week following the presentation. Students
will be informed of their participation grade in week 13 tutorial

Presentation Topics

Week 3: Financial Statements

Select a company listed on the Australian Stock Exchange at 30 June 2008. Company data is available from
the ‘Annual Report Collection’ data base which can be accessed via the Monash University library at the
following web address
http://www.connect4.com.au.ezproxy.lib.monash.edu.au/products/ar/index.html
You should click on the 2008 year icon located on the left hand side of the page to access companies in that
year.
For the company you select, find the annual report and after reading that report answer the
following questions:

1. The primary objective of financial reports is to provide useful information to users for „decision making‟.
Review the Directors Declaration and outline the responsibility of senior management in the issuing of
financial statements.
2. Management engage auditors on behalf of shareholders to improve the quality of financial report.
Read the audit report and describe the key responsibility of auditors in the conduct of a financial
statement audit?
3. Net assets can be funded by either debt or equity. What % total assets are funded by equity.
Comment on the implication of your findings for the future of the business.

Week 4: Cash Flow

Select any company with a year ending 2008 from the ‘Annual Report Collection’ data base which can be
accessed via the Monash University library at the following web address
http://www.connect4.com.au.ezproxy.lib.monash.edu.au/products/ar/index.htm l
It is important for a business to generate sufficient cash flow from operations to ensure the company
remains viable (solvent). For the company you selected answer the following questions.
1. Explain the difference between profit and cash flow from operations. Students are not required to
present a reconciliation, but they should be able to provide reasons for the difference and illustrate the
difference using examples of items from the company they choose.
2. Compare the total net cash flow (Net increase/decrease in cash held) and the cash flow from operations
and explain why these numbers differed. When there is a difference explain the long term implications
for the business.

Week 5: Balance Day Adjustments

13
WorldCom was a large US telecommunications company.
1. Briefly describe the circumstances surrounding the collapse of WorldCom in 2002.
2. With reference to the article by Kirchgaessner and Waters (2002) „Beaumont role under WorldCom
spotlight‟, describe how senior management at WorldCom managed to perpetrate the worlds
largest financial statement fraud. Contrast the accounting for the fraud with accounting for prepaid
expenses.
Week 6: Financial Statements
Select a company listed on the Australian Stock Exchange at 30 June 2008. Company data is available from
the ‘Annual Report Collection’ data base which can be accessed via the Monash University library at the
following URL:
http://www.connect4.com.au.ezproxy.lib.monash.edu.au/products/ar/index.html .
You should click on the 2008 year icon located on the left hand side of the page to access companies in that
year.
For the company you select, find the annual report and after reading that report answer the
following questions:
1. Assets can be funded by debt, and the cost of debt is interest. If interest rate is falling but credit is
scarce as in the current climate, what are the implications for shareholders?
2. Shareholders are the main users of financial reports, and use the profit figure to assess their
investment performance? What is the % increase/decrease in the net profit/loss from last year? What
is the main source of revenue contributing to profit?
3. Capital can increase/decrease in two ways: profit/loss and contribution/distribution. Which item made
the largest impact on the statement of changes in owner’s equity?
4. Would you invest in this company and why?
Week 7: Financial Statement Analysis (Ethics case)
Problem BYP 6.4 (Carey 2009; Page 259)
Week 8:
Chapter 7 Question 7 (Carey 2009; Page 285)
Week 9: Budgeting and responsibility accounting
Question 5 (Carey 2009; Page 333)
Week 10:
NO PRESENTATION
Week 11:
William F. Sharpe is one of the most respected Financial Economists of all time. At the following URL is
an elegant description and definition of what is finance by Professor Sharpe:
http://www.stanford.edu/~wfsharpe/mia/int/mia_int2.htm .
Required
1. What is William F. Sharpe‟s greatest claim to fame?
2. Explain the evolution of the economy from a barter economy to a monetary economy and finally to a
financial economy. In your discussion, explain why a monetary economy is superior to a barter
economy and similarly, why a financial economy is superior to a monetary economy.
3. What is the fundamental difference between traditional economics and financial economics? In
your discussion, highight an example that differentiates an economic transaction from a financial
transaction and discuss the four characteristics of the financial transaction.
4. Explain why the trading of money now for money in the future can be beneficial to an economy.
5. One of the fundamental principles in finance is that higher risk should be rewarded with a higher return.
Explain how the concept of risk is related to the four characteristics of a financial transaction. Discuss
a real life example of the risk-return trade-off in finance and state the specific type of risk that arises in
your example.
Hint: Sharpe’s discussion on financial economics at the URL above should serve as a starting point in
answering the questions above. Further research will deepen your understanding of the issues involved.

Week 12:

14
Gargorium Ltd. is a company that owns and operates nurseries. Gargorium is considering the
expansion of two of its current nurseries. The estimated initial cost of expanding the nurseries and the
subsequent increase in cashflows from the expansion is tabulated below:

YEAR NURSERY A NURSERY B

0 -$300,000 -$250,000
1 $50,000 $45,000
2 $52,000 $47,000
3 $54,000 $49,000
4 $56,000 $51,000
5 $58,000 $53,000
6 $60,000 $55,000
7 $62,000 $57,000

The company considers the expansion of either Nursery A or B to be mutually exclusive.

Required

1. What is a mutually exclusive project?

2. Define the term Net Present Value (NPV).
3. What is the NPV decision rule?
4. Draw a timeline that depicts the cashflows for expanding Nursery A.
5. Assuming a discount rate (interest rate) of 8% p.a., what are the NPVs of expanding Nursery A and B?
Show your workings.
6. Which nursery should the company expand and why?
7. The discount rate of 8% is the company’s best guess based on the assumed risk of the projects. The
company’s optimistic estimate of the discount rate is 6%. Recalculate the NPV for both projects using
the optimistic discount rate. Which project should the company now choose and why? Show your
workings.
8. Which of the projects is more risky and why?
9. What is the discount rate that sets the NPV of expanding Nursery A to zero? Show your workings.
What is this special discount rate called?
Hint: The Net Present Value (NPV) project evaluation technique is discussed in almost all standard
corporate finance texts. Obtain one of these texts to teach yourself about the NPV technique. Once you
understand the specifics of the NPV technique, you can then use the financial maths skills you have
developed to solve the numerical problems.

Week 13:
Nokia is the world leader in mobility, driving the transformation and growth of the converging Internet and
communications industries. We make a wide range of mobile devices with services and software that
enable people to experience music, navigation, video, television, imaging, games, business mobility and
more. Developing and growing our offering of consumer Internet services, as well as our enterprise
solutions and software, is a key area of focus. We also provide equipment, solutions and services for
communications through Nokia Siemens Networks.
For 2007, our net sales totaled EUR 51.1 billion (USD 74.6 billion) and net profit was EUR 7.2 billion (USD
10.5 billion). At the end of 2007, we employed 112 262 people; had production facilities for mobile devices
and network infrastructure around the world; sales in more than 150 countries; and a global network of
sales, customer service and other operational units. [Nokia Corporation, Form 20-F 2007, p. 25]

To answer the questions below, download Nokia‟s Form 20-F for 2007 from the web.

Required
1. Based on the Form 20-F for 2007, how has Nokia performed in recent times? Be sure to highlight
15
 the evidence you have used to reach your conclusion.
2. Using the web, obtain the share price history of Nokia for the past two years. Is the trend in the
share price of Nokia consistent with the evidence in the Form 20-F? If not, are there any external
factors that
you can think of that could have affected Nokia’s share price?
3. In order to stay at the forefront of the mobile communications market, Nokia spends a considerable
amount of money (about EUR 3 billion annually) on research and development. Using key
information from the balance sheet and data provided in the business insight in Chapter 11 of your
prescribed text, identify the source of this funding.

4. Analyse and comment on Nokia’s financing situation in the 2006-2007 period.

Assignment and Examination Assessment Criteria

Grading descriptors
High Distinction Distinction Credit Pass Fail

(80%+) (70 – 79%) (60 – 69%) (50 – 59%) (Less than 50%)
General Outstanding or A very high standard of Demonstrates a high level Satisfies the minimum Fails to satisfy the
description exceptional work in terms work which demonstrates of understanding and requirements minimum requirements
of understanding, originality and insight presentation and a degree
interpretation and of originality and insight
presentation

Reading Strong evidence of Evidence of reading Thorough understanding Evidence of having read Very little evidence of
independent reading beyond core texts and of core texts and materials core texts and materials having read any of the
beyond core texts and materials core texts and materials
materials

Knowledge of Demonstrates insight, Evidence of an Sound knowledge of Knowledge of principles Scant knowledge of
topic awareness and awareness and principles and concepts and concepts at least principles and concepts
understanding of deeper understanding of deeper adequate to communicate
and more subtle aspects and more subtle aspects intelligently in the topic
of the topic. Ability to of the topic
consider topic in the and to serve as a basis
broader context of the for further study
discipline

Articulation of Demonstrates imagination Evidence of imagination Well-reasoned argument Sound argument based Very little evidence of
argument or flair. or flair. based on broad evidence on evidence ability to construct
coherent argument
Demonstrates originality Evidence of originality and
and independent thought independent thought
Analytical and Highly developed Clear evidence of Evidence of analytical and Some evidence of Very little evidence of
evaluative skills analytical and evaluative analytical and evaluative evaluative skills analytical and evaluative analytical and evaluative
skills skills skills skills

Problem Ability to solve very Ability to solve non-routine Ability to use and apply Adequate problem-solving Very little evidence of
solving challenging problems problems fundamental concepts skills problem-solving skills
and skills

Expression and Highly developed skills in Well developed skills in Good skills in expression Adequate skills in Inadequate skills in
presentation expression and expression and and presentation. expression and expression and
appropriate to presentation. presentation. Accurate and consistent presentation presentation. Inaccurate
the discipline acknowledgement of and inconsistent
sources. acknowledgement of
sources.

Source: University of Adelaide 2005

Near Pass: From 2008, students enrolled in undergraduate courses managed by the Faculty of
Business and Economics who fail a unit with a mark between 45% and 49%, which is confirmed to be
the last unit necessary to complete a course of study, will be given a Near Pass (NP) in that unit
provided that they have completed all the work for the unit, and have sat the final examination. For
further information, refer to the following: links:
http://www.buseco.monash.edu.au/asg/agu/policies/near-
pass-fb-0507.html and for students enrolled prior to 2008
http://www.buseco.monash.edu.au/student/exams/np- info.html.

The Monash University Library provides services and resources to Monash students who want to
improve their academic learning skills, including the quality of their academic English and approaches to

16
study, at the undergraduate and postgraduate levels. Assistance is offered in such areas as oral
communication and presentation, reading, study and exam preparation, effective listening and note-
taking in lectures and seminars, analysis, problem solving and critical thinking, and academic essay,
report and thesis writing.
Drop-in sessions, classes and workshops are scheduled throughout the semester. You can come to a
library drop-in session for a brief 10 to 15 minute consultation with a learning skills adviser about your
assignment or academic skills. A longer appointment may be scheduled for a later date if deemed
necessary by the learning skills adviser.

Further information on learning skills services can be found at:

http://www.lib.monash.edu.au/learning-skills.

Online learning support resources are also available for higher degree research students, off-campus
learners and students with a disability. To access the online resources visit:
http://www.monash.edu.au/lls.
Health, Wellbeing and Development is a branch of the Student and Staff Services Division offering
services to students and staff in the areas of chaplaincy, counselling, family and child care advice,
financial aid, housing advice and health and medical assistance.
Health, Wellbeing and Development contributes to the university's goals by providing support and advice
to students and staff on emotional, psychological, health, financial, accommodation, religious/spiritual,
educational, child care and physical problems in order to enhance their academic performance and the
university community life. http://adm.monash.edu.au/community-services/about-us.html.

17
18