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Financial
Accounting
T E N T H E DI TIO N
HOGGETT
MEDLIN
CHALMERS
BEATTIE
HELLMANN
MAXFIELD
8.6 Allocation of partnership profits and 9.5 Dividends 417
losses 368 Cash dividends 418
Fixed ratio 369 Preference dividends 418
Ratio based on capital balances 369 Share dividends 420
Fixed ratio after allowing for interest and Share splits 421
salaries 370 Comparison of share dividends and share splits 422
8.7 Drawings and loans made by partners 373 9.6 Reserves 422
Drawings 373 Creation of reserves 422
Loans or advances by partners 375 Disposal of reserves 423
8.8 Financial statements for a partnership 376 9.7 Income tax 423
Key terms 379 9.8 Preparing the financial statements 424
Discussion questions 379 Illustrative example: preparation of financial
Exercises 380 statements 424
Problems 384
Key terms 431
Decision analysis 394
Discussion questions 432
Communication and leadership 394
Exercises 432
Ethics and governance 394
Problems 436
Financial analysis 395
Acknowledgements 395
Critical thinking 448
CHAPTER 9
Companies: formation and Acknowledgements 449
operations 397 CHAPTER 10

Chapter preview 398
9.1 Types of companies 399 Regulation and the Conceptual
Limited companies 399 Framework 450
Unlimited companies 401
Chapter preview 452
No‐liability companies 401
10.1 Regulation and development of accounting
Special companies 401 standards 452
Advantages and disadvantages of the corporate Brief history of regulation 452
entity 401
Financial Reporting Council 454
9.2 Forming a company 403
Australian Accounting Standards Board 454
Replaceable rules and constitution 403
Australian Securities and Investments
The certificate of registration 404 Commission 455
The prospectus 404 Australian Securities Exchange 456
Administering a company 404 International Accounting Standards Board
9.3 Categories of equity in a company 406 (IASB) 456
Share capital 406 The IFRS Interpretations Committee 457
Retained earnings 407 Financial Accounting Standards Board (FASB) 457
Other reserves 407 The Asian‐Oceanian Standard‐Setters Group
9.4 Accounting for share issues 408 (AOSSG) 458
Private share placements 408 10.2 The Conceptual Framework 459
Public share issue, payable in full on Background to developing the Conceptual
application 409 Framework 460
Public share issue, payable by instalments 410 10.3 The reporting entity 461
Undersubscription and oversubscription 413 10.4 Objectives of general purpose financial
Rights issue of shares 414 reporting 464
Bonus share issues 415 10.5 Qualitative characteristics of financial
Formation costs and share issue costs 415 information 465
Preference shares 416 Fundamental characteristics 466
vi CONTENTS
Enhancing qualitative characteristics 468 11.4 The petty cash fund 516
The cost constraint on relevant, faithfully Establishing the fund 516
representative information 470 Making payments from the fund 517
10.6 Definitions of elements in financial Reimbursing the fund 517
statements 470 11.5 Cash budgeting 520
Assets in the current Conceptual Framework 470 Need for cash budgeting 520
Assets in the proposed framework 471 Preparation of a cash budget 520
Liabilities in the current Conceptual 11.6 Cash management 523
Framework 472 Principles of cash management 523
Liabilities in the proposed framework 472 11.7 Analysing adequacy of cash flows 524
Equity in the current Conceptual Framework 473 Key terms 525
Income in the current Conceptual Framework 473 Discussion questions 525
Expenses in the current Conceptual Exercises 526
Framework 474 Problems 531
10.7 Recognition of the elements 475 Decision analysis 544
Asset recognition in the current Conceptual Critical thinking 544
Framework 475 Ethics and governance 544
Liability recognition in the current Conceptual Financial analysis 545
Framework 475 Acknowledgements 545
Asset and liability recognition in the proposed
framework 475 CHAPTER 12
Income recognition in the current Conceptual
Framework and standards 476
Receivables 546
Expense recognition in the current Conceptual Chapter preview 547
Framework 479 12.1 Types of receivables 548
10.8 Measurement 481 Accounts receivable 548
Measurement in the proposed framework 481 Bills receivable 548
Concepts of capital 481 Other receivables 549
Key terms 483 12.2 Accounts receivable (trade debtors) 549
Discussion questions 484 Recognition of accounts receivable 549
Exercises 485 Valuation of accounts receivable 550
Problems 490 12.3 Bad and doubtful debts 550
Decision analysis 498 Allowance method of accounting for bad
Critical thinking 498 debts 551
International issues in accounting 499 Estimating doubtful debts 552
Financial analysis 499 Writing off bad debts 555
Recovery of an account written off 556
Direct write‐off method 557
CHAPTER 11
Demonstration problem 558
Cash management and 12.4 Management and control of accounts
control 501 receivable 560
Credit policies 560
Chapter preview 502
Monitoring credit policies 561
11.1 Cash defined 502
Internal control of accounts
11.2 Control of cash 503
receivable 563
Control of cash receipts 504
Disposal of accounts receivable 563
Control of cash payments 505
Key terms 566
11.3 Bank accounts and reconciliation 507 Discussion questions 566
Cheque accounts 507 Exercises 567
Electronic funds transfer 508 Problems 569
The bank statement 509 Decision analysis 574
Bank reconciliation 511 Critical thinking 575
CONTENTS vii
Communication and leadership 575 CHAPTER 14
Financial analysis 576 Non‐current assets: acquisition
Acknowledgements 577 and depreciation 625
14.1 The nature of property, plant and
CHAPTER 13 equipment 626
14.2 Determining the cost of property, plant and
Inventories 578 equipment 627
Chapter preview 579 14.3 Apportioning the cost of a lump‐sum
13.1 Determining the cost of inventory on acquisition 629
hand 580 14.4 Assets acquired under a lease
Performing a stocktake 580 agreement 630
Transfer of ownership 581 14.5 Depreciation 631
Goods on consignment 581 The nature of depreciation 631
The cost of inventory 581 Determining the amount of depreciation 632
13.2 Assignment of cost to ending inventory and Depreciation methods 633
cost of sales — periodic system 582 Comparison of depreciation methods 637
Specific identification method — periodic 584 Revision of depreciation rates and methods 638
First‐in, first‐out (FIFO) method — periodic 585 Accumulated depreciation does not represent
Last‐in, first‐out (LIFO) method — periodic 586 cash 639
Weighted average method — periodic 586 14.6 Subsequent costs 639
Comparison of costing methods 587 Day‐to‐day repairs and maintenance 640
Consistency in using a costing method 589 Overhauls and replacement of major parts 641
13.3 Costing methods in the perpetual inventory Leasehold improvements 641
system 589 Spare parts and service equipment 642
First‐in, first‐out method 590 14.7 Property and plant records 643
Last‐in, first‐out method 592 14.8 Disclosure of property, plant and
Moving average method 592 equipment 645
13.4 Comparison of inventory systems 593 14.9 Analysis, interpretation and management
13.5 The lower of cost and net realisable value decisions 645
rule 595 Analysis and interpretation 645
13.6 Sales returns and purchases returns 597 Management decisions 646
Returns using the first‐in, first‐out method 598 Key terms 648
Returns using the moving average method 599 Discussion questions 649
13.7 Inventory errors 599 Exercises 650
13.8 Estimating inventories 601 Problems 653
Retail inventory method 602 Decision analysis 659
Gross profit method 604 Critical thinking 659
13.9 Presentation in financial statements 605 Communication and leadership 660
13.10 Effect of costing methods on decision
making 605
Key terms 607
Exercises 608 CHAPTER 15
Problems 613
Non‐current assets:
Critical thinking 623 revaluation, disposal and other
aspects 662
Acknowledgements 624 Chapter preview 663
15.1 The revaluation model 664
Initial revaluation increases 664
viii CONTENTS
Initial revaluation decreases 667 16.3 Provisions and contingent liabilities 711
Reversals of increases and decreases 667 Nature of provisions 711
15.2 The impairment test 669 Items excluded from provisions — future
15.3 Derecognition of non‐current assets 671 costs 712
Scrapping non‐current assets 671 Contingent liabilities 712
Sale of non‐current assets 672 16.4 Classification of liabilities 714
Derecognition of revalued assets 674 Need for classification 714
Exchanging non‐current assets 674 Basis of classification 714
Exchanging dissimilar assets 674 Categories 714
15.4 Composite‐rate depreciation 675 16.5 Current liabilities 715
15.5 Mineral resources 677 Accounts payable (trade creditors) 715
Exploration and evaluation costs 677 Bills payable 715
Development costs, construction costs and Employee benefits 717
inventories 678 Warranties 721
Amortisation 678 Onerous contracts 722
Depreciation of related construction assets 679 GST payable 723
15.6 Biological assets and agricultural 16.6 Non‐current liabilities 725
produce 679 The types of non‐current liabilities 725
15.7 Intangible assets 681 Debentures 726
Separately acquired intangibles 681 Other non‐current liabilities 728
Internally generated intangibles 682 Why finance through long‐term debt? 731
Intangibles subsequent to initial recognition 682 16.7 Analysing liabilities for decision making 732
Amortisation 683 Liquidity ratios 733
Patents and research and development Financial stability ratios 734
costs 683 Illustration of ratios 735
Copyrights 684 Key terms 737
Trademarks and brand names 684 Discussion questions 738
Franchises 684 Exercises 739
15.8 Goodwill in a business combination 686 Problems 742
Key terms 688 Decision analysis 746
Discussion questions 689 Communication and leadership 747
Exercises 689 Ethics and governance 747
Problems 694 Financial analysis 747
Decision analysis 703 Acknowledgements 748
Critical thinking 704
Communication and leadership 704 CHAPTER 17
Presentation of financial
statements 749
CHAPTER 16 Chapter preview 751
17.1 External reporting requirements 751
Liabilities 706 Annual financial report 751
Chapter preview 708 Concise report 753
16.1 Liabilities defined 708 Interim financial report 754
Present obligation 708 General requirements for the annual report 754
Past event 709 17.2 Statement of profit or loss and other
Future outflow of resources embodying economic comprehensive income 757
benefits 709 Disclosure of income and expenses 758
16.2 Recognition of liabilities 710 17.3 Statement of financial position 760
Why recognition is important 710 17.4 Statement of changes in equity 762
Criteria for recognition 710 17.5 Demonstration problem 764
CONTENTS ix
Key terms 772 Step 5: Cash and cash equivalents at beginning
Discussion questions 772 and end 832
Exercises 773 Notes to the statement 832
Problems 778 The indirect method of determining net cash from
Decision analysis 786 operating activities 833
Communication and leadership 786 Analysing the statement of cash flows 834
Ethics and governance 787 18.9 Limitations of the statement of cash
Financial analysis 787 flows 836
Key Terms 838
CHAPTER 18
Exercises 839
Statement of cash flows 789 Problems 850
Chapter preview 791
18.1 Purpose of the statement of cash Ethics and governance 869
flows 791 Financial analysis 869
18.2 General format of the statement of cash Acknowledgements 870
flows 792
18.3 Concept of cash 794 CHAPTER 19
18.4 Classification of cash flow activities 795
Cash flows from operating activities 795 Analysis and interpretation of
Cash flows from investing activities 796 financial statements 872
Cash flows from financing activities 796 Chapter preview 874
Summary of classification 796 19.1 Sources of financial information 874
18.5 Preparing the statement of cash flows — 19.2 The need for analytical techniques 874
direct method 797 19.3 Percentage analysis 878
Analysis of cash and other records 798 Horizontal analysis 878
Analysis of financial statements 799 Trend analysis 879
18.6 Notes to the statement of cash flows 810 Vertical analysis 879
Items included in cash and cash equivalents 811 19.4 Ratio analysis 880
Reconciliation note of profit and cash flows from Profitability ratios 880
operating activities (indirect method) 811 Liquidity ratios 886
Other notes 814 Financial stability ratios 889
18.7 Advanced issues 815 19.5 Some important relationships 891
Impact of the GST 815 19.6 Analysis using cash flows 892
Trade accounts receivable 817 Cash sufficiency ratios 893
Trade accounts payable and discount Cash flow efficiency ratios 895
received 819
19.7 Limitations of financial analysis 898
Non‐trade receivables and payables 819
19.8 The impact of capital markets research on
Bills receivable and bills payable 820 the role of financial statement analysis 899
Short‐term investments 821 Key terms 902
Dividends 821 Discussion questions 902
Income tax 822 Exercises 903
18.8 Comprehensive example 826 Problems 908
Step 1: Cash from operating activities — direct Decision analysis 916
method 829 Financial analysis 917
Step 2: Cash from investing activities 830 Ethics and governance 918
Step 3: Cash from financing activities 832 Communication and leadership 919
Step 4: Net cash increase/decrease 832 Acknowledgements 919
x CONTENTS
CHAPTER 1
Decision making and

the role of accounting
LEA RNIN G OBJE CTIVE S
After studying this chapter, you should be able to:

1.1 outline the dynamic environment in which accountants work
1.2 discuss the nature of decisions and the decision‐making process
1.3 outline the range of economic decisions made in the marketplace
1.4 explain the nature of accounting and its main functions
1.5 identify the potential users of accounting information
1.6 apply information to make basic economic decisions
1.7 describe the role of accounting information in the decision‐making process
1.8 compare accounting information for management and external users
1.9 summarise how the accounting profession is organised in Australia
1.10 identify the different areas of the economy in which accountants work
1.11 identify the importance of ethics in business and accounting and how to recognise and handle ethical
dilemmas as part of the decision‐making process.
SCENE SETTER
Getting started with accountancy

A uniquely caring, fair and inclusive view of
society is most often the product of a recipe
that includes powerful life lessons, positive cul-
tural understanding and thoughtful reflection.
These influences have turned Corinne Proske
CPA into the person she is today. What is per-
haps most surprising is that she fell so comfort-
ably into accounting.
Proske grew up in Melbourne, but spent time
in the US, France and Germany when she was
young. Her parents’ respect for nature was
passed on to Proske who, as a teenager, once
considered chaining herself to a tree during an
anti‐logging protest. Instead, a philosophical
discussion with her father led her in an unex-
pected direction.
‘We had a talk about whether it is more effective to strap yourself to the tree and wait for the bull-
dozer or to drive the bulldozer yourself,’ she says.
‘I began to realise the power of blending two worlds together.’
Proske originally dreamed of becoming a park ranger but instead studied commerce, specialising in
environmental economics and later completing her accounting professional qualification.
‘There is a role for people to be outraged but, using the skills of accounting and economics, I have
been able to make the most impactful influences and decisions.’
Proske worked with NAB as head of community finance and development and led NAB’s impact invest-
ment business, an emerging field of investment activities that aims to generate a measurable and beneficial
social or environmental impact along with a financial return. The Australian market for impact investment is
estimated to reach A$32 billion by 2022, so it makes economic sense for the bank to be involved.
From ‘behind the wheel of the bulldozer’, she developed, managed and launched NAB’s microfinance
program, offering assistance to individuals and businesses that have difficulty accessing mainstream
finance.
‘There are two key commercial drivers,’ says Proske. ‘One is that, economically, it makes sense to
include everybody; it is good for GDP. Second, we will be regulated if we don’t get this right. It is also
simply about doing the right thing.’
Research from the Centre for Social Impact, conducted on behalf of NAB, shows that three million
adult Australians are fully or severely financially excluded.
Corinne is now General Manager, Online and Retail at Good Shepherd Microfinance.
‘I would never have got here without my accounting knowledge and experience,’ says Proske. ‘It has
allowed me some real clarity.
‘The tools that accounting offered me have been absolutely essential.’
One piece of advice

‘Doing the right thing and achieving commercial outcomes need to, and can, align. Business is only
successful when society succeeds. Accountants need to look beyond the numbers.’
Source: Excerpts from Sheedy, C 2016, ‘A natural progression’, InTheBlack, June 2016, p. 70, http://intheblack.com/
articles/2016/06/01/could-394000-microfinance-projects-change-australian-market.
Chapter preview
Welcome to your journey into the field of accounting. If your initial reaction to accounting is ‘boring!’,
then think again. Accounting, at times, can be full of politics and intrigue, and the financial figures
it produces are useful for informing many business decisions. The figures also may be the result of
unethical behaviour whereby people have ‘cooked the books’. So let’s begin.
2 Financial accounting
Whether you are studying this subject with a view to following a career in community finance (as has
Corinne Proske in our scene setter), sports management, financial planning, or simply to gain a basic
understanding of the field as it relates to other areas of business, we hope that you find your study of
the subject enjoyable, challenging and useful. Inevitably, a study of accounting requires a basic under-
standing of record keeping, but accounting is far more than that. Accounting plays a vital role in the
decision‐making processes of every organisation, whether it is a for‐profit organisation (e.g. Common-
wealth Bank), not‐for‐profit organisation (e.g. a charity such as Oxfam) or a government organisation
(e.g. a local council).
1.1 The dynamic environment of accounting

LEARNING OBJECTIVE 1.1 Outline the dynamic environment in which accountants work.
Accountants traditionally have been viewed as the ‘bean counters’ or ‘number‐crunchers’ of an organ-
isation, but this is no longer their major task. Computerised accounting systems can now do much of the
work. Even small businesses have access to computerised accounting systems such as Mind Your Own
Business (MYOB) or Xero, so the role of accountants has changed radically. Accountants working in
organisations have become important members of the management team, as organisations have to con-
tend with social changes caused by several factors such as:
•• the dramatic development of information and communications technology including electronic
banking, the Internet and e‐commerce
•• the increasing demand by society for information of a non‐financial nature. This may include
information about an entity’s attention to such issues as occupational health and safety, social and
equity diversity (e.g. employment of people with disabilities and indigenous people), and environmental
considerations (e.g. water usage, the organisation’s carbon footprint and other sustainability practices).
•• the globalisation of business. Instead of merely being involved in a particular local community, many
organisations are seeing the world as their marketplace and as their source of labour and knowledge.
This has placed increasing demands on organisations to be accountable for their corporate behaviour in
foreign countries, including abiding by their rules and regulations, and their impact on the society and
environment of those countries. Questions being asked include: How well does an organisation treat
and pay its employees in developing countries? Is business conducted by way of political payments
(bribes) to influential officials in those countries? What corporate governance practices apply in those
countries?
•• the globalisation of regulations affecting business organisations, such as the development and adoption
of international financial reporting standards
•• digital disruption and unlocking the power of big data.
One thing is certain: change will continue. In order to cope, accountants of the future need to have
not only record‐keeping knowledge but also analytical and communication skills, and business strategy
and planning know‐how. They need the ability to think clearly and critically in order to solve problems,
a familiarity with information systems and technology, strong interpersonal communication skills with
clients and business associates, and sound ethical behaviour in different cultural environments.
This text is designed for all students studying accounting for the first time at university level, both
those majoring in accounting and those seeking a basic understanding of accounting but studying in
other fields, such as marketing, management, economics, information technology, law, engineering, the
arts and sciences. Accounting is usually a core unit in business degrees as it is the ‘language of business’.
Many students in non‐accounting majors can benefit greatly from reading this text. Engineers are often
involved in designing products to reduce costs and meet target prices, so much of their work is driven
by accounting measures. Marketers often strive to maximise sales, so a knowledge of costs, pricing and
accounting methods is helpful for success. Human resources managers are responsible for one of the
major costs in an organisation, so they need to choose a mix of staff to provide a quality service while
keeping control of salary and wages costs. Indeed, many professional groups outside of accounting find
CHAPTER 1 Decision making and the role of accounting 3

that having a good grasp of accounting concepts is an advantage and enhances the opportunities for suc-
cess in their chosen careers.
We begin the text by considering decision making in everyday life, and the role of accounting in pro-
viding information for the decision‐making process. Also in this chapter, we acquaint you with the types
of activities that are carried out by a professional accountant working in business.
LEARNING CHECK
■■ Accountants are not purely record keepers but are part of the management team in an organisation.
■■ Accountants need to have not only record‐keeping knowledge but also analytical skills, and
business strategy and planning know‐how.
■■ Accountants need the ability to think clearly and critically in order to solve problems, a familiarity
with information systems and technology, strong interpersonal communication skills with clients and
business associates, and sound ethical behaviour in different cultural environments.
1.2 Decisions in everyday life

LEARNING OBJECTIVE 1.2 Discuss the nature of decisions and the decision‐making process.
We make many decisions every day. For example, we decide when to get out of bed each morning
(sometimes prompted by our parents!); we decide the appropriate clothes to wear for the coming day’s
activities (influenced by our peers); we decide what to eat for breakfast, unless we are in too much of a
hurry, in which case we make another decision to go without breakfast.
Decisions involve choices because it is not possible to do everything we might like to do, as time and
resources are always limited. Some decisions can be made in no time at all with little thought, such as
putting on a coat if the weather is cold, but others may require much thinking, planning and information
gathering, such as choosing a career, buying a house or a car, moving from one city to another, going on
an overseas trip, choosing which subjects to study at university, and deciding when to retire from active
employment.
Sometimes, decisions made in haste can affect us adversely for the rest of our lives. Each decision we
make has outcomes which then affect decisions to be made at a later time. Ultimately, the decisions we
make, or the decisions made by others which affect us, determine our destiny in life. Decisions affect our
appearance, our economic wellbeing, even our emotional and spiritual wellbeing, so it is important that
we make decisions after careful consideration of all information available at the time.
Steps in decision making

In simple terms, a decision is the making of a choice between two or more alternatives. Every time
a problem arises and we need to make a decision, we consciously or unconsciously follow four main
steps, which can be framed as questions.
1. What are we trying to achieve? We must identify each situation in which a decision is needed and
determine the goals we wish to achieve. The decision we make will be influenced by our values,
motives and desires.
2. What information do we need? Information can help change our attitudes, beliefs or expectations.
Information relevant to each decision helps us determine the alternatives available from which to
choose given the time, resources and degree of effort that we are prepared to commit to making a
choice.
3. What are the consequences of different alternatives? Having obtained information to help us determine
the alternatives available, we then need to assess the consequences or outcomes of these alternatives.
Since the outcomes of each alternative lie in the future, every decision we make involves a degree of
uncertainty, which means that there is an element of risk in achieving a desired outcome. For example,
even a decision to take out car insurance involves a degree of risk as we balance the likelihood of
causing a car accident with the cost of the insurance premium.
4. Which course of action will we choose? Finally, after consideration of the alternatives available
and the consequences of those alternatives, we must choose a course of action which we hope
will achieve the goals that we established in the first place.
The steps in the decision‐making process are illustrated in figure 1.1.
FIGURE 1.1 Steps in the decision‐making process
1 2 Gather 3 4
available Determine Choose a
Establish goals
information consequences course
on of alternatives of action
alternatives
Once we have made a choice, we eventually find a set of actual outcomes or consequences. We may
be satisfied or dissatisfied with these outcomes. If we are dissatisfied, we may need to make further
decisions to achieve our ultimate goals. Hence, the outcomes or consequences of decisions commonly
lead to further decisions, which in turn have further outcomes, and so on.
LEARNING CHECK
■■ The decision‐making process involves four main steps: (1) establishing goals, (2) gathering
information on alternatives, (3) determining the consequences of alternatives, and (4) choosing a
course of action.
1.3 Economic decisions

LEARNING OBJECTIVE 1.3 Outline the range of economic decisions made in the marketplace.
Many (if not most) of the decisions that we make involve the use of economic resources. These are
resources that are traded in the marketplace at a price because they are in limited or scarce supply. Some
decisions are made for consumption purposes, such as what to eat for lunch and which brand of petrol to
buy for the car. Other decisions are made for investment purposes. These decisions usually require major
uses of resources, such as the decision to buy a car or a house. In business, some decisions require the
investment or commitment of many millions of dollars for the purchase of large items of machinery. Still
other decisions are of a financial nature, for example if a business wants to make an investment decision
to purchase new machinery, a decision must be made to find a source of finance.
However, even though the economic aspects of decisions are very important, other factors must also
be considered, and may be more important than economic factors in a particular circumstances:
•• personal taste — our decision to buy a certain brand of clothing may be determined on the basis of
preferred appearance or fabrics rather than price
•• social factors — such as the impact on unemployment in the local community if a business decides to
withdraw from that community
•• environmental factors — such as the potential for carbon emissions or water pollution
•• religious and/or moral factors — our decision not to purchase particular types of meat may depend
on religious beliefs
•• government policy — such as the prohibition of trade in certain types of drugs.

Economic decisions usually involve a flow of money. We may purchase goods for immediate cash
payment, on EFTPOS, payWave or on credit, in which case the flow of money occurs at a later date than
the flow of goods. The use of credit card facilities allows businesses to sell merchandise or provide ser-
vices to us and to collect money from our bank, which then charges the cost to our account. Purchase of
goods and services through the use of EFTPOS or payWave facilities, or through the Internet also allows
a business to charge the cost to our bank account, which means that the flow of money may occur at a
different time from the flow of goods and services.
Individuals and business entities make economic decisions in many different marketplaces. The mar-
ketplace with which we are all familiar is the retail market, where we make decisions as we buy gro-
ceries, mobile devices, cars, home furnishings and electrical goods. Then there is the wholesale market,
where retailers decide to buy their supplies of goods in large quantities from various manufacturers for
sale in their different retail outlets. Another popular market is the stock market, where individuals and
business entities buy and sell shares, debentures and options. Even the flea market is a place where
people make decisions to buy and sell merchandise, some of which they have handcrafted, others of
which are second‐hand. Services are also traded in a marketplace.
BUSINESS INSIGHT
Professional accountants needed in South-East Asia

With the year coming to a close, many countries in the South-East Asian region are busy preparing for
the formal establishment of the ASEAN Economic Community (AEC).
From where I stand, the AEC offers opportunities, not just challenges, for Indonesian businesses,
especially professional accountants, who will join a bigger market not limited by borders. The busi-
nesses that will reap the benefits are those that meet competition head on, by lifting their skills and
knowledge.
For accountants, seeking professional certification would not only support them to do their job well
but, more importantly, give them credibility and a competitive edge in AEC markets.
The government of Indonesia is on the right track in addressing the low number of professional
accountants. In 2014, the government initiated a strategy to create an additional 100,000 professional
accountants over the next few years.
In addition to increasing the number of accountants, the Government blueprint also aims to strengthen
accounting regulation, improve the quality of accountants through certification and increase cooperation
between the professional accounting association, the regulator and professional accountants.
Throughout history, accounting has always been at the core of every successful business, which
makes accounting one of the oldest professions in the world.
In 1954, the Accountant Law (UU Akuntan) was ratified in Indonesia, following the country’s indepen-
dence to secure the national treasury. To satisfy government demand for accountants, the country
established the National College of Accounting (STAN) in 1964. Demand for professional accountants
then increased in the private sector as Indonesia’s economic focus moved to crude oil. However, even
with the increase, the number of professional accountants is still low.
Data from the Finance Ministry’s Accountants and Appraisers Supervisory Center (PPAJP) in 2014
reveals that Indonesia is still in need of more professional accountants.
In 2014, the Ministry had recorded less than 16,000 professional accountants. Meanwhile, there are
more than 226,000 companies in Indonesia that require accounting services. From this, one can see that
many opportunities still exist for Indonesian accountants domestically let alone regionally.
To tap into the opportunities provided by the AEC, let alone the untapped domestic demand, quality
education is a key factor in determining whether an accountant is able to compete with their ASEAN
counterparts.
With the framework already well positioned by Indonesia’s Finance Ministry, professional Indonesian
accountants have a bright future with a large pool of untapped domestic market potential, and with even
bigger regional opportunities ahead.
Source: Excerpts from Bond, D 2015, ‘Professional accountants needed in Southeast Asia’, The Jakarta Post, December.
Economic decisions may be made not only in the local marketplace but also in markets in different
cities, states or countries. Many organisations have been prepared to establish places of business not only
in their home country but also in overseas countries.
Hence, whenever an economic decision is to be made, there are many aspects and alternatives to
consider, and this makes the decision‐making process a fascinating study in itself. How do people in
business organisations make decisions? What role does accounting play in the decision‐making process?
If decision makers are able to gain a certain level of accounting knowledge and understand the con-
cepts and standards on which accounting information and reports are based, this will help them make
more informed economic decisions, regardless of whether they are engineers, marketers, human resource
managers, or any other business decision makers. In the scene setter at the start of the chapter, Corinne
Proske, as an accountant, has been confronted with making many decisions about investing for measur-
able and beneficial social or environmental impact as well as financial return.
LEARNING CHECK
■■ Economic decisions are made for consumption purposes, investment purposes and/or financial
purposes.
■■ Various factors must be considered when making economic decisions such as: financial aspects,
personal taste, social factors, environmental factors, religious and/or moral factors, and government
policy.
■■ Individuals and business entities make economic decisions in many different marketplaces,
including the retail market, the wholesale market and the stock market, locally, nationally and
overseas.
1.4 The nature of accounting

LEARNING OBJECTIVE 1.4 Explain the nature of accounting and its main functions.
Accounting is a service activity. Its function is to provide and interpret financial information that is
intended to be useful in making economic decisions. Business entities, government departments, chari-
table organisations and not‐for‐profit organisations, family units and individuals all engage in economic
activity which involves making decisions about allocating available resources effectively. People need
relevant information to be able to make sound economic decisions.
In a complex society, decision makers have to rely on data supplied by specialists in various fields. For
example, lawyers provide information about the ramifications of existing and changing legislation, and
medical practitioners offer advice about the possible effects of different healthcare decisions. Accounting
as a profession has evolved in response to society’s need for economic information to help people make
economic decisions. The accountant’s main role is to be involved in steps 2 and 3 of the decision‐making
process illustrated in figure 1.1, to offer advice regarding step 4, and to measure the outcomes or con-
sequences of the decision‐making process. However, as you will see once you have studied accounting
more closely, much of the information needed to make an economic decision never makes its way into
the accounting records, but exists outside of those records.
Accounting is often called the ‘language of business’. A language is a means of social communication
and involves a flow of information from one person to one or more other people. Everyone involved
in business, from the beginning employee to the top manager, eventually uses accounting information
in the decision‐making process. To be effective, the receiver of the information must understand the
message that the sender intends to convey. Accounting uses its own special words and symbols to com-
municate financial information that is intended to be useful for economic decision making by managers,
shareholders, creditors and many others. As you study accounting, you must learn the meanings of these
words and symbols if you are to understand the messages contained in financial statements. The end‐of‐
chapter key terms build up this language progressively as you proceed through the text.

The importance of understanding accounting information is not restricted to those engaged directly in
business. Many people with little knowledge of accounting must interpret accounting data. For example,
lawyers must often understand the meaning of accounting information if they are to represent their
clients effectively, marketing consultants must be aware of the costs of developing advertising cam-
paigns, and engineers and architects must consider cost data when designing new equipment and build-
ings. Thus, accounting plays a significant role in society and, in a broad sense, everyone is affected by
accounting information.
Although accounting techniques are used in all types of economic units, in this text we concentrate
mainly on accounting for business entities. Business owners and managers need information provided
by the accounting system to plan, control and make decisions about their business activities. In addition,
shareholders, creditors, government departments and not‐for‐profit organisations (such as clubs and
societies) need financial information to help make investing, lending, regulatory and tax‐related decisions.
Accounting defined
Accounting has been defined as the process of identifying, measuring, recording and communicating
economic information to permit informed judgements and economic decisions by users of the information.
Identification involves observing economic events and determining which of those events rep-
resent economic activities relevant to a particular business. Selling goods to a customer, paying
wages to employees and providing services to a client are examples of economic activities. Economic
events of an entity are referred to by accountants as transactions, and are of two types, external and
internal. Accountants use the single term transaction to refer to both internal and external transactions.
Transactions constitute the inputs of the accounting information system.
External transactions (often called exchange transactions) are those that involve economic events
between one entity and another entity. When an entity purchases goods from a supplier, borrows money
from a bank, or sells goods and services to customers, it participates in external or exchange trans-
actions. Internal transactions are those economic events that take place entirely within one entity. For
example, when a car component is transferred from the stores department to the assembly line in a car
manufacturing business, the transfer must be accounted for, even if it is by simply transferring the cost
of the component from the records of one department to those of the other. Similarly, the depreciation
of machinery used in the production of goods must be accounted for, and since it does not concern an
outside party, it is an internal transaction. Internal transactions may even involve such things as the
growth of grapevines held by the entity or the market value of trading securities, because, under cer-
tain accounting standards, the increased value of these items must be recognised in the accounts of the
organisation.
Measurement must take place before the effects of transactions can be recorded. If accounting infor-
mation is to be useful, it must be expressed in terms of a common denominator so that the effects of
transactions can be combined. We cannot add apples to oranges unless we express them in terms of a
common measuring unit. In our economy, business activity is measured by prices expressed in terms of
money. Money serves as both a medium of exchange and as a measure of value, allowing us to compare
the value or worth of diverse objects and to add and subtract the economic effects of various trans-
actions. Accounting transactions are therefore measured and recorded in terms of some monetary unit,
such as the dollar.
Recording provides a history of the economic activities of a particular entity. Recording is the pro-
cess of systematically maintaining a file of all transactions which have affected the business entity after
they have been identified and measured. Simply measuring and recording transactions, however, would
provide information of limited use. The recorded data must be classified and summarised to be useful in
making decisions.
•• Classification allows thousands of transactions to be placed into more meaningful groups or categories.
All transactions involving the sale of goods, for example, can be grouped into one total sales figure
and all transactions involving cash received can be grouped to report a single cash receipt figure.
•• Summarisation of financial data is presented in reports and financial statements, which are provided
for use by both management and external users of accounting information. These reports usually
summarise the effects of all transactions occurring during some time period such as a month, a quarter
or a year.
Communication is the final part of the accounting process. Identifying, measuring and recording
economic activities are pointless unless the information contained in accounting records can be com-
municated in some meaningful form to the potential users of the information. Communication can be
described as the process of preparing and distributing accounting reports to potential users of accounting
information. Once the users of accounting reports have access to appropriate reports, they are able, after
analysing and interpreting the reports, often with the assistance of professional advice, to make informed
economic decisions. The most common forms of accounting reports are the financial statements, which
are introduced in the chapter that looks at financial statements for decision making.
The accounting process briefly overviewed above can be summarised diagrammatically as shown in
figure 1.2.
FIGURE 1.2 The accounting process
Identification Measurement Recording Communication
Transactions Quantification in Recording; Accounting Analysis

money terms classification; reports and
summarisation interpretation
Many people with little knowledge of accounting tend to view it as being limited to the recording
process and do not distinguish clearly between the recording and communicating of accounting data.
The recording or record‐keeping process involves measuring and recording business transactions and
may take place in one of several forms: handwritten records, mechanical or electronic devices, or simply
magnetic tapes or disks in a computerised system.
The communication process is a much broader function of accounting. It consists of placing accounting
data that have been classified and summarised into financial statements, as well as preparing interpretive
disclosures necessary to make the data understandable. The process requires extensive training, business
experience and professional judgement.
Computers have had a significant impact on the recording phase of the accounting process. The pro-
cesses of recording, classification and summarisation can be done electronically, and hence the recording
process is much more automated. However, the output from a computerised system is only as good as
the data input. Full coverage of the manual system is given in this text to help students understand the
processes performed by computerised accounting systems.
The communication process involves many potential users, and accountants who prepare reports must
have a full appreciation of who the users of the reports are and their needs for accounting information
in order to help them make economic decisions effectively. In this way, the accountant adds significant
value to the running of the organisation.
LEARNING CHECK
■■ Accounting is defined as the process of identifying, measuring, recording and communicating

economic information so that people can make informed judgements and decisions about scarce
resources.
■■ Accounting deals with ‘transactions’, which can be ‘external’ or ‘internal’. External transactions are
those that involve economic events between one entity and another entity. Internal transactions are
those economic events that take place within one entity.

1.5 Users of accounting information
LEARNING OBJECTIVE 1.5 Identify the potential users of accounting information.
Although accountants are involved mainly in the analysis and interpretation of financial data when they
serve as advisers to users of accounting information, the first objective of accounting is to provide infor-
mation in reports which can be used by internal and external decision makers.
Managers (internal decision makers) must have financial data for planning and controlling the oper-
ations of the business entity and hence need answers to such questions as follows.
•• How much profit is being earned?
•• What products should be produced?
•• What resources are available?
•• What is the most efficient production process?
•• How much does it cost to reduce carbon emissions from the production process?
•• What will be the effect of increasing or decreasing selling prices?
•• How much is owing to outsiders?
•• Will cash be available to pay debts as they fall due?
•• What are the benefits of purchasing an asset as opposed to leasing it?
Providing data to help answer these and many other questions generally called management
accounting. The data are presented to management in the form of special purpose financial statements.
These are prepared for users who have specialised needs and who possess the authority to obtain infor-
mation to meet those needs. Apart from internal management (which includes marketing, production,
finance, human resources, research and development, information systems and general managers), some
external users such as banks and government agencies (e.g. Australian Taxation Office) also have the
authority to command the type and nature of the information they require and may demand special pur-
pose reports.
External decision makers such as resource providers (creditors and investors), recipients of goods and
services (customers) and reviewers and overseers of business entities (employers, unions, government
agencies) need accounting information for making decisions concerning granting credit, investing, pur-
chasing goods and services, and complying with tax laws and other regulatory requirements. Questions
raised by external users include the following.
•• Should I invest money in this business?
•• Am I likely to be paid my wages?
•• Will the business be able to repay money lent to it?
•• What are the company’s earnings prospects?
•• Is the business financially sound?
•• Is the business providing products that are socially and environmentally friendly?
Reports prepared for external users include financial statements which generally consist of an income
statement (also called a statement of comprehensive income), a balance sheet (also called a statement of
financial position), a statement of changes in equity and a statement of cash flows. These are often called
general purpose financial statements because they provide general information for use by all external
users.
General purpose financial statements are designed to meet the information needs of a wide range of
users who are unable to command the preparation of reports tailored to satisfy their individual specific
needs for information. Figure 1.3 illustrates the relationship between financial statements/reports and
users of accounting information.
FIGURE 1.3 Financial statements and users
Transactions
Special purpose Special purpose

reports reports
Management Tax returns and
reports other reports
Management team Accounting Government agencies
(hourly, weekly, information system (often monthly
monthly, quarterly) and quarterly)
General purpose
financial statements
(annually or
half-yearly)
Management and Resource Recipients of Reviewers and

governing bodies providers goods and services overseers
Managers at all levels, Investors, creditors, Customers, Government agencies,

boards of directors, contributors, clients employers, unions, general
government agencies suppliers, lenders, public, special-interest
employees groups, e.g. Australian
Shareholders’ Association
LEARNING CHECK
■■ Internal decision makers — managers — require special purpose financial statements to help in
planning and controlling the operations of an entity.
■■ External decision makers — creditors, investors, customers, employees, unions, government
agencies — receive general purpose financial statements to obtain information about an entity.
These are designed to meet the information needs of a wide range of users who are unable to
command the preparation of statements tailored specifically for their needs.
1.6 Using information in economic decisions

LEARNING OBJECTIVE 1.6 Apply information to make basic economic decisions.
Economic decisions are made in business every day. To illustrate, consider the following business
scenario.
Cynthia loves beauty therapy. After several years in retail as a sales assistant, she decides to accept a
redundancy package from her employer and take on a new career. She now has the opportunity to work
in her own beauty business. On investigation, she finds there is an opportunity to set up such a business
to service a number of local suburbs in her area.

First she will need to invest in some equipment. The required items are listed below with their esti-
mated costs.
Second‐hand van $32 000

Massage tables 2 500
Manicure tables and chairs 1 950
Booking information system 2 600
Facial skin machine 2 150
Manicure and pedicure machines 1 600
Waxing pots 1 700
Uniforms 2 000
Towels 2 400
Robes 1 800
Cash register 1 850
52 550
Therefore, Cynthia needs approximately $53 000 in cash to establish the business.
She is unsure about the running costs of the business, but expects the cost of power, beauty products
and laundry to be about $320 per week. She is hoping to be able to provide services to about ten clients
per day, and to work for 6 days each week. She wants to work only 48 weeks of the year and have
4 weeks holiday. Furthermore, she intends to pay $150 per week to her boyfriend, Fred, for keeping the
records, doing the banking, and helping with some of the maintenance duties. (For the time being, we
are ignoring employer superannuation payments, workers compensation and insurances, but in reality
these would need to be taken into account.) Thus, running costs per week are estimated to be as follows.
Power, beauty products and repairs and maintenance $320

Part‐time employee (Fred) 150
470
Initially, Cynthia expects to have the following numbers of clients for the various services she intends
to provide the following.
Waxing (under a regular program) 42

Facials, manicures and pedicures (under a regular program) 12
Spray tans (as requested) 24
Based on this client list, each day she plans to perform waxing services on seven clients, and facials,
manicures and pedicures on two clients. She expects that the waxing will take, on average, 30 minutes
per client; facials, manicures and pedicures will take 1 hour per client; and spray tans will take about
15 minutes per client. The cost of each of the services is as shown.
Waxing $40
Facials, manicures and pedicures 80
Spray tans 10
In each week, the approximate amount of cash received, ignoring spray tan activities which are
requested on an irregular basis, is expected to be as follows.
7 waxes for each of 6 days at $40 each $ 1 680

2 facials, manicures and pedicures for each of 6 days at $80 each 960
2 640
This means that her gross annual turnover for the year’s work of 48 weeks is equal to $2640 × 48 =
$126 720, plus spray tan revenue. Because her annual turnover is greater than $50 000, her accountant
tells her that she will have to get an Australian business number (ABN) from the Australian Taxation
Office (ATO) and that she will be required to collect goods and services tax (GST) from each of her
clients and forward the GST to the ATO at regular intervals. Also, the cost she will pay to her accountant
for preparing the annual tax return and GST documents is $1632. On a weekly basis over 48 weeks, this
adds $34 per week ($1632 ÷ 48) for accounting services to the $470 per week calculated previously, a
total of $504 per week. (Detailed consideration of the GST is covered in other chapters. It is assumed in
this chapter that the figures quoted include the GST where applicable.)
Therefore, the expected weekly cash flow, excluding spray tanning revenue, is $2640 less the weekly
costs of $504, equalling $2136. Since Cynthia is so enthusiastic about owning her own beauty salon,
after consultation with Fred she decides to proceed with the business. Thus, a decision is made after
considering how much money she will need to contribute to set up the business (financing activity), the
equipment she will need to buy (investing activity), the running costs of the business and the weekly
cash inflow (operating activity).
Note that the decision is based on the steps illustrated in figure 1.1 — establishing goals (earning a living
while working as a beauty therapist), collecting information about the proposed business, and considering
the future consequences of conducting such a business. Of course, many of the factors considered in making
such a decision are estimates of future events and, hence, there is a need to proceed with caution. Cynthia
would be very wise to keep a careful eye on how well these cash flow estimates approximate reality.
Particularly important are the financial results. Will the actual weekly performance of Cynthia’s busi-
ness live up to the estimated performance? How much impact does the spray tanning service have on the
actual results? Is the waxing service more profitable than the facial, manicure and pedicure, or spray tan
services? When does Cynthia plan to replace the assets she bought at the start? How will she account for
the fact that these assets gradually wear out over time through use? And how much income tax and GST
will she have to pay? Cynthia may not have considered many of these aspects in making her decision,
and much of this information can be provided by an accountant.
In the next four chapters, we shall consider other examples of service businesses — Minh’s TV
Repairs and Intellect Management Services — and how accounting information can help in the busi-
nesses’ operations and decision making. We shall also return to Cynthia’s beauty business and ask fur-
ther questions which accounting can help to answer.
LEARNING CHECK
■■ Many questions need to be asked when making economic decisions. A decision to set up a
business can be made only after considering things such as how much money will be required to
start (financing activity), what equipment will be needed (investing activity), the running costs of the
business and the weekly net cash inflow (operating activity).
■■ Many of the factors considered in making an economic decision are estimates of future events, and
financial results will need to be monitored to see whether the cash flow estimates approximate reality.
1.7 Accounting information and decisions

LEARNING OBJECTIVE 1.7 Describe the role of accounting information in the decision‐making process.
From the example above, we can see that much financial information is needed before an economic
decision is made. But how much of that information is accounting information? Since accounting is
concerned mainly with identifying transactions and recording the financial history of the transactions
of an entity, a major focus of accounting information is on actual financial events, not on future events.
However, knowledge of information about actual events is useful in establishing relationships that are

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Andes the petroleum is of high grade. Samples of oil from Espejos
Spring, 12 leagues from Santa Cruz, indicate the quality expected
north to the Madre de Dios. This has 78 per cent kerosene, 17
lubricating oil, and 4 per cent coke. From indications it is believed
that gushers would come by boring to proper depth. It is said that
deposits of good quality are indicated at Calacoto on the Arica
Railway, a continuation of the Titicaca fields of Peru. These are
obviously much more accessible but less assured.
Mining properties of various kinds may be acquired and worked to
good advantage, some with a moderate outlay of capital; with larger
returns, naturally, from greater expenditure for the best equipment
and more extensive properties. There is work for centuries.
Industries
Other than mining industries are slightly developed, being local in

character for lack of proper transportation. There is therefore
opportunity for their introduction, the needs meanwhile being
supplied by importation.
Weaving. The weaving industry is one for which the natives are
peculiarly adapted; the Indians and the mestizos now produce with
crude equipment goods of excellent quality for strength and often for
color. In certain Provinces good strong cotton cloth is made which,
used for sheeting, clothing, etc., lasts indefinitely. The natives make
also heavy woolen stuff from llama wool, and fine soft material from
vicuña, alpaca, and silk. But not half enough is woven to supply the
demand, so that much coarse cotton cloth and a woolen called
bayeta are imported for the use of the Indians, as well as fine goods
for the white population. The llamas, estimated as numbering
500,000, are worth from $4 to $10 each; the alpacas, about half as
many, are valued at $50-75 each. There are also 500,000 goats.
Rugs and skins are exported in small quantities, the animals from
which these are taken growing rarer and liable to become extinct.
Rugs of vicuña skin have at least doubled in price since 1906 (their
export is forbidden), as is the case also with the chinchilla. Of the
latter there are two varieties, the blue and the white. They are hunted
by the Indians as are also the vicuñas. The former are now crossed
with the viscacha, a rodent resembling a hare, the resulting animal
being capable of domestication. Though the skins are inferior to
genuine chinchilla they serve the purpose.
It would be a most valuable enterprise if the vicuña could be
domesticated. At present the animals are wild like the guanaco, but
the breeding of herds ought to be possible if the greatest care were
exercised. The vicuña wool is probably the finest existing, and if the
animals could be saved from destruction and their numbers
increased, a highly profitable business would result. These animals,
like the guanacos, wander in small groups in remote places at high
altitudes, 14,000 to 16,000 feet, often difficult of access among the
mountains. These with the llamas and alpacas are ruminants, the
two latter domesticated and living in large herds.
The alpaca wool is much superior to that of the llama and better
than that of the sheep; if the animals were rationally bred on a large
scale the business should be extremely profitable. The animal has
shorter legs than the llama which it resembles; it is never used as a
burden bearer. The alpaca flourishes on the Titicaca Plateau and in
higher, cold and solitary mountain sections, among seed bearing
grasses where snow falls instead of rain. It requires better forage
than the llama. Pure water is an absolute essential. Their long
fleece, sheared once in two years, is always in great demand; a
fleece weighs 10-15 pounds. The alpacas, numbering probably
200,000, are tended by Indians whose patient endurance qualify
them in a measure, but who need instruction to supervise them with
more intelligent care. There are vast lands suitable for their breeding
and culture, and regions where sheep, donkeys, goats, and cattle
may be raised. None of these industries is practised except in a
small way, though land, suitable fodder, and climate are all of the
best.
Stock raising is carried on to a limited extent only, though
conditions for raising horned cattle are said to be ideal on the llanos
of the southeast, where vast natural prairies alternate with forests,
and many wild cattle exist. The large possibilities of this region will
undoubtedly be utilized before many years. Difficulty in reaching
markets is the great present drawback, but Argentine capitalists
have looked over the eastern lowlands and may find early means for
their exploitation. On the higher lands also are sections where the
business may be carried on to advantage. As at present only
ordinary stock is raised with no care in breeding, merely to supply
local needs for meat, there is need of imported cattle and better
methods, as is the case with sheep. Figures given for cattle are
800,000 head, of sheep 1¹⁄₂ million. Many more of the latter should
be raised in some sections of the plateau region. Mutton is more of a
staple food, largely used, dried and salted, by the Indians. Thus
prepared it is called chalona; dried-beef is called charque. The
cultivation of Siberian grasses on the plateau is suggested. Few
hogs are raised, although many districts are well adapted to them.
Agriculture
In agriculture Bolivia has enormous possibilities, but at present

small production. About 5,000,000 acres are under cultivation. With
the varying altitude and climate the vegetable products are similar to
those of the preceding countries, many of these spontaneous, a few
cultivated. The latter are almost solely for internal consumption. On
the plateau grow barley, quinua, and potatoes, the last, when frozen
called chuño, are the basis of the Indians’ diet; barley is much used
for fodder; quinua, a very nutritious millet, easy to cultivate and
hardy, in the form of meal among the plateau Indians takes the place
of wheat and corn, which do not grow at this altitude. In the valleys
below there is plenty of corn, from which is made the Indians’
favorite drink, chicha, though they will readily drink plain alcohol of
poor quality when they can get it. Wheat and rice are raised in
eastern Cochabamba, admirable coffee in the yungas, cacao, and
coca; none in sufficient quantity to supply the home market except
coca. Some coffee is exported but more is imported from Brazil and
Peru. All needful supplies could be provided in one or another part of
the country if population and means of transport existed.
Other Products. Cacao is less cultivated than coffee, though
raised in two departments. Trees are growing untended in the Rio
Madidi and Madre de Dios sections. Sugar cane is cultivated in
Santa Cruz and elsewhere, but most of it is used for making
aguardiente, and molasses or other syrup. More than 200,000
gallons of alcohol come annually from Santa Cruz. Rice also is
grown in this Department giving two harvests a year. It might be
cultivated in other sections. Tobacco of excellent quality thrives in
many places, but not enough is raised for home consumption.
Viticulture is slightly practised with primitive methods. Fruits of many
varieties as in Peru are raised, including especially fine oranges.
Various vegetables are grown but in these lines the development is
slight and poor.
Coca alone is exported among agricultural products, chiefly to
Chile and Argentina. Cultivated also in Cochabamba and Santa
Cruz, the chief centre is in the yungas of La Paz. The leaf is richer in
alkaloid than the Peruvian, as I myself noted, but as yet it has not
been so much exported to Europe on account of its higher price. The
plantations are in terraces on the mountain slopes between 5000
and 7000 feet altitude. In the yungas the bushes are usually three or
four feet high, but may grow to seven or eight. A small crop may be
gathered 18 months after planting, but only in four or five years are
they in full leaf. Three times a year the leaves are gathered, and with
good care the plantations will last half a century. The leaves are
picked by hand, dried, and stored in a dry place, later packed in
bales and pressed. Properly used the chewing of coca in the
highlands may be a blessing. Carried to the excess usual among the
Indians it is a curse, as it is where here used in drinks sold at the
soda counter, creating a habit as vicious as that of alcohol or opium.
For the cultivation of cotton on the lowlands there is much suitable
soil and climate.
Forestry
Of forestal products Bolivia contains all those found in the other

sections of the Amazon basin, varieties of timber, medicinal plants,
etc.; but none at present is of commercial value for export except
quinine, manufactured from cinchona bark, and rubber.
Rubber. The rubber industry of Bolivia is second to that of
minerals. In amount of this export the country is believed to be
second in South America to Brazil, though little has been touched of
the vast territory capable of its production. Sir Martin Conway
estimated the rubber trees of the Beni district as 50,000,000. There
are four zones of rubber producing country, one in the extreme north
near the Acre Territory of Brazil, with outlet from the port and custom
house of Cobija; second, the greater part of Colonias exporting
through the national custom house of Villa Bella, by Villa Rica at the
confluence of the Abuna and the Madeira, or by lesser ports; third,
the Department of La Paz, the rubber going out by Lake Titicaca and
Mollendo; fourth, Beni, Santa Cruz, and Cochabamba, the rubber
from the north going out by Guajará Merím or Villa Bella, that farther
south by Puerto Suarez on the Paraguay or by Yacuiba, and from
the west by Oruro and Antofagasta. The rubber of the region is
chiefly that called fine Pará, most of it exported through that port and
being of the best quality. The latex of the hevea is the source;
sernamby is second quality made of the residue of the finer quality
mixed with bark. The caucho from the castilloa elastica is little
exploited on account of few laborers and expensive transport. With
the opening of the Madeira-Mamoré Railway in 1912 better facilities
were secured, this railway having been built a distance of 207 miles
along the Brazilian shore to avoid the bad rapids on the two rivers.
The flooding of the market with Malay and Ceylon rubber seriously
affected Bolivian production and export, but these have recently
increased. With the forming of plantations in this section, a work
which an American company has undertaken, the rubber should be
better able to compete with that of Ceylon, as its superior quality is
known. The fact that the Bolivian export tax is lower than that of
Brazil gives the former an advantage.
In the Department of Cochabamba are great quantities of
maniçoba trees producing rubber known as ceará, of good quality
but not the best. It might be cultivated in hilly regions and on banks
of streams of the Yungas and other valleys in the Department of La
Paz. The lot of the seringueiros, the rubber workers, is bad; it may
and must be bettered if the industry is to continue. The establishing
of plantations will be a great improvement, but some amenities of life
might be made available even in the ordinary forest.
Investments
From the description of Bolivia, it is apparent that mining presents

the most attractive field for the large capitalist. Mining experts with
less money may be tempted to investigate gold prospects or to
search for rich veins of other metals, later organizing companies for
their development or selling at a handsome profit their acquired
claims, as some persons have done hitherto. However sales are not
always easily made. Petroleum is numbered among the mining
possibilities, although the most favorably located fields may be
preempted already, chiefly by American Companies, the Braden and
the Richmond Levering, in spite of the difficulties of access and
development. The petroleum procured would find its market in
Bolivia and in the neighboring countries of the East and West Coasts
where it is greatly needed. The oil with a paraffin base is of high
grade running to 45.8 Baumé.
Stock raising of various kinds would be profitable in certain
localities, and some forms of agriculture and small industries.
Railway construction, the development of electric power, the
installation of sanitary and other public works will afford many
openings for engineers.
CHAPTER XXVIII
CHILE: AREA, HISTORY, GOVERNMENT, POPULATION, ETC.
The country of Chile, the seventh in size of the South American

Republics, is frequently ranked with the two largest, Brazil and
Argentina, owing to the enterprise of its inhabitants: a natural result
of their location in the temperate zone, from 17° 57′ to 55° 59′ South
Latitude; increased perhaps by their long struggle with the
Araucanian Indians.
Area, Population, Boundary
Area. Chile, with an extent of 290,000 square miles, is ribbon like

in shape, having a length of nearly 2700 miles, a trifle more than
Argentina; in a direct line 2140 miles, with a width of 70-248, miles
averaging about 85.
Population. The country with approximately 4,000,000 inhabitants
is fifth in this respect.
Boundary. The boundary of Chile is simple. At the north is Peru,
on the east are Bolivia and Argentina, at the south and west the
Pacific Ocean.
History
The bold Spanish invaders of Peru might reasonably have been

contented for a time with the conquest of that vast territory. But
Diego de Almagro, incited by the grant of 200 leagues south of those
bestowed upon Pizarro, and enticed by the tales of a region richer
still in gold and silver, set forth to gain possession of the allotted
lands, not long after the founding of Lima in 1535. Over the great
Bolivian Plateau and a high mountain pass into Chile, Almagro
marched with his followers, only to return disappointed after enduring
untold hardships and suffering.
A few years later a second expedition was undertaken by Pedro
de Valdivia, this one along the shore. From Arica proceeding by sea,
having landed at the mouth of the Rio Maipo, in February, 1541,
Valdivia founded the city of Santiago. Still unsatisfied he continued
south, in spite of much opposition, making settlements at
Concepción, Imperial, Villa Rica, and Valdivia; but in 1553 he was
himself slain by the warlike Araucanians, who long disputed with the
invaders the occupation of their country. For 250 years the contest
continued intermittently, with some diminution and amalgamation of
the Indians, till the Chilians rose against Spain, when a more friendly
feeling was established.
The Chilians, who convoked a national congress in 1810, regard
this event as the inauguration of their independence; though not until
1818 was it secured with the aid of San Martín and his army from
Argentina. Chile subsequently experienced many internal difficulties,
but after 1861 the Government became more liberal, and since that
period, except for the revolution against Balmaceda in 1890, the
country has been free from serious internal strife.
Government
The government is that of a centralized republic with the usual

three branches. The President, elected for a term of five years and
not eligible at once for a second term, appoints the Intendentes and
Gobernadores who respectively administer the 23 Provinces, and
their subdivisions, the 82 Departments. There is one Territory,
Magallanes, which includes the southern mainland and the coastal
islands. The police force is national in organization. In the Provinces
no legislative bodies exist save municipal councils with certain local
duties. The franchise is so restricted (the voters must have property
and be able to read and write) that as 25 per cent of the population is
illiterate and most of the laboring class landless, the Government is
said to be practically in the hands of a few leading families.
Senators, 37 in number, must have an income of $2000 and
Deputies, 118, one of $500. The President must not leave the
country while in office.
Chile has 23 Provinces, all but five of which border on the Pacific,
and one Territory. Beginning at the north the names of the Provinces
follow with their approximate areas and population, and with the
names and population of their capitals:
Provinces Area, in Population Capitals Population
square
miles
Tacna 9,000 40,000 Tacna 8,000
Tarapacá 17,000 134,000 Iquique 45,000
Antofagasta 46,500 220,000 Antofagasta 66,000
Atacama 31,000 67,000 Copiapó 13,000
Coquimbo 14,000 191,000 La Serena 16,000
Aconcagua 5,400 140,000 San Felipe 12,000
Valparaiso 1,775 347,000 Valparaiso 212,000
Santiago 5,900 627,000 Santiago 450,000
O’Higgins 2,168 125,000 Rancagua 13,000
Colchagua 3,900 163,000 San 10,000
Fernando
Curicó 3,045 115,000 Curicó 23,000
Talca 3,900 135,000 Talca 42,000
Maule 2,800 125,000 Cauquenes 12,000
Linares 4,000 120,000 Linares 3,000
Nuble 3,500 199,000 Chillán 40,000
Concepción 3,300 271,000 Concepción 72,700
Arauco 2,200 74,000 Arauco 3,500
Bio-Bio 5,400 106,000 Los 14,000
Angeles
Malleco 3,300 136,000 Angol 10,000
Cautín 6,400 175,000 Temuco 31,000
Valdivia 9,000 187,000 Valdivia 26,000
Llanquihue 35,000 150,000 Puerto 8,000
Montt
Chiloé 7,000 100,000 Ancud 4,000
Territory
Magallanes 65,000 32,000 Punta 20,000
Arenas
Population
The population of Chile is little if any below 4,000,000, which gives

it an average of 12 or more to the square mile, the highest rate of all
the North and West Coast countries. There is considerable variation
in the different Provinces, but less than in the other Republics, if the
Territory is omitted. The most thickly inhabited region is from
Valparaiso south to Valdivia; the Province of Santiago having the
largest population and that of Valparaiso the densest. As to the
character of the population it is estimated that 40 per cent are of
white extraction, with at least 50-60 per cent mestizos; probably
50,000 Indians, including possibly 5000 in the far south, uncivilized
and dying out. The educated class as in other countries forms a
small minority of the inhabitants, but in recent years greater attention
has been paid to the diffusion of knowledge among the common
people.
Education
The middle and upper classes pay much attention to education. In

Santiago there are two universities, the larger the University of Chile,
open also to women, and the Catholic University, each with various
departments; a National Institute or high school, a School of Mines, a
Normal School, a School of Arts and Trades. In La Serena and
Copiapó at the north are other Mining Schools, and in cities at the
south Schools of Agriculture; also Normal Schools. An Industrial
College is to be opened in Valparaiso. All towns have elementary
schools; in all State schools including universities education is free,
and in primary grades from 1921 compulsory. There are various
private schools, in Santiago a large and excellent one for boys
(managed for years by American Methodists), where the sons of
many prominent families have been educated, as in La Paz, Bolivia.
Press, Religion, etc.
Press. The Press is free, influential, and of high character, the

Mercurio of Valparaiso and Santiago having a world wide reputation,
and ranking with the best of any country. There are about 700
newspapers and journals.
Religion. The Roman Catholic religion is recognized as that of the
State, but freedom is permitted to others. The women generally are
very devout, though as in the other countries the men of the
governing classes are inclined to agnosticism.
Telegraph. Chile possesses 30,000 miles of telegraph lines and
46,000 of telephone. There are 32 wireless stations at intervals from
Arica down to Punta Arenas, with one on Juan Fernandez Island.
Money. A gold peso (there are no such coins) may be regarded as
worth 36 cents, but the paper money which is in general use
fluctuates in value, a peso varying from 14 to 25 cents, usually 18-
22. There are silver coins of 10, 20, 40 centavos, and copper of
smaller value.
The Metric System of weights and measures is obligatory, all
others being excluded by law.
CHAPTER XXIX
CHILE: PHYSICAL CHARACTERISTICS
The country of Chile has an extraordinary shape, very long and

narrow. Unlike the other Republics of the West Coast, Chile has no
trans-Andine region, as the watershed of the Andes constitutes the
eastern boundary line. Thus confined between the sea and the
mountain tops, while the coast line of the country is nearly 2700
miles, as far as from Labrador to Guiana, the width is scanty, mostly
varying from 100 to 225 miles, though at one point in the south the
western boundary of Argentina is but 26 miles from the Pacific
Ocean.
Although so narrow for most of the distance, Chile has three
sections longitudinally: a very narrow coastal strip, a plateau, or a
central valley, and the mountain region. Its remarkable length from
18° S. Lat., several degrees in the torrid zone, to 56°, well towards
the Antarctic Circle, gives it a wide range in climate arising from the
latitude, as well as the variation from the altitude which it shares with
the countries previously mentioned. From north to south also, the
Republic has three zones: the hot arid land at the north, 18°-32°,
followed by the temperate agricultural section in the centre to 42°,
and the cool, rainy, forested lands at the south; sometimes four
sections are spoken of, in which case the first is regarded as two,
dividing at 27° into the nitrate section north and a mineral, south. Of
these two the former has a plateau section between the Andes and
the sea, the latter some transverse ridges. The country has 25 per
cent in woods and forests, 7¹⁄₂ per cent in pastures, 5 irrigable land
and 12¹⁄₂ per cent arable.
As already noted, the Pacific Coast south of Ecuador is a
practically rainless desert for a distance of 1600 miles along the
shore of Peru and Chile, about as far as Coquimbo. Here begins the
agricultural centre of Chile, including the rich longitudinal valley (with
soil 330 feet deep), in which the capital, Santiago, is situated; the
valley extends from the Aconcagua River to the Gulf of Ancud, 620
miles. Many populous towns and ports are in this section, among
them Valparaiso. The forest country farther south is but sparsely
settled.
Mountains. The Cordillera of the Andes, which extends
throughout the entire length of the country, and is continued at the
north by the Cordillera of Peru, is recognized from its geological
formation as belonging to a recent epoch. It contains many
volcanoes, mostly extinct or inactive except in the south. Aconcagua,
of volcanic origin, the highest peak of the Andes and of all America
so far as is yet known, is a little north of the centre. Its summit is just
over the border in Argentina, as the watershed forming the boundary
here runs west of the line of greatest altitude. The height of
Aconcagua is variously stated, but 22,817 feet has perhaps the best
authority. Other lofty peaks are near, Mercedario and Tupungato,
each over 22,000 feet. There are 24 passes across the range at a
height of 10,000 feet more or less. Farther south the mountains
diminish rapidly in height with few summits above 10,000 feet. The
range ends in Tierra del Fuego with Mt. Sarmiento, 7000 feet.
A cordillera of the coast, geologically older, is much lower,
disappearing altogether at the north. In general quite steep towards
the sea, it slopes gradually towards the central valley or plateau.
This range continues at the south in islands, which in great numbers
fringe the coast. Here the shore is much indented with straits and
bays, resembling the fjords of Norway. Nearly all of the narrowing
point of the continent, the entire Strait of Magellan, and most of
Tierra del Fuego belong to Chile.
Rivers
The rivers of the country are numerous except in the north, where
but two reach the ocean. Farther south to 35° they are torrential in
character, but important both for irrigation and as a potential source
of hydro-electric power; their descent from so great a height
indicating large future possibilities. Beyond 35° a number of streams
are navigable for some distance for boats of light draught, 500 miles
in all, the Bio-Bio for 100 miles, the Maule for 75. South of these
rivers are many picturesque and important lakes close to the
Cordillera where they serve as great reservoirs for the excessive
precipitation of rain and snow on the west side of the mountains. The
largest are Lakes Rauco and Llanquihue, with estimated areas
respectively of 200 and 250 square miles. Lake Todos los Santos, 40
square miles, described as of marvelous beauty, is northeast of
Puerto Montt among the Andean foothills, at a height of 500 feet.
The seaboard at the north, with few indentations, has in
consequence poor harbors, where landing in small boats may
occasionally be dangerous or impossible. In the far south are
sheltered harbors, but few cities requiring them.
Climate
The climate of the country naturally is extremely varied. In the

northern section the immediate coast like that of Peru is preserved
from intense heat by the Antarctic current. A little way back on the
arid plateau the temperature is excessive by day but cool at night.
Going south from the arid section the rainfall gradually increases
until in the far south there is too much. The central regions have a
fair supply with an excellent climate, mean annual temperatures of
50°-60°. Farther south with rain 150-170 days in the year, in some
places 80-100 inches, the climate is less agreeable. The winds are
generally west, either a little north or south. While the mean
temperatures are fairly low, the extremes are much less than at the
same latitudes in most parts of North America or on the East Coast
of Argentina. Even at the farthest south, at Punta Arenas, the most
southern city of the globe, the weather is never so cold as often in
the usual winters of New York or Boston. Until recently suitable
sanitation has been lacking in many cities and the death rate has
been high. Now the authorities are alive to these matters and with
the installation of proper sewerage, already accomplished in
Santiago and in progress in other cities, the death rate is lower. In no
cities from Guayaquil south need any tourist be apprehensive of
danger.
CHAPTER XXX
CHILE: CAPITAL, INDIVIDUAL PROVINCES, CITIES
Capital
Santiago, the capital, with 450,000 inhabitants, is the fourth in

population of the cities of South America, the first three being
Buenos Aires, Rio de Janeiro, and São Paulo. The city is finely
located in the fertile Central Valley, on the Mapocho River. Important
as the Government and social centre, it has much commercial
activity. A little off the direct Trans-Andine line between Valparaiso
and Buenos Aires, it is equally a terminus, as special cars run to
each city from Los Andes where they connect with the narrower
mountain railway. Santiago is the centre of the north and south
railway systems which traverse the country almost from end to end.
A lack of first class hotels has been partially remedied by the
construction of a large one on modern lines, but it may be said that
in all of the capital cities and chief ports of the West Coast additional
accommodations of a higher class are desirable. In Santiago
important improvements recently accomplished include the
installment of a sewerage system and the repavement of the
principal streets. Electric lights have long been enjoyed and an
excellent system of electric cars, one feature of which New York
might imitate to advantage, the numbering of the cars to indicate the
various routes. Santiago in addition to its delightful location may well
boast of its fine buildings, especially its Capitol, the handsome opera
house, and many fine residences; still more of its parks, the far
famed Santa Lucía, Parque Cousiño, and the Quinta Normal; also of
the Palace of Fine Arts, and the Cemetery, especially beautiful in
rose time. Most of the streets are narrow, but there is one splendid
broad avenue, the Alameda or Avenida de Delicias with a central
parkway ornamented with statuary.
CHILE, ARGENTINA, PARAGUAY, URUGUAY
Provinces
A brief review of the Provinces follows, beginning at the north.

Unless otherwise stated, the Provinces extend from the coast back
to the mountains, bordering at the east on Bolivia or Argentina.
Tacna, formerly a part of Peru, is still claimed by that country,
though in the possession of Chile. It is separated by the Sama River
from the Peruvian Province, Moquegua. Largely mountainous, Tacna
has many peaks above 18,000 feet; the two passes to Bolivia are
about 14,000 feet. Of 500,000 acres of possible agricultural land
about one tenth is irrigated, the rest is desert. Alfalfa is the chief
production; beans and maize are important with other vegetables
and fruit. The leading export is sulphur.
The capital, Tacna, is a pleasant town, connected by rail with the
port of Arica, though it is not on the road to La Paz. Arica, with a
better harbor than most of the others, is an important primary port
where all steamers call, as it is the terminus of the Arica-La Paz
Railway; one of the three Pacific outlets for Bolivia. New docks are to
be constructed.
Tarapacá follows on the south, this Province containing with other
minerals, extensive, hot, arid plains with nitrate fields. The sloping
coastal section has two important ports, Pisagua and Iquique,
besides smaller ones exclusively for the export of nitrates, in which
the two named are chiefly engaged.
Iquique, the capital and principal port, is of great commercial
importance for such export, and has very large imports from the fact
that these include all eatables as formerly all drinkables, even water.
Now the water comes in pipes 150 miles from the mountains. The
soil too was imported for the few plazas and gardens existing, as
nothing will grow in the native soil. It is an enterprising community
with a good proportion of pleasant British homes, clubs, theatres,
etc.
Antofagasta comes next, separated from Tarapacá by the River
Loa. On the east it has both Bolivia and a piece of northern
Argentina. The surface descends from the Andes in a series of
plateaus. Vegetation is scanty. This Province, with Atacama on the
south, shares in the activities of the nitrate industry.
The capital city, Antofagasta, is 200 miles south of Iquique, both
ports having very poor harbors, though with enormous commerce for
places of their size. Antofagasta, the terminus of a third railway from
La Paz, the second in Chile, has much Bolivian trade besides export
of nitrates, and lately from Chuquicamata of copper. The Province
contains other ports and cities of consequence, Taltal, Tocopilla,
Mejillones, etc.
Atacama on the south borders exclusively at the east on
Argentina, which from here down forms the eastern boundary of
Chile. The surface of the Province is uneven, with mountains,
plateaus, and ravines; in the valleys of Huasco and Copiapó there is
some agriculture. Minerals, as gold, silver, and copper receive
attention.
Copiapó, the capital, is an important railway junction.
Coquimbo, following, is a narrower Province, the mountains and
the Argentine boundary coming nearer the shore. There are many
lofty peaks at the east; and between spurs running down to the coast
are fertile, well watered valleys, as we now come to the central
section where with a mild climate there is moderate rainfall. Cereals,
fruit, wine, and livestock are exported.
La Serena, the capital, is a pretty town, which has tramway
connection with Coquimbo, a first class port, and a busy city.
Aconcagua is next, with the great peak of that name in the range
at the east. Some 15 miles south of the peak is the Uspallata Pass,
for many years the main commercial highway between Chile and
Argentina. By this Pass came Almagro, and later a division of the
army of San Martín; another division by the pass of Los Patos, a little
lower and farther north, by which cattle are often driven into Chile.
The Province is chiefly agricultural and pastoral, with crops of
cereals, fruits, hemp, and tobacco. The finest wine is produced;
there are large herds of cattle; and copper has some exploitation.
Valparaiso, one of the two Provinces bordering on Aconcagua at
the south, is next to the smallest in the Republic, and the first coming
from the north which does not extend across the country. With
Aconcagua on the north it has Santiago on the east and south. The
surface is mountainous with extensive valleys, the Coast Range here
reaching a height of 7000 feet. Several rivers and a number of bays
are among its favorable features. With a mild climate and sufficient
rain agriculture is the principal industry aside from the commercial
interests of the chief port of the West Coast, Valparaiso.
Santiago, south of Aconcagua and east of Valparaiso, extends
from Argentina on the east, south of Valparaiso to the sea, and has
the two Provinces of O’Higgins and Colchagua on the south. The
Central Valley, which occupies a great part of its area, is here a
broad plain, part of which is well watered and fertile but with some
sections arid; the foothills and valleys are well wooded. The Central
Valley slopes towards the west, having an altitude of nearly 3000
feet at the foot of the Andes, and about 1000 feet near the hills of the
Coast Range. The highest point of the Andes, here south of Mt.
Aconcagua, is less than 20,000 feet while the Coast Range
approaches 8000. Cereals, vegetables, fruit, and wine are the chief
products. Among other towns in the Province is the port of San
Antonio.
O’Higgins, a very small Province, occupies what may be called a
jog at the southeast corner of Santiago, which is therefore on the
west and north, while Argentina is east and Colchagua south.
Although a rugged district, irrigation is developed and large crops of
cereals and fruit are grown. Rich in mineral deposits, copper alone is
exploited.
Colchagua, south of Santiago and O’Higgins, extends across the
country from the sea to the mountains, which have three easy
passes into Argentina. The plains of the Central Valley have a rich
soil and good rainfall, but as the summers are dry, as in Santiago,
irrigation is needful. Crops of wheat, beans, alfalfa, etc., are
important, and also the cattle industry.
Curicó follows across the south with similar features and
productions.
Talca is next, also extending from the coast to Argentina. With a
temperate climate, there are greater extremes of heat and cold on
the plain. Besides the agricultural and cattle industries, the dense
forests here afford opportunity for exploitation. Two Provinces are on
the south.
Linares, the more eastern, has Argentina on the east, Nuble
south, and Maule west. With considerable agricultural land, along the
lower slopes of the Andes it has dense woods.
Maule, the coast Province south of Talca, has both Linares and
Nuble on the east, and Concepción south. The valleys of the Coast
Cordillera, which are fertile, afford opportunity for increased
agriculture, but unwise deforestation has been injurious.
Nuble, again an Andean Province, between Argentina and Maule,
is south of Linares and north of Concepción. Easy passes lead into
Argentina, forests are extensive, and vines and cereals are grown on
a large scale.
Concepción, south of Maule and Nuble, extends from the Pacific
to Argentina. Mountainous at the east, it is rather arid in the centre,
but extremely fertile near the coast. The fine crops include grapes
and excellent wine. Large forests and extensive coal deposits are a
source of wealth.
Arauco and Bio-Bio are on the south; Arauco along the coast, with
important agriculture and large herds of cattle, has also extensive
forests and mineral deposits, coal mines actively worked, and gold,
both alluvial and quartz.
Bio-Bio at the east is mountainous and well watered, as is this
region in general. Cereals are largely grown and viticulture is
practised. The cattle industry is important and the forests are
exploited.

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(eBook PDF) Financial Accounting 10th

operations 397 CHAPTER 10

Decision making and

After studying this chapter, you should be able to:

Getting started with accountancy

One piece of advice

1.1 The dynamic environment of accounting

CHAPTER 1 Decision making and the role of accounting 3

1.2 Decisions in everyday life

Steps in decision making

FIGURE 1.1 Steps in the decision‐making process

1.3 Economic decisions

CHAPTER 1 Decision making and the role of accounting 5

Professional accountants needed in South-East Asia

1.4 The nature of accounting

CHAPTER 1 Decision making and the role of accounting 7

FIGURE 1.2 The accounting process

Identification Measurement Recording Communication

Transactions Quantification in Recording; Accounting Analysis

■■ Accounting is defined as the process of identifying, measuring, recording and communicating

CHAPTER 1 Decision making and the role of accounting 9

Special purpose Special purpose

Management and Resource Recipients of Reviewers and

Managers at all levels, Investors, creditors, Customers, Government agencies,

1.6 Using information in economic decisions

CHAPTER 1 Decision making and the role of accounting 11

Second‐hand van $32 000

Power, beauty products and repairs and maintenance $320

Waxing (under a regular program) 42

7 waxes for each of 6 days at $40 each $ 1 680

1.7 Accounting information and decisions

CHAPTER 1 Decision making and the role of accounting 13

Other than mining industries are slightly developed, being local in

In agriculture Bolivia has enormous possibilities, but at present

Of forestal products Bolivia contains all those found in the other

From the description of Bolivia, it is apparent that mining presents

The country of Chile, the seventh in size of the South American

Area, Population, Boundary

Area. Chile, with an extent of 290,000 square miles, is ribbon like

The bold Spanish invaders of Peru might reasonably have been

The government is that of a centralized republic with the usual

The population of Chile is little if any below 4,000,000, which gives

The middle and upper classes pay much attention to education. In

Press, Religion, etc.

Press. The Press is free, influential, and of high character, the

The country of Chile has an extraordinary shape, very long and

The climate of the country naturally is extremely varied. In the

Santiago, the capital, with 450,000 inhabitants, is the fourth in

A brief review of the Provinces follows, beginning at the north.

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