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This page intentionally left blank
 Chapter

Accounting 1
in action
 The scene setter helps you picture how the chapter topic relates to the real world of
2 Principles of accounting and finance accounting and business. You will find references to the story throughout the chapter.

SCENE SETTER

Financial reporting: a matter of trust In recent years, the financial press has
been full of articles about financial scandals and accounting misdeeds. It started with Enron, but then
spread to Xerox, One.Tel, HIH and WorldCom, and more recently Lehman Brothers, ABC Learning,
Centro, Westpoint and Dick Smith. Many of the articles in the press expressed concern that, as an
increasing number of misdeeds came to public attention, a mistrust of financial reporting in general
was developing. These articles made clear just how important accounting and financial reporting are
to world financial markets and to society as a whole.
Sustainability reporting and reporting on corporate governance structures
have also become a focus of larger public interest entities such the NAB and
Amazon. This type of social responsibility and concern for the condition of
society at large has increased in importance in recent years. Entities include
such reporting to assist users of reports in understanding how the entity is
responding to community and environmental issues. Entities are increasingly
using the notion of triple bottom line reporting, which not only focuses on the
determination of profit, but also on including information on the social and en-
vironmental costs of business activity. Some consider disclosing non-financial
information important for a company in discharging its accountability to its ex-
ternal stakeholders such as shareholders. Investors and other stakeholders are also interested in how
well the company is being managed and run. Good corporate governance, which deals with system of
management and control, is essential for business prosperity and has become a major focus for pro-
fessional investors when evaluating the performance of a company.
In order to make financial decisions as either an investor or a manager, you need to know how to
read financial statements. In this book you will learn about financial reporting and some basic tools
used to evaluate financial statements. In the first chapter we introduce you to financial reporting.
Without reliable financial information, managers would not be able to evaluate how well their business
is doing or to make decisions about the best way to make their business grow in the future. Without financial
statements, bankers and investors could not make informed decisions about how to allocate their funds.
There is no doubt that a sound, well-functioning economy depends on accurate and dependable financial
reporting.
 CHAPTER 1 Accounting in action 3

LEARNING OBJECTIVES

After studying this chapter, you should be able to: Learning objectives give you a
framework for learning the
1. explain what accounting is specific concepts covered in
2. understand the role and value of accounting information the chapter.

3. understand the role of corporate governance in enhancing the quality of financial and broader
corporate reporting
4. identify the users and uses of accounting
5. understand why ethics is a fundamental business concept
6. understand the importance of sustainability, and sustainable reporting, for business
7. understand the importance of integrated reporting
8. understand how accounting standards have been regulated and developed
9. explain the nature of the reporting entity
10. state the basic accounting equation, and define assets, liabilities and owner’s equity
11. understand the two recognition criteria that must be met before an item can be included in the
financial statements
12. understand the four financial statements.

PREVIEW OF CHAPTER 1

Good quality financial information is critical for effective business decisions. Whatever one’s pursuits
or occupation, the need for financial information is inescapable. You cannot earn a living, spend
money, buy on credit, make an investment or pay taxes without receiving, using or dispensing finan-
cial information. Entities are also increasingly reporting on a wider range of issues including risk
management, governance and sustainability performance. Good decision making depends on good
information and transparency of how an entity is managed and controlled.
The purpose of this chapter is to show you that accounting is the system used to provide infor-
mation which is useful for decision making. We will focus on the provision of financial information.
The content and organisation of chapter 1 are as follows.

ACCOUNTING IN ACTION

Why is accounting important? What is accounting? The building blocks of accounting

• Corporate collapses • The role of accounting • Ethics: a fundamental business concept

• Regulatory response
• Enabler of capital allocation
• Credibility of corporate information
• The role of corporate governance in
enhancing the quality of financial
reporting
• Who uses accounting data
• Brief history of accounting
• Distinguishing between bookkeeping
and accounting
• Accounting and you
• The importance of sustainability
reporting
• Regulation and development of
accounting standards
• The reporting entity
• Assumptions
• Basic accounting equation
• Recognition of the elements
• The four financial statements

The preview describes and outlines the major topics and subtopics you will see in the chapter.
4 Principles of accounting and finance

Why is accounting important?

Corporate collapses
As indicated in the scene setter, accounting scandals and corporate misdeeds are com-
mon in the news media. For example, HIH Insurance Limited, which was Australia’s
second largest insurance company, collapsed in March 2001, making it one of Aus-
tralia’s biggest corporate collapses. Thousands of people were left without insurance
cover, and the collapse also led to a royal commission, criminal prosecution of board
members and subsequent legislative reforms. An estimated $5.3 billion was owed to
policyholders and other creditors. The collapse was reported to have resulted from
an aggressive expansion plan and underestimating the amount for insurance payout
liabilities. One.Tel, a telecommunications company, was placed into liquidation in 2001
with debts estimated at $1.8 billion. The company’s strategy of selling mobile phone
contracts below cost was not sound. Its cash collection policies were less than ade-
quate, resulting in One.Tel’s customers using the telephone services for long periods
without receiving a bill for payment. The demise of this company resulted in the loss
of approximately 1400 jobs. WorldCom’s US$3.8 billion restatement of inflated earn-
ings contributed to losses to shareholders of US$179.3 billion and to job losses of
17 000. Enron’s variety of schemes that inflated profit by US$586 million, leading to
financial restatements and bankruptcy, caused investor losses of US$66.4 billion and
job losses of 6100. Xerox Corp., using ‘accounting tricks’ to fool investors, was forced
to restate five years of earnings to reclassify more than US$6 billion in income.
Following the ‘Global Financial Crisis’ (2007–08), the collapse of Westpoint,
Fincorp, Australian Capital Reserve and Centro again highlighted the importance
of the faithful representation of financial reports. The directors of Centro were held
to account for the misclassification of current liabilities as non-current liabilities. In
a tight credit market, Centro was forced into bankruptcy when it could not refinance
after repayment of its current liabilities fell due. In 2016, the collapse of Dick
Smith — leaving creditors more than $260 million short — again brought the ac-
counting profession into focus. The liquidator has uncovered questionable account-
ing practices designed to inflate earnings.

Regulatory response
Given the accounting scandals of the past, numerous proposals to improve business
practices and accounting oversights have come from government, professional
associations (including accounting associations), regulators and the investment com-
munity. Following major business failure, it is common for government to introduce
new regulation to attempt to correct market inefficiencies. For example, in Australia,
the Corporate Law Economic Reform Program (Audit Reform and Corporate
Disclosure) Act 2004 (Cwlth) (also known as CLERP 9) became law on 1 July 2004
initiating major financial reporting and audit reform. The Australian Securities
Exchange introduced corporate governance best practice principles in 2003
(subsequently revised in 2007 and 2014), which place particular focus on the quality
of financial reporting. In the United States (US), the Sarbanes–Oxley Act, signed
into law in July 2002, increases the resources for the government to combat fraud
and to curb poor financial reporting practices, and it introduces sweeping changes
to the structure of the accounting and auditing professions.
For some time, corporate law has recognised that financial reports in themselves
do not provide all of the financial information that investors require to make
informed decisions. s299 of the Corporations Act sets out the required content of
directors’ reports, and for listed entities, s299A(1) requires that the directors’ report
must contain information that shareholders would reasonably require to make an
informed assessment of the entity’s operations and financial position, and impor-
tantly, their business strategies and prospects for future financial years.
 CHAPTER 1 Accounting in action 5

An operating and financial review (OFR) is a key part of annual reporting by listed
entities. An OFR provides an overview that enables shareholders to understand an entity’s
business performance and the factors underlying its results and financial position. The
purpose of the OFR requirements is to ensure that the financial report and directors’
report are presented in a manner that maximises their usefulness, with a particular focus
on the needs of people who are unaccustomed to reading financial reports. The OFR
requirements were introduced to address a lack of contextual information explaining the
results set out in an entity’s annual financial report.ASIC Regulatory Guide 247 was issued
in 2013 to provide guidance on, and improve the overall standard of, OFRs.
One thing is evident from these recent embarrassing, illegal or unethical business
events: accounting is important. Good accounting is essential to sound business and
investing decisions. Bad accounting cannot be tolerated. At the slightest hint of a com-
pany’s accounting improprieties, investors sell their shares and batter its share price.
Recent events prove the worth of studying, understanding and using the accounting
process and accounting information. This book is your introduction to accounting as a
valuable tool of business record keeping, communication and analysis. Make the most
of this course — it will serve you for a lifetime in ways you cannot now imagine.

What is accounting?

Accounting is an information system that identifies, records and communicates the LEARNING
economic events of an entity to interested users. Let’s take a closer look at these OBJECTIVE 1
three activities.
Explain what
1. Identifying economic events involves selecting the economic activities relevant accounting is.
to a particular entity. The sale of running shoes and sporting attire by Nike, the
providing of services by Jim’s Group, the payment of wages by Ford Motor Key terms are printed in bold
Company, and the collection of ticket sales and the payment of expenses by when they first appear, and are
major sporting clubs are examples of economic events. defined in the end-of-chapter
glossary.
2. Once identified, economic events are recorded to provide a history of the entity’s
financial activities. Recording consists of keeping a systematic, chronological
diary of events, measured in dollars and cents. In recording, economic events are ALTERNATIVE
also classified and summarised. TERMINOLOGY

3. The identifying and recording activities are of little use unless the information The terms financial
is communicated to interested users. Financial information is communicated statements and financial
through accounting reports, the most common of which are called financial state- reports are used
ments. To make the reported financial information meaningful, accountants interchangeably.
report the recorded data in a standardised way. Information resulting from sim-
ilar transactions is accumulated and totalled. For example, a company’s sales
transactions are accumulated over a certain period of time and reported as one References throughout the
amount in its financial statements. Such data are said to be reported in the chapter tie the accounting
concepts you are learning to
aggregate. By presenting the recorded data in the aggregate, the accounting the story that opened the
process simplifies a multitude of transactions and makes a series of activities chapter.
understandable and meaningful.
A vital element in communicating economic events is the accountant’s ability to
analyse and interpret the reported information. Analysis involves the use of ratios,
percentages, graphs and charts to highlight significant financial trends and relation-
ships. Interpretation involves explaining the uses, meaning and limitations of reported
data. Financial statements will be referred to in a number of chapters of this book.
At this point, they probably strike you as complex and confusing. By the end of this
course, you’ll be surprised at your ability to understand and interpret them.
6 Principles of accounting and finance

Figure 1.1 The accounting process may be summarised as shown in figure 1.1.
Accounting process

Communication

SOFTBYTE
Identification Recording

SOFTBYTE

Prepare accounting reports

DISKS

Select economic events (transactions) Record, classify and summarise

TE rt
BY epo
FT alR
SOnnu
A

Analyse and interpret for users

The role of accounting

Accounting is often referred to as the ‘language of business’. The purpose of accounting
LEARNING
OBJECTIVE 2
is to assist people, whether internal or external to an entity, to make decisions about the
allocation of scarce resources. For example, if you are a holder of shares in Blackmores
Understand the role and (a manufacturer and distributor of vitamins, minerals and nutritional supplements), you
value of accounting
information. rely on the regular reporting of accounting information to help you to decide whether
or not you will continue to hold your shares.
Accounting is a means of communication, as it provides information that assists users
to understand where the entity has been by looking at its past performance, to understand
where it is now by looking at its current financial position, and to provide insight into
what its likely future prospects are. This information is important so that the users of
such information can make informed decisions.
Accounting is a means of measuring business activity and processing this information
into reports to communicate results to decision makers. For the information to be useful,
it must be relevant and faithfully represented (reliable). Not only are the shareholders
of Blackmores interested in accounting information; Blackmores management is too.
They are interested in the information to assist them in making decisions such as whether
to expand into a new market, or invest in equipment or materials to produce a new range
of vitamin supplements. More specifically, accounting, as a communication tool, also
enables internal users (i.e. management) to assess and analyse information to gain insight,
especially if the entity is not performing as well as anticipated. In these instances, through
regular reporting, management can identify what may have gone wrong and what to do
to get the entity back on track. This is discussed later in the chapter.
Many would say the information provided by an entity’s accounting system is the
most important single source of information for financial decision makers. Later in this
chapter, you will see that other information, such as sustainability reporting, and increas-
ingly more integrated reporting, are also viewed as important by users.

The role of corporate governance in enhancing

the quality of financial reporting
Financial failures and collapses, as identified in the scene setter at the beginning of
this chapter, cost investors billions of dollars. These failures impact employees and
creditors of those entities, and undermine public confidence in accounting
 CHAPTER 1 Accounting in action 7

information and reports. As a result, corporate governance has become a focus of

regulatory attention around the world.
Corporate governance can be defined as the system in which entities are directed LEARNING
OBJECTIVE 3
or controlled, managed and administered. It influences how the objectives of a com-
pany are set and achieved, how risk is monitored and assessed, how performance of Understand the role of
the entity is optimised and how management is held to account (www.asx.com.au). corporate governance in
Much government regulation is designed to encourage good corporate governance. enhancing the quality of
For example, there are Corporations Law regulations outlining the role and respon- financial and broader
corporate reporting.
sibility of directors and the rights of stakeholders (e.g. shareholders). Governance
is largely about the decision-making process of the entity, ensuring that the goals
and hence the decisions made by management are aligned with those of shareholders
(i.e. capital providers). If good corporate governance practices are followed, investors
may be better protected from opportunistic behaviours of managers who may not
act in the best interest of stakeholders. Good corporate governance such as increased
transparency through the disclosure of information and effective monitoring should
enhance the perception, reputation and prosperity of the entity, as well as assisting
management to maximise operational performance.
Apart from the response to the corporate failures and collapses, there are various
reasons why corporate governance has grown in importance, including the increasing
number of small investors, that is, your average ‘mums and dads’ owning shares; the
globalisation of markets that has led to increased competition between entities; the
freeing up of capital markets with more pressure on the attraction of capital; and
the rapid growth of accessible information, which is more readily available to the
public at large. This means there are more interested people demanding accounta-
bility across a much broader spectrum.
In summary, why is corporate governance important? There are various partic-
ipants who have an interest in the entity and who determine and influence the
direction and performance of the entity, namely, for a company, shareholders, man-
agement and the board of directors. However, investors (i.e. shareholders) typically
do not manage companies, particularly public companies: managers are entrusted
with this decision-making authority on behalf of shareholders. The principal (share-
holders) delegates its decision rights to the agent (management) to act in the prin-
cipal’s best interest. This idea is called agency theory. There is, therefore, a separation
of ownership and control, which implies a loss of effective control by shareholders.
If the interests of those who manage the entity differ from those who own the entity,
there is the potential for profits to be diverted away from the best interests of share-
holders. Good corporate governance principles and practices such as effective mon-
itoring and transparency through the disclosure of information means shareholders
can monitor the performance of management and thus reduce the incidence of
divergent behaviour.
Given its importance, a number of bodies throughout the world have introduced
corporate governance best practice guidelines and principles. The Australian
Securities Exchange (ASX) released the Corporate Governance Principles and
Recommendations in 2003, which were first revised in 2007 and then again in 2014
(the third edition). The ASX Corporate Governance Council articulates eight core
principles that underlie good corporate governance. While these recommendations
are not mandatory (although the ASX listing rules require listed companies to dis-
close their compliance with the corporate governance principles — if not/why not
approach) and cannot, by themselves, prevent corporate failures or mistakes in
decision making, they can provide a reference point for companies to optimise
performance and accountability and minimise risks.
The principles are as follows:
1. Lay solid foundations for management and oversight. That is, companies should
establish the functions of the board and management to disclose the process for
evaluating the performance of senior management.
8 Principles of accounting and finance

2. Structure the board to add value. That is, a majority of board members, including
the chair, should be independent directors.
3. Promote ethical and responsible decision making. That is, companies should
adopt a code of conduct.
4. Safeguard integrity in corporate reporting. References in principle 4 to ‘financial
reporting’ in the first and second editions were replaced with references to
‘corporate reporting’ in the third edition. Among other things, companies should
establish an audit committee comprising a majority of independent directors.
5. Make timely and balanced disclosures. That is, companies should ensure com-
pliance with ASX listing rule disclosure requirements.
6. Respect the rights of shareholders. That is, companies should promote effective com-
munication with shareholders and encourage their participation at general meetings.
7. Recognise and manage risk. That is, companies should establish policies, and
design and implement risk management and internal control systems to manage
the company’s material business risks.
8. Remunerate fairly and responsibly. That is, companies should establish a remu-
neration committee to ensure that there are clear guidelines for the remunera-
tion of directors and managers.
Principles 4, 5 and 7 deal specifically with governance over corporate reporting. Three
important changes were made in relation to these principles in the third edition in 2014:
1. A new recommendation was introduced to principle 7, recommendation 7.4: ‘A
listed entity should disclose whether it has any material exposure to economic,
environmental or social sustainability risks and, if it does, how it manages or
intends to manage those risks.’
2. Principle 4 now states, ‘A listed entity should have formal and rigorous processes
that independently verify and safeguard the integrity of its corporate reporting.’
This is potentially a much broader change than that to principle 7. While corporate
reporting is not defined in the third edition, an ordinary English interpretation of
the term includes any written or verbal report in any format (paper or online) on
any topic that is issued by a listed company. This would include OFRs and sustain-
ability reports, including reporting under recommendation 7.4. Accordingly,
directors are now obliged to ensure that formal and rigorous processes that inde-
pendently verify and safeguard the integrity of its corporate reporting are in place.
3. The third edition allows listed companies to make the corporate governance state-
ment under ASX Listing Rules on the corporate governance page of their websites.
This change is designed to reduce some of the volume in annual reports.
Financial reporting is an important component of an effective system of corporate
governance. So too is overall corporate reporting, although principle 4 does not yet
have recommendations on corporate reporting components other than financial
reports. Following principle 4 above will increase the likelihood of better quality
corporate reporting and ensure stakeholders can more effectively monitor the firm’s
performance. High quality financial reporting is needed to ensure management is
remunerated fairly (principle 8 above) and the rights of shareholders are respected
(principle 6 above).
Increased shareholder confidence can result if entities adopt sound corporate
governance structures coupled with good management who have a mix of experience,
skills and independence. This can be achieved through the entity being better able
to provide sound, timely and balanced disclosures in its periodic reporting to the
public (in particular, shareholders), employees and other interested parties. Having
good corporate governance encourages entities to create value and provide account-
ability with the ultimate aim of improving the entity’s performance and attracting
additional investment.
 CHAPTER 1 Accounting in action 9

Before you go on questions

BEFORE YOU GO ON... at the end of major text
sections offer an opportunity
Do it to stop and re - examine the key
Review the corporate governance statement of Blackmores in its latest annual re- points you have studied.
port available at https://www.blackmores.com.au/about-us/investor-centre/corporate-
governance. How does the information disclosed in the corporate governance Accounting in action
examples illustrate important
statement assist you in deciding whether to invest or trade with Blackmores? and interesting accounting
situations in business.

ACCOUNTING IN ACTION Business insight

Allco Finance Group (Allco) commenced operations in Australia as a private struc-

tured finance business in 1979. The group evolved significantly into a fully inte-
grated global financial services business specialising in asset origination, funds
creation and funds management. Allco has, in recent times, appeared in the
financial press for all the wrong reasons. Allco is long regarded as a byword for
poor disclosure and questionable corporate governance in Australia. Questions have
been asked by finance commentators on how long the company’s board and exec-
utives were aware of the poor liquidity position of the company and of keeping
shareholders in the dark about the company’s position. The disclosure statements
in their annual report were often filled with financial ‘gobbledegook’ that also con-
founded users of the reports. Disclosure of $1.9 billion of short-term liabilities
was classified as long-term liabilities in error — a mistake identified by the media
and the market. Further, more questions were raised by institutional and small in-
vestors regarding the purchase of Rubicon Partners, and on a deal that relied heavily
on the US property market after the sub-prime mortgage fallout.
The questionable transactions, recording errors and the market perception of the
company resulted in the resignation of three executive directors, David Coe, Gordon
Fell and David Turnball. Interestingly, David Coe and Gordon Fell were two of the
largest shareholders in Rubicon. Greed was seen to be responsible for the downward
spiral of Allco that also wiped out the wealth of Allco’s shareholders. The result of
such questionable behaviour resulted in Allco shares trading at 50 cents on 8 March
2007. Allco shares were trading at $13 a year earlier!
Source: Based on information from the Allco Finance Group website, March 2008; M. Sainsbury, ‘High Cost
to Allco’s Day in the Sun’, The Weekend Australian, 8 March 2008, p. 39; M. West, ‘Who will call accountants
to account?’, The Age, 13 March 2008, p. 10.

Accounting should also consider the needs of the users of financial information.
Therefore, you should know who these users are and something about their infor-
mation needs (e.g. investors, analysts, bankers).

Who uses accounting data

Because it communicates financial information, accounting, as stated earlier, is often LEARNING
called ‘the language of business’. The information that a user of financial information OBJECTIVE 4
needs depends on the kinds of decisions the user makes. The differences in the de- Identify the users and
cisions divide the users of financial information into two broad groups: internal users uses of accounting.
and external users.
10 Principles of accounting and finance

Internal users
Internal users of accounting information are managers who plan, organise and run
Figure 1.2 a business. These include marketing managers, production supervisors, chief financial
Questions asked by officers and other employees. In running a business, managers must answer many
internal users important questions, as shown in figure 1.2.

Questions asked by internal users

BOWLING
BALL
MACHINE

DEBT
COLLECTOR

Is cash sufficient to pay bills? What is the cost of manufacturing each unit of product?

ST ON
ST RIK r
RIK E fai es
E Un ctic
Acme P r a
Products

Acme
Acme Acme
Mouse Traps
Products Bowling Balls

Can we afford to give employee pay rises this year? Which product line is the most profitable?

Helpful hints help clarify To answer these and other questions, users need detailed information in a timely
concepts or items being manner. For internal users, accounting provides internal reports. Examples are con-
discussed. tribution margin statements and cash budgets. Internal reporting is explored in
chapters 2 and 3.
HELPFUL HINT

The tax authorities External users

require businesses to
retain records that can
be audited. Also,
corporate regulators
require public companies
to keep records.
There are several types of external users of accounting information. Investors (owners)
use accounting information to make decisions to buy, hold or sell shares. Creditors such
as suppliers and bankers use accounting information to evaluate the risks of granting
credit or lending money. Some questions that may be asked by investors and creditors
about an entity are shown in figure 1.3 (page 11).
The information needs and questions of other external users vary considerably.
Tax authorities, such as the Australian Taxation Office, want to know whether the
entity complies with the tax laws. Regulatory agencies, such as the Australian
Securities and Investments Commission (ASIC) and the Securities and Exchange
Commission (SEC) in the US, want to know whether the entity is operating within
prescribed rules. Customers are interested in whether an entity will continue to
honour product warranties and support its product lines. Employees and labour
unions want to know whether the entity can pay increased wages and benefits.
Economists use accounting information to forecast economic activity.

Distinguishing between bookkeeping and accounting

Many individuals mistakenly consider bookkeeping and accounting to be the same.
This confusion is understandable because the accounting process includes the book-
keeping function. However, accounting also includes much more. Bookkeeping usually
 CHAPTER 1 Accounting in action 11

Questions asked by external users

XYZ Tyres
Yeah! ABC Tyres

Is the business earning satisfactory income? How does the business compare in size
and profitability with competitors?

What do we do
if they catch us?
DEBT
COLLECTOR

Will the business be able to pay its debts as they fall due?

Figure 1.3
involves only the recording of economic events. It is therefore just one part of the Questions asked by
accounting process. In total, accounting involves the entire process of identifying, external users
recording and communicating economic events and involves considerable judgement.

ACCOUNTING IN ACTION Business insight

With increasing business complexity, commercial litigation and fraud, forensic accounting
is a growth area in the accounting professional services sector. Forensic accounting divi-
sions provide litigation support, investigative accounting and dispute services. Paul Vincent,
Vincent Chartered Accountants, is a forensic accountant and states that forensic account-
ants are required to understand ‘all the financial issues of the business’. As such, appro-
priate qualifications and work experience, especially in auditing, are assets for anyone
wishing to work in the field of forensic accounting. A forensic accountant is involved in
analysing a business’s records and presenting a report on these accounts to a court of
law. The reports can relate to a variety of financial issues, including an insurance claim
for personal injury or a multimillion dollar corporate collapse. Forensic investigations can
range from looking at expense claims for personal taxi fares to substantial home improve-
ments being charged to the business as legitimate business expenses. Forensic account-
ants are also called upon to conduct fraud risk assessments for businesses. Forensic ac-
countants at Vincent Chartered Accountants are offering expert testimony in court in a
case against packaging company Amcor Australasia, which colluded with Visy to fix prices.
Source: M. Ham, ‘Courting numbers’, The Sydney Morning Herald, 8 March 2008, p. 10; ‘Forensic accounting –
The number sleuths’, Midlands Business Insider, 23 January 2008; K. Walters, ‘Focus – Crime fiction’, BRW,
13 March 2008, p. 48.

Accounting may be further divided into financial accounting and management

accounting. Financial accounting is the field of accounting that provides economic and fi-
nancial information for investors, creditors and other external users. Management accounting
provides economic and financial information for managers and other internal users.
12 Principles of accounting and finance

Accounting and you

One question frequently asked by students of accounting is, ‘How will the study of
accounting help me?’ It should help you a great deal, because a working knowledge
of accounting is desirable for virtually every field of endeavour. Some examples of
how accounting is used in other careers include:
• General management. Imagine running BMW, a major hospital, a school, a
McDonald’s franchise or a bike shop. All general managers need to understand
accounting data in order to make wise business decisions.
• Marketing. A marketing specialist develops strategies to help the sales force be
successful. But making a sale is meaningless unless it is a profitable sale of a good
product. Marketing people must be sensitive to costs and benefits, which account-
ing helps them quantify and understand.
• Finance. Do you want to be a banker, an investment analyst or a stockbroker?
These fields rely heavily on accounting. In all of them you will regularly examine
and analyse financial statements and all other corporate reports. In fact, it is dif-
ficult to get a good job in a finance function without having completed two or
three subjects in accounting.
• Real estate. The most prevalent career in real estate is that of an agent, a person
who sells real estate. Because a third party — the bank — is almost always involved
in financing a real estate transaction, agents must understand the numbers
involved. Can the buyer afford to make the payments to the bank? Does the cash
flow from an industrial property justify the purchase price? What are the tax
consequences of the purchase?
Accounting is useful even for occupations you might think are completely unrelated.
If you become a doctor, a lawyer, a social worker, a teacher, an engineer, an architect or
an entrepreneur — you name it — a working knowledge of accounting is relevant. You
will need to understand financial statements in any entity you are associated with.

Before you go on questions

at the end of major text
sections offer an opportunity
to stop and re-examine the key
points you have studied.
BEFORE YOU GO ON...
Review it
1. What is accounting?
2. What is meant by analysis and interpretation?
3. Why is accounting important?
4. What is corporate governance and how can it enhance the quality of
information?
5. Who uses accounting information? Identify specific internal and external
users of accounting information.
6. To whom are the origins of accounting generally attributed?
7. What is the difference between bookkeeping and accounting?
8. How can you use your accounting knowledge?

The building blocks of accounting

Every profession develops a body of theory consisting of principles, assumptions and
standards. Accounting is no exception. Just as a doctor follows certain standards in
treating a patient’s illness, an accountant follows certain standards in reporting
financial information. For these standards to work, a fundamental business concept
is followed — ethical behaviour.
 CHAPTER 1 Accounting in action 13

Ethics — a fundamental business concept

Wherever you make your career — whether in accounting, marketing, management, fi-
LEARNING
nance, government or elsewhere — your actions will affect other people and entities. OBJECTIVE 5
The standards of conduct by which your actions are judged as right or wrong, honest or
dishonest, fair or not fair, are ethics. Imagine trying to carry on a business or invest money Understand why ethics is
if you could not depend on the individuals you deal with to be honest. If managers, cus- a fundamental business
concept.
tomers, investors, co-workers and creditors all consistently lied, effective communication
and economic activity would be impossible. Information would have no credibility.
Fortunately, most individuals in business are ethical. Their actions are both legal
and responsible, and they consider the entity’s interests in their decision making.
To sensitise you to ethical situations and to give you practice at solving ethical
dilemmas, we have included in this book three types of ethics materials:
• marginal notes that provide helpful hints for developing ethical sensitivity
• ethics in accounting boxes that highlight ethics situations and issues
• an ethics case simulating a business situation at the end of the chapter.
In the process of analysing these ethics cases and your own ethical experiences,
you should apply the three steps outlined in figure 1.4.
As stated in figure 1.4, to minimise the possibility of unethical behaviour, most pro-
fessional bodies have laid down certain codes of conduct for members to follow. The
Accounting Professional and Ethical Standards Board Limited (APESB) was estab-
lished in 2006 as an initiative of the Institute of Chartered Accountants in Australia
(ICAA) and CPA Australia. The Institute of Public Accountants (IPA) has subsequently
become a member. The APESB is an independent body responsible for setting the code
of ethics and the professional standards by which the members of these professional
accounting bodies are required to abide. The APESB issues and reviews the professional
and ethical standards and guidance notes for the benefit of practising accountants. The
requirements of these standards are mandatory for all members of the professional
accounting bodies. A condition of membership of a professional association (ICAA or
CPA Australia) is that members agree to follow ethical guidance throughout their work-
ing life. For additional information, visit the website of the APESB (www.apesb.org.au). Figure 1.4
Steps in analysing
ethics cases

Solving an ethical dilemma

1. Recognise an ethical
situation and the ethical
issues involved.
Use your personal ethics to
identify ethical situations and
issues. Some businesses and
#1 #2 professional organisations
ALT ALT provide written codes of
ethics for guidance in some
business situations.
2. Identify and analyse
the principal elements
in the situation.
Identify the stakeholders —
persons or groups who may
be harmed or benefited. Ask
the question: what are the
responsibilities and obligations
of the parties involved?
3. Identify the alternatives,
and weigh the impact of
each alternative on various
stakeholders.
Select the most ethical
alternative, considering all the
consequences. Sometimes there
will be one right answer. Other
situations involve more than
one right solution; these
situations require an evaluation
of each and a selection of the
best alternative.

The importance of sustainability reporting LEARNING

One of the significant changes in reporting by entities in recent years has been the OBJECTIVE 6
emerging requirement from users for the reporting of information on performance
Understand the impor-
(in relation to natural (or environmental) and social (or relationship) capital). It is tance of sustainability, and
acknowledged that information concerning the firm’s social and environmental sustainability reporting, for
performance may contribute to the value of an entity and its future earnings. The business.
reporting and management of non-financial performance is often referred to as
14 Principles of accounting and finance

sustainability reporting. Sustainability reporting can also be referred to as corporate

social responsibility reporting or environmental, social and governance (ESG)
reporting. The concept of sustainability was defined by the Bruntland Commission
of the United Nations in 1987 as ‘meeting the needs of the present without compro-
mising the ability of future generations to meet their own needs’. From this definition
evolved the term triple bottom line, which has the following three components:
• social bottom line
• environmental bottom line
• economic bottom line.
The social bottom line is an indicator of how the entity deals with issues such
as employee working conditions and safety and security, and the entity’s support and
contribution to community services. The environmental bottom line looks at how an
entity’s products or operations impact on the environment. For example, the nature
of its greenhouse emissions and waste and how they are dealt with. The economic
bottom line refers to the entity’s profitability and business strategy; that is, the eco-
nomic bottom line is financial reporting.
As accountants are in the primary position of being responsible for providing
accounting information to the users of financial statements, they are also well
equipped to assist other departments in an entity such as human resources, research
and development, health and safety, and manufacturing in the provision of non-
financial performance measures. Preparation of a sustainability report involves
senior management and requires interaction with internal and external stakeholders
such as employees, investors, communities, funding organisations and customers.
CorporateRegister.com, a global directory of corporate social responsibility (CSR)
reporting, incorporating a CSR report directory, research services and a CSR news and
information section (www.corporateregister.com), conducted a study in 2007 to deter-
mine the number of organisations producing sustainability reports. The study found that
234 of the world’s largest 300 companies produce such reports. The Body Shop, an
international cosmetics organisation, is well known for promoting environmental and
sustainability reporting and continually making business decisions with sustainability in
mind. The Body Shop states the following on their website (www.thebodyshop.com.au):
‘At The Body Shop we are committed to ensuring that our business is ecologically
sustainable: meeting the needs of the present without compromising the future’.
Stakeholders want more than just financial statements. They also want informa-
tion on how the entity is impacting society at large. Users of such information are
interested in knowing that when an entity is conducting its business activity in the
provision of goods and services, it does not cause unwanted harm or disadvantage to
the community. In fact, there are a growing number of investors who assess the entity
in terms of its impact on society and the environment before they decide to invest.
That is, they invest on an ethical basis and are known as socially responsible investors.
Entities and investors acknowledge that corporate social responsibility, through
developing environmentally friendly products and services, offers opportunities to
manage risk and create value in a number of ways, including increased loyalty from
employees, customers and investors through brand and reputation; increased invest-
ment by socially responsible investors; and, consequently, reduced risk of backlash
from consumers for not acting responsibly.
Entities are also focusing on their impact on the environment as a result of
the costs that can be incurred if their business operations cause environmental
damage. The community was particularly interested in the Ok Tedi Mining degra-
dation to the environment in Papua New Guinea by BHP in the mid-1990s, which
cost BHP hundreds of millions of dollars in restoration costs. An oil spill by Exxon
in the Alaskan waters in 1989, which also received much publicity and is still doc-
umented on a dedicated website at www.evostc.state.ak.us, cost that organisation
US$2.1 billion and more than four summers to clean the spill. In 2015, BHP Billiton
had a significant environmental incident at its Samarco operation in Brazil. The
 CHAPTER 1 Accounting in action 15

cost of cleaning up what has been described as the worst environmental disaster
in Brazilian history is likely to exceed 5 billion dollars.
The measurement of non-financial performance is difficult to objectively quan-
tify in dollar terms; however, much has been done over the last decade to standardise
reporting. While international accounting standards have not yet directly addressed
social and environmental accounting and reporting, the Global Reporting Initiative
(GRI) has pioneered the development of the world’s most widely used sustainability
reporting framework. The GRI has developed useful benchmarks and guidelines for
voluntary reporting to facilitate comparisons between entities and industries. The
GRI is a large multi-stakeholder network with thousands of experts from business,
accountancy, human rights, environmental, labour and government organisations in
countries all over the world. Across 44 countries, more than 1000 organisations
publicly disclose that they use the GRI-developed guidelines. These guidelines are
available from the GRI website www.globalreporting.org.
The guidelines, titled G3, were launched in 2006 and list 50 core indicators that
entities can report against and an additional 60 indicators that may be relevant
depending on the organisation. To be able to state that an entity’s reports are pre-
pared ‘in accordance with GRI’, the entity must report against the core set of indi-
cators that cover the following:
• direct economic impacts
• environmental impacts
• labour practices and decent work
• human rights
• society
• product responsibility.
The GRI issued the fourth generation of its guidelines in 2013, known as G4.
G4 marked the culmination of two years of extensive stakeholder consultation and
dialogue with hundreds of experts from across the world from a wide variety of
sectors, including companies, civil society, labour organisations, academia and finance.
The aim of G4 is to help reporters prepare sustainability reports that matter — and
to make robust and purposeful sustainability reporting standard practice.
In the lead-up to the 21st annual UN Climate Talks (COP21) 2015, expectations
were high for global agreement on reducing carbon emissions. For this reason,
KPMG focused research for the report on the quality of carbon reporting among
the world’s 250 largest companies in the Corporate Responsibility Reporting Survey
2015. They offered advice on what we consider to be best practice in corporate carbon
reporting and explore how these companies measure up against the key criteria.
The survey explored how the world’s largest 250 companies report on carbon
in their annual financial and corporate responsibility (CR) reports and looks at wider
quantitative trends on sustainability reporting, covering 4500 companies across 45
countries. The key insights reported are listed below.
• The frequency of corporate responsibility reporting and corporate responsibility
assurance continues to increase.
• The inclusion of corporate responsibility information into annual reports has risen
to 56%; this is a significant increase, as four years ago only 20% of reporters were
including CR in their annual reports.
• There was no evidence that the quality of reporting had increased since the last survey.
• Of those surveyed, an 82% majority are reporting; however, not in a consistent
manner, which makes it difficult to compare performance.
• Only half of carbon reporters are setting targets.
In line with the global reporting trends, the sustainability reporting rate in Aus-
tralia has remained stable year-on-year with 81 companies producing a sustainability
report in one form or another. There was an increase in the quantity of reporting
 16 Principles of accounting and finance

published with 74% of the reporters producing a standalone sustainability report in

ALTERNATIVE
TERMINOLOGY
Sustainability can also be
referred to as triple bottom
line and corporate social re-
sponsibility.
2015. That was up from 62% in 2013. There was also an increase in quality, with stand-
alone sustainability reports being more likely to apply GRI and obtain third party
assurance. In line with global trends, there are more companies that include sustain-
ability information in their annual report and produce standalone reports.
The survey also identified an increase in the quantity of assurance, level of assur-
ance and coverage of assurance. It found that disciplined carbon reporting — through
National Greenhouse and Energy Reporting (NGER) and the two years of a price on
carbon — had driven quality carbon reporting, with Australian G250 companies scoring
above the European benchmark at an average score of 65. In the absence of regulatory
reporting, voluntary guidelines (GRI) have played an important role in the consistency
of reporting across industries and regions. The quality of CR reporting had improved
slightly in Asia Pacific but declined slightly elsewhere. Companies are getting better
at reporting environmental and social trends and risks that affect their businesses.
Given the importance of sustainability reporting, a number of not-for-profit
organisations provide awards to entities for their reporting efforts. The Australasian
Reporting Awards Inc (ARA) provides an annual Sustainability Reporting Award.
The ARA also provides a Governance Reporting Award. CorporateRegister.com
also provides awards for the best report, best first time report and best carbon dis-
closure report, among others. The winner of the 2016 ARA Sustainability Reporting
Award in the private sector was Sanford Limited (a New Zealand company), with
Watercare Services winning in the public sector. The winner of the 2016 ARA
Governance Reporting Award was Woodside Petroleum in the private sector, and
New Zealand Superannuation Fund in the public sector. Full details of the award
winners can be found on the website.

ACCOUNTING IN ACTION Business insight

Environmental sustainability and the need to be accountable for carbon emissions

and minimise greenhouse impacts has emerged as a ‘must do’ for many businesses.
Although regulation on carbon emissions is not forcing businesses to report their
activities, and, indeed, there is still debate on how to appropriately measure a carbon
footprint, all businesses will need to find out their carbon footprints quickly, or risk
potentially losing partners, shareholders and customers.
Sean Lee, the owner of Mt Rael Retreat, a restaurant and accommodation facility
in Healesville Victoria, who is trying to sell his business, was asked by an interested
party in Beijing China how much carbon his restaurant and accommodation facility was
emitting and at what cost. As a result, Lee contacted a number of carbon auditors to assist in assessing the level
of carbon in his business and the associated costs. As there are no guidelines for providing such a service, organisations
can collect and analyse a wide array of information considered relevant and charge a fee they deem appropriate.
The World Business Council for Sustainable Development and the UK-based The Climate Group are still explo-
ring models towards establishing a global standard on how to capture carbon emissions and their cost. When
PricewaterhouseCoopers surveyed more than 300 chief executives, they found that more than 75% of those busi-
nesses surveyed had not formally assessed the risk of climate change, and only 2% had recorded emissions data.
Dr Mary Stewart, a former chemical engineering academic and now a principal consultant with Energetics,
a firm that consults to governments and businesses, believes that while many companies have made bold state-
ments about going carbon neutral, many have not realised what is involved and what the financial implications
are. Stewart believes that large organisations will take around 3 years to calculate their carbon footprints, with
smaller organisations requiring 2 years. The result may be a change to cost structures of organisations, as well
as a material impact on the sharemarket.
Source: M. Murphy and R. Williams, ‘Businesses warned they must get moving or pay the price’, The Age ‘Business Age’, 25 February 2008, p. 1; M. Murphy,
‘Conflicting audits make it hard to be green’, The Age ‘Business Age’, 25 February 2008, p. 1; D. Tarrant, ‘Calculating your business’ carbon footprint’, In the
Black, March 2008, pp. 28–33.
Another random document with
no related content on Scribd:
„Nu is ’t raadsel opgelost,” roept de heer, die tot geluk van de jongens een
goedmoedig mensch blijkt te zijn en zich bijtijds z’n eigen jongenstijd herinnert.

„Dáár zit de geheimzinnige macht,” lacht hij. „Kom er eens uit bengel, of wil je
liever wachten op een volgend slachtoffer?”

De dame, nog bleek van schrik, is ’t maar half eens met haar echtvriend en kan
zich niet voorstellen dat hij het geval zoo van den komieken kant beschouwt.

„Zulke kwajongens,” zegt ze boos.

„Past u maar op, mijnheer,” roept Ambro overmoedig. „Tusschen alle boomen
in den laan hangt zoo’n draadje.”

En de heer en dame gaan voor alle zekerheid naar de overzijde van de straat,
waar ze in de duisternis vreemde geluiden uit de portieken der huizen hooren
opklinken.

„Als je een beetje bang van aard bent, zou je gauw aan spoken gaan gelooven
en de kluts kwijt raken,” zei de heer lachend.

Dan vervolgt het tweetal zijn weg.

„Ik ga d’r uit,” roept Ambro. „Die man nam ’t zoo koeltjes op, de aardigheid is er
nu vanaf. Ze moeten razen en tieren, dan is ’t echt.”

En rrrtts! daar staat hij weer op den beganen grond. [46]

Wim volgt zijn voorbeeld en klautert ook naar beneden. De jongens zijn weer
bij elkaar.

„Wat gaan we nu doen?” vroeg Paul.

„Nu gaan we jou naar bed brengen en dan stoppen we je fijn onder de wol
enne … dan krijg je een fopspeentje in je mondje,” plaagde Ambro.

Paul durfde Ambro niet aan, anders had hij ’m wel op z’n gezicht geslagen,
maar hij kende de kracht van Ambro’s knuisten.
[Inhoud]
 NETTE MANIEREN … EN ONNETTE JONGENS.

’t Is hartje winter; de tijd van schaatsenrijden, op de prik zitten en

sneeuwballen gooien. Zalige, heerlijke wintertijd!

Voor eenigen der jongens is echter een pretje begonnen, dat ze minder
aangenaam stemt, ze vinden het een zuren appel, waar je maar doorheen
moet bijten.

De ouders van Ambro en Karel hebben n.l. besloten, teneinde hun jongens
wat nettere manieren te laten leeren, ze op dansles te doen bij juffrouw
Hesterman.

Deze juffrouw nu, was een toonbeeld van netheid, wat ook geen wonder
was, want ’t goede mensch deed immers zaken in „nette manieren”.

Ik vrees, dat de jongens van haar artikel niets willen weten.

We zullen zien!

De jongens sputterden vreeselijk tegen het plan van hun ouders en Ambro
beweerde, dat ie, als [47]’t er op aankwam, nog liever naar school ging.

En zoo zien we dan op een kouden winteravond, waarop de sneeuw ’n paar

voet hoog ligt, Karel, met zijn dansschoenen in een wit-flanellen zakje
gepakt, onder den arm, zich door de donkere straten naar de dansles
begeven.

Achter hem loopt een klein heertje, dat plotseling naast hem komt loopen en
met een eenigszins vreemde stem vraagt of hij zich hier in de Tuinderstraat
bevindt.

„Neen, Mijnheer,” zegt Karel, die ’t gezicht van ’t heertje in ’t donker niet
goed kan onderscheiden.

„Dan moet U eerst rechtuit en dan bij den hoek rechts afslaan.”
„Dank u wel,” zegt het heertje op denzelfden krakenden toon en blijft naast
hem voortloopen.

„’t Is koud vanavond,” zegt hij dan en al pratend loopen ze samen voort in de
richting van de dansles.

Bij een lantaarn gekomen, kijkt Karel eens even naar het gezicht van zijn
begeleider, geeft dan een schreeuw van verbazing en barst in een
schaterlach uit, als hij in het heertje Ambro herkent.

„Wel verdraaid!” giert Karel, „Ambro in een lange, met een kaasbol op z’n
hersens!”

„Hoe is ie?” vraagt Ambro, terwijl hij zich trotsch als een pauw opricht en
zich van alle kanten door Karel laat bewonderen. Ambro ziet er potsierlijk uit
en ’t is hem aan te zien, dat broek noch hoedje hem toebehooren. [48]

De broek is hem een eind te groot, zoodat de stof bij de pijpen als een
harmonika op z’n schoenen ineen valt; daarentegen is het hoedje hem veel
te klein en balanceert heel mal op z’n ronden kaaskop.

Maar de twee jongens vinden ’t prachtig en zien die kleine gebreken wel
over ’t hoofd.

Als Karel eindelijk uitgekeken is vraagt hij: „Hoe kom je er aan?”

„Van me neef geleend,” zegt Ambro blij. „Thuis weten ze er niets van, ik ben
me stiekum even bij hem gaan verkleeden en na de dansles ga ik het goed
weer verwisselen.”

„’n Reuze-bak,” zegt Karel en samen verkneuteren ze zich in de pret.

Onder al dit praten en lachen zijn ze eindelijk genaderd aan ’t huis van
juffrouw Hesterman.

Ze schellen vrij onzacht aan en worden open gedaan door een kittig
dienstmeisje, met tullen muts met lange banden.
Direct trekt Ambro aan de uitdagende lange slierten en roept:
„Tingelingeling, wie is daar?”

Het meisje is woedend en zegt smalend: „Dat draagt een lange broek!!”

Ambro schaamt zich wel een beetje over het feit dat zijn gedrag niet in
overeenstemming is met de lengte van z’n broekspijpen en loopt haastig
door.

Het meisje wijst ze daarop de kleedkamer en verdwijnt.

„Wij zijn de eersten,” zegt Karel. [49]

Een tweede meisje verschijnt en wijst hun de plaats waar hun schoenen
bewaard moeten worden.

De jongens ontdoen zich van hun schoenen.

Dan komen vier nieuwe gezichten binnen, alle jongens van ongeveer
denzelfden leeftijd als Ambro en Karel.

„Goeden avond, heeren,” zegt Ambro. „Moeten jullie ook springen leeren?”
De jongens, weinig toeschietelijk, brommen iets terug, waarop Karel
minachtend zegt:

„Kunnen jullie niet antwoorden? Wat een kevers.”

Op hetzelfde oogenblik vliegt er een laars naar hem toe, die een groote
moddervlek nalaat op de muurvlakte van z’n hoogen witten boord.

„Dàt laat je je niet doen,” zegt Ambro woedend. „Geef pit, Boekie, knok ’m
op z’n kanes!”

Rang, pats!

Eenige welgeraakte meppen volgen en dan werpt Karel zich op den langen
roodharigen slungel die z’n boord, z’n glorie zoo gemeen bedierf. [50]

„Ik zàl je! rooje vuurtoren!” schreeuwt Karel woedend.

De vechtersbazen maken een helsch kabaal.

Ambro meent de zaak te kunnen redden door het electrisch licht uit te
draaien. Maar in ’t donker wordt de strijd voortgezet en timmert Karel met
een spiksplinternieuwe dansschoen op z’n beleediger los.

Plotseling gaat de deur open en hoort men angstige vrouwenstemmen

vragen wat er toch gebeurt en waarom het licht uit is.

Dan wordt het licht opgedraaid en staat juffrouw Hesterman midden in de

kamer.

Het is een lange dame, met een scherp vogelgezicht. Ze is heel deftig
gekleed, in een ruischende zijden japon, die haar eenigszins wesp-achtige
gestalte nauw omsluit.

„Wat is dat hier voor een kabaal,” zegt ze boos.

„Ze maken kennis met mekaar, juffrouw,” lacht Ambro.

„Schandelijk, schandelijk,” zegt de juffrouw verontwaardigd.

„’t Wordt tijd dat jullie nette manieren leert, men zou bijna zeggen, dat jullie
uit een achterbuurtje kwaamt.”

„Kalm maar, juffrouw,” sust Ambro.

„’t Is al gedaan.”

De beide ruziemakers laten elkaar los en zien er, nu fel beschenen door ’t
electrisch licht, zeer onbetamelijk en gehavend uit. [51]

„De rooie vuurtoren” vertoont een blauw oog, zoodat met de kleur van zijn
haar zijn gelaat wel een veelkleurig schilderspalet gelijkt.

De met zooveel zorg gefabriceerde scheiding in Karel’s haardos is

verdwenen en z’n bol toont veel overeenkomst met een stoffer.

De mooie boord is in zwijm gevallen en het keurige, lichte dasje bengelt als
een touwtje op zijn rug.

„Jullie ziet er fraai uit,” zegt de juffrouw boos. „Als er ooit weer zoo’n
schandaal in mijn huis mocht plaats hebben, dan zet ik de belhamels die het
veroorzaken voor goed het huis uit.”

„Je hoort ’t,” zegt Ambro met een veelbeteekenend, kwasi-ernstig gezicht.

De vechtersbazen doen angstige pogingen om hun toilet weer eenigszins in

orde te brengen.

„Nu voortmaken, jongeheertjes, de les gaat beginnen,” zegt de juffrouw en

verlaat de kamer.

„Tòch lag je onder,” zegt Karel sarrend tegen den langen slungel.

„Nou niet weer beginnen,” komt Ambro tusschenbeide.

Dan gaan ze allen te zamen, achter de juffrouw aan naar de danszaal.

Ambro, die geen rekening houdt met den gladden parket-vloer der danszaal,
glijdt uit en komt vrij onzacht op z’n zitvlak terecht.
„Bèns!” gilt hij door de zaal. „’t Lijkt waarachies wel ijs.”

„Ik heb spijkers onder m’n schoenen,” zegt Karel heel kalm. „Ik kan niet
vallen.” [52]

Juffrouw Hesterman, die dit hoort, komt hard aangehold, in grooten angst
voor haar mooien vloer.

Doch dan ziet ze dat de bengel dansschoenen aan heeft, en boos over z’n
plagerij, dreigt ze hem met een spitsen vinger.

Aan den wand der zaal staan aan één kant lange banken met fluweelen
zittingen, aan den anderen kant vele stoeltjes op een rij.

Op de banken zitten ongeveer veertien meisjes, ook van den leeftijd der
jongens, in aardige, witte jurkjes gekleed, breede witte linten in het haar,
kousen en schoentjes in dezelfde kleur.

„Net een rij opgeprikte kapellen,” smaalt Ambro.

De jongens moeten op de stoelen plaats nemen.

Eensklaps roept Karel hardop: „Kijk es, Ambro, de zittingen van die stoelen
kan je omkeeren.”

Met draait hij de houten zitting om en komt een mooie, rood-satijnen zitting
boven.

„Veel zachter,” zegt Karel en wil er op gaan zitten.

Maar de juffrouw, die het alweer zag, komt naar hem toe en zegt nijdig:

„Wil je dit wel eens laten! Die zittingen mogen jullie niet gebruiken, die
worden alleen gebruikt als er feestjes zijn.

„En nu wil ik verder geen last van jullie hebben, denk erom.”

Juist als de juffrouw de les wil beginnen, wordt er op de deur geklopt en op

haar „binnen” betreden twee jongens de zaal.
Ze zijn van een heel ander slag dan de andere jongens en zullen zeker ’t
hart van de juffrouw [53]stelen, want ’t zijn toonbeelden van netheid.

„’t Is vast een tweeling,” zegt Ambro. „Ze lijken precies op elkaar.”

En dan tot de jongens: „Zeg, jij moet een rood strikje aandoen, en jij een
blauw, anders kunnen we jullie niet uit elkaar houden.”

Het keurig-nette tweetal zegt boe noch ba, ze kijken alleen met verachtelijk
opgetrokken neusjes naar den kleinen man in den langen pantalon die zoo
staat op te scheppen.

BERG en DAL DAL en BERG

Dit zwijgen prikkelt Ambro.

„Wacht even,” zegt hij. „Jullie zijn tòch te onderscheiden, jij hebt een puist op
je neus en jij een pitje in je kin! Jongens, gezicht op Berg en Dal!!” en
schaterend wendt Ambro zich af van de twee parkietjes. [54]

Juffrouw Hesterman gaat midden in de zaal staan, klopt met haar spitse
vingertoppen tegen elkaar en commandeert:

„Stilte, meisjes en jongens.”

„’t Spul gaat beginnen,” roept Karel.

De juffrouw stampvoet van woede: „Stilte heb ik gezegd! Heb je ’t verstaan?”

En dan gaat ze kalm verder:

„Nu komen de jongenheertjes op een rij voor me staan. Luister nu goed naar
wat ik je zeg en doe precies na wat ik je voor doe.”

Ambro trekt tot groot vermaak van de jongens net zoo’n pruimenmondje als
de juffrouw en zet z’n lichaam precies in de houding van de gecorsetteerde
dame.

„Ik zal beginnen jullie de buiging te leeren.”

Tegelijkertijd neemt ze, om goed te laten zien hoe ze de voeten moeten

zetten, met twee nuffige vingers aan weerskanten een tip van haar toch al
niet langen rok op, plaatst haar hooggehakte schoentjes naast elkaar en
verzoekt ze hetzelfde te doen. [55]

Ambro, ondeugend als hij steeds is, trekt ook vol gratie z’n beide
broekspijpen een eind omhoog.

Nijdig zegt de juffrouw: „Dàt hoeft niet, mijnheertje Verbrugge, en u moet me

nu niet meer lastig vallen, want ik wensch u niet nogmaals te verbieden, u
staat hier niet als clown.”

„Zij wel,” fluistert Ambro in Karel’s oor.

De heele rij jongens staat nu volmaakt naar den zin van juffrouw Hesterman.
 „Heel goed is ’t zoo,” zegt ze
voldaan.

„Wanneer we nu het lichaam

doorbuigen, blijven de armen
ongedwongen omlaag
hangen, zoo ook de handen.
Kijk, flauw gebogen.”

Bij de heeren-buiging blijkt het

corset van de juffrouw haar
parten te spelen en ze blijft
halverwege steken.

De heele rij buigt nu. Maar ’t

lijkt meer op jongens die
haasje-over gaan springen,
uitgezonderd natuurlijk Berg
en Dal, die voor buigen in de
wieg zijn gelegd.

„Héél goed, jongenheertjes

Otto en Eugène,” zegt ze
waardeerend. „Jullie hebt me
volmaakt begrepen.”

„Ik krijg pijn in m’n rug,” zegt

Ambro, die nog altijd gebukt
staat.

Nu worden ze een voor een

onder handen genomen en na
korten tijd buigen ze allen als
volleerde saletjonkers.

„Nu gaan de jongenheertjes weer zitten en komen een voor een ’n buiging
voor mij maken. En ik zeg jullie eens en voor altijd, dat ’t mijn wensch is, dat
jullie bij komen en gaan steeds op die [56]manier je compliment voor me
komt maken.”

„Wat een flauwe kul,” fluistert Karel met een scheefgetrokken mond Ambro
in.

Na deze proeve van wellevendheid komen de meisjes aan de beurt.

Ze zijn veel gemakkelijker te regeeren dan de jongens … tenminste … op de

dansles.

Op één wenk van de juffrouw kwamen alle witte kappelletjes van de bank
gevlogen.

„Groot ballet bij Carré,” spot Ambro.

De jongens moeten nu wachten tot de veel moeilijker dames-buiging is

geleerd. En als dat afgeloopen is, is ook de eerste dansles voorbij.

„De volgende week verwacht ik jullie op hetzelfde uur, en ik hoop, dat de

verschillende jongenheertjes zich dan wat fatsoenlijker zullen gedragen, de
eerste indruk was verre van beschaafd. Jullie kunt gaan.”

„Berg en Dal” stappen te zamen naar de juffrouw en maken voorbeeldig de

pas-geleerde buiging.

Vijf andere jongens doen het hen zeer onbeholpen na.

Ambro is al bij de deur, als hij door de juffrouw teruggeroepen wordt. Ze wijst
hem erop, dat hij haar nog niet gegroet heeft.

Hij kijkt even om het hoekje van de deur en terwijl hij haar amicaal toewuift,
roept hij: „Dag juffrouw, houdt u maar haaks.” En weg is de bengel.

Het schoenen-verwisselen geschiedt deze keer zonder hindernissen.

Kareltje en de Vuurtoren [57]hebben blijkbaar vrede gesloten, want ze zitten
broederlijk naast elkaar te babbelen.
„Berg en Dal” zijn nog niet in de kleedkamer verschenen, zij hebben
toestemming van de juffrouw gekregen zich te verkleeden in een kamertje
aan den anderen kant der danszaal.

Eindelijk zijn de meesten klaar en ze moeten zich door een haag van
dienstboden werken die allen in den corridor staan om hun respectievelijke
jongejuffrouwen af te halen.

Buiten ligt als een wit tapijt, de verschgevallen sneeuw.

„Dat belooft wat,” zegt Ambro, vergetend dat hij een hard hoedje op heeft.

„Zeg dàt wel,” antwoordt Karel en tegelijkertijd vliegt Ambro’s kaashoed door
een welgemikten bal van Karel door de lucht.

„Had ik nou dat lamme ding maar niet op,” zucht Ambro.

„Ik breng ’m vast niet heel thuis en dan zal je me neefie hooren.”

„Stil, jong, de deur gaat open,” zegt Karel zacht.

Ingepakt als twee bakerkinderen verschijnen Berg en Dal op de stoep.

„Pats! Midden in hun facie,” roept Ambro.

De twee slachtoffers loopen in vollen draf langs de huizen der stille straat
voort.

Nadat Ambro en Karel al wat uit de deur kwam bekogeld hadden, namen ze
afscheid van elkaar en ging elk zijns weegs.

Ambro versnelt zijn pas, want hij bedenkt met [58]schrik, dat hij z’n huiswerk
nog moet maken en ook nog het geleende goed terug moet brengen.

Daar passeert hij de brug bij de Westersingel. Een plotselinge rukwind … en

z’n hoed ligt in ’t water.

„Die is naar de maan,” mompelt hij in zichzelf.

Beteuterd kijkt hij ’t hoedje na, dat vol loopt en zinkt.

„Niets aan te doen,” bedenkt hij. „Daar gaat voor een paar maanden m’n
weekgeld aan,” en bedroefd vervolgt hij zijn weg, nog uitgelachen door een
paar straatbengels die hem naroepen:

„Hij komt weer boven!”

Zoo eindigde Ambro’s eerste dansles.

[Inhoud]
 WIE EEN KUIL GRAAFT VOOR EEN ANDER …

De jongens zaten allen bij elkaar in het hol. Het was winter en het hol was niet
zoo dicht begroeid als anders, doch door al het gewir-war van takken waren
ze toch moeilijk te ontdekken.

„Wat zijn we hier in langen tijd niet geweest,” zei Ambro.

„Als ze ons maar niet door de takken heen zien,” zei Puckie Voortman, die na
een lange ongesteldheid zich weer bij de roovers had aangesloten.

„Wat is de grond hier vochtig,” vond Piet Kaan.

„Nou ja, ’t is geen zomer,” zei Ambro.

„Waarom was jij vanmorgen niet op school?” vroeg Wim aan Ambro. [59]

„Ik heb zitten teekenen langs den Overschieschen Weg. Den molen heb ik
gemaakt.”

„’t Zal wat moois zijn,” spotte Wim.

„Nou, hier heb ik ’m,” zei Ambro.

De jongens verdrongen zich om Ambro, teneinde de teekening goed te

kunnen zien.

„Verduiveld, dat ’s aardig,” zei Puckie bewonderend.

De andere jongens waren ook vol lof en Piet Kaan voorspelde, dat Ambro nog
eens een beroemd schilder zou worden.

Ambro lachte. „Kan je denken!” zei hij.

„Ik word koekebakker, kan je fijn taartjes voor noppes eten.”

„Meen je het heusch?” vroeg Paul ongeloovig.

„Neen hoor,” zei Ambro en dan liet hij er ernstig op volgen:

„Ik zou ’t liefst clown in een circus worden.”

„Valt geen spat mee te verdienen,” meende Chris.

„Met het schilderen zeker wel,” spotte Ambro.

„En een clown gaat twintig jaar voor z’n tijd dood.”

„Dat lieg je! August de Domme werd zeventig.”

„Dat zegt niks,” hield Chris vol. „Als ie kruidenier was geweest, zou ie de
honderd gehaald hebben.”

„Clown of detective zou ik willen worden,” zei Ambro peinzend.

„Geen klein verschil,” meent Karel. „Ik wil officier worden.”

„Ajakkes!” zegt Paultje. „Dat doe je nou ook om het mooie pakje.” [60]

En dan laat hij er waanwijs op volgen:

„Mijn oom is ook officier en die zegt, dat ie er al spijt van had, een jaar nadat
hij ’t geworden was. Hij is in Indië geweest, zie je, en daar maken ze een boel
mee.”

„Je lijkt wel een oud mannetje, Paul,” lachte Karel. „Ik vind ’t toch wàt een fijn
leven. Vol avonturen is het en iederen dag wat anders.”

„Dat zeg je nu, als jongen, maar oom zegt, dat je daar naderhand heel anders
over denkt, vooral, als je een oorlog hebt meegemaakt.”

„Ik heb al lang genoeg van jullie gezwam,” viel Ambro de twee praters wat ruw
in de rede.

„Ik ga bootje varen bij de ronde bank.”

Dat vonden alle jongens best, ze hadden ’t meer gedaan en ’t gaf altijd
reuzen-pret. Ze gingen een zeil-wedstrijd houden. Daartoe maakte ieder z’n
eigen bootje.
De romp van het schip bestond uit een stuk boomschors, het zeil met den
mast werd voorgesteld door een eendenveertje.

„Effe kijke of er niemand aankomt,” en ze gluurden voorzichtig door de takken.

„Ja warempel, daar heb je Willem van de beeren.”

Willem reed voorbij met een wagen vol bloederig vleesch waarmee hij z’n
pleegkinderen ging voeren.

„Kom maar, jongens,” zei Ambro. „Het terrein is nu veilig.”

En achter elkaar slopen de jongens het boschje uit.

De groote bank was dichtbij en stond vlak bij den grooten vijver. [61]

„De wind is gunstig,” zei Ambro, die z’n nat gemaakte vinger omhoog stak. Nu
haalden ze hun zakmessen te voorschijn en begonnen kerven te maken in de
mooie, dikke platanen. Heele stukken schors haalden zij er op die manier af.

In het gras vonden ze bij hoopjes de eendenveertjes liggen. Het voornaamste

was nu, om de juiste grootte te vinden van schors en veertjes, alsook de
plaats waar het veertje op het schip bevestigd moest worden.

„Zijn jullie klaar?” vroeg Ambro.

Allen waren gereed en zes bootjes werden gelijktijdig te water gelaten en

kregen nog een laatste duwtje van den maker. Dan was ’t een feest voor de
jongens om te kijken wat er ging gebeuren met hun vaartuigjes.

„Wie zou ’t eerst aan den overkant zijn?”

„Ik zie ’t al,” zei Ambro. „Die van Karel gaat ’t hardst. Net als de vorige keer.
Hij is de beste bootenmaker van ons allen.”

’t Scheepje van Paul draaide als razend in ’t rond.

„Jij hebt je mast verkeerd gezet.”

De wind was de bootjes inderdaad gunstig. Langzaam dobberden ze al verder

en verder van den kant en met kleine rukjes staken ze ’t breede water over.
Vol spanning keken de jongens naar de liliput-vloot.

„Ik ben jullie al drie meter voor,” riep Karel, die trotsch was op z’n schuitje.

„De mijne doet niets dan draaien,” klaagde Paul. [62]

„Jij kan beter een malle-molen maken dan een schip,” plaagde Chris hem.

Midden op den vijver aangekomen, kreeg de vloot het hard te verduren en

twee bootjes werden door een rukwind omver geworpen en vergingen met
man en muis.

Een ander bootje werd aangevallen door een eendje, dat nog nooit in z’n
leven zoo’n vreemdsoortig ding in zijn gebied zag ronddrijven.

De mast werd weggepikt en ’t afgetuigde schip nu door den stroom

meegevoerd.

„Ik ben er bijna,” riep Karel en liep naar den overkant van den vijver.

Daar aangekomen haalde hij zegevierend zijn scheepje naar binnen.

„Lang leve „de Karel Boekers”,” riepen de jongens. „De snelste zeiler van het
land, hiep hôj!”

Plotseling roept Karel: „Jongens, daar komt de lange Loese, hij is vast weer
op vangst uit.”

In vollen draf rende hij terug naar zijn makkers aan den overkant, die op ’t
hooren van dien naam hun spel in den steek lieten en gingen beraadslagen
wat ze zouden doen, nu hun aardsvijand, de Lange Loese, in aantocht was.

Die „Lange Loese” was veel grooter en sterker dan een van hen allen en zijn
grootste amusement bestond in plagen van kleinere jongens, ze gevangen te
nemen en als slaven uit den ouden tijd te behandelen.

Zijn koninklijk verblijf (want hij voelde zich heelemaal vorst) was gelegen in het
beneden rotshol, [63]dat voor jong en oud toegankelijk was en waaraan de
sombere legende verbonden was, dat daar eens een oude water-Chinees den
hongerdood gestorven was.
„Hij heeft er nog drie bij zich,” riep Ambro, die achter een boom het naderend
onheil bespiedde.

„We kunnen ze met ons zessen toch niet aan,” zei Paul.

„Hij zit alweer in de piepzak,” plaagde Karel.

„Net doen of we ze niet zien, dan zullen ze ons misschien niets doen,” stelde
Paul voor.

„Ik zal mijn leven duur verkoopen,” zei Ambro op gezwollen toon. „Niet dan
over mijn lijk komen ze ’t rotshol binnen.”

Van beenen maken, was geen kwestie, want de „stelten” van de lange Loese
deden de jongens denken aan de zevenmijlslaarzen van den reus.

Enkele kleinere jongens hadden den wedloop wel eens gewaagd, maar in
minder dan geen tijd hadden zij den ijzeren greep in hun nekvel gevoeld, om
daarna als gevangen slaaf meegevoerd te worden naar lange Loese’s paleis.

„Had ik nou me boksbeugel maar bij me,” zuchtte Ambro. „Maar die heeft
vader me gisteren afgepakt. Daar is-t-ie, jongens, gewoon doorloopen, niet
naar ’m kijken.”

De lange Loese was zich volkomen bewust van den grooten indruk die hij op
de kleinere jongens maakte.

Nu kreeg hij ze in de gaten, en een kwaadaardige grijns kwam om z’n

wreeden mond. [64]

„Bereidt u voor op den dood,” schreeuwde hij den jongens toe. „Uw laatste uur
heeft geslagen.”

Kleine Paul verstopte zich achter Ambro, die, nu er niets meer te redden viel,
besloot zich dapper te verdedigen.

„Van jou ben ik niet bang, lange lijs,” riep hij overmoedig.

Op hetzelfde oogenblik werd hij bij den kraag gepakt, Paul incluis, terwijl de
drie helpers van lange Loese de andere jongens overmeesterden.