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HI5001 Lecture 01 v3
HI5001 Lecture 01 v3
Lecture 1
Accounting for Decision Making
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Introduction
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Introduction
Record-
keeping
knowledge
Future
accountants
Analytical &
communication
skills
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An Overview
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of The title
Unitstyle
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Topics
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Here’s what you will learn from this lecture:
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Topics
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Here’s what you will learn from this lecture:
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The Dynamic
Click Environment
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title style
Factors influencing change in current accounting environment
Rapid
development
of information
& B
communication B
technology b
Illegal
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The Dynamic
Click Environment
to edit Master of Accounting
title style
Factors influencing change in current accounting environment
Rapid
development
of information
& B
communication B
technology b
Illegal
Demand for
non-financial
information
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The Dynamic
Click Environment
to edit Master of Accounting
title style
Factors influencing change in current accounting environment
Rapid
development
of information
&
communication
technology
Ordinary
Illegal
Demand for
Globalization
non-financial
of business
information
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The Dynamic
Click Environment
to edit Master of Accounting
title style
Factors influencing change in current accounting environment
Rapid
development Adoption of
of information international
& B regulations &
communication B accounting
technology b standards
Ordinary
Illegal
Demand for
Globalization
non-financial
of business
information
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Pause Point 1title style
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Decisions in Everyday
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Master title style
• Decisions in everyday life
• Decisions involve choices because resources are limited
– we must choose how to spend our time
– we must choose how to spend our resources
– often competing options available.
Option 1
Option 2
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Decisions in Everyday
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Master title style
• Each decision has outcomes that will affect future decisions
• Good decisions require good processes
I choose option 1
as I have the
resource & skill
to execute this
project
High
Option 1
return
High Risk
Low
Option 2
return
Low Risk
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Overview of Master
Decision-Making
title style Process
Establish goals
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Overview of Master
Decision-Making
title style Process
Gather available
1 information on
alternatives
Establish goals
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Overview of Master
Decision-Making
title style Process
Determine
consequences
2
of alternatives
Gather available
1 information on
alternatives
Establish goals
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Overview of Master
Decision-Making
title style Process
Choose
course of
3
action
Determine
consequences
2
of alternatives
Gather available
1 information on
alternatives
Establish goals
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Overview of Master
Decision-Making
title style Process
Choose
course of
3
action
Determine
consequences
2
of alternatives
Gather available
1 information on Accounting
alternatives
Establish goals
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Overview of Master
Decision-Making
title style Process
Choose
course of
3
action
Determine
consequences
2
of alternatives
Gather available
1 information on Accounting
alternatives
Establish goals
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Click to edit
Overview of Master
Decision-Making
title style Process
Choose
course of
3
action
Determine
consequences
2
of alternatives
Gather available
1 information on Accounting
alternatives
Establish goals
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Economic Decisions
Master title style
• Many (most) decisions involve economic resources.
• Economic resources have a price as they are scarce.
• Must also consider:
B
B
b
Ordinary
Ordinary
Illegal
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Economic Decisions
Master title style
• Economic decisions for different purposes
• consumption
• investment
• financial
B
B
b
Ordinary
Ordinary
Illegal
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Economic Decisions
Master title style
• Must also consider:
Personal
Taste
Social factors
B
B
Environmental b
Ordinary
factors
Illegal
Religious/
Moral factors
Government
Policy
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Master2 title style
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The Nature
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title style
• Accounting is a service activity:
– Its function is to provide and interpret financial information to
assist in decision making. (Steps 2, 3 and 4 of decision-making
process).
• Accounting is used in a range of organisations:
– business
– government
– charities
– not-for-profits.
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The Nature
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title style
• Identification involves observing
economic events.
Process
Process of
of identifying,
identifying, • External transactions involve economic
measuring,
measuring, recording
recording events between one entity and another
and
and Communicating
Communicating entity.
economic
economic • Measurement must take place before the
information
information toto permit
permit effects of transactions can be recorded.
Informed • Recording provides a history of the
Informed judgements
judgements economic activities of a particular entity.
and
and economic
economic decisions
decisions • Communication is the final part of the
by
by users
users of
of the
the accounting process
information
information
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The Nature
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title style
Recording,
Quantification in
Transactions classification, Accounting reports
monetary terms
summarisation
Analysis and
interpretation
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Pause Point 3 title style
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Users
Click of
to Accounting Information
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Why we have
accounting?
Who is involved
with accounting?
Accounting
decision they need
to make
Stakeholders
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Users
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to Accounting Information
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• Internal users:
– How much profit is being earned?
– What products should be produced?
– What resources are available?
– What is the most efficient production process?
– What is the cost to reduce carbon emissions?
– What will be the effect of increasing or decreasing selling prices?
– How much profit is owing to outsiders?
– Will cash be available to pay debts as they fall due?
– What are benefits of owning vs leasing? This is more complex than you
think as there are lease options (financial vs. operating)
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Users
Click of
to Accounting Information
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Users
Click of
to Accounting Information
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• External users:
– Should I invest money in this business?
– Will the business be able to repay money lent to it?
– Will they make a profit?
– What are the business’s earning prospects?
– Is the business financially sound?
– Is the business providing products that are socially and
environmentally friendly?
– Are they behaving ethically?
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Users
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to Accounting Information
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Users
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to Accounting Information
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Master4 title style
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Using
Click Information in title
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style Decisions
An Example:
– Darren is a hard-working sales assistant in a retailing shop.
– He would like to take on a new career and start his own lawn-mowing
business.
– Using the decision-making process already outlined he needs to
decide if this is the right decision for him
– Darren wants to do something different to standing behind a sales
counter all day. So clearly a lawn-mowing business will meet this goal.
– He also wants to be financially secure. To establish this will require
additional information
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Using
Click Information in title
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style Decisions
First, Darren will need to invest in some equipment
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Using
Click Information in title
to edit Master Economic
style Decisions
He will also need to consider what the running costs will be:
Example (continue):
Based on these figures, Darren would expect over a 48-week year that
his income will be:
As his earnings are more than $75K per annum, he will need to obtain an
ABN from the ATO plus he will be required to collect GST. This will add to
his costs and needs to be factored in (estimated to be $50.00 per week).
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Using
Click Information in title
to edit Master Economic
style Decisions
Example (continue):
With $800 per week for operating costs, plus the additional $50.00 for
preparing annual tax return, GST documents, etc, (total of 2.4K per
annum) meaning that his weekly outgoings are $850.00.
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Using
Click Information in title
to edit Master Economic
style Decisions
Darren’s Lawn
Mowing
Incoming Outgoing
$1890 $850
per per
week week
Illegal
A
a
$1040 Any extra
per income from
week tree topping
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Using
Click Information in title
to edit Master Economic
style Decisions
Darren’s Lawn
Mowing
Incoming Outgoing
$1890 B
per $850 B
week per b
Ordinary
week
Illegal
$1040
per
Profit week
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Accounting
Click to editInformation
Master title&style
Decisions
• Many decisions require significant amounts of financial
information
– Accounting information is a very important part of this process.
• Actual versus future events
– Accountants report on past.
– Still useful as a guide for making decisions about the future.
– Past performance not necessarily indicative of future results.
• Outcomes or results of activity
Accounting information assists owners and managers
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Pause Point 5 title style
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Management
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Master Accounting
title style
Management Accounting Financial Accounting
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Management
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Master Accounting
title style
Differences
between
Management
Accounting
and
Financial
Accounting
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Management
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Master Accounting
title style
Differences
between
Management
Accounting
and
Financial
Accounting
(Continue)
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Master6 title style
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Accounting
Click to editAs a Profession
Master title style
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Public Accounting
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Public Accounting
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Accountants
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Master & Industry
title style
Commercial Accounting
• Responsibilities include
o General accounting
o Cost accounting
o Accounting information systems
o Budgeting
o Taxation accounting
o Internal auditing and audit committees
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Not-for-Profit Accounting
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Not-for-Profit Accounting
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Not-for-Profit Accounting
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Examples of Not-for-profits
entities
B
B
b
Ordinary
Hospital Educational
Institute
Charity
Church Club
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Ethics and
Click to Accounting
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• Ethics in Business
– Businesses today appreciate the importance of ethical behaviour in
all their business dealings.
– All people working in the entity have to be honest, abide by the
rules and ‘do the right thing’.
– The audit and assurance services function
of accounting also represents a Business
controlling influence in
maintaining ethical Professional
Ethics accounting
behaviour in bodies
business entities.
Practice
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Ethics and
Click to Accounting
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• Ethics and professional accounting bodies
– Code of ethics for professional accountants
– Miscellaneous professional statements and joint guidance notes
– Such other ethical issues or similar matters of interest in respect of the
accounting profession.
• Ethics in practice
– self interest
Business
– failure to maintain objectivity and independence
– improper leadership and poor organisational culture
– lack of ethical courage to do what is right Professional
Ethics accounting
– lack of ethical sensitivity bodies
– failure to exercise proper professional
judgement. Practice
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Key Take
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Summary of Lecture 1
• Understand the dynamic environment in which accountants work
• Discuss the nature of decisions and the decision-making process
• Explain the nature of accounting and its main functions
• Identify the potential users of accounting information
• Describe the role of accounting information in the decision‐making process
• Compare accounting information for management and external users
• Accounting bodies in Australia & accounting as a profession
• Ethics in business and accounting
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End ofto
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• Recommended Readings
Hoggett & Edwards (refer to unit outline) - Chapter 1
• Tutorial Questions
Hoggett & Edwards - Chapter End Questions
• Next Lecture
Lecture 2 – Financial Statements for Decision Making
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