Welcome to Foundation in Accounting (ACCT5001)

Dr Roel Boomsma

The University of Sydney Page 1

 Dr Roel Boomsma
Accounting academic & Learning designer
University of Amsterdam University of Sydney

Stockholm School of Economics

The University of Sydney Page 2
 The ACCT5001 teaching team

Coordinators Tutors

Roel Boomsma Janine Coupe Marija Vidovic Sabrina Shen

Katarina Djukic

The University of Sydney Page 3

 Structure of the unit
Week 1 Module 1 lecture
Week 2 Module 2 lecture Module 1 tutorial
Week 3 Module 3 lecture Module 2 tutorial
Week 4 Module 4 lecture Module 3 tutorial
Week 5 Module 5 lecture Module 4 tutorial Group Case 1 - 10%

Participation - 5%
Week 6 Module 6 lecture Module 5 tutorial
Week 7 Module 7 lecture Module 6 tutorial
Week 8 Module 8 lecture Module 7 tutorial
Week 9 Module 9 lecture Module 8 tutorial Business simulation - 20%
Week 10 Module 10 lecture Module 9 tutorial
Week 11 Module 11 lecture Module 10 tutorial
Week 12 Module 12 lecture Module 11 tutorial Group Case 2 - 15%
Week 13 Review Module 12 tutorial

Final exam - 50%

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ACCT5001:
Foundation in Accounting

Module 1
THE ROLE OF ACCOUNTING
IN DECISION MAKING

Reading: Textbook:
Ch 1: 1.1 - 1.8 (pp.1-36).

Slide 5
Module 1: The Role of Accounting in Decision Making

Reading: Textbook: Ch. 1 (pp. 1-36)

Textbook Learning objectives (See Chp. 1, p.1 of textbook)

1.1 Explain why accounting is important
1.2 Describe the accounting equation and define assets, liabilities, and
equity
1.3 Use the accounting equation to analyse transactions
1.4 Prepare financial statements

1.5 Use financial statements to evaluate business performance

1.6 Describe the organisations and principles that govern accounting
1.8 Explain the role of ethics, professional conduct and sustainability
in accounting Slide 6
ACCT5001:
Foundation in Accounting

Module 1 – Part A

What is accounting?

Learning objectives 1.1 and 1.2

Slide 7
Activity
What is accounting?

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1.1 What is accounting and why is it important?

What is accounting?
- More than just technical knowledge
- Analyses, measures and records business activites

- Processes transaction data into useful financial reports

- Communicates the results to internal/external decision makers

Accounting is often termed the ‘language of business’

- Accounting is a (global) means of communication
-
-
- Generally accepted principles
-
-
-
Slide 9
Slide 10
Slide 11
1.1 What is accounting and why is it important?

Why is accounting important?

Accounting enables users of it to make better decisions by providing an

information system that:

• analyses, measures and records business activities

• processes transaction data into useful financial reports
• communicates the results to internal/external decision makers

Slide 12
Types of accounting

Slide 13
Decision makers: the users of accounting information
• External users – use general purpose reports to help with decisions
– Investors
– Individuals
– Businesses
– Creditors
– Government regulatory agencies and authorities
– Other users,

• Internal users - use custom made info/reports and for specific decisions
– Senior and middle management to help plan, manage, monitor
and control the business

Slide 14
1.2 The accounting equation
This measures:
The resources (assets) = how they were financed from external
sources (liabilities) and internal sources (equity)

Asset Liabilities Equity

or
The resources of a business (assets) and the external claims (liabilities)
and internal claims (equity) to those resources

Asset Liabilities Equity

It forms the basic structure of the Balance Sheet (The Statement of

Financial Position) Slide 15
 Accounting Entity

The accounting equation

(Assets = Liabilities + Equity) is
Accounting period represented on the balance sheet

ASSETS

LIABILITIES

EQUITY

Slide 16
 Elements of the accounting equation
• Assets (A) are present economic resources (or rights) controlled by the
entity as a result of past events, that have the potential to produce
economic benefits

• Liabilities (L) present obligations (duties / responsibilities) of the entity

to transfer economic resources as a result of past events,
that the entity has no practical ability to avoid.

• Equity (E) is the residual interest in the assets of the accounting entity,
after deducting all of its liabilities.
– It is increased by owner’s investment and profit (Revenue > Expenses)
– It is decreased by owner’s drawings and losses (Expenses > Revenue)
• Revenue (arises from ordinary operating activities of the entity
Revenue increases profit (and therefore increases equity)
• Expenses arise from operating activities of the entity.
They decrease profit (and equity) by using up assets or increasing
liabilities to deliver goods & services to customers Slide 17
ACCT5001:
Foundation in Accounting

Module 1 – Part B

Accounting for business transactions

Learning objective 1.3

Slide 18
1.3 Accounting for business transactions

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1.3 Accounting for business transactions
Core accounting principles (see 1.6)

 Accounting entity concept:

Defines the accounting/reporting entity for which accounting data is collected and reported,

and ensures the entity's transactions are kept separet from the owners transactions.

 Accounting period concept:

Defines the unit of time for which accounting data are collected and reported.

 Going concern assumption:

Assumes that the business as a whole will continue operating for the foreseeable future.

 Accrual basis of accounting:

The effects of transations are recognised when they occur.

Slide 20
1.3 Accounting for business transactions

• Accounts record the impact of financial events that affect the entities’
assets, liabilities and equity
• Transactions are financial events that either involve the business
entity and at least one other external party exchanging resources
(external transaction) or a transfer/ reclassification between accounts
(internal transaction)
○ Each transaction affects at least 2 accounts
○ Some transactions affect only one side of the equation (eg. +A
and -A) ; some affect both sides (eg. +A and +L)

○ After each transaction, the accounting equation is balanced

(by definition A=L+E)

The effects of all transactions on accounts are analysed, recorded,

and summarized at end of the period to prepare financial reports
Slide 21
1.3 Accounting for business transactions

What happens to the accounting equation when a business

takes out a $100,000 bank loan?

Slide 22
 Demonstration Question
- Accounting for business transactions
(1) Starting the business – Sheena Bright invested $30,000 into her
Smart Touch business by depositing it into the business bank a/c
(2) Purchased land for cash for $20,000
(3) Purchased $500 of office supplies on credit/on account
(4) Received $5,500 cash from a customer for services provided
(5) Provided services worth $3,000 to a customer who will pay later
this month
(6) Paid $3,300 for expenses (salary $1200, rent $1,100, computer
lease $600, electricity/gas $400)
(7) Paid $300 off an account owing to the supplier
(8) Collected $1,000 that was receivable from a customer
(9) Sold some land for $9,000
(10) Withdrew $2,000 cash from the business for personal expenses
(11) Sheena’ spent $10,000 renovating her private home with this cash
and a further $8,000 of her personal savings
Slide 23
Exercise 1 - Accounting for business transactions

Assets Liabilities Owners´

= equity

Cash Land Office supplies Accounts Accounts Sheena

receivable payable Bright, capital

1) +30 000 1) +30 000

Captial

2) -20 000 2) +20 000

3) +500 3) +500

4) +5 500 4) +5 500
Revenue

5) +3 000
Revenue

6) -3 300 6) -3 300
Expense

Various expenses
* Various - salaries
expenses $1,200
– Salaries , rent
$1,200, $1,100,
Rent computer
$1,100, lease
computer $600,
lease electricity
$600, andand
electricity gasgas
$400
$400
Slide 24
Exercise 1 - Accounting for business transactions
Assets Liabilities Owners´ equity

Cash Land Office supplies Accounts Accounts Sheena Bright,

receivable payable capital

7) -300 7) -300

8) +1 000 8) -1 000

9) +9 000 9) -9 000
10) -2 000
10) -2 000 Owner's
drawing

___________ ___________ ___________ __________ ___________ ______________

__ __ __ __ __ __

19 900 Captial
11 000 500 2 000
200 $30 000
Revenue
$8500
Expenses
-$3 300
Drawings
-$2 000
Slide 25
ACCT5001:
Foundation in Accounting

Module 1 – Part C

Preparation and Presentation of

Financial Statements

Learning objectives 1.4, 1.5, 1.6 and 1.8

Slide 26
Preparation and Presentation of Financial Statements

Income statement (fin performance)

1/7 30/6
Rev – Exp = Profit (loss)

Statement of changes in equity

1/7 30/6

Balance sheet (fin position)

1/7 X30/6
A=L+EQ

Cash flow statement

1/7 30/6

Slide 27
Preparation and Presentation of Financial Statements
Assets Liabilities Owners´ equity

Cash Land Office supplies Accounts Accounts Sheena Bright,

receivable payable capital
19,900 11,000 500 2,000 200 Capital +
$30,000
Revenue +
$8,500
Expenses -
$3,300
Drawings -
$2,000
$33,400 $200 $33,200

Slide 28
Preparation and Presentation of Financial Statements
Assets Liabilities Owners´ equity

Cash Land Office supplies Accounts Accounts Sheena Bright,

receivable payable capital
19,900 11,000 500 2,000 200 Capital +
$30,000
Revenue +
$8,500
Expenses -
$3,300
Drawings -
$2,000
$33,400 $200 $33,200

Slide 29
Preparation and Presentation of Financial Statements

Continues …
Slide 30
Preparation and Presentation of Financial Statements
Assets Liabilities Owners´ equity

Cash Land Office supplies Accounts Accounts Sheena Bright,

receivable payable capital
19,900 11,000 500 2,000 200 Capital +
$30,000
Revenue +
$8,500
Expenses -
$3,300
Drawings -
$2,000
$33,400 $200 $33,200

Slide 31
Slide 32
 Read & Review

1.5 Use financial statements to evaluate business performance

1.6 Regulatory Organisations and accounting principles

- International regulation (IASB)
- Australian regulatory bodies (AASB, ASIC, Professional Accounting Bodies)
- Conceptual framework for financial reporting
- Qualitative characteristics of financial statements (fundamental & enhancing)
- Accounting principles
- Accounting entity concept
- Accounting period concept
- Going concern assumption
- Accrual basis of accounting

1.8 Ethics, professional conduct, and sustainability

- Professional standards
- Code of ethics (Integrity, Professional competence & due care, Confidentiality,
and Professional behaviour.
- Sustainability

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 Explore our Canvas site

Explore our Canvas site Get (and use) the textbook

Get ready for your Online or F2F tutorial Thanks for joining & see you next week!

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