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1.7       What is a business transaction and how does it relate to the accounting process? Illustrate the concept of a business transaction with five examples relating to a provider of  test bank for Chinese therapeutic massages.

A business transaction can be defined as external exchanges of resources between the entity and another entity or individual that affects the assets, liabilities and owners’ equity items in an entity. The accounting process is the identifying, measuring and communicating of economic information about an entity to a variety of users for decision-making purposes. The first component of the process is the identification of business transactions which are then measured and communicated to the different users of financial reports for test bank is available.

Business transactions for a provider of Chinese therapeutic massages include the following:

1. The contribution of capital by the owner to commence the business. This transaction would increase cash (asset) and increase capital (equity).

2. The purchase of equipment (massage tables, massage chairs) on credit test bank. This transaction would increase equipment (asset) and increase creditor (liability).

3. The payment of building rent. This transaction would decrease cash (asset) and decrease profit (equity).

4. The purchase of office equipment for cash. This transaction would increase office equipment (asset) and decrease cash (asset).

5. Withdrawal of business funds by owner. This transaction would decrease cash (asset) and increase drawings/decrease capital (equity).

1.8       Differentiate between financial and management accounting. Give an example of how management accounting reports would be incorporated into textbook solutions  financial accounting reports.

In differentiating between financial accounting and management accounting it is important to consider the users of financial information — both internal and external users. Financial accountants prepare and report information for external users (for example prospective investors or the tax office) and as such are subjected to regulation from GAAP, the Corporations Act and in some cases the ASX through their Listing Rules. Management accountants are concerned with the effective use of an entity’s resources, and in so doing assist the manager/s (i.e. internal users) of the entity in achieving their goal of enhancing customer and shareholder value. Therefore the management reports generated need to be up to date to be effective. Regulation in management accounting is much less formal and in some areas rules are basically non-existent. Ultimately there will be interaction between the financing accounting and management accounting areas. The information provided by management accountants will provide information for internal users that will be reflected in the financial reports used by the external users. See Table 1.3, page 10, for a detailed list of the differences between textbook solutions financial and management accounting.

1.9       Describe how accounting information helps shareholders and lenders to make decisions concerning the operations and performance of the entity.

Users of accounting information (both internal and external) require accounting information to assist them in the decision making process. External users such as investors, employees, banks, suppliers, government agencies (e.g. ATO) all have their own specific information needs. A potential investor will require past profits and future profit projections, as well as future growth prospects, to determine if the entity is a good investment proposition or not. Lenders will be seeking details of the level of risk it is exposing itself to by lending money to the entity plus the prospects of the entity repaying its’ debt textbook solutions is also available. 

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1.4       The AASB's role has changed since the introduction of test bank IFRS in 2005.  Most of the Australian accounting standards mandated in Australia are Australian equivalents to IFRSs.  Why do you think Australia has adopted Australian equivalents to IFRS?

The Australian standard setter i.e. the AASB has changed its role since the adoption of IFRS in 2005.  It is not solely making accounting standards for use by Australian reporting entities, much of that role is now undertaken by the IASB in its development of IFRS. IFRS adoption means that the AASB can now contribute to the development of global financial reporting standards. Most recently, the AASB provided export support on the IASB's discussion paper on 'extractive activities'. Adopting IFRS means that there is a reduction in standard setting costs for Australia. Adopting Australian equivalents of IFRS means that there is still scope for the AASB to tailor the IFRS to meet the needs of Australian entities. For example: certain test bank IFRS standards will be made available to specific Australian entities rather than all Australian entities. Conversely, there will be other IFRS which the intention is for a more narrow group of entities e.g. all listed companies and in Australia it might be applies to both proprietary and limited companies. Adopting Australian equivalents means that there is also the scope to change the wording of certain standards to “fit” the Australian business environment.

1.5       The sustainability report is a recent disclosure by some Australian companies. The Qantas   Group’s sustainability report includes disclosures on occupational health and safety, environmental information, customer information including number of on-time arrivals and employee absenteeism. What do you think are the advantages and disadvantages to the company of providing such disclosures of test bank?

Such textbook solutions disclosures provide a positive signal about the company to various stakeholders such as consumers, investors, general public, employees and suppliers. The disclosures can provide information to investors to determine the future of an entity and to assess the future cash flows for dividends and the possibility of capital growth of investment. Employees can use the information to ascertain job security and future promotional opportunities.  Suppliers of the entity can use the information to determine an entity’s ability to repay debt associated with purchases.

1.6      The historical cost nature of the annual report is seen as being a limitation of textbook solutions financial accounting information. What do you think are the advantages and disadvantages of using historical costs? Can you think of any alternative ways of measuring assets that my provide advantages over using historical cost?

Historical cost accounting requires that items in the annual report such as assets are reported at their original cost. This has various advantages. Historical costs are seen as being reliable figures where there has been evidence of the actual price e.g. invoice, receipt. Other methods of valuation are not always reliable, as management can use their discretion (sometimes opportunistically) to arrive at the value which could be detrimental to the firm.  Disadvantages of using historical costs are that they may not be relevant and for that reason may not reflect the real value of the firm. Lenders most likely would be interested in the historical cost of Balance Sheet items and if there are any impairment losses. Other alternative methods include market value for assets such as land. For assets such as inventory for textbook solutions is also available.

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4.9       What is meant by the ‘concept of duality’? Provide an illustration involving test bank a business transaction where the business purchases office furniture on credit.

The concept of duality means that every business transaction will have a dual effect on the accounting equation. The equation always stays balanced. For example the purchase of office furniture on credit will mean that the office furniture will be increased and the supplier (accounts payable) will be increased.

4.10     Both the journal and the ledger can be used to record a large number of transactions. Differentiate between financial recordkeeping in the journal and the ledger for test bank.

A journal is a book which records each business transaction shown on the source documents in chronological order. An entity may record their transactions in separate journals for transactions that occur frequently. For example: entities which deal mainly in cash will have a cash receipts journal and cash payments journal. An entity dealing with credit will also have a credit sales and credit purchases journal for test bnk is also available.

A ledger is an account that accumulates all the information about one item in the accounting reports, e.g. sales, cash. It is often prepared using the summarised information from the journals. For example: if you used special journals to record similar transactions such as cash receipts or cash payments then you would post the totals from these journals to the ledger accounts. There will be a separate ledger account for each item affected by the transactiontextbook solutions is available for

and each account will have a debit side and a credit side. The advantage of recording in the ledger is that it summarises all the transactions affecting one account e.g. Wages.

4.11     Discuss the purpose of a double-entry bookkeeping system.

A double-entry bookkeeping system accounts for a large number of transactions and involves the dual effect of the transaction being recorded as a debit entry and a credit entry. A debit entry will increase assets and decrease liabilities and equity and textbook solutions. For this reason, debits (which are often abbreviated to Dr) are entered on the left-hand side of a ledger account. The credit entry will increase liabilities and equity and decrease assets. For this reason, credits (which are often abbreviated to Cr) are entered on the right-hand side of a ledger account.

4.12     Summarise the procedures you would undertake if an accounting worksheet does not balance.

The initial step that you would take if the accounting worksheet does not balance would be to double-check every transaction entered and ensure that the duality rules have been applied. Then all the arithmetic should be rechecked. The bookkeeper should also check for transposition errors (where figures may have been transposed). For examples the owner withdraws cash of $ 2400 and this is entered as negative cash $2400 and negative equity as $4200 textbook solutions also available.

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