Accounting Fundamentals

Part One Accounting for Decision Making

Chapter 1 Decision making and the role of accounting

1. Decisions in everyday life
2. Steps in decision making
3. Economic decisions
4. The nature of accounting
5. Accounting defined
6. Users of accounting information
7. Using information in economic decisions
8. Accounting information and decisions
9. Accounting as a profession

Chapter 2 Accounting and financial reports for decision making

1. The structure of business entities
2. Basic financial reports
3. Some underlying assumptions of accounting reports
4. Development of accounting concepts and standards
5. Ethics and accounting

Part Two Accounting Systems and Processes

Chapter 3 Recording transactions

1. Transactions
2. Source documents
3. Transactions and their effects on the accounting equation
4. The accounting cycle
5. The ledger account
6. General ledger
7. Chart of accounts
8. Double-entry accounting
9. Recording transactions General journal
10. Illustration of transactions analysis
11. Trial balance
12. Use of dollar signs and decimal points
13. Expanded accounting cycle

Chapter 4 Adjusting the accounts and preparing financial statements

1. Measurement of net profit
2. Adjusting entries
3. Adjusted trial balance
4. Preparation of financial statements
5. Using the worksheet to prepare financial statements
6. The accounting cycle - further expansion
7. Financial statements and decision making

Chapter 5 Completing the accounting cycle

1. Closing temporary accounts
2. Using the worksheet to complete the accounting cycle
3. The closing process
4. The post-closing trial balance
5. Accrual entries in subsequent periods
6. Reversing entries
7. The complete accounting cycle
8. Accounting procedures applicable to a partnership or a company

Chapter 6 Accounting for merchandising

1. Merchandise inventory
2. Merchandise business operations
3. Accounting for sales transactions
4. Accounting for purchases and cost of goods sold
5. End of period processes
6. Detailed profit and loss statement
7. Trading statement and profit and loss statement
8. Net priÌce method of recording purchases and sales
9. Profitability analysis for decision making

Chapter 7 Accounting systems

1. Operation of an accounting system
2. Manual accounting systems - subsidiary ledgers
3. Manual accounting systems - special journals
4. Refinements to accounting systems
5. Computerised accounting systems
6. M.Y.O.B. accounting - an overview
7. Computerised accounting - advantages and disadvantages
8. Accounting cycle - manual and computerised

Part Three Accounting for Assets and Liabilities

Chapter 8 Cash and cash management

1. Cash defined
2. Internal control
3. Control of cash
4. Control of cash receipts
5. Control of cash payments
6. Cash budgeting
7. Cash management

Chapter 9 Receivables

1. Types of receivables
2. Accounts receivable (trade debtors)
3. Bad and doubtful debts
4. Management and control of accounts receivable
5. Bills receivable

Chapter 10 Inventories

1. Determining inventory on hand
2. Determining cost of inventory
3. Assignment of cost to ending inventory and cost of goods sold
4. Comparison of costing methods
5. Consistency in using a costing method
6. The lower of cost and market rule
7. Perpetual inventory system
8. Comparison of inventory systems
9. Sales returns and purchases returns
10. Inventory errors
11. Estimating inventories
12. Presentation in financial reports
13. Effect of costing methods on decision making

Chapter 11 Non-current assets: acquisition and depreciation

1. Determining the cost of property, plant and equipment
2. Apportioning the cost of a lump-sum acquisition
3. Exchanging a bill for property, plant and equipment
4. Assets acquired under a lease agreementt
5. The nature of depreciation
6. Subsequent costs
7. Property and plant records
8. Reporting property, plant and equipment in financial statements
9. Analysis, interpretation and management decision making

Chapter 12 Non-current assets: revaluation, disposal and other aspects

1. Revaluation of non-current assets
2. Disposal of non-current assets
3. Composite-rate depreciation
4. Natural resources
5. Self-geneırating and regenerating assets
6. Intangible assets
7. Goodwill
8. Discount on acquisition

Chapter 13 Liabilities

1. Liabilities defined
2. Recognition of liabilities
3. Provisions and contingencies
4. Classification of liabilities
5. Current liabilities
6. Non-current liabilities
7. Analysing liabilities for decision making

Chapter 14 The conceptual framework and measurement

1. The conceptual framework
2. The reporting entity
3. Objectives of general-purpose financial reporting
4. Qualitative characteristics of financial information
5. Definitions of elements in financial statements
6. Recognition of the elements
7. Assumptions underlying financial reports
8. Measurement systems

Part Four Accounting for Owners’ Equity

Chapter 15 Partnerships: formation, operations and reporting

1. Partnership defined
2. Advantages of a partnership
3. Characteristics of a partnership
4. Partnership agreement
5. Accounting for a partnership
6. Accounting for the formation of a partnership
7. Allocation of partnership profits and losses
8. Drawings by partners
9. Advances or loans by partners
10. Financial statements for a partnership

Chapter 16 Partnerships: admission, retirement and dissolution

1. Valuation of net assets
2. Admission of a new partner
3. Retirement of a partner
4. Death of a partner
5. Partnership dissolution

Chapter 17 Company formation

1. Types of companies
2. Advantages of the corporate entity
3. Disadvantages of the corporate entity
4. Forming a company
5. Administering a company
6. Owners equity in a company
7. Accounting for share issues
8. Preference shares

Part Five Financial Reporting and Analysis

Chapter 18 Company operations and reporting

1. Reserves
2. Dividends
3. Income tax
4. Company financial statements
5. Proposed amendments

Chapter 19 Statement of cash flows

1. Development of the statement of cash flows in Australia
2. General format of statement of cash flows
3. Concept of cash
4. Classification of cash flow activities
5. Preparing the statement of cash flows
6. Advanced issues
7. Analysing the statement of cash flows
8. Limitations of the statement of cash flows

Chapter 20 Analysis and interpretation of financial statements

1. Sources of financial information
2. The need for analytical techniques
3. Percentage analysis
4. Ratio analysis
5. Analysis using cash flows
6. Limitations of financial analysis

Part Six Accounting for Management and cost accounting systems

Chapter 21 Accounting for management

1. Management accounting
2. Organisations and management
3. Different cost classifications
4. Nature of manufacturing operations
5. Manufacturing cost elements
6. Cost behaviour considerations
7. Cost of goods sold - merchandising and manufacturing
8. Financial statements - merchandising and manufacturing
9. Accounting systems considerations
10. Management analysis

Chapter 22 Cost accounting systems

1. Cost accounting
2. Job order costing
3. Job order costing procedures
4. Process costing
5. Equivalent units
6. Cost of production report
7. Process costing procedures
8. Comparison of job order and process costing
9. Just-in-time processing
10. Acti!vity-based costing (ABC)

Part Seven Financial Planning and control and performance Evaluation

Chapter 23 Cost-volume-profit analysis for decision making

1. Cost behaviour
2. Analysis of mixed costs
3. Cost behaviour and the profit and loss statement
4. Direct costing
5. Reconciling direct costing and absorption costing net profit
6. Benefits and limitations of direct costing
7. Assumptions of cost-volume-profit analysis
8. Profit planning with CVP analysis
9. Break-even analysis
10. Margin of safety concept
11. Target net profit
12. Analysing CVP relationships for profit planning
13. Using CVP analysis with multiple products
14. Contribution margin variance analysis

Chapter 24 Budgeting for planning and control

1. Nature of budgetary planning and control
2. Organisational structure and budgeting
3. Goal congruance
4. Management participation and acceptance
5. Accounting and reporting system
6. Benefits of budgeting
7. Financial planning with budgeting
8. Sales forecast
9. The master budget
10. Preparation of operating budgets
11. Preparation of financial budgets
12. Financial control with budgeting
13. Budgeting in non-manufacturing entities

Chapter 25 Performance evaluation

1. Departmental/segmental accounting
2. Responsibility accounting
3. Flexible budgeting
4. Standard costs

Part Eight Analysis for Management decisions

Chapter 26 Differential analysis, profitability analysis and capital budgeting

1. Management decision making
2. Differential analysis
3. Profitability analysis
4. Capital budgeting decisions
5. Evaluating investments - net present value method
6. Evaluating investments - net present value index
7. Evaluating investments - internal rate of return method
8. Other capital budgeting methods

Part One The Australian accounting environment

Chapter 1 An overview of the Australian external reporting environment

1. Users demand for general-purpose financial reports
2. Sources of external reporting regulations
3. The Conceptual Framework and its relevance to financial reporting
4. A critical review of the Conceptual Framework
5. The harmonisation of Australian and international Accounting Standards
6. The use and role of audit reports

Part Two Theories of accounting

Chapter 2 An overview of theories of accounting

1. Introduction
2. Theory definition
3. Positive Accounting Theory
4. Accounting policy selection and disclosure
5. Accounting pohcy choice and ‘creative accounting’
6. Some criticisms of Positive Accounting Theory
7. Normative accounting theories
8. Systems-oriented theories to explain accounting practice
9. Role of reporting awards in disclosure strategy adoption
10. Further reading

Part Three Accounting for assets

Chapter 3 An overview of accounting for assets

1. Definition of assets
2. General classification of assets
3. Determination of future economic benefits
4. Acquisition cost of assets

Chapter 4 Depreciation of non-current assets

1. Depreciable amount (base) for the asset
2. Determination of useful life
3. Method of cost apportionment
4. When to start depreciating the asset
5. Revision of depreciation rates
6. Land and buildings
7. Modifying existing non-current assets
8. Sale of a depreciable asset
9. Contractual implications of building depreciation
10. Disclousre reqirements

Chapter 5 Revaluation of non-currentassets

1. Introduction to revaluations
2. Revaluation increments
3. Treatment of balances of accumulated depreciation upon revaluation
4. Revaluation decrements
5. Reversal of revaluation decrements and increments
6. Accounting for profit on the disposal of a revalued non-current asset
7. Consideration of present values
8. Offsetting increments/decrements within a class of non-current assets
9. Economic consequences of asset revaluations
10. Disclousre reqirements

Chapter 6 Inventory

1. Definition of inventory
2. The general basis of inventory measurement
3. Inventory cost-flow assumptions

Chapter 7 Accounting for intangibles

1. Research and development
2. Accounting for goodwill
3. self-generating andregenerating nature

Part Four Accounting forliabilities and owners’equity

Chapter 8 Accounting for heritage assets and assets of a

1. Heritage assets
2. Accounting for self-generating and regenerating assets
3. Disclousre reqirements
4. An overview of accountingforliabilities
5. Liabilities defined
6. Debt equity debate
7. Accounting for debentures
8. Hybrid securities

Chapter 10 Accounting for leases

1. Introduction to accounting for leases
2. Lessee accounting for finances leases
3. Lessee accounting for operating leases
4. Lessee accounting for sale and leaseback transactions
5. Lessee disclosure requirements
6. Accounting by lessors
7. Lessor accounting for direct financing leases
8. Lessor accounting for sales-type leases
9. Lessor accounting for operating leases
10. Leases involving land and buildings
11. Lessee accounting for lease incentives under a non-cancellable operating lease
12. Implications for accounting-based contracts

Chapter 7 Debt defeasance and debt set-offs

1. Defining extinguishment of debt
2. Legal defeasance
3. Insubstance defeasance
4. Instantaneous insubstance debt defeasance
5. Partial defeasance
6. Advantages to be derived from undertaking an ISDD
7. Set-off and extinguishment of assets and liabilities

1. Accounting for employee entitlements
2. Overview of employee entitlements
3. The development of AASB
4. Accounting for employee entitlements
5. Disclosures required by AASB 1028

Chapter 7 Share capital and reserves

1. Owners’ equity as a residual claim on net assets
2. Accounting for the issue of share capital
3. Different classes of shares
4. Redemption of preference shares
5. Forfeited shares
6. Share splits and bonus issues
7. Required disclosures for share capital
8. Reserves

Chapter 14 Accounting for financial instruments

1. Financial instruments defined
2. The development of AASB
3. Derivative financial instruments

Chapter 15 Revenue recognition issues

1. Definition of revenue
2. Revenue recognition
3. Accounting for sales with association conditions
4. Interest and diviends
5. Unearned revenue
6. Accounting for construction contracts

Chapter 16 The profit and loss statement

1. Profit and loss disclosure
2. Expenses and revenues included in the profit and loss?
3. Abnormal and extraordinary items
4. Incentives to disclose items as ordinary or extraordinary
5. Other profit and loss disclosure requirements
6. Profit as a guide to an organisations success

Chapter 17 Accounting for income taxes

1. Intra-period tax allocation
2. Inter-period tax allocation (tax-effect accounting)
3. More about permanent and timing differences
4. Changes in the tax rates
5. Financial statement presentation
6. Tax-effect accounting worksheet
7. Treatment of tax losses
8. Transfer of tax losses
9. Capital gains tax
10. Assets’ and ‘liabilities’ in tax-effect accounting

Part Five Accounting for disclosure of cash flows

Chapter 7 Statement of cash flows

1. Comparison with other financial statements
2. Defining ‘cash’
3. Classification of cash flows
4. Format of statement of cash flows
5. Calculating cash inflows and outflows
6. Contractual implications
7. Australian Financial Accounting

Part Six Industry-specific accounting issues

Chapter 7 Accounting for the extractive industries

1. Extractive industries’ defined
2. Alternative methods to account for pre-production costs
3. Research on accounting regulation of pre-productionexpenditures
4. Other developments in extractive industry reporting

Chapter 7 Financial reporting of general insurance activities

1. Recognition of insurance premium revenue
2. Insurance claims
3. Assets
4. Consistency with other Accounting Standards
5. Opposition to AASB
6. Accounting for superannuation plans
7. Classification of superannuation plans
8. Measurement rules
9. Financial reporting for a defined benefit superannuation plan
10. Presentation of financial reports for a defined contribution plan

Part Seven Other disclosure issues

1. Events occurring after reporting date
2. Subsequent events
3. Financial reporting by segments
4. Segment reporting
5. Further comments about disclosure of segment information
6. Related-party disclosures
7. Related-party relationship defined
8. Example of a related-party disclosure note
9. Earnings per share
10. Computation of basic earnings per share
11. Diluted earnings per share

Part Eight Accounting for equity interests in other entities

Chapter 7 Accounting for group structures

1. Rationale for consolidating the accounts of different legal entities
2. Development of the Accounting Standard on consolidated
3. financial statements
4. Alternative consolidation concepts
5. The concept of control
6. Accounting for the consolidation of separate legal entities
7. Recognition of a discount on acquisition
8. Consolidation after the date of acquisition
9. Subsidiary’s assets not recorded at fair values

Chapter 27 Further consolidation issues I: Accounting for inter-entity transactions and outside equity interests

1. Dividend payments pre- and post-acquisition
2. Inter-entity sale of inventory
3. Sale of non-current assets within the group
4. Outside equity interests

Chapter 28 Further consolidation issues II: Accounting for indirect interests and changes in degrees of ownership of subsidiary

1. Indirect ownership interests
2. Australian Financial Accounting
3. Increase in the ownership interest held in a subsidiary^
4. Sale of shares in a subsidiary

Chapter 29 Accounting for equity investments

1. Why do firms make equity investments?
2. Types of investments
3. Accounting Standards for equity investments
4. Investments held as current assets
5. Non-current equity investments
6. The equity method of accounting
7. Application of the equity method of accounting
8. Losses incurred by an associate
9. Carrying amount of the investment in the associate

Chapter 29 Accounting for interests in joint ventures

1. Joint ventures defined
2. Joint venture operations
3. Joint venture entities
4. Future developments in accounting for joint ventures

Part Nine Foreign currency

1. Accounting for foreign currency transactions
2. Foreign currency transactions
3. Longer-term receivables and payables
4. Translation of other monetary assets such as cash deposits
5. Qualifying assets
6. Hedging transactions
7. Foreign currency swaps
8. Translation of the accounts of foreign operations
9. Classification of foreign operations
10. Consolidation subsequent to translation

Part Ten Corporate social-reponsibiuty reporting

Chapter 30 Accounting for corporate social-responsibility reporting

1. Introduction to social responsibility
2. The responsibilities of business: to whom and for what?
3. Theoretical perspectives about the responsibilities of business
4. Evidence of public environmental-performance reporting
5. Share market reactions to social disclosures
6. Current Australian environmental-reporting practices
7. Linkage between environmental-performance and
8. financial-performance reporting
9. Australian initiatives to improve environmental-performancereporting