Kế toán, kiểm toán - Chapter 1: Accounting — Present and past (introduction)

CHAPTER 1Accounting—Present and Past(Introduction)1OverviewWhy study accounting?What is accounting?Who uses accounting?What do accountants do?How has accounting developed?Accounting standards Ethics and the accounting professionThe conceptual frameworkObjective of financial reporting for businesses2Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynWhy Study Accounting?Accounting is the language of business.Anyone involved in the economic activities of our society needs to know enough of this language to be able to make decisions and informed judgements about those activities.“If you want to be rich long-term, it could be the most important subject.” - Robert Kiyosaki author of Rich Dad, Poor Dad3Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynWhat is accounting?identifyingmeasuringcommunicatingeconomic information about an entityfor decisions and informed judgements.Accounting is the process of:4Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynUsers and uses of accounting information5Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynWhat do accountants do? Financial accounting generally refers to the process that results in the preparation and reporting of financial statements for an entity. Financial accounting is primarily externally oriented and concerned with the historical results of an entity’s performance.Financial Accounting6Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynWhat do accountants do? Financial statements reflect what has happened in the past. These past results can also be used to predict future results. The 3 main Financial Statements we will focus on (in Chapters 4 to 9) are: The Income Statement; The Balance Sheet; and The Cash Flow Statement.Financial Accounting7Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynWhat do accountants do?Management accounting is concerned with the use of economic and financial information to plan and control many of the activities of the entity and to support the management decision-making process.Cost accounting relates to the determination and accumulation of product, process or service costs.Management / Cost Accounting8Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynWhat is auditing? An audit is a review by an independent third party. Public accounting firms and individual Certified Practising Accountants (CPAs) and Chartered Accountants (CAs) provide auditing services and issue an independent auditor’s report. The audit report states whether the financial statements are prepared in conformity with Australian Accounting Standards and the Corporations Act. An auditor’s report can be unqualified or qualified.Auditing / Public Accounting9Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van Rhyn What do accountants do?Internal auditors are professional accountants who perform functions much like those of an external auditor. However, internal auditors are employed in industry rather than public accounting, and often their functions are more specific and detailed.Internal Auditing10Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynWhat do accountants do?Governmental units (e.g., local, state, and federal levels) Not-for-profit entities (e.g., schools, hospitals, and religious organisations) May be involved in accountability for budgets of billions of dollars and so these entities require the same accounting functions to be performed as do other accounting entities.Governmental Not-for-Profit Accounting11Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynWhat do accountants do? Tax practitioners deal with Federal, State and Foreign income tax laws.They often develop specialties in the taxation of individuals, partnerships, corporations, trusts and estates, or international tax law issues. Income Tax Accounting12Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynEthics and the accounting profession Integrity Independence Competence ObjectivityObligation to serve employer, client and publicJoint Code of Professional ConductCPA AustraliaICAA13Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynHow has accounting developed?3000 B.C.3000BC Mesopotamians record tax receipts on clay tablets.1494AD - Luca Pacioli published the first textbook describing a comprehensive double-entry bookkeeping system.1494 AD14Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynHow has accounting developed?3000 B.C.14941800s The industrial revolution of the 19th century generated the need for large amounts of capital to finance the large scale enterprises that replaced the reliance on individual craftsmen. This need resulted in the corporate form of organisation and the need to provide investors with reports showing the financial position and the results of operations.15Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynHow has accounting developed?3000 B.C.14941800’s1900s1928 Accounting professionals in Australia organised themselves in the early 1900s and worked hard to establish certification laws, standardised audit procedures and other attributes of a profession using the model from the Institute of Chartered Accountants in England and Wales.1928 – The Institute of Chartered Accountants in Australia (ICAA) was constituted by Royal Charter.16Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynHow has accounting developed?3000 B.C.14941800s1900s1946195219281946 – The ICAA issued the first attempt at codified standards: it released a series of five recommendations of accounting principles.1952 – The Australian Society of Accountants (ACA) was established. Forerunner to CPA Australia.17Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynHow Has Accounting Developed?3000 B.C.14941800s1900s194619521966198419281966 – The Australian Accounting Research Foundation (AARF) was established by the two professional accounting bodies, to conduct research and issue accounting standards (however, these lacked legal status).1984 – The Accounting Standards Review Board (ASRB) was established. Accounting standards now given legal backing.18Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynHow has accounting developed?3000 B.C.14941800s1900s19461952196619941991198419281991 – The Australian Accounting Standards Board (AASB) replaced ASRB. Accountable to Australian Securities Commission, later to become Australian Securities and Investment Commission (ASIC).1994 – The Urgent Issues Group (UIG) was established – an interpretive committee for issues arising from existing accounting standards and SACs .19Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynHow has accounting developed?Late 1990s – Corporate Law Economic Reform Program (CLERP) and creation of Financial Reporting Council (FRC) with members appointed by the Treasurer to oversee AASB. 3000 B.C.14941800s1900s194619521966200019941991198419282000 – Creation of new AASB with merging of Public Sector Accounting Standards Board (PSASB) and old AASB.This new body is the official regulator, whose standards become law after acceptance by the Federal Parliament.20Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynHow has accounting developed?From 1 January 2005 – Australia has adopted the International Financial Reporting Standards (part of a global movement known as international harmonisation).3000 B.C.14941800s1900s19461952196620052000199419911984192821Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynHow has accounting developed?By 2006 – AASB had issued more than 50 accounting standards and more than 50 interpretations.3000 B.C.14941800s1900s19461952196620062000199419911984192822Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynAccounting standards aka rulesAccounting is not a science. It is concerned with communication.Responds to society’s needsChange over time/ subject to ‘fashion’Change with changes in economic conditionsDepend on professional judgementBest answer at present to a problem- no universal agreementInterpreted variously.23Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynAccounting standardsFinancial Accounting and ReportingAASB – responsible for setting standards In consultation with: ICAA and CPA AustraliaASICASXInstitute of DirectorsGroup 100academicsothers. 24Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynAccounting standardsFinancial Accounting and ReportingGAAPsGENERALLY ACCEPTED ACCOUNTING PRINCIPLESPrinciples that have developed over time, in response to the changing needs of society, to guide financial accounting and reporting. They are not codified in a set of rules that can be blindly followed.25Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynAccounting standardsOther types of accounting:Management/Cost AccountingCompanies self- regulateAuditing/Public AccountingAuditing Standards BoardGovernment and Not-for-ProfitAASBIncome Tax AccountingIncome Tax Assessment Act and regulations26Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynAccounting standardsThe International Accounting Standards Board (IASB) is based in London and seeks methods of providing comparability between financial statements prepared according to the differing accounting standards of its member nations.International Accounting Standards27Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynAustralia adopted these international standards (known as IFRS) from 1 January 2005. Included in our law as AIFRS.Over 90 countries have also done so.International Accounting StandardsAccounting standards28Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynThe conceptual framework (CF)Statements of Accounting Concepts (SACs) are guidelines that describe the concepts and relationships that underlie the financial accounting standards. Those still existing today:SAC1 Definition of the Reporting Entity;SAC2 Objective of General Purpose Financial Reporting.AASB Frame work supports these SACs29Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynObjective of financial reporting-SAC 2: Useful info for decisionsFinancial position What does the firm own? How much does the firm owe?Information about:Earnings and Cash Flow Profitability Dividends Cash to pay debt30Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van RhynObjective of financial reportingFINANCIAL ACCOUNTING AND REPORTING STANDARDSModified to mirror developments in the business world Modified to reflect current views and theories of financial reporting31Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting: What the Numbers Mean 2e by Marshall, McCartney & Van Rhyn