ACCG1000 - Accounting for decision making

Introduction to Accounting

• Purpose of lecture: Provide foundational information for students about accounting.

• Topics covered:

  • What is accounting?

  • Accounting's relation to society and decision making.

  • Users of accounting information (stakeholders).

  • Main branches of accounting.

  • Evolution of accounting practices.

  • Common forms of business organizations in Australia.

Defining Accounting

• Accounting as the "language of business":

  • Facilitates communication of financial and non-financial information.

  • Provides information for decision making, indicating its broad relevance beyond just business contexts.

Accounting in Daily Life

• Accounting impacts personal decisions:

  • Planning for holidays or major purchases (e.g., saving for a car).

  • Everyday decisions (dining out) influenced by financial considerations.

• Highlighted examples:

  • Saving for vacations requires accounting to determine necessary savings.

  • Dining out decisions based on available budget and spending priorities.

Accounting and Society

• Accounting as a critical mechanism in driving societal economic activities:

  • Sociocultural influences on business decisions (e.g., shift to electric vehicles).

  • Government policies and legislation shaping business operations and accountability.

  • Emphasis on societal impact and sustainability in business decision making.

Importance of Accounting to Businesses

• Role of accounting in business growth decisions:

  • Determines financing strategies: borrowing, issuing shares, etc.

  • Informs management on growth plans such as new products or geographical market expansion.

• Utilizing accounting information:

  • Helps in assessing operational costs and environmental impact.

  • Addresses both financial and non-financial implications of business decisions (e.g., sustainability).

Functions of Accounting

• Primary function: Provide relevant information for decision making.

• Accounting process involves:

  • Identifying financial-impacting events;

    • Example: Paying wages impacts cash flow.

  • Measuring the financial impact in monetary terms.

  • Recording transactions systematically in accounting information systems.

  • Communicating information succinctly via financial statements (income statement, balance sheet, cash flow statement).

Users of Accounting Information

• Stakeholders are varied; different groups use accounting information to identify performance and make decisions:

  • Internal Users: Management, employees (e.g., determining job security).

  • External Users:

    • Shareholders: Monitor business performance to guide investments.

    • Creditors/banks: Assess repayment ability before lending.

    • Suppliers: Ensure business stability for sustained transactions.

    • Consumers: Decide on purchasing based on financial health and product availability.

    • Government: Ensure legal compliance and tax obligations.

    • Societal stakeholders: Monitor environmental impact and ethical practices.

Conclusion

• Accounting is not merely a business-focused discipline; it significantly affects wider societal contexts and personal decisions.

• Encourages students to embrace a holistic view of accounting throughout their learning journey.