Topic outline
-
-
As the topics unfold in this course you will find that in many ways accounting involves the application of specific assumptions and techniques to a variety of situations. As important as these assumptions and procedures are, they make no sense if the social context of their use is not understood. If you have previously studied accounting at secondary school, TAFE or a similar institution and level, the prevalence of 'Why?' in this course in addition to the 'How?' that may have guided your previous study will take a little getting used to. However, the 'Why?' is central to the nature of any course at tertiary level - even accounting!
For those who have not done any accounting study before, you will not be tainted by the bad habits of previous experience.
Before the first number is written on paper (or keyed into the computer), purveyors and users of accounting information need to contemplate why they are doing so. Posing questions such as 'Why account at all?', 'Why use certain methods in accounting?', 'Who is this being done for?' will lead to a better understanding of the discipline and explain the assumptions, techniques and resultant information that you will be introduced to as the course unfolds.
Having looked at the nature of accounting and the roles it plays, we now look at the different types of organisations that are accounted for. In this topic, we also introduce the three major financial statements available to external users - the Balance Sheet, Income Statement and the Statement of Changes in Equity.
The activities that produce these statements are collectively termed the accounting process. We examine this process and begin analysing financial events that affect the organisation. This analysis involves identifying the effect of events on the accounting equation and applying certain assumptions that have been established in accounting.
This is a very important topic and forms the foundation for nearly everything you do for the rest of the course, so please take the time to work through the topic material carefully.
The main things you need to get out this week is an understanding of:
- the accounting definitions of Assets, Liabilities, Equity, Income & Expenses
- the accounting equation: Assets = Liabilities + Equity
- that at least two account items are affected by every transaction in accounting
- the three financial statements - Income Statement, Balance Sheet and Statement of Changes in Equity. Make sure you know what elements go into each of these
- some basic accounting assumptions which will form the basis of the conceptual knowledge that underpins accounting
It is important to understand the difference between the common English meaning of the elements Assets, Liabilities, Equity, Income and Expense and the Accounting meaning and that you will be assessed on the latter.
Also, make sure you are clear that only Income and Expenses go in the Income Statement and only Assets, Liabilities and Equity go in the Balance Sheet.
-