Accounting

TUTORIAL 1 TUTORIAL SOLUTION

Discussion Questions

1.1 The basic purpose of financial accounting is to produce useful information which is used in many and varied ways. People use the information generated by financial accounting to improve their decision-making in allocating scarce resources.

1.2 Financial performance means generating new resources from day-to-day operations over a period of time. Financial position is the organisation’s set of financial resources and obligations at a point in time.

1.9 The following are some suggested situations where judgement is required by preparers of financial information; however this list is not exhaustive!

▪ deciding which accounting policies to use

▪ deciding on the level of depth of information that is provided in financial reports

▪ deciding on when to provide financial information, including how often, as well as at what time of the year

▪ deciding on how to technically keep the records, for example, using computers versus human effort, what the various records will look like, etc.

▪ deciding on whether or not to be ethical in reporting the financial information deciding in which period a transaction occurs

▪ deciding on how to measure a transaction, for example a property that cost $100 000 ten years ago may be worth $500 000 today. Therefore, how do preparers decide on the value of assets/ liabilities to be reported.

15.1 A decision made in advance about how, when and whether to record or recognise something.

15.4 A judgment needs to be made about how to present this information. The choice is likely to impact users of the accounts.

Problems

Problem 1.3: - Refer to the website for solution outlines. http://www.cengage.com.au/trotman/finaccounting4e

Problem 1.7

Accrual profit = total sales – total expenses

= (750 000 + 260 000) – (580 000 +240 000)

= $190 000

Problem 1.14

1 Cardigan’s owners’ equity as at 30/06/09 = Assets – Liabilities...