Accounting: Business Reporting for Decision Making 7th Edition by Jacqueline Birt Solution manual

 
4. The purchase of office equipment for cash. This transaction would increase office equipment (asset) and decrease cash (asset).
 
5. Withdrawal of business funds by owner. This transaction would decrease cash (asset) and increase drawings/decrease capital (equity).
 
 
1.2      Differentiate between financial and management accounting. Give an example of how a management accounting report would be incorporated into financial accounting reports.
 
In differentiating between financial accounting and management accounting, it is important to consider the users of financial information — both internal and external users. Financial accountants prepare and report information for external users (for example prospective investors or the tax office) and as such are subjected to regulation from GAAP, the Corporations Act and in some cases the ASX through their Listing Rules. Management accountants are concerned with the effective use of an entity’s resources, and in so doing assist the manager/s (i.e. internal users) of the entity in achieving their goal of enhancing customer and shareholder value. Therefore, the management reports generated need to be up-to-date to be effective. Regulation in management accounting is much less formal and in some areas rules are basically non-existent. Ultimately, there will be interaction between the financial accounting and management accounting areas. The information provided by management accountants will provide information for internal users that will be reflected in the financial reports used by the external users. See table 1.3 for a detailed list of the differences between financial and management accounting.
1.3      Describe how accounting information helps shareholders and lenders to make decisions concerning the operations and performance of an entity.
 
Users of accounting information (both internal and external) require accounting information to assist them in the decision-making process. External users such as investors, employees, banks, suppliers and government agencies (e.g. ATO) all have their own specific information needs. A potential investor will require past profits and future profit projections, as well as future growth prospects, to determine if the entity is a good investment proposition or not. Lenders will be seeking details of the level of risk it is exposing itself to by lending money to the entity plus the prospects of the entity repaying its debt.
 
 
1.4      Provide an example each of a company that would produce a GPFS and a company that would produce a special purpose financial statement. Who are the likely stakeholders of both types of entities?
 
An example of a company who would produce a GPFS would be Qantas Group. Qantas Group has various stakeholders such as investors, employees, customers, supplies, banks and regulatory bodies that would all require important information from the Qantas annual report. A company that would prepare a special purpose financial statement could be an entity such as a local government association. This type of entity would provide a set of financial statements in accordance with the local government code of accounting practice and financial reporting and relevant Australian accounting standards. The association would not have a diverse range of stakeholders and a special purpose financial statement would fit the requirement of its stakeholders such as lenders and regulatory bodies.
 
 
1.5      One of the new opportunities for accounting graduates is forensic accounting. What does forensic accounting entail? Provide an example of a position as a forensic accountant.
 
Forensic accounting involves accountants helping to solve crimes such as computer hacking and the theft of large amounts of money through hoax schemes on the internet. In recent years, several Australian banks have been the targets of this type of crime, where customers have been sent an email supposedly from the bank, requesting them to provide confidential personal banking details. Some of these customers have been misled and supplied personal details, resulting in unauthorised individuals accessing their personal funds. Some examples of positions advertised for a forensic accountant include the following.

• Data Analytics Manager at NAB in Melbourne — advertised through JORA in November 2018.
• Forensic accountant at Pilot Partners in Brisbane — advertised through SEEK in November 2018.
• Graduate accountant at Jardine Lloyd Thompson Pty Ltd to joint their Sydney JLT Forensic team — advertised through SEEK in October 2018.
• Forensic technology graduate at Genius People at Melbourne — advertised through SEEK in October 2018.