Accounting: Business Reporting for Decision Making 7th Edition by Jacqueline Birt Solution manual
1.6 List five stakeholders of accounting information. Describe the information requirements for each one; for example, lenders would need information regarding the business's ability to repay debt and service a loan.
Any five of the following:
STAKEHOLDERS: INFORMATION NEEDS:
Managers require information to determine make or buy decisions or whether to expand or close down or whether to change banks.
Investors seek information on capital growth prospects and future dividend payments.
Lenders need information on the ability of the entity to repay its loans.
Suppliers want to know if the entity can pay for its supply purchases.
Consumers are interested in the life expectancy of the entity and the entity’s ability to provide appropriate goods and services.
Government agencies for example, ATO — require information to determine the amount of tax liability of the entity.
Regulatory bodies for example, ASX and ASIC need to know whether the entity is following the ASX listing rules and the rules and regulations of the Corporations Act.
Managers require information to determine make or buy decisions or whether to expand or close down or whether to change banks.
Investors seek information on capital growth prospects and future dividend payments.
Lenders need information on the ability of the entity to repay its loans.
Suppliers want to know if the entity can pay for its supply purchases.
Consumers are interested in the life expectancy of the entity and the entity’s ability to provide appropriate goods and services.
Government agencies for example, ATO — require information to determine the amount of tax liability of the entity.
Regulatory bodies for example, ASX and ASIC need to know whether the entity is following the ASX listing rules and the rules and regulations of the Corporations Act.
1.7 Jackie Smith is considering purchasing a sushi bar in the inner Melbourne suburb of Albert Park. Outline the importance of a business plan for Jackie and the type of accounting information she will require to assist her in making the decision.
For Jackie, the business plan would provide a clear, formal statement of direction and purpose. It would allow her to work towards a set of clearly defined goals in the daily operations of the business. It also helps her in evaluating the business.
Jackie should seek the advice of her accountant regarding the following.
1. Evaluate the purchase — from the accountant’s experience (or with assistance from his/her professional association) advice can be obtained on whether the purchase is a good buy or not (e.g. through comparisons of similar recent sales; analysing past financial reports).
2. Prepare budget forecasts (e.g. on sales — i.e. target sales of food necessary to make the purchase worthwhile or to compare whether it is better financially to remain in your present job and make passive investments with your capital). This will enable a prospective buyer to evaluate if such sales are feasible.
3. Explain the personal qualities required in owning such a business (e.g. long hours; tedious work; customer relationships; impact on family life).
1.8 What is stakeholder theory and how is it related to corporate governance?
Stakeholder theory suggests that many groups other than shareholders have a stake in the activities and performance of an entity, and that corporate governance needs to reflect the wider duty of care that society is placing on the decision makers of entities.
1.9 What are the challenges associated with digital disruption for accountants?
With the streamlining of certain accounting processes due to the introduction of new technologies, there will be less need for traditional accounting services but at the same time there are additional opportunities for accountants in managing the regulatory, tax and financial implications of the fintech industry.