Week 2 Lecture Notes Acct1501

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THE UNIVERSITY OF
NEW SOUTH WALES

Australian School of Business
School of Accounting
ACCT 1501: Accounting and Financial Management
1A
Week 2

Measuring & Evaluating Financial Position & Performance

Student Handout

Lecturer:
Dr. Youngdeok Lim
School of Accounting
UNSW
QUAD 3069
youngdeok.lim@unsw.edu.au
Blackboard: http://telt.unsw.edu.au

Session 1, 2013

WEEK 2: Measuring & Evaluating Financial Position &
Performance
1.

Introduction

Every commercial entity engages in transactions with other parties. Woolworths buys products from suppliers, employs shop assistants, builds new stores, sells groceries and each individual transaction is recorded and reported in the Balance Sheet. Individual retail stores would report their profitability and the costs of running each store categorising their expenses so management are fully informed of the cost involved in running each service or retail store. They will even have information about the individual products they sell through internal reporting and cost profit sales analysis. In this lecture we will examine the communication of financial information in the Income Statement through to the Balance Sheet.

Learning objectives
At the end of this topic, you should be able to:


Understand the terms, format and function of the Balance Sheet & the Income Statement



Identify the components of financial statements



Describe the relationship between the balance sheet and the income statement



Understand the implications of the decision to record expenditure as an asset or as an expense



Understand the differences between cash profit and accrual profit

Required Reading
Trotman, Gibbins & Carson Chapter 2
AASB: Framework for Presentation of Financial Statements (downloadable from your course website or http://www.aasb.gov.au )

Session 1, 2013

2.

Tutorial Questions – Week 3

Preparation Questions




DQ 2.1, 2.2
P2.3
Case 2A

Tutorial Questions



DQ 2.6, 2.10
P2.7, P2.9, P2.11

Session 1, 2013

Australian School of Business

ACCT1501
Semester 1, 2013

Week 2 –
Measuring & Evaluating Financial Position
& Performance
Lecturer: Dr Youngdeok Lim

Building the foundations of accounting over the next few
weeks
Week 2: The Balance Sheet and Income Statement (Ch. 2)
Week 3: The Double Entry System (Ch. 3)
Week 4: Record Keeping (Ch. 4)
Week 5: Accrual Accounting Adjustments

(Ch. 5)

Don’t forget to use the Glossary! (T,G&C, p. 788)
In the course of your study you will be introduced to many key Accounting terms; it is like learning a new language.
You should refer to the glossary as often as needed until you get to know all the new terms.
Practice using the glossary - look up the new terms each week and try to explain them in your terms or think of an example to explain it. (Tip: Define, explain, example!)

Lecture Two Outline

• Learning objectives
• Recap
• Topic 2
• 1. Balance Sheet
• 2. Connecting the Balance Sheet & Income Statement
• 3. Income statement
• 4. Capitalise vs expense
• 5. Cash profit and accrual profit.

4

Topic 2: Measuring & Evaluating Financial Position & Performance

• Learning objectives (LO) - You should be able to:
1. Understand the terms, format, and function of the balance

sheet & the income statement
2. Identify the components of financial statements
3. Describe the relationship between the balance sheet and
the income statement
4. Understand the implications of the decision to record
expenditure as an asset or as an expense
5. Understand the differences between cash profit and accrual profit.

Recap continued: The 3 key financial statements
Balance sheet
Financial position of an enterprise at a particular point in time. What are the entity’s resources and how were they financed? Income statement
Financial performance of an enterprise over a period of time. Has the entity used its resources efficiently...
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