Professional Documents
Culture Documents
UNIT GUIDE
_____________________________________________________________________________________________________ Updated 11 November 2011 Page 2 of 22 NB This unit outline is subject to change. For latest version refer to Student Website
_____________________________________________________________________________________________________ Updated 11 November 2011 Page 3 of 22 NB This unit outline is subject to change. For latest version refer to Student Website
The basic format for classes will be: Lectures Analysis of previous and current assignments by syndicate groups Class quizzes Previewing the assignments for next lecture. You are encouraged to access course materials from, and conduct research for the syndicate project using the class webpage (for instructions and id/password see internet access sheet in your binder). The following can be downloaded from your class webpage: course outline assignment answers, powerpoint slides and sample test and exam
PART A BASIC ACCOUNTING CONCEPTS & FINANCIAL STATEMENT PREPARATION
PART B
FINANCIAL STATEMENT ANALYS IS AND RELATED ISS UES Analysis of Financial Statements Topic 6
INTERNAL MANAGEMENT REPORTING Short Term Mg Topic 10 t Pl anning Budgeting Topic 9 & Planning
Topic 8
Topic 9
Topic 10
_____________________________________________________________________________________________________ Updated 11 November 2011 Page 4 of 22 NB This unit outline is subject to change. For latest version refer to Student Website
25%
50% 100%
Please note that to pass the subject students must pass the final examination and perform satisfactorily in each of the remaining components. In addition, to obtain an overall grade of HD for the subject, the students must also obtain an HD in the final examination. Late work will be penalised at a rate of 10% of the maximum mark per calendar day up to the total value of the assessment component. 7.1 In-Class Tests Length: Format: Dates 1 hour each To be discussed in class 2 February 2012 (Week 4) 23 February 2012 (Week 7) 15 March 2012 (Week 10) Weighting: 25%
_____________________________________________________________________________________________________ Updated 11 November 2011 Page 5 of 22 NB This unit outline is subject to change. For latest version refer to Student Website
Assignments
Session 1 - The Nature of Accounting Class Assignment Questions to consider: 1. 2. 3. The activities of accountants embrace much more than bookkeeping Why? Who are the principal users of accounting information? Many organisations provide financial information to external users in excess of regulatory requirements. Why would they do so given the costs of providing such information? What do the following equations indicate? Assets = Liabilities + Owners Equity Profit = Revenue Expenses 5. 6. What is the purpose of setting accounting standards? Accounting is irrelevant to decision-making because it only relates to the past. Do you agree? Why or why not? (solutions online)
4.
_____________________________________________________________________________________________________ Updated 11 November 2011 Page 6 of 22 NB This unit outline is subject to change. For latest version refer to Student Website
Assignments
Session 2 - The Accounting Cycle and Bookkeeping Class Assignment questions to consider: A. Basic Accounting Concepts 1. 2. Mr Wong purchased a machine and paid for it by cheque. Does this affect the accounting equation? Why do we treat the machine as an asset? Sally Lim, a sole trader, used her business cheque account to pay for her home electricity bill. Knowing that people refer to electricity as an expense, she has treated it as such in the accounting records of the business. What would you advise Sally? Harry Wong, an architect, purchased a photocopier worth $2000 from George Brown. George Brown accepted $2,000 worth of architectural services from Mr Wong in exchange. Should this transaction be recorded in the books of Mr Wong? What effect would this transaction have on the accounting equation? What problems do you foresee if this transaction is not recorded? David Glass, a printer, claims he has made neither a profit nor a loss over the past 12 months as his bank balance at 30 June this year is exactly the same as it was on 30 June last year. Do you necessarily agree with Mr Glass? The Statement of Financial Position shows how much a business is worth. Do you agree? Discuss (solutions online) B. The Recording of Transactions 6. 7. Debits are good and credits are bad. Do you agree with this statement. The total debits equal total credits in the trial balance. Therefore, the interim financial statements can be prepared as obviously no errors were made in the recording process. Is this statement correct? Why? Closing the ledger means that all accounts are set back to zero, and the recording process can be started again for the new period. Is this statement correct? Why? (solutions online) Practical Exercises: Exercise 3.2 Page 111 of Textbook Problem 3.2 Page 117 of Textbook Problem 3.4 Page 119 of Textbook (solutions online)
3.
4.
5.
8.
_____________________________________________________________________________________________________ Updated 11 November 2011 Page 7 of 22 NB This unit outline is subject to change. For latest version refer to Student Website
Assignments
Session 3 - The Accounting Statements Class Assignment Questions to consider: 1. 2. 3. What type of organization would be suited to use: (i) a cash basis of accounting, (ii) an accrual basis of accounting. Explain the reasons for your choices. What are the accounting processes necessary at the end of the financial year to be able to prepare the financial statements. Why are adjusting entries necessary? Surely they cause too much delay in preparing financial statements, and the financial effect of any entries made is immaterial in the long run. Respond to this criticism. If users are to better understand financial statements, they must recognize the relationships between items in the profit and loss statement and the balance sheet. Discuss. (solutions online) Practical Exercises: 1. Exercise 4.1 Page 165 of Textbook 2. Problem 4.3 Page 172 of Textbook 3. Problem 4.6 Page 174 of Textbook (solutions online)
4.
_____________________________________________________________________________________________________ Updated 11 November 2011 Page 8 of 22 NB This unit outline is subject to change. For latest version refer to Student Website
Assignments
Session 4 - Cash Flow Analysis Class Assignment questions to consider: 1. Define each of the following as either an operating, investing or financing activity: 2. 3. payment to employees for wages receipt from sale of goods to customer receipt from collection of loan proceeds from the issue of debentures payment for the purchase of land and buildings repayment of mortgage loan payment of dividends receipt of interest from bills receivable proceeds from sale of equipment payment for income tax.
A statement of cash flows which has been given to you by your accountant has indicated a net cash inflow from financing activities. Suggest reasons for this inflow. In what way is the cash flow statement (a) similar to the statement of financial performance (b) different to the statement of financial performance? (solutions online)
Practical Exercises:
Exercise 24.4 Page 1033 of Textbook Exercise 24.12 Page 1040 of Textbook (solutions online)
_____________________________________________________________________________________________________ Updated 11 November 2011 Page 9 of 22 NB This unit outline is subject to change. For latest version refer to Student Website
Assignments
Session 5 - Working Capital Analysis Class Assignment questions to consider: 1. 2. What are some of the limitations in using the average inventory turnover ratio to evaluate inventory management? Sam Gregg is the Credit Collections Manager of ABC Ltd. Of late, the Days Receivable (also known as Average Collection Period) has blown out, increasing by another 25 days. Although the Sales Director of ABC is unhappy with Sam, Sam believes he is not to blame. Why might Sam not be to blame for the deterioration in collection period? (solutions online) Practical Exercises:
_____________________________________________________________________________________________________ Updated 11 November 2011 Page 10 of 22 NB This unit outline is subject to change. For latest version refer to Student Website
Assignments
Session 6 - Analysis of Financial Statements Class Assignment questions to consider: 1. 2. How do the financial information needs of owners and creditors differ? An accounting student was presented with the previous two years profit and loss statements for company A and company B. The student looked no further than the bottom line, the net profit, which showed: Year 1 $ 80,000 $100,000 Year 2 $150,000 $150,000
Company A Company B
The student replied, company A has been more profitable in the second year as it has increased its profit by $70,000 over year 1, whereas company B has only increased its profit over year 1 by $50,000. What other factors should be taken into consideration before a conclusion could possibly be reached? 3. 4. What ratios might be used to predict an organizations financial failure? What other signs may alert the analyst that there are financial difficulties? Due to higher inflation, diminishing cash flows and poor performance over the past twelve months, the directors decided to revalue several fixed assets that had previously been disclosed at historical cost. They also decided not to write off bad debts until after the balance date and to run down inventory balances before closing the books. Discuss the impact of this on a financial statement analysis conducted on the company. (solutions online)
Assignments
Session 7 - Analysis of Financial Statements No pre-prescribed questions.
_____________________________________________________________________________________________________ Updated 11 November 2011 Page 11 of 22 NB This unit outline is subject to change. For latest version refer to Student Website
Assignments
Session 8 - Management Accounting 1 Class Assignment questions to consider: 1. 2. Why it is important to determine the cost of products/services? Applying overhead as a percentage of direct labor dollars is one of the oldest methods. It is certainly far and away the most common. The percentage of direct labor cost is derived by dividing the total manufacturing overhead of a production department by the direct labor cost of this department. What are the assumptions implicit in this statement and possible limitations? Why might a firm adopt direct costing? What are some of the advantages? I dont understand, commented an accounting student, Variable costs per unit remain constant, yet fixed costs per unit vary with the level of activity. I thought fixed costs remained constant. Discuss. Joinery products Pty Ltd purchased a machine some years ago. The annual depreciation charge of the machine is $8,900. Three different items could be produced by the machine at an annual operating cost of $15,000. The following information has been provided: (solutions online) Revenue ($) 47,000 68,000 33,000 Additional production costs ($) 24,000 42,000 10,000 (solutions online)
3. 4.
5.
Which item do you suggest should be manufactured? Explain which costs were relevant in making your decision. Identify sunk costs. Practical Exercises: Exercise 9.3 Page 411 of Textbook Exercise 9.12 Page 414 of Textbook Problem 9.1 Page 415 of Textbook (solutions online)
_____________________________________________________________________________________________________ Updated 11 November 2011 Page 12 of 22 NB This unit outline is subject to change. For latest version refer to Student Website
Assignments
Session 9 Management Accounting 2 Class Assignment questions to consider: 1. The owner-manager of a small business enterprise was heard to make the following remark: Break-even analysis has little relevance for my business. I am not in business to break even, but to make profits. Do you agree? Explain your position. How can analysing differences between planned and actual contribution margin help in the control aspect of management? (solutions online) Practical Exercises: Exercise 11.9 Page 489 of Textbook Problem 11.2 Page 491 of Textbook (solutions online)
2.
_____________________________________________________________________________________________________ Updated 11 November 2011 Page 13 of 22 NB This unit outline is subject to change. For latest version refer to Student Website
Weighting: 25% Members of your syndicate are all employed as analysts by a major merchant bank. A significant client of the bank wishes to invest a substantial amount of capital in a company listed on the local stock exchange and seeks the banks assistance in identifying the company. The investment is to be of a long-term nature and the investor prefers to invest in companies with strong financial fundamentals. As part of the process of identifying a company in which the client might invest, your syndicate is expected to conduct an analysis of the financial statements of that company and one or more of its major competitors listed on the same stock exchange. In addition, your syndicate must submit a report indicating whether or not the client should invest in the selected company, the major competitor(s), or refrain from investing in the industry altogether. Your lecturer will indicate the companies you are to study on a term by term basis. Your analysis may take the following form: 1. A review of industry-specific factors (e.g. level of competition, barriers to entry) that would be material to the clients decision. This should include a brief review of recent share price movements. 2. A review of current and expected economic conditions (e.g. inflation, recession) that would be material in forming your recommendation. 3. An analysis of the companys and competitors recent financial performance. This analysis should include: (a) A table of financial ratios for the most recent five year period. The ratios selected should consider: (i) (ii) (iii) (iv) (v) Liquidity Profitability short -term asset management Risk leverage and capital structure
You should be selective in your choice of ratios. While you are expected to discuss all of the above issues, greater coverage should be given to those particularly helpful to your analysis. (Definitions of ratios together with actual ratio calculations should be attached to your report as an appendix). (b) A discussion of the financial ratios you have calculated, highlighting the financial strengths and weaknesses of each company as revealed by your ratio analysis.
_____________________________________________________________________________________________________ Updated 11 November 2011 Page 14 of 22 NB This unit outline is subject to change. For latest version refer to Student Website
Weighting: 50% The exam format will be closed book, and will consist of a combination of multiple choice, short answer and essay style questions. More details on the exam will be provided in class. The final exam will cover: Lectures and unit notes Text and reference book chapter topics Assignments and In-class discussions The final exam will cover all materials of the whole term. The MGSM Examination period in Term 1 2012 is from 19 March to 24 March You are expected to present yourself for examination at the time and place designated in the MGSM Examination Timetable. The timetable will be available on 31 January 2012 at https://students.mgsm.edu.au/sydney/timetable/exams/
_____________________________________________________________________________________________________ Updated 11 November 2011 Page 15 of 22 NB This unit outline is subject to change. For latest version refer to Student Website
_____________________________________________________________________________________________________ Updated 11 November 2011 Page 17 of 22 NB This unit outline is subject to change. For latest version refer to Student Website
GRADE %
Distinction 75-84
Credit 65-74
Pass 50-64
Fail 0-49
Attendance Policy The interactive environment of the classroom is central to the MGSM experience. Students are required to attend all classes for the duration of each class. We recognise that exceptional circumstances may occur circumstances such as unavoidable travel on behalf of your organization or the serious illness or injury of you or a close family member. Special consideration may be given for a maximum of 20% non-attendances for such circumstances as long as, where possible, lecturers are notified in advance and supporting documentation provided. Failure to abide by these conditions may result in a Fail grade being recorded. Planning Your Time The unit is based on an average student workload of 160 hours; made up of 40 hours face to face contact and 120 hours unsupervised private study and group work.
_____________________________________________________________________________________________________ Updated 11 November 2011 Page 18 of 22 NB This unit outline is subject to change. For latest version refer to Student Website
_____________________________________________________________________________________________________ Updated 11 November 2011 Page 19 of 22 NB This unit outline is subject to change. For latest version refer to Student Website
Session 1: The Nature of Accounting The accounting context, accounting for decision making, various types of organizations, distinction between internal and external users of accounting reports, accounting principles/conventions, and an introduction to accounting concepts. References Hoggett (Textbook) Chapters 1 & 2 Unit Notes - Session 1
Session 2: The Accounting Cycle and Bookkeeping Transaction analysis, classification of accounts, the accounting equation, the recording cycle: transactions, classification, journals, ledger accounts, trial balance and final reports. References Hoggett (Textbook) Chapter 3 Unit Notes - Session 2
Session 3: Adjusting Entries and Financial Statements Balance sheet elements and classification, issues of reporting and disclosure, accrual accounting and provisions, income statement elements and classification, revenue and expense recognition, the relationship between external financial reports. Historical cost accounting framework, closing entries, adjusting entries, non-current assets, depreciation, inventory and bad debt are also examined. References Hoggett (Textbook) Chapters 4 & 5 Unit Notes - Session 3
Session 4: Statement of Cash Flows Differences between cash and accrual accounting, statement of cash flows, and the relationship between the balance sheet and cash flows. References Hoggett (Textbook) Chapter 24 Unit Notes - Session 4
_____________________________________________________________________________________________________ Updated 11 November 2011 Page 20 of 22 NB This unit outline is subject to change. For latest version refer to Student Website
Session 5: Working Capital Analysis Concept of working capital and related management issues; use of accounting analytical techniques to evaluate and inform. References Hoggett (Textbook) Chapters 18 & 19 Unit Notes - Session 5
Session 6: Analysis of Financial Statements Analysis and interpretation of financial reports, common size comparisons; liquidity ratios, leverage and capital structure ratios, profitability ratios and trend analysis. References Hoggett (Textbook) Chapter 25 Unit Notes - Session 6
Session 7: Analysis of Financial Statements Review of annual report assignment. Analysis and interpretation of financial statements (continued). References Hoggett (Textbook) Chapter 25 Unit Notes - Session 7
_____________________________________________________________________________________________________ Updated 11 November 2011 Page 21 of 22 NB This unit outline is subject to change. For latest version refer to Student Website
Session 8: Management Accounting 1 Introduction to management accounting, overview of costing methodologies, fixed and variable costs, classification of costs. References Hoggett (Textbook) Chapter 9 Unit Notes - Session 8
Session 9: Management Accounting 2 Control systems, cost allocation, contribution approach, break-even analysis, and measuring responsibility center profits. References Hoggett (Textbook) Chapter 11 Unit Notes - Session 9
_____________________________________________________________________________________________________ Updated 11 November 2011 Page 22 of 22 NB This unit outline is subject to change. For latest version refer to Student Website