Chapter 1 & Chapter 3 KCQs

Chapter 1

There is always an impression in my mind that accounting and those financial statements are just collecting and recording and summarizing the data of the transactions of an entity and the more important part is analyzing those data.

Can number really create the reality? I think it may partly be true. Indeed the numbers and the financial statement may clearly show the performance of the company, but it cannot fully represent the condition of that company, especially if there is big change in the world market. The culture and environment in a company in some extent, to my opinion, also influence the company’s future performance a lot. Because the culture and reputation of a company has great influence on shareholder, customer, and investor’s confidence, which will not, directly represented by the numbers in financial statements.

What’s the differences between trust/beneficiaries and company/largest or only shareholder?

What would real bookkeeping in a company be like? There must some rules dealing with different situation happened such as losing information, lost invoice, wrong numbers on invoice and some other possible situation. It will happen in reality especially small business.

What mode will the business use to record to ensure the validity of the data? To

Question 1-1

Why do we have double-entry accounting? Why do we put in everything twice? Why not just once?

To my opinion, the double entry accounting is used for recording the usage of the money and the source of the money, to backup the data and ensure the accuracy of the data input. Errors can be detected easier.

Question 1-2

For your firm, identify three Assets, three Liabilities and three items of Equity. Describe what each item means to you (you may find some footnotes in your frim’s financial statements may help)

Asset

Trade and other receivables – transactions occurred but not yet receive the payment yet

Cash and cash requivalents – money in bank account

Intangible assets

Liabilities

Trade and payables – Money owed by a business to its suppliers

Deferred tax liability – a company owes and does not pay at that current point, although it will be responsible for paying it at some point in the future

Short term provisions – provision is an account which records a present liability of an entity to another entity.

Equities

Contributed equity – reflects payments of cash or assets that the owner have made to the company in order to increase the company’s equity

Reserves – the part of shareholder’s equity except for basic share capital.

Retained earnings – the portion of net income of a corporation that is retained by the corporation rather than distributed to shareholders as dividends.

Chapter 3

According to the article, almost all listed companies will not just be one company but a group of companies. The consolidated statement shows the general financial position of the group of the company, but can we know the individual company’s full information of financial situation, asset, debt and dividends each year by looking at the footnote of the consolidated financial statement? Or they will publish individual financial statement to the public?

If one company is partly owned by two company, what the two company’s consolidated financial statement would be like?

If the company is focusing on two different area, how can the financial statement reflects the performance in either area in that period? For example, HiTech Group Australia focus on recruitment and consultation. How to show the revenues and expenses from each branches on the financial statement?

Each business have different culture and framework. I thought the ratio just offered one option of reference or standard to evaluate the performance of the company.

The early bankers’ contribution to development of ratio is very great. There must be many kind of ratios invented in later years and the way read them must have changed a lot.