ACCOUNTING FOR BUSINESS STUDENTS

ACCOUNTING FOR BUSINESS STUDENTS A T R I LL’S ATRILL • McLANEY • HARVEY Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2018 — 9781488616570 — Atrill/Accounting for Business Students 1e Atrill, Peter, et al. Accounting for Business Students eBook, P.Ed Australia, 2017. ProQuest Ebook Central, Created from usyd on :48:54. Copyright © 2017. P.Ed Australia. All rights reserved. This page is intentionally left blank Atrill, Peter, et al. Accounting for Business Students eBook, P.Ed Australia, 2017. ProQuest Ebook Central, Created from usyd on :48:54. Copyright © 2017. P.Ed Australia. All rights reserved. ACCOUNTING FOR BUSINESS STUDENTS A T R I LL’S ATRILL • McLANEY • HARVEY ACCOUNTING FOR BUSINESS STUDENTS A T R I LL’S ATRILL • McLANEY • HARVEY Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2018 — 9781488616570 — Atrill/Accounting for Business Students 1e Atrill, Peter, et al. Accounting for Business Students eBook, P.Ed Australia, 2017. ProQuest Ebook Central, Created from usyd on :48:54. Copyright © 2017. P.Ed Australia. All rights reserved. Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2018 Pearson Australia 707 Collins Street Melbourne VIC 3008 Authorised adaptation from the original UK editions, entitled Accounting and Finance for Non-Specialists 10/e (ISBN: 9781292135601) by Peter Atrill & Eddie McLaney © 2017 and Accounting and Finance: An Introduction 8/e (ISBN: 9781292088297) by Peter Atrill & Eddie McLaney © 2016, both published by Pearson Education Limited. Licensed for sale in Australia and New Zealand only. First adaptation edition published by Pearson Australia Group Pty Ltd, Copyright © 2018 by arrangement with Pearson Education Ltd, United Kingdom. The Copyright Act 1968 of Australia allows a maximum of one chapter or 10% of this book, whichever is the greater, to be copied by any educational institution for its educational purposes provided that that educational institution (or the body that administers it) has given a remuneration notice to Copyright Agency Limited (CAL) under the Act. For details of the CAL licence for educational institutions contact: Copyright Agency Limited, telephone: (02) , email: All rights reserved. Except under the conditions described in the Copyright Act 1968 of Australia and subsequent amendments, no part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. 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Accounting--Problems, exercises, etc. Other Creators/ McLaney, E. J., author. Contributors: Harvey, David Every efort has been made to trace and acknowledge copyright. However, should any infringement have occurred, the publishers tender their apologies and invite copyright owners to contact them. Pearson Australia Group Pty Ltd ABN Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2018 — 9781488616570 — Atrill/Accounting for Business Students 1e Atrill, Peter, et al. Accounting for Business Students eBook, P.Ed Australia, 2017. ProQuest Ebook Central, Created from usyd on :48:54. Copyright © 2017. P.Ed Australia. All rights reserved. BRIEF CONTENTS About the Australian author xii Preface xiii About the contributor xvii Acknowledgements xviii For students: How do I use this book? xx Resources for students and educators xxii 1 Introduction to accounting 1 2 Measuring and reporting financial position 46 3 Measuring and reporting financial performance 92 4 Recording transactions—the journal and ledger accounts 162 5 Accounting systems and internal control 227 6 Introduction to limited companies 280 7 Regulatory framework for companies 326 8 Measuring and reporting cash flows 376 9 Corporate social responsibility and sustainability accounting 430 10 Analysis and interpretation of financial statements 472 11 Cost–volume–profit analysis and relevant costing 534 12 Full costing 582 13 Planning and budgeting 634 14 Capital investment decisions 705 Glossary 759 Index 767 Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2018 — 9781488616570 — Atrill/Accounting for Business Students 1e Atrill, Peter, et al. Accounting for Business Students eBook, P.Ed Australia, 2017. ProQuest Ebook Central, Created from usyd on :48:54. Copyright © 2017. P.Ed Australia. All rights reserved. vi ACCOUNTING FOR BUSINESS STUDENTS About the Australian author xii Preface xiii About the contributor xvii Acknowledgements xviii For students: How do I use this book? xx Resources for students and educators xxii CHAPTER 1 Introduction to accounting 1 Nature and role of accounting 3 Accounting as a service function 4 Costs and benefts of accounting information 5 Accounting as an information system 6 Users of accounting information 8 Financial and management accounting 9 What is the financial objective of a business? 11 Stakeholder theory 13 Balancing risk and return 14 The main financial reports—an overview 15 Financial accounting 15 Management accounting 18 Business and accounting 20 What kinds of business ownership exist? 20 How are businesses managed? 25 Not-for-proft organisations 26 The changing face of business and accounting 28 Ethics and ethical behaviour in business 30 How useful is accounting information? 33 Why do I need to know anything about accounting and fnance? 34 The ALTC’s Academic Standards for Accounting 35 Characteristics of successful business people 37 Summary 38 Reference 39 Discussion questions 39 Case study 41 Solutions to activities 42 CHAPTER 2 Measuring and reporting financial position 46 Nature and purpose of the statement of financial position 47 Assets 47 Claims against the assets 48 The accounting equation 50 The effect of trading operations on the statement of fnancial position 52 The classification of assets and claims 55 The classifcation of assets 55 The classifcation of liabilities 56 The classifcation of owners’ equity 57 Formats for statements of financial position 58 Financial position at a point in time 61 Factors influencing the form and content of the financial reports 62 Conventional accounting practice 63 Valuing assets 67 Usefulness of the statement of financial position 72 Statement of financial position deficiencies 74 Summary 77 Discussion questions 78 Application exercises 79 Case study 87 Solutions to activities 88 CHAPTER 3 Measuring and reporting financial performance 92 The statement of financial performance— its nature and purpose, and its relationship with the statement of financial position 93 The stock approach to calculating proft 95 The format of the income statement 97 Key terms 97 Classifying expenses 99 The reporting period 101 CONTENTS Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2018 — 9781488616570 — Atrill/Accounting for Business Students 1e Atrill, Peter, et al. Accounting for Business Students eBook, P.Ed Australia, 2017. ProQuest Ebook Central, Created from usyd on :48:54. Copyright © 2017. P.Ed Australia. All rights reserved. CONTENTS vii Profit measurement and the recognition of revenues and expenses 102 Recognition of revenues 102 Recognition of expenses 106 Proft, cash and accruals accounting—a review 110 Profit measurement and the calculation of depreciation 111 Calculating depreciation 112 Selecting a depreciation method 118 Impairment and depreciation 119 Depreciation and the replacement of fxed assets 119 Depreciation and judgement 119 Profit measurement and the valuation of inventory 120 What is inventory? 120 What is the cost of inventory? 120 What is the basis for transferring the inventory cost to cost of sales? 121 The net realisable value of inventory 125 Profit measurement and the problem of bad and doubtful debts 127 The traditional approach 127 The impairment of assets approach 129 A first-principles approach 131 Uses and usefulness of the income statement 137 Summary 143 Discussion questions 144 Application exercises 145 Case study 156 Solutions to activities 157 CHAPTER 4 Recording transactions— the journal and ledger accounts 162 The recording process—an overview 163 Double-entry bookkeeping 167 Ledger—detailed method of recording 168 The trial balance 177 Closing of the accounts 179 Period-end adjustments 183 Prepayments and accruals 183 Revenues due and prepaid 184 Depreciation 185 Bad and doubtful debts 187 Inventory 189 Manufacturing and trading accounts 191 Adjusted trial balance and worksheet 195 The chart of accounts 199 Summary 204 Discussion questions 204 Application exercises 205 Case study 214 Solutions to activities 215 CHAPTER 5 Accounting systems and internal control 227 What is internal control? 228 Internal control in practice 230 Internal control and e-commerce 232 Why doesn’t internal control always work? 233 Illustration of a functional area of a business and its internal control 234 The ledger and subsidiary records 238 Divisions of the ledger 239 Subsidiary records—a traditional manual system 239 The sales and purchases journals 240 The cash book and cash journals 243 The journal 247 Control accounts and reconciliations 249 Control accounts 249 Reconciliation statements 250 Computerised accounting systems 255 Cloud computing 256 Summary 265 Discussion questions 265 Application exercises 266 Case study 275 Solutions to activities 27