Post on 15-Jul-2015
Accounting is the recording of financial transactions:
WHAT IS ACCOUNTING?
Purchases of stock Purchase of cars
Loan repayments
GST
Investments Wages paid
Cash salesLoansRent
Phone bill Credit salesElectricity
Accountants then turn these transactions into three important reports:
WHAT IS ACCOUNTING?
Income
StatementBalance Sheet
Cash Flow
Statement
These reports are prepared for several users of accounting
information…
WHAT IS ACCOUNTING?
Management
Employees
Owners
Investors
Tax Office CustomersSuppliers
Government
These reports are then used to analyse the business so users can make
informed decisions…
WHAT IS ACCOUNTING?
How much profit did the business
make?
Does the business have enough
cash?
Which stock is selling well/poorly? Can the business afford to expand?
Are the firm’s shares over or under-
valued?What does the business own?
What are the firm’s debts and when
are they due?
What return is the firm making on
the owner’s investment?
Decisions
Accounting is not just for accountants
Myth – only people wanting to study Accounting at university should study VCE Accounting
Accounting is broader than that – whichever profession you do, a background in Accounting and Finance is essential in many careers such as:
Small business owner
Banking
Lawyer
Stockbroker/trader
Engineer
Marketing and advertising
Retail
Sports management
WHY STUDY ACCOUNTING?
Accounting is not just for accountants
Myth – qualified or “chartered” accountants work in a range of industries…
WHY STUDY ACCOUNTING?
38%
35%
3%
12%
In Accounting Practices In Industry (Commerce) In the Public Sector Overseas
Where do Chartered Accountants work?
Accounting is essential for studying Commerce at university
WHY STUDY ACCOUNTING?
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Natural andphysicalsciences
Informationtechnology
Engineering Architectureand building
Agriculture andenvironment
Health Education Managementand commerce
Society andculture
Creative arts Hospitality andfood
2012 First Preferences by Field of Interest - All Students
Accounting is essential for studying Commerce at university
WHY STUDY ACCOUNTING?
0
1000
2000
3000
4000
5000
6000
7000
8000
Natural andphysicalsciences
Informationtechnology
Engineering Architectureand building
Agricultureand
environment
Health Education Managementand
commerce
Society andculture
Creative arts Hospitalityand food
2012 First Preferences by Field of Interest - Male
Accounting is essential for studying Commerce at university
Every Management and Commerce Degree has Accounting as a core subject…
WHY STUDY ACCOUNTING?
Bachelor of Commerce
ACT10001 Accounting Reports and Analysis
Bachelor of Commerce
MAA103 Accounting for Decision-Making
Bachelor of Business
BUS1AFB Accounting and Finance
Bachelor of Business
ACCT2105 Accounting in Organisations
Accounting is essential for studying Commerce at university
Every Management and Commerce Degree has Accounting as a core subject…
WHY STUDY ACCOUNTING?
Bachelor of Commerce
AFC1000 Principles of Accounting
Source: http://www.buseco.monash.edu.au/future/why.html
Want more info? Join the ICAA One Network for high school students…
WHY STUDY ACCOUNTING?
http://www.charteredaccountants.com.au/Students/OneNetwork
Do I need to be good at Maths to study Accounting?
Accounting requires only basic arithmetic – there are no mathematical formulas or functions…
THE VCE ACCOUNTING COURSE
You only need a basic calculator – graphics calculators
are BANNED in SACs and Exams because you don’t
need them
Accounting isn’t a “scoring ” subject
Myth – every subject is a scoring subject !
All VCE subjects give you a study score from 1-50 based on:
How well you perform
How well you perform compared to everyone else in your class
How well you perform compared to everyone else in the state
Your score from 1-50 wil l then be scaled so it can be compared to other subjects…
http://www.vtac.edu.au/pdf/scaling_report.pdf
THE VCE ACCOUNTING COURSE
Accounting isn’t a “scoring ” subject
So how is Accounting scaled?
THE VCE ACCOUNTING COURSE
Year Mean 20 25 30 35 40 45 50
2012 30.5 19 24 30 35 41 46 50
2011 30.4 18 24 30 36 41 46 50
2010 30.4 19 24 30 36 41 46 50
2009 30.2 18 24 30 35 41 46 50
2008 30.2 18 24 30 35 41 46 50
2007 30.0 18 24 30 35 41 46 50
Year Mean 20 25 30 35 40 45 50
2012 30.5 19 24 30 35 41 46 50
2011 30.4 18 24 30 36 41 46 50
2010 30.4 19 24 30 36 41 46 50
2009 30.2 18 24 30 35 41 46 50
2008 30.2 18 24 30 35 41 46 50
2007 30.0 18 24 30 35 41 46 50
Year Mean 20 25 30 35 40 45 50
2012 30.5 19 24 30 35 41 46 50
2011 30.4 18 24 30 36 41 46 50
2010 30.4 19 24 30 36 41 46 50
2009 30.2 18 24 30 35 41 46 50
2008 30.2 18 24 30 35 41 46 50
2007 30.0 18 24 30 35 41 46 50
Year Mean 20 25 30 35 40 45 50
2012 30.5 19 24 30 35 41 46 50
2011 30.4 18 24 30 36 41 46 50
2010 30.4 19 24 30 36 41 46 50
2009 30.2 18 24 30 35 41 46 50
2008 30.2 18 24 30 35 41 46 50
2007 30.0 18 24 30 35 41 46 50
Year Mean 20 25 30 35 40 45 50
2012 30.5 19 24 30 35 41 46 50
2011 30.4 18 24 30 36 41 46 50
2010 30.4 19 24 30 36 41 46 50
2009 30.2 18 24 30 35 41 46 50
2008 30.2 18 24 30 35 41 46 50
2007 30.0 18 24 30 35 41 46 50
Year Mean 20 25 30 35 40 45 50
2012 30.5 19 24 30 35 41 46 50
2011 30.4 18 24 30 36 41 46 50
2010 30.4 19 24 30 36 41 46 50
2009 30.2 18 24 30 35 41 46 50
2008 30.2 18 24 30 35 41 46 50
2007 30.0 18 24 30 35 41 46 50
Year Mean 20 25 30 35 40 45 50
2012 30.5 19 24 30 35 41 46 50
2011 30.4 18 24 30 36 41 46 50
2010 30.4 19 24 30 36 41 46 50
2009 30.2 18 24 30 35 41 46 50
2008 30.2 18 24 30 35 41 46 50
2007 30.0 18 24 30 35 41 46 50
Year Mean 20 25 30 35 40 45 50
2012 30.5 19 24 30 35 41 46 50
2011 30.4 18 24 30 36 41 46 50
2010 30.4 19 24 30 36 41 46 50
2009 30.2 18 24 30 35 41 46 50
2008 30.2 18 24 30 35 41 46 50
2007 30.0 18 24 30 35 41 46 50
Accounting gives you f inancial l i teracy ski l ls
Which shares should I buy out of these two companies?
THE VCE ACCOUNTING COURSE
Total Sales Net Profit
$3,119
million
$141
million
$1,868
million
$101
million
Net Profit Margin
4.5%
5.4%
Company A
Company B
Financial Analysis and Performance:
• Unit 2
• Unit 4
Accounting gives you f inancial l i teracy ski l ls
How do I read these documents?
THE VCE ACCOUNTING COURSE
Financial Reporting:
• Unit 1 and 2
• Unit 3 and 4
Accounting gives you f inancial l i teracy ski l ls
I need to prepare a budget for the future… how do I do that?
THE VCE ACCOUNTING COURSE
Budgeting:
• Unit 1
• Unit 4
Accounting gives you f inancial l i teracy ski l ls
I want to run my own business one day but I have no idea how to complete a BAS Statement?
THE VCE ACCOUNTING COURSE
GST and BAS Statements:
• Unit 1 and 2
• Unit 3
Accounting gives you f inancial l i teracy ski l ls
How do I do my income tax? What can I claim? Did you know…
You can claim $1 for every t ime you wash your work uniform during the year provided it has the company logo on it (e.g. McDonalds)?
THE VCE ACCOUNTING COURSE
Taxation:
• Unit 1
Accounting gives you f inancial l i teracy ski l ls
How do I do my income tax? What can I claim? Did you know…
You can get your money back for anything you wear that is essential for the job (e.g. protect ive equipment)?
THE VCE ACCOUNTING COURSE
Taxation:
• Unit 1
Accounting gives you f inancial l i teracy ski l ls
How do I do my income tax? What can I claim? Did you know…
You don’t have to pay tax on lotto winnings, gifts or gambling wins?
THE VCE ACCOUNTING COURSE
Taxation:
• Unit 1
Accounting gives you f inancial l i teracy ski l ls
How do I do my income tax? What can I claim? Did you know…
You can claim money when your boss asks you to travel from work to another location?
THE VCE ACCOUNTING COURSE
Taxation:
• Unit 1
What have these companies al l got in common?
These are al l case studies covered in VCE Accounting…
HEARD OF THESE COMPANIES?
Bankruptcy
The case of Lehman Brothers…
An investment bank and financial services firm
Over 150 years old
HEARD OF THESE COMPANIES?
247,816 260,336
312,061
357,168
410,063
503,545
691,063
2001 2002 2003 2004 2005 2006 2007
Lehman Brothers - Total Assets (in $ Millions)
HEARD OF THESE COMPANIES?
6,7
36
6,1
55
8,6
47
11
,57
6 1
4,6
30
17
,58
3
19
,25
7
1,2
55
97
5
1,6
99
2,3
69
3,2
60
3,9
41
4,1
92
2001 2002 2003 2004 2005 2006 2007
Lehman Brothers - Revenue and Profit (in $ Millions)
Revenue
Profit
HEARD OF THESE COMPANIES?
But for years, Lehman’s had an exceedingly high level of debt…
24
7,8
16
26
0,3
36
31
2,0
61
35
7,1
68
41
0,0
63
50
3,5
45
69
1,0
63
23
9,3
57
25
1,3
94
29
8,8
87
34
2,2
48
39
3,2
69
48
4,3
54
66
8,5
73
2001 2002 2003 2004 2005 2006 2007
Lehman Brothers - Total Assets and Liabilities (in $ Millions)
TotalAssets
TotalLiabilities
HEARD OF THESE COMPANIES?
And in September 2008…
Lehman’s went bankrupt in one weekend in September 2008
The biggest bankruptcy in US history
Total Liabilities
$768 Billion
Total Assets
$639 Billion but…
HEARD OF THESE COMPANIES?
Assets Liabilities<
Lehman Brother Case Study
• Unit 3
Who was Enron?
Created in 1985
Sold and traded in electricity and gas
Tremendous growth during the mid to late 1990s
HEARD OF THESE COMPANIES?
By 2001, Enron was America’s 7 th largest company with assets valued
at $65.5 bil l ion
HEARD OF THESE COMPANIES?
6.8
21.7
31.334.0
42.045.0
65.5
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
Apple McDonalds Johnson &
Johnson
Hewlett
Packard
Boeing Disney Enron
2000 Assets in $US Billion
HEARD OF THESE COMPANIES?
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
1994 1995 1996 1997 1998 1999 2000
Enron Assets 1994 - 2000 ($US million)
HEARD OF THESE COMPANIES?
0
200
400
600
800
1,000
1,200
1994 1995 1996 1997 1998 1999 2000
Enron Profit 1994 - 2000 ($US million)
And then this happened…
HEARD OF THESE COMPANIES?
$-
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
$90.00Enron Share Price ($US)
By November 28 th 2001, Enron was bankrupt
Largest bankruptcy in US history: $US 63 bil l ion
HEARD OF THESE COMPANIES?
Video - Trailer
How could this happen?
January 2001 – Enron is America’s 7 th largest company
2000 Revenue = $100.7 billion
2000 Profit = $979 million
2000 Assets = $65.5 billion
November 2001 – Enron is bankrupt
HEARD OF THESE COMPANIES?
How could this
happen?
There were always
key signs that
something was wrong
with the business
All anyone had to do
was analyse and
interpret the
financial reports a
little closer
HEARD OF THESE COMPANIES?
Enron Case Study
• Unit 4
HEARD OF THESE COMPANIES?
ABC Learning:
Founded by Eddie Groves
Grew from one childcare centre in 1988
At its peak, ABC Learning was opening
up four new centres per week
HEARD OF THESE COMPANIES?
43 94 187
327
660
1,257
2,238
-
500
1,000
1,500
2,000
2,500
2001 2002 2003 2004 2005 2006 2007
ABC Learning – No. of centres at year end
HEARD OF THESE COMPANIES?
3.3 6.8 12.1
21.4
52.3
81.0
143.1
-
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
2001 2002 2003 2004 2005 2006 2007
ABC Learning – Net Profit ($m)
HEARD OF THESE COMPANIES?
ABC Learning:
Despite being highly profitable in 2007 , by February 2008 the share pr ice
dropped rapidly from a high of over $8.00 to a low of $1 .15…
HEARD OF THESE COMPANIES?
ABC Learning:
In early November 2008 the firm went into administrat ion
Overnight, the firm’s shares became worthless
Creditors and
banks were
owed over
$1 billion
HEARD OF THESE COMPANIES?
ABC Learning:
How could ABC Learning go b roke in 2008 when i ts p rofi ts and cash were growing?
52.3
81.0
143.1
45.7
88.0
123.1
-
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
2005 2006 2007
Net Profit
($m)
Net
Increase/
Decrease in
Cash ($m)
HEARD OF THESE COMPANIES?
ABC Learning:
43.2 89.2 206.9
-454.0
-851.3
-1579.4
456.5
850.1
1495.6
-2,000.0
-1,500.0
-1,000.0
-500.0
-
500.0
1,000.0
1,500.0
2,000.0
2005 2006 2007
ABC Learning – Net Cash Flows ($m)
Operating
Activities ($m)
Investing
Activities ($m)
Financing
Activities ($m)
COURSE BREAKDOWN
• Course structure…
Unit 1 – Establishing and operating a service
business
• Area of Study 1 – Going into business
• Area of Study 2 – Recording financial data
and preparing financial reports
Unit 2 – Accounting for a Trading Business
• Area of Study 1 – Recording financial data
and preparing financial reports
• Area of Study 2 – ICT in accounting
• Area of Study 3 – Evaluation of business
performance
Unit 3 – Recording and Reporting for a
Trading Business
• Area of Study 1 – Recording financial data
• Area of Study 2 – Balance-day
adjustments and interpreting financial
information
Unit 4 – Control and Analysis of Business
Performance
• Area of Study 1 – Extension of recording
and reporting
• Area of Study 2 – Financial planning and
decision-making
• Unit 3/4 structure…
Unit 3 SACs, 25% Unit 4 SACs, 25% Exam, 50%
0% 50% 100%
COURSE BREAKDOWN
70% 30%
• Unit 3/4 structure…
COURSE BREAKDOWN
70% 30%
Unit 3 SACs, 25% Unit 4 SACs, 25% Exam, 50%
0% 50% 100%
• Any quest ions please contact me…
Michael Allison
Off i ce R113 (bet ween R13 and R14)
allisonm@trinity.vic.edu.au
COURSE BREAKDOWN
Create space on intranet for
this presentation and show
screen dump here