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Accounting 100. Contact Details. Lecturer NIT China: email: Room :. Accounting 100. Accounting 100 will run as a 6 hour seminar comprising lecture and tutorial components Responsibility for learning is yours Best results are achieved by consistent work throughout the semester. - PowerPoint PPT Presentation
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Accounting 100
Contact Details
Lecturer NIT China:
email:
Room :
Accounting 100
Accounting 100 will run as a 6 hour seminar comprising lecture and tutorial components
Responsibility for learning is yours
Best results are achieved by consistent work throughout the semester
Accounting 100
Tutorials begin this week
Attendance at the tutorial is compulsory
Attempt the tutorial work each work before the tutorial session
Check your answers and ask questions at the tutorial
Text Books
Essential
Hoggett and Edwards (2003) “Accounting in Australia 5th Edition”, John Wiley & Sons
Essential
Hutchings G (2004) “Accounting 100 in Practice” , John Wiley & Sons
Assessment Structure
Mid-Semester Test 25% TBA
Assignment One 25% TBA
Final Exam 50% TBA
You must achieve 40% or more in the exam to pass the unit
What is accounting
Accounting is commonly known as the language of business
It is the recording, reporting and analysis of financial information and associated activities.
Completion of a Curtin degree with a major in accounting qualifies for associate membership of CPA Australia (Certified Practising Accountant) or ICA (Institute of Chartered Accountants)
Accounting
Various types of work performed by accountants; Financial Management External Auditing Internal Auditing Taxation Liquidation/Insolvency Small Business Consultancy Law Enforcement
What Accountants do
Bookkeepers maintain the financial records not accountantsThe accountant has a supervisory roleThe accountant is typically involved in strategic planning and analysisAn accounting background is highly regarded when competing for executive positions
Career prospects in accounting
Demand is extremely high for qualified accountants, particularly in Business consultancy and taxation.
International opportunities. Many aspects of accounting are common throughout the world. Eg Australian CPA can convert to USA CPA
Curtin double majors in accounting
Accounting & Law
Accounting & Taxation
Accounting & Information Systems
Accounting and Small Business
Etc.
Accounting & FinanceAccounting & BankingAccounting & Accounting TechnologiesAccounting & Financial Planning
Starting a Business
Lecture Outline
Options in Starting a Small Business
Business Structures
Common Reasons for Business Failure
Getting Started
The first decision you need to make is how you are going to enter the small business world. You can choose from one of three options:1. Start your own business
2. Buy an existing business
3. Obtain a franchise
Starting your own Business
Benefits
1. Independence.
2. Lower Cost.
3. New start – no negative sentiment towards the business.
Limitations1. No relationship with
Customers Suppliers
2. Business may be slow for a while.
3. Problems New staff New technology and
equipment.
Buying a Business
Benefits
1. Established reputation.
2. Immediate stream of income.
3. Easier to borrow additional funds.
Limitations
1. May be stuck with poor decisions made by prior owners(s).
Obtain a Franchise
Benefits
1. Strong Reputation.
2. Much lower risk of failure.
3. Training and support may be provided by franchise owner.
Limitations
1. Lack of independence Must conform to
franchise policies.
2. Fees must be paid to franchise owner.
3. Damage to reputation of franchise name.
Ownership Structure
Choose a form of business structure. The most common are;Sole Trader: Partnership: Company
Proprietary Limited (Pty. Ltd.)Public (Ltd.)
Partnership
DefinedThe relationship between persons carrying on a business in common with a view to making a profit.
Characteristics:Two or more partnersNot a separate legal entity But treated as a separate accounting entity.
Written or verbal Partnership Agreement
Partnership Agreement
A partnership agreement should contain:
1. Partnership Name and names of partners.
2. Information on how profits & losses are to be shared.
3. Conduct of the partnership affairs.
4. Authority of each partner in contractual situations.
5. Procedures to be followed in the event of dispute.
Legal Status
Partnership (Not a Separate Legal Entity)
Company (A Separate Legal Entity)
Partners/Business
Owners Company
Partnership
Major Benefits
1. Easy to form
2. Minimal cost to establish
3. Limited rules and regulations
Major Limitations
1. Unlimited Liability
Proprietary Company
Minimum – 1 Person
Maximum 50 shareholders
Separate legal entity
Usually a family business that has been incorporated to obtain the benefits of limited liability.
Starting your own Business Companies
Major Benefits
1. Limited liability
2. Ability to raise more money.
Major Limitations
1. Highly regulated.
Introduction
Rate of new business failure is extremely high.
50% of new businesses will fail in the first year, whilst 75% will fail in the first 5 years.
Failure as a % of start ups.
Year 1 32.3%
Year 2 16.5%
Year 3 10.3%
Year 4 6.8%
Year 5 4.5%
Reasons for Business Failure Economic Environment
In most cases, an economic downturn merely exposes entities which are over leveraged (ie have too much debt) or poorly managed.
More businesses collapse during economic booms than during economic downturns.
Reasons for Business Failure
The overwhelming reason for business collapse is poor management. Lack of Internal Controls (Topic 1) No Strategic Plan (Topic 1) Inadequate Pricing Structures (Topic 2) Poor Management Decisions (Topics 2 & 3) Lack of Budgetary Control (Topic 4) Overleveraged (Topic 4)
Reasons for Business FailureLack of Internal Controls
Internal Control
Comprises all the methods and measures established to safeguard assets, ensure reliability of records, promote operational efficiency and encourage adherence to prescribed managerial policies.
Internal Controls
Examples of internal controls:1. Separation of duties.2. Clearly established lines of responsibility.3. Internal auditing.4. Mechanical and electronic devises.
• Refer to pages 405-407 of “Accounting in Australia – 5th Edition”.
Reasons for Business FailureLack of Internal Controls
Failure to implement and/or regulate internal control policies can be fatal.Barings Bank
Barings Bank
Leeson (novice trader) posted to Singapore in July 1992Acted beyond his authorityBy 31/12/94 had accumulated losses of £208M through unauthorized tradesRepresented that he was making a profitPerceived as a “Star Performer” By 27/2/95 accumulated losses of £830MDiscovered 23/2/95 – Barings Collapses
Barings Bank
The BOE report into the collapse stated:
(a) the losses were incurred by reason of unauthorized and concealed trading by Leeson(b) the true position was not noticed earlier by reason of a serious failure of internal controls and managerial confusion within Barings; (c) the true position had not been detected prior to the collapse by the external auditors, supervisors or regulators of Barings.
Barings Bank Collapse
“The Bank regarded the controls in Barings as informal but effective. It had confidence in Baring's senior management, many of whom were long-standing Barings' employees.”
Extract from the conclusion of the Bank Of England Report on the Collapse of Barings
Reasons for Business FailureNo Strategic Plan
Strategic Plan Defined
A blueprint for developing a business and provides a basis for measuring progress towards the achievement of goals.
Consists of several basic steps: Mission Statement Objectives SWOT Analysis
Reasons for Business FailureNo Strategic Plan
Strategic Plan Defined
A blueprint for developing a business and provides a basis for measuring progress towards the achievement of goals.
Consists of three basic steps: Mission Statement Objectives SWOT Analysis
Strategic PlanMission Statement
The mission statement should focus on the one, possibly two, feature(s) that distinguishes your business from your competitors.
It is designed to motivate employees so it should be brief so that employees are able to memorise the statement.
Generic Mission Statement
Our mission is to provide the highest quality product at the lowest price and to provide outstanding service within an aesthetically pleasing environment.
Strategic PlanObjectives
Characteristics (SMART)
1. Specific – Clear & Precise
2. Measurable
3. Achievable
4. Relevant
5. Time frame in which objectives should be achieved.
Examples of Objectives
Example of a SMART objective;
We will increase sales of computers by 10% within 12 months.
Example of an objective that is not SMART – Why??
We will increase customer satisfaction by 10%.
Objectives
Not SMART because;
No time frame – when will it happen?
Not specific or measurable – What is customer satisfaction & how would we precisely measure it at low cost?
Strategic PlanSWOT Analysis
Strengths & Weaknesses (Internal Analysis)Reviews the way in which a business operates. Management Style Resources
What internal factors (over which a manager does have control) represent strengths and weaknesses.
Curtin Business School
Strengths1. ‘Curtin’ brand2. EQUIS
accreditation3. Well Resourced.4. Diversity of double
majors.5. Diversity of
students.
Weaknesses
1. Parking.
2. Absence from campus.
Strategic PlanSWOT Analysis
Opportunities & Threats (External Analysis)
Review of external environment Market Regulation Competitors
What external factors (over which your entity has no control) represent a threat or an opportunity.
Strategic PlanSWOT Analysis
Threats
By identifying potential threats you can take action now to minimise or avoid these threats.
Opportunities
By identifying potential opportunities you can take action now to ensure that you profit from the opportunity.
Curtin Business School
Opportunities
1. China Market
Threats
1. Reduction in govt. funding.
2. Online degrees from international universities.
Lecture summary
You should be able to now;
Name and explain 3 business structures
Explain the causes of business failure
Explain the importance of a business plan
List & define the elements of a business plan
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