Atrill_4e_SM_Ch01.pdf

Solutions Manual to accompany ACCOUNTING: an introduction Compiled by D. Harvey and M. Jenner 1 Introduction to Accounting and Finance Solutions 2 Chapter 1 - Introduction to Accounting and Finance Suggested Solutions Discussion Questions 1.1 Basically comprised of: (a) Transactions – buy; sell; borrow; lend (b) Transformations – convert raw materials via labour and overhead to finished goods (c) Other economic events – natural disasters (flood; fire); economic events (recession; inflation); regulation (exchange rate restrictions; import restrictions; banned substances). This relates to usefully repacking the financial data: (a) Classify (b) Summarise (c) Record Financial reports (a) Statement of Financial Performance (b) Statement of Cash Flows (c) Statement of Financial Position 1.2 The AASB Framework suggests the report users need to be both competent and diligent. Therefore, it is not assumed that financial reports will be readily read and understood by the lay reader, but rather that the readers will be proficient in accounting and finance (aptitude and application). 1.3 The organisations’ mission represents its primary goal or purpose, where it is headed in the longer term. This may be expressed in terms of the range of products or services, the quality and reputation of those products or services, the market share and so on. Long-term plans represent the strategies to be adopted in the quest to achieve its mission. These will include such things as staff appointments and training, resources acquisition and expenditure, product development, production arrangements and marketing plans. 1.4 Planning is concerned with providing direction for future activity. Control can be defined as compelling events to conform to the plan. 1.5 The accounting system can facilitate control through: (a) Financial reports (a