28 Accounting: Business Reporting for Decision Making
Enhancing qualitative characteristics The qualitative characteristics that enrich both relevant and
faithfully represented financial information.
Equity The residual interest in the assets of the entity after all its liabilities have been deducted.
Expenses Decreases in economic benefits during the accounting period in the form of outflows or
depletions of assets or incurrences of liabilities that result in decreases in equity, other than those
relating to distributions to equity participants.
External users (stakeholders) Parties outside the entity who use information to make decisions about
the entity.
Financial accounting Preparation and presentation of financial information for users to enable them to
make economic decisions regarding the entity.
Financial Reporting Council (FRC) A statutory body responsible for overseeing the accounting and
auditing standard-setting process for both the public and private sectors in Australia.
Financial statements A set of statements directed towards the common information needs of a wide
range of users.
Fundamental qualitative characteristics The necessary qualitative characteristics of financial
information.
General purpose financial statements Financial statements prepared to meet the information needs
common to external users.
Generally accepted accounting principles (GAAP) A set of rules and practices, having substantial
authoritative support, that guide financial reporting who are unable to command the preparation of
statements tailored to their needs.
Historical cost Original amount paid or expected to be received for an item.
Income Increases in economic benefits during the accounting period in the form of inflows or
enhancements of assets, or decreases of liabilities that result in increases in equity, other than those
relating to contributions from equity participants.Internal users Owner(s) or managers of the entity who use the information to assist in various aspects
of business decision making.
International Financial Reporting Standards (IFRS) Accounting standards that are prepared and
issued by the International Accounting Standards Board (IASB).
Liability Present obligation of the entity arising from past events, the settlement of which is expected
to result in an outflow from the entity of resources embodying economic benefits.
Listing Rules Rules governing the procedures and behaviour of all ASX-listed companies.
Management accounting Field of accounting that provides economic information for use by
management in internal planning and decision making.
Market Rules Rules governing the operations and behaviour of participating entities of the ASX and
affiliates.
Profit Income less expenses for a reporting period.
Special purpose financial statements Financial statements prepared to suit a specific purpose.
Statement of cash flows Statement that reports on an entity’s cash inflows and cash outflows for a
specified period.
Statement of profit or loss Statement that reports on the income and expenses of an entity for a
period and the resulting profit or loss.
APPLY YOUR KNOWLEDGE 45 marks
a. Provide an example of the different types of activities that would be performed by a
management and financial accountant for a large public company listed on the ASX. 5 marks
b. What are some of the advantages of business planning? 5 marks
c. Carbon accounting is a very important and huge growth area of accounting. Discuss the
different stakeholders (and their information needs) that would be interested in the carbon
accounting report. 10 marks