Accounting involves recording financial transactions and preparing three important reports: the income statement, balance sheet, and cash flow statement. These reports are used by various stakeholders like management, investors, and the government to analyze the business and make informed decisions. The document then discusses why accounting is an important subject to study, providing examples of careers that utilize accounting skills and explaining how accounting is essential for commerce degrees. It also introduces some high-profile company collapses like Enron and Lehman Brothers that are analyzed as case studies in the VCE Accounting course.

1. WHAT IS ACCOUNTING?

2. WHAT IS ACCOUNTING?
 Account ing is the recording of f inancial t ransactions:
GST
Investments Wages paid
Rent Loans Cash sales
Electricity Phone bill Credit sales
Purchases of stock Purchase of cars
Loan repayments

3. WHAT IS ACCOUNTING?
 Accountants then turn these t ransactions into three impor tant repor ts:
Income
Statement
Balance Sheet
Cash Flow
Statement

4.  These repor ts are prepared for several users of account ing
informat ion…
WHAT IS ACCOUNTING?
Management
Employees
Owners
Investors
Government
Suppliers Tax Office Customers

5. WHAT IS ACCOUNTING?
 These repor ts are then used to analyse the business so users can make
informed decisions…
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

6. WHY STUDY ACCOUNTING?

7. WHY STUDY ACCOUNTING?
Accounting is not just for accountants
 Myth – only people want ing to study Account ing at universi ty should study VCE
Account ing
 Account ing is broader than that – whichever profession you do, a background in
Account ing and Finance is essent ial in many careers such as:
 Small business owner
 Banking
 Lawyer
 Stockbroker/trader
 Engineer
 Marketing and advertising
 Retail
 Sports management

8. WHY STUDY ACCOUNTING?
Accounting is not just for accountants
 Myth – q u a lified o r “c h a r tered” a c countants work in a range of
in d u stries…
38%
Where do Chartered Accountants work?
35%
3%
12%
In Accounting Practices In Industry (Commerce) In the Public Sector Overseas

9. WHY STUDY ACCOUNTING?
Account ing is essent ial for studying Commerce at universi ty
20000
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
Natural and
physical
sciences
Information
technology
Engineering Architecture
and building
Agriculture and
environment
Health Education Management
and commerce
Society and
culture
Creative arts Hospitality and
food
2012 First Preferences by Field of Interest - All Students

10. WHY STUDY ACCOUNTING?
Account ing is essent ial for studying Commerce at universi ty
8000
7000
6000
5000
4000
3000
2000
1000
0
Natural and
physical
sciences
Information
technology
Engineering Architecture
and building
Agriculture
and
environment
Health Education Management
and
commerce
Society and
culture
Creative arts Hospitality
and food
2012 First Preferences by Field of Interest - Male

11. WHY STUDY ACCOUNTING?
Account ing is essent ial for studying Commerce at universi ty
 Every Management and Commerce Degree has Account ing a s a co re s u b j e c t …
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

12. WHY STUDY ACCOUNTING?
Account ing is essent ial for studying Commerce at universi ty
 Every Management and Commerce Degree has Account ing a s a co re s u b j e c t …
Bachelor of Commerce
AFC1000 Principles of Accounting
Source: http://www.buseco.monash.edu.au/future/why.html

13. WHY STUDY ACCOUNTING?
 Want more info? Join the ICAA One Network fo r h i g h s c h o o l st u d e nt s …
http://www.charteredaccountants.com.au/Students/OneNetwork

14. THE VCE ACCOUNTING
COURSE

15. THE VCE ACCOUNTING COURSE
Do I need to be good at Maths to study Account ing?
 Account ing requi res only basic ari thmet ic – there are no mathemat ical formulas
or funct ions …
You only need a basic calculator – graphics calculators
are BANNED in SACs and Exams because you don’t
need them

16. THE VCE ACCOUNTING COURSE
A c count ing i s n’t a “s co r ing ” s u bj ect
 Myth – every subject is a scoring subject !
 All VCE subjects give you a study score from 1-50 based on:
 How wel l you perform
 How wel l you perform compared to everyone else in your class
 How wel l you perform compared to everyone else in the state
 Your score from 1-50 wi l l then be scaled so it can be compared to other
s u b j e cts…
 http://www.vtac.edu.au/pdf/scaling_report.pdf

17. THE VCE ACCOUNTING COURSE
A c count ing i s n’t a “s co r ing ” s u bj ect
 So how is Account ing scaled?
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

18. THE VCE ACCOUNTING COURSE
Account ing gives you f inancial l i teracy ski l ls
 Which shares should I buy out of these two companies?
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

19. THE VCE ACCOUNTING COURSE
Account ing gives you f inancial l i teracy ski l ls
 How do I read these documents?
Financial Reporting:
• Unit 1 and 2
• Unit 3 and 4

20. THE VCE ACCOUNTING COURSE
Account ing gives you f inancial l i teracy ski l ls
 I need to prepare a budget fo r t h e f u t u re … h ow d o I d o t h a t ?
Budgeting:
• Unit 1
• Unit 4

21. THE VCE ACCOUNTING COURSE
Account ing 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?
GST and BAS Statements:
• Unit 1 and 2
• Unit 3

22. THE VCE ACCOUNTING COURSE
Account ing gives you f inancial l i teracy ski l ls
 How do I do my income tax? What can I claim? D i d yo u k n ow…
 You can claim $1 for every t ime you wash your work uni form during the year
provided i t has the company logo on i t (e.g. McDonalds)?
Taxation:
• Unit 1

23. THE VCE ACCOUNTING COURSE
Account ing gives you f inancial l i teracy ski l ls
 How do I do my income tax? What can I claim? D i d yo u k n ow…
 You can get your money back for anything you wear that is essent ial for the job
(e.g. protect ive equipment )?
Taxation:
• Unit 1

24. THE VCE ACCOUNTING COURSE
Account ing gives you f inancial l i teracy ski l ls
 How do I do my income tax? What can I claim? D i d yo u k n ow…
 You d o n ’ t h ave t o p ay tax o n lotto winnings, gi f ts or gambl ing wins?
Taxation:
• Unit 1

25. THE VCE ACCOUNTING COURSE
Account ing gives you f inancial l i teracy ski l ls
 How do I do my income tax? What can I claim? D i d yo u k n ow…
 You can claim money when your boss asks you to travel from work to another
locat ion?
Taxation:
• Unit 1

26. HEARD OF THESE
COMPANIES?

27. HEARD OF THESE COMPANIES?
 What have these companies al l got in common?
Bankruptcy
 These are al l case studies c ov e r e d i n V C E A c c o u n t i n g …

28. HEARD OF THESE COMPANIES?
 The case of Lehman Brothers…
 An investment bank and financial ser vices fi rm
 Over 150 years old

29. HEARD OF THESE COMPANIES?
Lehman Brothers - Total Assets (in $ Millions)
247,816 260,336
312,061
357,168
410,063
503,545
691,063
2001 2002 2003 2004 2005 2006 2007

30. 6,736
Lehman Brothers - Revenue and Profit (in $ Millions)
6,155
8,647
11,576
14,630
17,583
19,257
1,255
975
1,699
2,369
3,260
3,941
4,192
2001 2002 2003 2004 2005 2006 2007
Revenue
Profit
HEARD OF THESE COMPANIES?

31.  Bu t fo r ye a r s , L e hman’ s h a d a n exceedingly high level of debt …
247,816
Lehman Brothers - Total Assets and Liabilities (in $ Millions)
260,336
312,061
357,168
410,063
503,545
691,063
239,357
251,394
298,887
342,248
393,269
484,354
668,573
2001 2002 2003 2004 2005 2006 2007
Total
Assets
Total
Liabilities
HEARD OF THESE COMPANIES?

32. HEARD OF THESE COMPANIES?
 A n d i n S e p temb e r 2 0 0 8…
 Lehman’s went bankrupt in one weekend in September 2008
 The biggest bankruptcy in US history
Lehman Brother Case Study
• Unit 3
Total Liabilities
$768 Billion
Total Assets
$639 Billion but…
Assets < Liabilities

33. HEARD OF THESE COMPANIES?
 Who was Enron?
 Created in 1985
 Sold and traded in electricity and gas
 Tremendous growth during the mid to late 1990s

34. HEARD OF THESE COMPANIES?
 B y 2 0 01 , E n r o n wa s Ame r i c a ’ s 7th largest company wi th assets valued
at $65.5 bi l l ion
6.8
21.7
2000 Assets in $US Billion
31.3
34.0
42.0
45.0
65.5
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
Apple McDonalds Johnson &
Johnson
Hewlett
Packard
Boeing Disney Enron

35. HEARD OF THESE COMPANIES?
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
Enron Assets 1994 - 2000 ($US million)
1994 1995 1996 1997 1998 1999 2000

36. HEARD OF THESE COMPANIES?
1,200
1,000
800
600
400
200
0
Enron Profit 1994 - 2000 ($US million)
1994 1995 1996 1997 1998 1999 2000

37. HEARD OF THESE COMPANIES?
 And then this happened…
$90.00
$80.00
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$-
Enron Share Price ($US)

38. HEARD OF THESE COMPANIES?
 By November 28th 2001, Enron was bankrupt
 Largest bankruptcy in US histor y: $US 63 bi l l ion
Video - Trailer

39. HEARD OF THESE COMPANIES?
 How could this happen?
 January 2001 – Enron is America’s 7th largest company
 2000 Revenue = $100.7 billion
 2000 Profit = $979 million
 2000 Assets = $65.5 billion
 November 2001 – Enron is bankrupt

40. 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 repor ts a
little closer
Enron Case Study
• Unit 4

41. HEARD OF THESE COMPANIES?
ABC Learning:
 Founded by Eddie Groves
 Grew from one chi ldcare centre in 1988
 At i ts peak, ABC Learning was opening
up four new centres per week

42. HEARD OF THESE COMPANIES?
ABC Learning – No. of centres at year end
43 94
187
327
660
1,257
2,238
2,500
2,000
1,500
1,000
500
-
2001 2002 2003 2004 2005 2006 2007

43. HEARD OF THESE COMPANIES?
3.3 6.8
ABC Learning – Net Profit ($m)
12.1
21.4
52.3
81.0
143.1
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
-
2001 2002 2003 2004 2005 2006 2007

44. HEARD OF THESE COMPANIES?
ABC Learning:
 Despi te being highly prof i table in 2007, by Februar y 2008 the share pr ice
dropped rapidly f rom a high of over $8.00 to a low of $1.15…

45. HEARD OF THESE COMPANIES?
ABC Learning:
 In ear ly November 2008 the f i rm went into administ rat ion
 O v e r n i g h t , t h e f i rm’ s s h a r e s b e c ame wor thless
Creditors and
banks were
owed over
$1 billion

46. HEARD OF THESE COMPANIES?
ABC Learning:
 How could ABC Learning go broke in 2008 when i ts prof i ts and cash were growing?
52.3
81.0
143.1
45.7
88.0
123.1
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
-
2005 2006 2007
Net Profit
($m)
Net
Increase/
Decrease in
Cash ($m)

47. HEARD OF THESE COMPANIES?
ABC Learning:
ABC Learning – Net Cash Flows ($m)
43.2 89.2
206.9
-454.0
-851.3
-1579.4
456.5
850.1
1495.6
2,000.0
1,500.0
1,000.0
500.0
-
-500.0
-1,000.0
-1,500.0
-2,000.0
2005 2006 2007
Operating
Activities ($m)
Investing
Activities ($m)
Financing
Activities ($m)

48. COURSE BREAKDOWN

49. COURSE BREAKDOWN
• C o u rs e st ru ct u re…
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

50. COURSE BREAKDOWN
• Unit 3/4 structure…
Unit 3 SACs,
25%
Unit 4 SACs,
25%
Exam, 50%
0% 50% 100%

51. COURSE BREAKDOWN
• Unit 3/4 structure…
Unit 3 SACs, 25% Unit 4 SACs, 25% Exam, 50%
0% 50% 100%
70% 30%

52. COURSE BREAKDOWN
• Unit 3/4 structure…
Unit 3 SACs, 25% Unit 4 SACs, 25% Exam, 50%
0% 50% 100%
70% 30%

53. COURSE BREAKDOWN
• A ny q u e st i o n s p l e a s e co nta c t me …
Michael Allison
Of f i ce R113 (between R13 and R14)
allisonm@trinity.vic.edu.au
Create space on intranet for
this presentation and show
screen dump here