School of Accounting

ACCT 1511: Accounting and Financial Management 1B

Topic 1



Financial Reporting Principles & Accounting Standards




Student Handout


Contents:
1. Learning Objectives
2. Questions for this topic
3. Lecture Slides



Lecturer:
Dr Per Tronnes





1

Introduction and Learning Objectives

At the end of this topic, you should:

LO1. Introduction to differences between rules-based accounting and principles-
based accounting.
LO2. Demonstrate principles, conventions, and assumptions that are consolidated in
the Framework for the Preparation of Financial Statements.



Required Readings

Required Readings

Framework for the Preparation and Presentation of Financial Statements
(Available on Moodle)
Amendments to the Framework (Available on Moodle)
Trotman, Gibbins & Carson (TGC) 5
th
edition Chapter 6.1-6.3, 6.5-6.7 (inclusive)

Additional References
http://www.aasb.com.au























2

HOMEWORK QUESTION
SEMESTER 2, 2011 MID-SESSION EXAM, QUESTION 1 (ADAPTED)

The following information is taken from the accounts of Whisky-in-the-Jar Ltd.
for the year-ended 31 December, 2010:
$
Accounts receivable, 1 January, 2010 95,000
Accounts receivable, 31 December, 2010 65,000
Allowance for doubtful debts, 1 January, 2010 15,000
Allowance for doubtful debts, 31 December, 2010 7,000
Inventory, 1 January, 2010 90,000
Inventory, 31 December, 2010 110,000
Accounts Payable, 1 January, 2010 80,000
Accounts Payable, 31 December, 2010 60,000
Credit sales


400,000
Cash sales 110,000
Cost of goods sold 420,000
Bad debts expense 12,000

Required:
(a) Calculate total cash received from customers for the year ending 31 December
2010. Use the traditional method for T-accounts (i.e. not the short-cut method) where
applicable. Show all workings. [3 marks]
























DO NOT WRITE OUTSIDE THE BOX

3

(b) Write the journal entries to recognise bad debts expense and any bad debt write-
off. [2 marks]











DO NOT WRITE OUTSIDE THE BOX

(c) With reference to the accounting concept of the matching principle, explain the
rationale for creating a contra account (i.e. allowance for doubtful debts) for accounts
receivable. [1 marks]






DO NOT WRITE OUTSIDE THE BOX

(d) With reference to the accounting concept of conservatism, explain the rationale
for creating a contra account (i.e. allowance for doubtful debts) for accounts
receivable. [1 marks]






DO NOT WRITE OUTSIDE THE BOX