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Topic 1 Tutorial Questions

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814998503wck
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Topic 1 - Introduction to Accounting

Attempt the following questions before attending your tutorial in week 2 where you will
discuss them as a class to develop deeper understanding of the topic.

Question 1

(a) One of the distinguishing features between management accounting and financial
accounting information is the frequency with which the reports are prepared.
Explain this distinction and justify why it is the case.

(b) One of the distinguishing features between management accounting information


and financial accounting information is the level of detail provided in the reports.
Explain this distinction and justify why it is the case.

Question 2

The covid-19 pandemic has affected businesses over the past four years. In light of this
global phenomenon, explain how the reliance on accounting information for decision
making (both financial accounting and management accounting) would have increased in
importance.

Question 3

Two fundamental characteristics that financial information should possess are relevance
and faithful representation. Explain these concepts and discuss whether you believe one is
more important than other, or if they are equally important?

Question 4

Provide at least three examples of assets, liabilities, incomes and expenses for (i) a
supermarket business, and (ii) a medical practice.

Question 5

Imagine you are a financial advisor to a group of entrepreneurs planning to launch a new
artificial intelligence (AI) software business. They have asked you to explain how accounting
information will be crucial for decision-making throughout the life cycle of their business.

Provide specific examples of how accounting information would be used for decision making
in each of the following stages of the AI software business:

1. Startup Phase: The period when the entrepreneurs are developing their AI algorithm,
seeking initial funding, and preparing to enter the market.
2. Growth Phase: The business has launched its product and is experiencing rapid
expansion, including hiring new employees and potentially expanding
internationally.
3. Maturity Phase: The business has established a stable market position and is
considering diversification or acquisition strategies.
4. Decline or Pivot Phase: The original AI product is losing market share, and the
business needs to decide whether to wind down operations or pivot to a new
technology.

For each phase: a) Provide at least two specific examples of accounting information that
would be crucial for decision-making. b) Explain how this information would be used to
make specific business decisions. c) Discuss any unique accounting challenges or
considerations that might arise in each phase for an AI software business.

Question 6

Why is it important that the recognition criteria are met (along with the definitions) in
relation to the elements? Explain with reference to the following scenario:

The National Gallery of Victoria has recently received a donation of an original Monet
painting from a wealthy benefactor. The accountant has asked you how the painting should
be treated in the Gallery’s accounts. Applying the relevant definition and recognition
criteria found in The Conceptual Framework explain whether the painting can be treated as
an asset by the Gallery.

Question 7 (Group presentation question): Please discuss this question within your group
and prepare a group response before attending your tutorial in week 2.

EcoTech Inc. is a manufacturer and retailer of eco-friendly home appliances throughout


Australia. The business sells its products directly to customers through its website and retail
stores. To encourage customer loyalty and showcase confidence in their products, EcoTech
offers the following guarantee with every purchase:

"EcoTech Inc. provides customers with a free extended 5-year warranty on all parts and
labor, in addition to the standard 2-year manufacturer's warranty."

Customers can claim their warranty by registering their product online or by mail, with no
time limit imposed for registration. The extended warranty service can be carried out at any
of EcoTech's service centers across Australia. Based on past experience, approximately 30%
of customers utilize the extended warranty service at some point during the additional 5-
year period.

Required:

By reference to the definition and recognition criteria for a liability in the Conceptual
Framework, should EcoTech Inc. recognize a liability for the extended warranties in its
financial statements? Justify your answer

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