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Accounting Fundamentals BUACC1507

Subject Name – Accounting Fundamentals
Subject Code –BUACC1507
University Name – Federation University, Australia

Accounting Fundamentals BUACC1507

Accounting Fundamentals BUACC1507 is an essential subject that helps the students with financial accounting knowledge who are interested in majoring in accounting.

Both practical and theoretical knowledge will help students to master credit-debit notation in the context of sole traders, partnerships, and companies. The theoretical exercise is used to gain a rigorous understanding of accrual accounting. In addition to their primary discipline, students can also complement the studies other disciplines to develop a soundly bases knowledge of accounting

How does it complement the studies with other disciplines?

Accounting is an independent subject that builds a relationship with other disciplines such as economics, statistics, and law.

Accounting and Economics
The relationship between Accounting and Economics is very close. Accounting provides the necessary and relevant information to both the purchasers and sellers for decision making, on the other hand economics is related to studying human behaviour with limited goods and services.

Accounting and Statistics
They are deeply related. The main function of statistics is to collect, classify and analyse the data of various events alternatively accounting is based on multiple information from financial statements.

Account and Law
These subjects are interrelated to each other. The accountant and accounts officer should have a clear knowledge of the law, tax law, company law, and other relevant laws otherwise it will be impossible to settle conflicts and cases.

What do you learn in the fundamentals of accounting?

Gain some practical knowledge in numeracy, including rearranging simple equations.
You can build a good understanding of the fundamental concepts
Able to record transactions in the ledger account.
Familiar with three financial statements, the income statement, balance sheet, and statement of cash flows.
You will go over the income statement and how it fits with the accounting equation and the balance sheet.
You will get to know the different types of accounting such as financial accounting, managerial accounting, and income taxes.
Able to understand the major difference between accounting and bookkeeping

Basic Principles of Accounting

These principles are the rules and regulations that a business applies to maintain its business standards. Let’s understand some of the basic principles of accounting:
Going Concern Principle
This accounting principle is based on the assumption that the business will continue in operation. It is also assumed that the business will not end up in the near foreseeable future.
Matching Principle
This principle is the basis of the accrual basis of accounting in the business. The revenues and expenses should be recognized in the accounting period.
Full Disclosure Principle
Any sort of information that helps a shareholder, user, and creator of the financial statements must be disclosed. This principle specifies that if a business finds that certain information is important for any of them, such information must be fully disclosed in the footnotes of the financial statements.
Conservatism Principle
This principle encourages the accountant to be conservative when reporting its revenue and be realistic when reporting its expenses and other liabilities.

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Required Question

Question 1

The unadjusted trial balance for the year ended 30 June 2020 for Churchill Trading is
presented below. The business employs a periodic inventory system and classifies other
expenses as selling and distribution expenses, administrative expenses, and finance costs.

Question 2
(a) Assume that the business has received notification on 15 April 2020 that a debtor owing $1,850 has declared bankruptcy. Prepare the general journal entry to write-off this account as a bad debt under each of the following methods:
(i) The direct write-off method
(ii) The allowance method

(b) Using the data in the tables above, present the general journal adjusting entries to provide for
bad debts expense for the year ended 30 June 2020 under each of the two allowance methods:
(i) Percentage of net credit sales approach assuming bad debts are provided for as 2% of net credit sales.
(ii) Ageing of accounts receivable method using the data above.

(c) Return to the scenario outlined in part (a), assume on 22 August 2020 the debtor
unexpectedly remits full payment for the previously written-off account. Prepare the general journal entry to re-establish this debt and record payment under each of the following methods:
(i) The direct write-off method
(ii) The allowance method

(d) Compare and contrast the direct write-off method of accounting for receivables with the allowance method. Ensure you discuss the reasons why the allowance method is generally regarded as being superior.

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