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Customers trading name, cross and contact details Type of education (economic / reverberateer(a)) Other details ensure descent exists and invoices crapper be posted to the right-hand(a) address . Years client has been in this subscriber line Other establishes track evidence and history 3. Total assets and estimates of judges of assets in the art scotch establishes size of asset base of logical argument 4. Total liabilities ( enumerate commitments) scotch establishes how much the caper currently owes others to respect the extent of claims against assets 5.Profits of the course for the to the highest degree recent and previous periods Economic used to prise whether the melodic line generates sufficient returnss to perceive the digestments that go out exhaust to be do of their account 6. Credit references Other enables Ashley to be up with other businesses the customer already has accounts with, to assess whether the customer has paid their account s in metre and in full 7.Details Of either collateral or security that can be campaignd should the customer default on their payments Economic and other Ashley entrust motivation to ensure that the business impart be able to rec over any non-paying amounts by claiming from a third company or having a claim over the assets of the business rogue 2 of 19 Exercise 1. 7 Factors in fashioning a government end connect the relevant business journal or newspaper article and identify the acts of your courtship involving an important government decision. Identify the narrate government decision voluminous.Discuss the impact of the decision and its relevance to the press and community. Factors to be interpreted into account in arriving at a government decision include 2. 3. 4. 5. 6. 8. 9. 10. 11. 12. 13. 14. The constitution of the government decision. The government policy dictating the decision. The political impact of the decision. Identifying every(prenominal) parties af fected by the government decision. Identifying all the s earnholders (I. E. Parties to which the decision entrust confuse a positive or negative impact). Identifying any particular manse or special occupy groups involved with the Issue.Identifying the operational funding or resources available for the government decision. How is the government initiative to be funded? Identifying the speak to of the initiative. Was the decision made in a consultative manner? Was thither much political debate or commentary? Possible gains or losings anticipated to be experienced by the community. Possible alternatives which could have been employed by the government. Was the departant decision considered to be the most efficient use of community resources? scalawag 3 of 19 Exercise 1. Economic decisions made by management compulsory Provide examples of economic decisions that the following spate would take up to counter equilibrate with the use of manner of report reading A manager i n a sales department Of a shoe store A manufacturing countersink manager The manager of a aver cricket team The manager of an puppet shelter which relies on donations for funding theatre director of a sales department Decisions virtually number of cater contendd, and when the busy times be (for additional staffing) type and touchstone of stock to purchase (based on diachronic sales figures), woo of inventory researched (for deciding on selling prices and specials / discounts / sales during the coming season) average length of time for which stock is held stock on hand at any point in time (for procedures of re-ordering) latest fashion trends randomness well-nigh the demographics of the customer base to enable allow for stock to be held and sequester prices to be set. Factory manager Decisions a bust appropriate factory staff levels appropriate plant and machinery capacity to run the factory be of raw materials, labor and overhead, such as electricity, in orde r to sop up decisions bout goods to be manufactured, productionion mix be of occupational health and safety to brace decisions about the most cost in force(p) way to achieve compliance.Manager of a farming cricket team Decisions about the choice and be of players and coaching staff appropriate playing and training Venues and their location to the middle of the city sponsorship enticements and entitlements purchase of appropriate fair equipment for training and match sidereal days. Manager of an physical shelter Decisions about the cost of sight systems to receive donations and the most appropriate method of obtaining nations the cost of maintaining animals in the shelter such as food and veterinary costs overheads such as electricity, insurance and expound the costs of full-time employment in the shelter, and the management of volunteers. Page 4 of 19 Exercise 1. 10 The wee business owner What types of economic decisions would a mortal wishing to start their own sma ll business be required to make?How could an accountant assist in qualification these decisions? The following atomic number 18 examples of the types of economic ( pecuniary) and non- pecuniary decisions a small business owner would have to make A clear exposition of the product or service that is to be provided (non- fiscal), and what the business forget charge for these products or services ( monetary) this pay take determine the intercommunicate or probable income How the business testament be funded entrust the owners put all the money in or will there be other owners or lenders (non- monetary and financial)? How the business will market its product or service (non-financial), and how much it will cost to do this? Financial) Where the business will be located (non-financial), and what the rental cost will be (financial) How much staff will be required, what skills do they regard to perform their jobs properly (non-financial), and how much will they be paid (thi s will have to be benchmark against other businesses in the same industry or using staff with similar skills and experience) What equipment or other assets argon required to start the business (non- financial), and how will these be acquired and at what cost (financial)? Will the business be registered for SST? What explanation and training systems be required for the business (non-financial and financial)?This should be adequate to provide information o the owners, and accurately capture legal proceeding that take place, (including any SST components thereof) The above argon just some examples of decisions that will need to be made by a person wishing to start a business. There ar many others, and it should be storied that many decisions have both(prenominal) a financial and non-financial component it is wherefore often difficult to make non-financial decisions without considering the financial implications and impacts of those decisions. Accountants can help small bus iness owners With the selection of an appropriate bill system system, with regulatory attainment such as registering for SST, registering a business name, and applying for appraise numbers and other evaluate obligations (such as PAYS) as required this will depend on the size of the business and what staff will hired.They can withal assist by providing the financial information and assisting in the drafting of a laboured business plan that covers all the likely financial impacts of the decisions to be made. They can provide book-keeping and page 5 of 19 accounting services to maintain accurate financial records for the business and assist in preparing income tax returns, SST returns and other regulatory porting requirements. Accountants can as well as help a small business owner prep be a budget for the business, forecast cash flow requirements, and make decisions about which assets to purchase and how best to finance them. CHAPTER 2 FINANCIAL STATEMENTS FOR DECISION making DISCUSSION QUESTIONS SOLUTIONS 2. Define the harm, assets, liabilities, and equity. Are these terms related in anyway? If so, how?Assets are delineate in the Framework as resources controlled by the entity as a result of past events and from which future economic benefits are expect to flow to the entity. Liabilities are defined in the Framework as relegate obligations of an entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. Liabilities require future payments from assets, generally in the form of cash, or the performance of services to part them. fairness is the owners claim to (or the residual interest in) the assets of the entity later on deducting all its liabilities. The basic accounting equation (Assets = Liabilities + Equity) indicates the relationship between assets, liabilities and equity.From the equation, the total assets of the entity equal the total claims against those sets by creditors and owners. Creditors claims take precedence over owners claims, and owners are seen as the ultimate risk-takers in the entity. Thus, equity is a residual claim on the assets of the entity after liabilities are fully paid, and the basic accounting model which expresses this idea clearly is Assets Liabilities = Equity 3. A local restaurant is noned for its fine food, as evidenced by the large number of customers. A customer was heard to remark that the secret of the restaurants advantage Was its fine chef. Would you regard the chef as an asset of the business? If so, would you include the chef on the balance sheet of the business and at what value?Suggested topics of discussion Asset definition Assets are resources controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity. Does the chef provide future economic benefits to the entity? Yes. Is the chef controlled by the entity? In Page 6 o f 19 many cases, it is unadorned that he/she could not be controlled by the entity (e. G. He/she can resign when he/she likes, can take sick days). He/she cannot be acquired or sold by the business, I. . They do not have rights to take in him/her. How would you value the chef as an asset? commonly you have some idea of the keep of the asset, however, the restaurant would not know how tenacious the chef would be working for them (this argument relates certify to controlling the asset). 6.Discuss the implication of the following conjectures in the preparation of an entity financial statements (a) entity assumption (b) accumulation al-Qaida assumption (c) exhalation concern assumption (d) period assumption (a) Entity supposition If the proceeding Of an entity are to be recorded, classified ad and summarized onto financial statements, the accountant must be able to identify clearly the boundaries of the entity be accounted for. Under the accounting entity assumption, the e ntity is considered a separate entity distinguishable from its owner and from all other entities. It is fancied that each entity controls its assets and incurs its liabilities. The records of assets, liabilities and business activities of the entity are kept completely separate from those of the owner of the entity as well as from those of other entities. The accounting entity assumption is important since it leads to the ancestry of the accounting equation. ) The Accrual Basis assurance Under the accrual basis of accounting, the effects of transactions and events are recognized in accounting records when they occur, and not when the cash is have or paid. Hence, financial statements report not only on cash transactions but also on obligations to pay cash in the future and on resources that represent receivables of cash in future. It is argued in the Framework that accounting on an accrual basis provides significantly better information about the transactions and other events fo r the purpose of decision making by users of financial statements than does the cash basis. C) The Going Concern self-assertion According to the Framework, financial statements are active on the assumption that the existing entity is expected to continue operating into the future.It is assumed that the assets of the entity will not be sold off and that the entity will continue its activities hence, excreting set (prices in a forced sale) of the entity assets are not generally reported in financial statements, as this assumes that an entity is to be tease up. When management plans the sale or liquidation of the entity, the going concern assumption is therefore set aside and the financial statements are prepared on he basis of estimated sales or liquidation values. The significance of the going concern assumption is in the valuation Page 7 of 19 placed on the assets of an entity in the mentis financial statements. The statements should identify clearly the basis upon which asset values are stubborn going concern? Or liquidation? (d) The finale Assumption For financial reportage purposes, it is assumed that the total life of an entity can be divided into equal time intervals.Hence, the financial performance of the entity can be ascertain for a given time period, and the financial session of the entity can be determined on the last day of that reportage period. As a result of this assumption, profit determination involves a process of recognizing the income for a period and deducting the expenses incurred for that same period. Together, the period assumption and accrual basis assumption lead to the requirement for making balance day adjustments on the last day of the reporting period. These adjustments will be considered in a later chapter.