Accounting and Taxation

Accounting and Taxation By Peter Baskerville

Taxation • Get a good accountant – suburban Vs mid-tier Vs Big 4. • Income Tax, GST, BAS • PAYG withholding tax for employees – use tables – paid with BAS • Superannuation 9.5% Gross – monthly

Taxation • Fringe Benefits Tax - car • Payroll Tax – big business – State based • Record keeping – audit - 5 years from lodgement – electronic – cheque a/c & credit card.

Finance & Accounting Financial accounting Record Past Financial statements MYOB + Qualified CA, CPA Strict standards External stakeholders - ATO Management accounting Predict Future Budgets MYOB + Excel + Us User determined Internal stakeholders - Us You are here

Why do we need accounting? Why do we need accounting?

History of accounting https://www.youtube.com/watch?v=caNGir_fhUQ

The purpose of accounting

The language of business • Funders, investors and interested parties all speak ‘finance & accounting’ • We need to learn the language of business • Glossary of finance & accounting terms • Also Known As (aka) – 500 year evolution

Basic Accounting Concepts

Accounting conventions • Dual Aspect - financial transactions consist of both a debit side and a credit side of equal amounts. • Matching principle expenses should be recorded in the same period in which the revenue is earned. This approach is supported by the accrual accounting method. • Objectivity ensure that the information recorded in the accounting system is based on fact and not just on personal opinion. • Separate accounting entityassumption the business is an entity that is perceived to have its own existence, separate from its owner. • Time Period assumption allows for the performance evaluation of a business to be broken-up into specific period of time such as a month, a quarter or a year.

Accountant Vs Bookkeeper Bookkeeper Vs Accountant

Accounting System Accounting System

Accounting Process Accounting Process

Source documents Source doccuments • Evidence of a financial transaction taking place • Used for data entry & audit • Source document for every transaction • Types: Cash receipt original/duplicate, payment advice (cheque butt), supplier invoice, bank statement, authorised memo.

5 Account Groups Account groups

Account groups explained Account groups explained

Profit Profit

Chart of accounts Chart of Accounts • Ease of computerised data entry & analysis • Industry based • Enterprise customised • Quick recognition of group

Accounting equation Accounting equation

Double-entry bookkeeping Double-entry bookkeeping • 500 years old • Two sides to every financial transaction • Called ‘Debit’ & ‘Credit’ • At least two accounts affected • Keeps the accounting equation in balance

Who keeps the books? • Accountants? • Too expensive Poor use of time • They don’t want it – no value add • Compliance (Tax, ASIC, funding) • Bookkeeper? • Cheaper but needs your time – Q&A • Their business rules • Can’t spot the mistakes • You • MYOB makes it possible • Forces surveillance of costs/class • Better cashflow & profit budgeting

Financial statements • MIS produces financial statements – health report • Financial statements help • Managers make decisions • Businesses comply with the law • Two you should know about: • Balance Sheet (aka) – Snap shot – financial strength. Assets = Liabilities + Owners Equity • Income Statement (aka) – Past period – financial sustainability. Revenue – Expenses =

Balance Sheet • Every financial transaction changes the balance sheet • Balance sheet represents the accounting equation. A=L+OE • Owners equity is what would be left over after selling the assets and repaying the liabilities – net worth • Current earnings = Net profit • Current & non-current

Income Statement • Expansion of the current earnings on the balance sheet • Looks at the revenue less the expenses that created the current earnings • Provides key information to assist with comparison benchmarking & forecasting (GP%, Variable cost %, Fixed costs per month) • Sustainability – ability to endure

Accounting and Taxation