Overview

Birt’s Accounting: Business Reporting for Decision Making, 9th Edition is the market-leading text for core accounting units in business and commerce degrees, specifically designed for first-year students across all business disciplines, including marketing and HRM. What sets this text apart is its focus on the connection between accounting and business decision-making, presented from a management and stakeholder perspective rather than a technical accounting view. 

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Author:   Jacqueline Birt (University of Western Australia, Australia) ,  Keryn Chalmers (Swinburne University, Australia) ,  Suzanne Maloney (University of Southern Queensland, Australia) ,  Albie Brooks (University of Melbourne, Australia)
Publisher:   John Wiley & Sons Australia Ltd
Imprint:   John Wiley & Sons Australia Ltd
Edition:   9th Revised edition
ISBN:  

9781394333943

ISBN 10:   1394333943
Pages:   640
Publication Date:   10 October 2025
Audience:   College/higher education ,  Tertiary & Higher Education
Format:   Paperback
Publisher's Status:   Active
Availability:   Available To Order  
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Table of Contents

Preface x About the Authors xiii How to use this text xv Chapter 1 Introduction to accounting and business decision making 1 Chapter preview 2 1.1 The accounting process 2 1.2 Accounting information and its role in decision making 3 1.3 Financial accounting and management accounting 5 1.4 Role of accounting information in business planning 7 Benefits of a business plan 8 Operation of the business 8 Evaluation of the business plan 8 1.5 Globalisation of accounting 8 1.6 Accounting information systems 9 1.7 Digital disruption and the impact on accounting 9 1.8 Careers in accounting 10 New opportunities 10 Summary of learning objectives 13 Key terms 14 Apply your knowledge 15 Comprehension questions 15 Problems 15 Decision-making activities 16 References 16 Acknowledgements 17 Appendix 1A: Excel primer 18 Chapter 2 Sustainability and reporting 39 Chapter preview 40 2.1 Sources of company regulation 40 Australian Securities and Investments Commission (ASIC) 40 Australian Securities Exchange (ASX) 41 Australian Competition and Consumer Commission (ACCC) 41 Reserve Bank of Australia (RBA) 41 Australian Prudential Regulation Authority (apra) 41 Australian Taxation Office (ATO) 42 Other government agencies 42 2.2 Australian and international accounting standards 42 Financial Reporting Council (FRC) 43 Development of accounting standards 43 Regulation in New Zealand 43 Role of professional associations 44 2.3 Business sustainability 45 Theories of business sustainability 47 2.4 Sustainability reporting and disclosure 48 2.5 Role of the Conceptual Framework 49 Objective of financial reporting 49 Qualitative characteristics of useful financial information 50 Cost constraint on useful financial reporting 51 Definition and recognition of the elements of financial statements 51 2.6 Corporate governance 52 What is corporate governance? 53 2.7 Corporate governance principles, guidelines and practices 54 2.8 Ethics in business 55 Ethics and regulation 55 Professional codes of ethics 56 Ethical decision-making methods 56 2.9 Limitations of accounting information 57 Information not reported in financial reports 58 Potential costs of providing accounting information 58 Summary of learning objectives 60 Key terms 61 Apply your knowledge 62 Self-evaluation activities 63 Comprehension questions 65 Exercises 67 Problems 69 Decision-making activities 70 References 71 Acknowledgements 71 Chapter 3 Business structures 73 Chapter preview 74 3.1 Forms of business entities 74 3.2 Definition and features of a sole trader 74 3.3 Advantages and disadvantages of a sole trader 75 Advantages 75 Disadvantages 75 3.4 Definition and features of a partnership 76 The partnership agreement 77 3.5 Advantages and disadvantages of a partnership 77 Advantages 77 Disadvantages 77 3.6 Definition and features of a company 78 Forming a company 78 3.7 Types of companies 79 Proprietary companies 79 Public companies 80 3.8 Advantages and disadvantages of a company 81 Advantages 81 Disadvantages 82 3.9 Definition and features of a trust 82 3.10 Advantages and disadvantages of a trust 82 3.11 Comparison of business reports 83 Sole trader reports 83 Partnership reports 84 Company reports — private company 85 Company reports — public company 86 Summary of learning objectives 90 Key terms 91 Apply your knowledge 92 Self-evaluation activities 93 Comprehension questions 95 Exercises 95 Problems 98 Decision-making activities 100 References 101 Acknowledgements 101 Chapter 4 Business transactions 103 Chapter preview 104 4.1 Recognising business transactions 104 Examples of business transactions 104 4.2 Business and personal transactions and business events 105 4.3 The accounting equation 105 The concept of duality 105 4.4 Analysis of business transactions 106 4.5 The accounting worksheet 107 4.6 Capturing accounting information: journals and ledger accounts 111 The journal 111 The ledger 111 Chart of accounts 111 4.7 Rules of debit and credit 112 4.8 The trial balance 114 4.9 Accounting errors 115 Single-entry error 115 Transposition error 115 Incorrect entry 115 Using the accounting equation to solve for missing figures 115 Summary of learning objectives 118 Key terms 119 Apply your knowledge 119 Self-evaluation activities 120 Comprehension questions 125 Exercises 125 Problems 127 Decision-making activities 131 Reference 132 Acknowledgements 132 Chapter 5 Statement of financial position 133 Chapter preview 134 5.1 Financial reporting obligations 134 Rules for the preparation of financial statements 134 General purpose and special purpose financial statements 135 5.2 Nature and purpose of the statement of financial position 136 5.3 Accounting policy choices, estimates and judgements 139 5.4 The definition of assets 140 Asset definition 140 5.5 The definition of liabilities 141 Liability definition 141 5.6 The definition and nature of equity 143 5.7 Assets, liabilities and equity 143 5.8 Format of the statement of financial position 144 5.9 Presentation and disclosure of elements in the statement of financial position 147 Current and non-current assets and liabilities 147 Presentation and disclosure of assets, liabilities and equity 148 5.10 Measurement of various assets and liabilities 157 Measurement principles 157 Measuring receivables 158 Measuring inventory 159 Measuring non-current assets 161 5.11 Potential limitations of the statement of financial position 164 Summary of learning objectives 167 Key terms 169 Apply your knowledge 171 Self-evaluation activities 171 Comprehension questions 174 Exercises 175 Problems 179 Decision-making activities 182 References 184 Acknowledgements 184 Chapter 6 Statement of profit or loss and statement of changes in equity 185 Chapter preview 186 6.1 Purpose and importance of measuring financial performance 186 6.2 Accounting concepts for financial reporting 188 The reporting period 188 Accrual accounting versus cash accounting 188 Depreciation 191 6.3 Effects of accounting policy choices, estimates and judgements on financial statements 191 Quality of earnings 193 6.4 Measuring financial performance 194 6.5 Income 195 Income definition 195 Income classification 195 6.6 Expenses 195 Expense definition 195 Expense classification 196 6.7 Applying recognition criteria to income and expenses 197 Income (revenue) recognition 198 Expense recognition 199 6.8 Presenting the statement of profit or loss 201 Prescribed format for general purpose financial statements 201 Material income and expenses 202 Format for entities not required to comply with accounting standards 204 6.9 Financial performance measures 205 Gross profit 205 Profit pre- and post-tax 206 Profit pre- and post-interest 206 Profit pre- and post-depreciation and amortisation 207 Profit pre- and post-material items 207 Profit from continuing and discontinued operations 207 Management-defined performance measures 207 6.10 The statement of comprehensive income 208 The statement of changes in equity 209 6.11 The link between the financial statements 210 Summary of learning objectives 214 Key terms 215 Apply your knowledge 217 Self-evaluation activities 217 Comprehension questions 219 Exercises 220 Problems 224 Decision-making activities 228 References 230 Acknowledgements 231 Chapter 7 Statement of cash flows 233 Chapter preview 234 7.1 The purpose and usefulness of a statement of cash flows 234 Difference between cash and accrual accounting 235 Relationship of the statement of cash flows to other financial statements 237 7.2 Format of the statement of cash flows 245 Operating activities 246 Investing activities 247 Financing activities 248 Reconciliation of cash from operating activities with operating profit 248 Presentation of the statement of cash flows 249 7.3 Preparing the statement of cash flows 250 7.4 Analysing the statement of cash flows 258 Trend and ratio analysis 260 Complexity of transactions 263 Summary of learning objectives 265 Key terms 265 Apply your knowledge 266 Self-evaluation activities 267 Comprehension questions 271 Exercises 272 Problems 276 Decision-making activities 280 References 281 Acknowledgements 282 Chapter 8 Analysis and interpretation of financial statements 283 Chapter preview 284 8.1 Users and decision making 284 8.2 Nature and purpose of financial analysis 285 8.3 Analytical methods 286 Horizontal analysis 286 Trend analysis 289 Vertical analysis 290 Ratio analysis 292 Benchmarks 293 8.4 Profitability analysis 294 Return on equity 294 Return on assets 295 Profit margin ratios 295 Analysis of profitability: JB Hi-Fi Ltd 296 8.5 Asset efficiency analysis 298 Asset turnover ratio 298 Days inventory and days debtors ratios 298 Analysis of asset efficiency: JB Hi-Fi Ltd 299 8.6 Liquidity analysis 301 Current ratio and quick ratio 301 Cash flow ratio 301 Analysis of liquidity: JB Hi-Fi Ltd 302 8.7 Capital structure analysis 302 Capital structure ratios 303 Interest servicing ratios 304 Debt coverage ratio 304 Analysis of capital structure: JB Hi-Fi Ltd 304 8.8 Market performance analysis 306 Net tangible assets per share 306 Earnings, cash flow and dividend per share 306 Price earnings ratio 307 Analysis of market performance: JB Hi-Fi Ltd 307 8.9 Ratio interrelationships 308 8.10 Limitations of ratio analysis 309 Summary of learning objectives 313 Summary of ratios 314 Key terms 316 Apply your knowledge 317 Self-evaluation activities 318 Comprehension questions 324 Exercises 324 Problems 331 Decision-making activities 336 References 339 Acknowledgements 339 Chapter 9 Budgeting 341 Chapter preview 342 9.1 Strategic planning and budgeting 342 9.2 Budgets 343 The budgeting process 343 9.3 Types of budgets 344 9.4 Master budget 345 Preparation of an operating budget for a service entity 346 Preparation of an operating budget for a manufacturing entity 349 9.5 The cash budget 352 9.6 Budgets: planning and control 354 Improving cash flow 355 Budgeting and planning in times of upheaval 356 9.7 Behavioural aspects of budgeting 357 Styles of budgeting 357 Effect of budget targets on behaviour 357 Summary of learning objectives 360 Key terms 360 Apply your knowledge 361 Self-evaluation activities 361 Comprehension questions 362 Exercises 363 Problems 368 Decision-making activities 374 Reference 377 Acknowledgements 377 Chapter 10 Cost–volume–profit analysis 379 Chapter preview 380 10.1 Cost behaviour 380 Fixed, variable and mixed costs 380 10.2 Break-even analysis 382 Break-even analysis for a single product or service 383 Break-even analysis for multiple products 386 10.3 Contribution margin ratio 388 10.4 CVP assumptions 389 10.5 Using break-even data 389 10.6 Operating leverage 390 10.7 Contribution margin per limiting factor 391 10.8 Relevant information for decision making 392 10.9 Outsourcing decisions 393 10.10 Special order decisions 396 Summary of learning objectives 401 Key terms 402 Apply your knowledge 402 Self-evaluation activities 403 Comprehension questions 404 Exercises 405 Problems 411 Decision-making activities 417 References 418 Acknowledgements 419 Chapter 11 Costing and pricing in an entity 421 Chapter preview 422 11.1 Use of cost information 422 11.2 Direct and indirect costs 423 11.3 Cost allocation 425 Cost drivers 425 11.4 Allocation process 427 Determination of full cost 428 11.5 Inventoriable product cost 434 11.6 Pricing of products and services 439 Summary of learning objectives 443 Key terms 443 Apply your knowledge 444 Self-evaluation activities 445 Comprehension questions 446 Exercises 446 Problems 450 Decision-making activities 454 Reference 456 Acknowledgements 456 Chapter 12 Capital investment 457 Chapter preview 458 12.1 The nature and scope of investment decisions 458 The process of decision making 459 12.2 Accounting rate of return 461 Decision rule for ARR 462 Advantages and disadvantages of ARR 462 12.3 Payback period 462 Decision rule for payback period 463 Advantages and disadvantages of PP 463 12.4 Net present value 464 Time value of money 464 Decision rule for NPV 465 Discount tables 465 Determining the discount rate 465 Advantages and disadvantages of the NPV method 466 12.5 Practical issues in making decisions 467 Sustainability and ESG reporting 468 Ethical investing 468 Collecting data 468 Taxation effects 469 Finance 469 Human resources 469 Goodwill and future opportunities 469 Conclusion — Coconut Plantations’ potential coconut oil manufacturers’ investment decisions 470 Summary of learning objectives 473 Key terms 473 Apply your knowledge 474 Self-evaluation activities 475 Comprehension questions 475 Exercises 476 Problems 477 Decision-making activities 479 References 480 Acknowledgements 480 Appendix 12A 481 Appendix 12B 481 Chapter 13 Financing the business 483 Chapter preview 484 13.1 Managing net working capital 484 Deciding the appropriate level of net working capital 484 13.2 Managing cash 486 The need to have sufficient cash 486 The timing of cash flows 486 The cost of cash 487 The cost of not having enough cash 487 13.3 Managing accounts receivable 488 Benefits and costs of granting credit 488 Determinants of the level of accounts receivable 488 13.4 Managing inventories 490 Types of inventories 491 Benefits and costs of holding inventories 491 Inventory management techniques 492 13.5 Sources of short-term finance 493 Accrued wages and taxes 493 Trade credit 493 Bank overdrafts 494 Commercial bills and promissory notes 494 Factoring or debtor/invoice/trade finance 495 Inventory loans or floor-plan finance 495 13.6 Sources of long-term debt finance 496 Intermediated finance 496 Debt finance from the Australian market 498 13.7 Equity finance 498 Ordinary shares 499 Preference shares 499 Rights and options 500 13.8 Hybrid finance 500 Convertible notes 500 Convertible preference shares 501 13.9 International sources of funding 501 13.10 New funding opportunities for business 501 Green finance 502 Venture capital 502 Angel investors 502 Crowdfunding 502 Security token offerings (STOs) 502 Microcredit (microloans) 502 Summary of learning objectives 505 Key terms 506 Apply your knowledge 507 Self-evaluation activities 508 Comprehension questions 509 Exercises 509 Problems 510 Decision-making activities 512 References 513 Acknowledgements 513 Chapter 14 Performance measurement 515 Chapter preview 516 14.1 Organisational performance measurement 516 Balanced scorecard 517 14.2 Divisional performance measurement 519 Divisional performance evaluation 521 Pricing guide 522 Evaluation of investment level 523 14.3 Investment centre performance evaluation 524 Residual income 526 Economic value added 527 ROI, RI and EVA compared 528 The investment base 529 14.4 Environmental and social performance 530 Eco-efficiency 531 14.5 Individual performance measurement 531 14.6 Non-financial performance evaluation 533 14.7 Data visualisation 535 Summary of learning objectives 539 Key terms 539 Apply your knowledge 540 Self-evaluation activities 541 Comprehension questions 543 Exercises 544 Problems 546 Decision-making activities 550 References 552 Acknowledgements 552 Appendix I 553 Appendix II 573 Index 609

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