Accounting Fundamentals in Society
WEEK 2: Hoggett et al (2018) chapter 2: DQ 2.3, 2.5, 2.10;
EX 2.1, 2.2, 2.3, 2.5, 2.6, 2.8 & 2.10.
DISCUSSION QUESTIONS
2.3 Entities are expected to perform in the spheres of profit, people and the planet. List some
key performance indicators applicable to each sphere.
The sphere of profit relates to financial performance and business strategies of the entities. Examples
of key performance indicators under the profit sphere include:
profit margin asset turnover
profit after tax EPS growth
return on assets sales growth.
return on equity
The sphere of people relates to the entities’ employees and involvement in the community. Examples
of key performance indicators under the people sphere include:
employee turnover rate
employee absenteeism
number of work place accidents
percentage of female employees
donations to charities
programs run by the entities for the community.
The sphere of planet relates to the impact of the entities’ operations on the environment. Examples of
key performance indicators the planet sphere includes:
carbon gas emissions
water and electricity usage
recycling program
waste management
2.5 Analyse why the cash received from the sale of a good is income yet the cash contributed
by the owner is not income.
The Conceptual Framework defines income as ‘increases in economic benefits during the
accounting period in the form of inflows or enhancements of assets or decreases of liabilities that
result in increases in equity, other than those relating to contributions from equity participants’
(para. 70(a)). In other words, for an item to be classified as income, there must be increases in
economic benefits which result in increases in equity, and the increases in economic benefits must
not come from owners. Both cash from sale of a good and cash contributed by owner are increases
in economic benefits which increase equity. However, cash contributed by the owner is not income
as it is a form of contributions from equity participants (i.e. the owner), whereas cash from sale of a
, good is income as it does not come from the owner but from customers.
WEEK 2: Hoggett et al (2018) chapter 2: DQ 2.3, 2.5, 2.10;
EX 2.1, 2.2, 2.3, 2.5, 2.6, 2.8 & 2.10.
DISCUSSION QUESTIONS
2.3 Entities are expected to perform in the spheres of profit, people and the planet. List some
key performance indicators applicable to each sphere.
The sphere of profit relates to financial performance and business strategies of the entities. Examples
of key performance indicators under the profit sphere include:
profit margin asset turnover
profit after tax EPS growth
return on assets sales growth.
return on equity
The sphere of people relates to the entities’ employees and involvement in the community. Examples
of key performance indicators under the people sphere include:
employee turnover rate
employee absenteeism
number of work place accidents
percentage of female employees
donations to charities
programs run by the entities for the community.
The sphere of planet relates to the impact of the entities’ operations on the environment. Examples of
key performance indicators the planet sphere includes:
carbon gas emissions
water and electricity usage
recycling program
waste management
2.5 Analyse why the cash received from the sale of a good is income yet the cash contributed
by the owner is not income.
The Conceptual Framework defines income as ‘increases in economic benefits during the
accounting period in the form of inflows or enhancements of assets or decreases of liabilities that
result in increases in equity, other than those relating to contributions from equity participants’
(para. 70(a)). In other words, for an item to be classified as income, there must be increases in
economic benefits which result in increases in equity, and the increases in economic benefits must
not come from owners. Both cash from sale of a good and cash contributed by owner are increases
in economic benefits which increase equity. However, cash contributed by the owner is not income
as it is a form of contributions from equity participants (i.e. the owner), whereas cash from sale of a
, good is income as it does not come from the owner but from customers.
