Ex 1.8 (p.

8-10)

All accounting is creative

 Accounting involves creative choices

o Creative accounting is normally seen as bad
o Has standard procedures, but still many choices
 Depreciation method, inventory valuation
o A snapshot of the situation
 But many alternative picture/angles
 Pergamon press case (p.10)
 Accounting helps create/construct society
o Helps organise society by
 Measuring performance
 Enabling scarce resources to be allocated – stock markets
o Has become indispensable

Ex 1.9

Large profits, no wage increase

 Company
o Labour is a cost that must be minimised to maximise profit
 Workers
o Feel it is exploitation of labour
o Are stakeholders to
o Invest their lives in firms and should be properly rewarded

Ex 1.10

 As a customer, I may feel that profits have been generated at our cost (increasing our cost of
living) – especially since we have no choice of another supplier
 As an employee, I would need to feel loyal to my company and justify the increase in prices
on customers, but I would also feel aggrieved if the company was not rewarding me
appropriately for my contributions to the company as an employee.

Ex 1.16

Importance of financial literacy in business

 Ability to understand and use financial information

 Accounting is the ‘language of business’, need to understand this language
o How well is a business performing?
o How risky is its financial position?
 Use financial information to help make decisions
 Could be held liable if you don’t use the financials in your decision making

But financial literacy isn’t everything

 Don’t only use accounting information

 Accounting only shows the financial transactions
 Decision making should be based on wider information
 Market competition, customer attitudes, staff motivation
 Non-financial information is important to lots of users