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ACCA COURSE NOTESJune 2014 ExaminationsACCAFIAF1 FABAccountantin BusinessPlease spread the word about OpenTuition, so that all ACCAstudents can benefit.ONLY with your support can the site exist and continue toprovide free study materials!OpenTuition Course Notes can be downloaded FREE from http://opentuition.comCopyright belongs to OpenTuition.com - please do not support piracy by downloading from other websites.Visit opentuition.com for the latest updates, watch free video lecturesand get free tutor support on the forums
To fully benefit from these notesplease watch the free ACCA Lectures on theOpenTuition websiteFree ACCA resources by Paper(free course notes / lectures / revision lectures / tests /flashcards and more - on line on http://opentuition.com/acca/)F1 Accountant in Business / FAB Foundations in AccountancyF2 Management Accounting / FMA Foundations in AccountancyF3 Financial Accounting / FFA Foundations in AccountancyF4 Corporate & Business Law (English & Global)F5 Performance ManagementF6 Taxation (UK)F7 Financial ReportingF8 Audit and AssuranceF9 Financial ManagementP1 Governance, Risk & EthicsP2 Corporate ReportingP3 Business AnalysisP4 Advanced Financial ManagementP5 Advanced Performance ManagementP7 Advanced Audit & Assuranceand CAT/FIA Course Notes are also available on the siteThe best thingsin life are free
June 2014 ExaminationsACCA F1 / FABACCA Paper F1 Accountant in Business /(FAB) Foundations of Accounting in BusinessContents1.The nature and structure of organisations32.Information and information technology173.An organisation’s environment254.Organisational culture315.An organisation’s stakeholders376.Corporate governance and ethical considerations417.Accountancy and the accountancy profession518.Internal control and the implications of fraud599.Management6310.Leadership7111.The nature of groups8112.Theories of motivation8713.How an individual can develop9714.The nature of communication10115.The recruitment and selection process10516.How people learn11117.Performance and appraisal interviews11518.Some legal obligations11919.Economics13120.Answers to Tests13921. Paper F1 Test Centre (online)22. Paper F1 Mock Exam (online)Free ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t StudyBuddy t Largest ACCA forums1
June 2014 ExaminationsACCA F1 / FABAccess all Free ACCAresources on line:ACCA Paper F1 Free LecturesFree ACCA F1 slidesACCA F1 - Key to success articleACCA F1 flashcardsACCA F1 online TestsACCA F1 online Mock ExamPaper F1 Forum SupportAsk The Tutor - ACCA F1 - FIA FAB Forums- post your questions to get help from other members and tutors- download or share your own notes- join or start a F1 study groupFree ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t StudyBuddy t Largest ACCA forums2
June 2014 ExaminationsACCA F1 / FABChapter 1The nature and structure oforganisations1. OrganisationsAn organisation can be defined as:“A social arrangement which pursues collective goals, which controls itsown performance, and which is a boundary separating it from itsenvironment.”๏This is, perhaps, a deceptively simple definition. Probably the most important word is‘social’. Organisations consist of people and we are all social animals. We have to geton with our colleagues; ideally we would like our boss, or at least respect our boss. Wehave to get on with customers; we have our own ambitions; we have our ownmotivations.๏Early management theory tended to neglect the social side of organisations andmanagement and had a rather cold, militaristic approach. Modern theories havechanged this considerably.๏Another important aspect of the definition is that of ‘collective goal’s. There has to bean assumption that people within an organisation are ultimately aiming at the sameend results, if they are not, then chaos is likely to rule. One of the functions ofmanagement is to arrange the business and the people in it so that everyone ispulling in the same direction, and the collective goals are ultimately established.Free ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t StudyBuddy t Largest ACCA forums3
June 2014 ExaminationsACCA F1 / FAB2. SystemThe definition of an organisation included the terms ‘boundary’ and ‘environment’. Theseterms come from systems theory.The environment is what the organisation sits or lives in. For example a business lives in itsnational or country environment and perhaps in the international environment. Theboundary separates the environment from the organisational system. Input normally goesinto the organisation and output comes out of the organisation; some sort of processingtakes place within the ationAll organisations or systems can be divided into subsystems. For example, an organisationwill have a sales and marketing department, an accounting department, a manufacturingdepartment and so on. Subsystems can then be further split down into even smallersubsystems. For example, the accounting department will consist of the receivables ledger,the payables ledger, the cash book, the nominal ledger and so on.Some systems are known as ‘closed systems’: they take no input from the environment andgive no output to it. These are very theoretical and have no long life. It will be difficult to seean organisation continuing to compete successfully if it paid no heed to technologicaladvances, or what its rivals were doing, or what its customers wanted.Open organisations on the other hand do receive input from the environment and produceoutput which is sent to the environment. These are the only ones of any practicalimportance.Free ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t StudyBuddy t Largest ACCA forums4
June 2014 ExaminationsACCA F1 / FAB3. Types of organisationYou need to be aware of the characteristics of several types of organisation.๏Commercial organisations are profit-seeking. They can be sole traders, partnerships,limited liability partnerships and limited companies. The main advantage of limitedliability partnerships and limited companies is that if the organisation hits hard timesand has to go to liquidation, the owners of the organisation are protected. Creditorsand banks can pursue only the assets which are in the company. Sole traders andpartners, on the other hand, have unlimited liability for all the business’s debts.๏The second type of organisation is a not-for-profit organisation. An example of a notfor-profit organisation could be a charity, such as a charitable hospital. Instead ofproducing a profit and loss account, they tend to produce income and expenditureaccounts. Ultimately their income has to exceed their expenditure or they will run outof money.๏Public sector organisations are owned by the state either at a national level or at alocal level. Examples could be the defence department, many health services andeducational systems. In some economies other industries or businesses are alsoowned by the state. For example, many national airlines are state-owned.๏Non-governmental organisations tend to be not-for-profit organisations but with aninternational brief. Many United Nations organisations will fall into this category.๏Co-operatives are owned by the people who work in the organisation. Some farmers,for example, set up co-operatives to market their products more effectively than theycould on their own. Usually they seek some sort of profit, but the ownership is sharedwidely amongst the people who are working in the organisation.Free ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t StudyBuddy t Largest ACCA forums5
June 2014 ExaminationsACCA F1 / FAB4. Organisation structuresOrganisation structures can be described al, ormatrix.Entrepreneurial structures are very simple; basically it’s a boss and the workers. They aresmall, often family-owned, and are not large enough to be divided into separatedepartments.Once a business begins growing it will normally develop into a functional structure. Thismeans that there are separate departments according to function – a sales and marketingdepartment, an accounting department, a payables department, receivables department,research and development department and so on. This can be a very efficient structure asexpertise is concentrated in each department and there could be great economies of scale.If the business continues to grow it may find it worthwhile to divisionalise. This meanssplitting the company up, perhaps on the basis of product or geography. For example youmight have a North American division and a European division. You might have a divisionwhich makes and sells paint and you might have a division which makes and sellspharmaceuticals. The rationale for splitting a company up into divisions is to achievespecialisation. If you are selling paint and pharmaceuticals it is likely that the manufacturingis very different, the markets and competition will be very different, as will the regulation ofthe business. There is probably not much point in keeping it all together as one, and thebusiness is better off being divided up into different divisions which can specialise.A matrix organisation is more complex. A good way to think of a matrix organisation is tothink of a project team. A project team for project A, for example, will have a project leaderor manager for project A. The members of the team report to that manager. But themembers of the team also have functional responsibilities. For example, there will be aproject accountant and someone who looks after the quality control aspects of the projectperhaps someone who deals with the personnel involved in the project.These people, as well as reporting to the project manager, also have to report to theirfunctional heads. Therefore each person can have two bosses. Classical managementtheory suggested that this was unfair. But in fact depicting the organisation as a matrixdoesn’t cause there to be extra pressure on the people who work for the project. It isperhaps simply a more honest representation of the pressures that the project members areunder.Free ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t StudyBuddy t Largest ACCA forums6
June 2014 ExaminationsACCA F1 / FAB5. Mintzberg’s structureMintzberg divides organisations into five parts.The strategic apex is equivalent to top management or the Board of Directors.The middle line is the middle managers, sometimes called the scalar chain. This is thehierarchy as it passes down through the organisation.The operating core are the people near the bottom who for the most part do the day-today work.Support staff would include the accounting staff and IT staff.The technostructure. This is perhaps the hardest to understand and is the part of theorganisation responsible for devising and enforcing standards and procedures. It is thetechnostructure that would write the quality control manual, the employee handbook, thehealth and safety manual, the finance manual.As drawn initially:Strategic apexTecstru hnoctureMiddle linetporSup affstOperating corethe diagrams show what Mintzberg would have called the machine bureaucracy which isbasically a large mass manufacturing organisation.The size and importance of the five parts of the organisation change as we change theorganisation. In an entrepreneurial organisation there will be a strategic apex and theoperating core. You may remember that entrepreneurial organisation was a basically a bossand the workers with little middle line and the organisation was so small that there was notmuch support staff and no need for technostructure.Free ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t StudyBuddy t Largest ACCA forums7
June 2014 ExaminationsACCA F1 / FABOne of the most interesting adaptations of the basic structure is what Mintzberg calledprofessional organisation.Strategic apextporSup affsto-n ech urTe uctrstMiddle lineOperating coreHe was thinking of something like a large firm of accountants and lawyers. In theseorganisations, the middle line is much shorter, representing that there is really quite a closerelationship between the partners at the top of the organisation and the people doing theaudit or legal work at the bottom. These people need to communicate and cooperate veryclosely. There are of course middle managers but the middle line is relatively short.Support staff is still quite large. But what is surprising is that the technostructure is verysmall. This is perhaps surprising because auditors and lawyers have large files ofstandardised procedures, for example, audit programs to fill in, and you might think thataudits and legal work were highly regulated and standardised. But if you think about it,every client an auditor goes to, or every client coming to see a lawyer, will have slightlydifferent problems. We are not in the mass production manufacturing industry anymore.We are dealing with tailoring solutions to clients. So the technostructure, such as it is,represented by standard forms is somewhat superficial. Each client and each service has tobe individually devised and delivered, so the power of the technostructure is relativelysmall.Free ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t StudyBuddy t Largest ACCA forums8
June 2014 ExaminationsACCA F1 / FAB6. LevelsOrganisations are often regarded as having three levels.StrategicTacticalOperationalThe top level is the strategic level. This is basically the very top managers and the board ofdirectors. They should be looking after the strategy of the organisation, and whenever youhear the word “strategy,” you should be thinking of something like a five-year plan for thewhole organisation. What will the organisation be doing in five years? In what countries willit be operating? Will it still be manufacturing or will it have switched to predominantlyservice provision?Right at the bottom of the organisation is the operational level. This is the level where theday-to-day activities are carried out. The time horizons are very short, often things are dealtwithin a day, and planning is often not much longer than a week or two. These people arepredominantly dealing with or recording transactions which are either happening or havealready occurred: processing invoices, sending out orders, dealing with customer queries,these are all at the operational level.In between there is the tactical level, think of the tactical level as being the level of amanager of a department. Typically this person will have a time horizon of about a yearbecause this person will often be concerned with meeting the year’s budget. Of coursethey have to deal from time-to-time with day-to-day activities, but their particular prioritywill be to make sure that they organise their department to meet this year’s budgets andexpectations.Free ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t StudyBuddy t Largest ACCA forums9
June 2014 ExaminationsACCA F1 / FAB7. Tall/narrow, wide/flatOrganisations are often described as being tall-narrow or wide-flat.In the tall narrow organisation each manager or supervisor looks after relatively few people.Here the diagram has been drawn so that each supervisor directly looks after two people.That will be described as having a span of control of two.In the wide flat organisation the span of control is much wider. In this diagram we’ve showna span of control of seven, meaning that each supervisor or manager has seven peoplereporting directly to him or her.You will see in a tall narrow structure there are many layers and because each managerlooks after only a few people, there can be very close supervision. Indeed it might not besupervision; it might be closer to re-performance or interference.The tall narrow structure is sometimes described as very bureaucratic, very formal, strict jobdescriptions, great importance placed on exactly what one’s grade is, and the sort of payand benefits and conditions that would go with that grade. The wide flat organisation ismuch more egalitarian; there is much less distance between top and bottom in theorganisation and communication between top and bottom will be much faster. Because itis more egalitarian, there tends to be less emphasis on strict job descriptions and a greateremphasis on how can we get the job done, a greater emphasis on all being a part of ateam, rather than being a part of a hierarchy.In the 1990s there tended to be deliberate moves from tall narrow to wide flat by manyorganisations. They called this ‘delayering’ or ‘flattening’ the shape of the organisation. Therewere two motives for doing this.Free ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t StudyBuddy t Largest ACCA forums10
June 2014 ExaminationsACCA F1 / FABFirst of all in the ‘90s there began to be very great cost pressure from Far Easternmanufacturers where manufacturing was relatively cheap. In response to this, Westernbusinesses had to be somewhat ruthless. They had to ask, “Is any value being added bythese people in the middle, or are they just managers, managing supervisors, managingassistant supervisors?” It was decided that often these people were not adding value andthat they could safely be removed from the organisation.Secondly in the 1990s, things began to move quickly. Technology changed very rapidly;there were huge changes in world markets, and operations based in China or India orMalaysia became very skilled and very adept at designing and launching new competingproducts. Western organisations to change and respond quickly and the tall narroworganisation was very slow to change. Many layers had to agree to the change, and manypeople were protecting their own particular grade. Therefore to get faster and more flexibleresponses to change, the wide flat organisation was often adopted.8. Centralisation/decentralisationThe shape of the organisation is independent of where power lies within the organisation.You could have two organisations of exactly the same shape and structure, yet in one aparticular grade of employee could be given an expenditure authority of only 100 Euros butin another, the same grade of person could be given an expenditure authority of 10,000Euros. Decentralisation or centralisation describes how far down the organisation power ispassed. Generally it is agreed that some decentralisation is good but too muchdecentralisation can be counterproductive.Claimed advantages are as follows.๏ If nothing is decentralised, all decisions have to remain at the top of the organisation,with the managing director or the board of directors for example. Those people wouldbe overworked, they will be mixing up trivial decisions with important decisions, andreally their skills should be reserved for making important decisions.๏ Secondly, if requests have to be passed up through an organisation for a decision to bemade and then the answers are passed down, decisions are likely to be much slower. Sodecentralisation adds speed.๏ Third, it might be better to decentralise power to areas of expertise. For example thebest person to make a decision about where to place advertising is somebody in thesales and marketing department, not the managing director who may have come froman accounting or engineering background. Similarly, perhaps the best person to dealwith competitive pressures in South America is the head of the South Americanorganisation, not somebody based in London or Paris. The person in South America haslocal or geographic expertise.๏ Fourth, motivation: good employees like to make decisions and like running their owndepartments or divisions. If you don’t decentralise and allow them to have power, thegood people will leave.Free ACCA course notes t Free ACCA lectures t Free tests t Free tutor support t Study
ACCA Paper F1 Free Lectures Free ACCA F1 slides ACCA F1 - Key to success article ACCA F1 flashcards ACCA F1 online Tests ACCA F1 online Mock Exam Paper F1 Forum Support Ask The Tutor - ACCA F1 - FIA FAB Forums - post your questions to get help from other members and tutors - download or share your ow
ACCA F9 –Financial Management PROFESSIONAL (5 papers in total) Essentials ACCA P1 –Governance, Risk and Ethics ACCA P2 –Corporate Reporting ACCA P3 –Business Analysis Options (two to be completed) ACCA P4 –Advanced Financial Management ACCA P5 –Advanced Performance Management ACCA P6 –Advan
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Only on OpenTuition you can find: Free ACCA notes Free ACCA lectures Free ACCA tests Free ACCA tutor support The largest ACCA community Accountant in Business (AB) ORGANISATIONS AND THEIR ENVIRONMENT 1. The nature and structure of organisations 3 2. An organisation
Civil Engineering 30 Computer Systems Engineering 32 Engineering Science 34 Electrical and Electronic Engineering 36 Mechanical Engineering 38 Mechatronics Engineering 40 Software Engineering 42 Structural Engineering 44 Course descriptions 46 APPENDIX 84 Find out more 88. 2 Dates to remember 06 Jan Summer School begins 12 Jan Last day to add, change or delete Summer School Courses 01 Feb .
