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12 Cards in this Set
- Front
- Back
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What is Accounting? |
- Collect and record data - Process data to produce useful info. - Communicate or report info to interested parties.
"The process of identifying, measuring and communucating economic information to permit informed judgements and decisions by users of the information". |
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Why do entities undertake accounting? |
- Record money in and out - Support decision-making - Report activities and performance - Report financial state - Help assess benefit to society - Control the company - Help plan future activities - A basis of taxation
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Who are the users of Accounting information? |
- Management - Control business, Make decisions, Plan future.
- Investors - ROCE, stewardship, share/voting decisions, prospects.
- Employees - Pay increase/security of employment. - Pay increase/security of employment.
- Customers - Security/continuity of supply.
- Suppliers - Will they be paid?
- Lenders - Ability to pay? Security.
- Government - Assess amount of tax due. Measure of how the economy is performing.
- Competitors - Assess threats/benchmark.
- Community - CSR, ability to provide employment.
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Who are the providers of accohnting information? |
- Sole traders
- Partnerships
- Limited companies
- Public sector bodies
- Clubs and societies
- Not for profit organisations |
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What is the differeneces between these forms of business? |
The top 3 are businesses which profit maximise. The bottom 3 are businesses which provide a service/publuc value. |
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What are the types of accounting? |
Financial accounting and Managerial accounting. |
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What is financial accounting? |
- Regulated and in a standardised format. - Historical orientation. - High degree of precision expected. - Not normally produced quickly. - Formal, legal communication to outsiders. - Externally verified by audit/review. - Infrequent.
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What are the limitations of accounting? |
- Only financial - Reflects past - Inexact science - Non-quantifiable items - Unstable currency - Input quality affects output |
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What are the two financial statements? |
Income statement - Records income and expenses of a business over time. Income - expenses = PROFIT OR LOSS Statement of Financial Position - Records assets/liabilities and capital at a point in time. |
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What are the common accoutning terms? |
1 Income - What the business earns from the sale of goods/services. 2 Expense - What it cost the business to earn the income. 3 Asset - Resources available to a business. 4 Liability - Amounts owed by a business. 5 Capital - Amount invested in the business by the owner. |
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What is the difference between a non-current and a current asset or liabiltity? |
Non-current asset - An asset that will bring a firm economic benefit for more than 1 accounting period. Current asset - An asset whose benefit will be used up in the current accounting period. Non-current liability - Amounts due to third parties that are not liable for repayment within the year. Current liability - Debts owed by the organisation that will be paid back within a year. |
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What are the accounting convemtions? |
- Going-Concern : The business will continue operations for the forseeable future - No need/intention to liquidate soon. : The business will continue operations for the forseeable future - No need/intention to liquidate soon. - No need/intention to liquidate soon. exercising caution, dont be over optimistic. - Prudence : Is an attitude/mindset exercising caution, dont be over optimistic.Profits should not be recorded until realised.Record actual/anticipated losses in full Profits should not be recorded until realised. Record actual/anticipated losses in full - Consistency : Consistent treatment in accounts for; • Like items within each accounting period. • Treat items the same over time Any change must be stated and effect quantified. Incosistency: Reduces utility of info. - Business Entity : For accounting purposes business and owner are treated as seperate and distinct |
