1 chp 1 Introduction to Accounting Flashcards
What is Accounting?
The process of identifying, measuring and communicating economic information.
What are the two distinct Accounting roles?
Stewardship and Decision Usefulness
What is meant by ‘Accounting Stewardship’?
Providing accountability by reporting on the status of transactions for a period.
What is meant by “Accounting Desision Usefulness”?
Assisting a wide range of users to make informed decisions about the allocation of scarce resources.
To be useful, accounting information must have what fundamental qualitities?
Accounting information must have “Relevance” and “Faithful representation”.
What is meant by Accounting information relevance?
Accounting information RELEVANCE means the accounting information is able to INFLUENCE DECISIONS, else there is no reason in producing it.
What is meant by Accounting Information Relevance Materiality?
Account information materiality means that the information has the potential to alter decisions that users make. Materiality must be present as part of relavance.
The process of collecting, measuring and communicatng economic information is known as?
“Accounting” is the process of collecting, measuring and communicating information.
What are “Stewardship” and “Decision-Usefulness”?
“The two roles of accounting” is Stewardship and Decision-Usefulness.
When Accounting information is releveant, what values can it have?
Confirmatory value (confirms what happened in the past) and Predictive value (attempts to predict future economic states/events)
What is meant by “Accounting Information Faithful Representation”?
Acccounting Information is:
Complete
Neutral
Free from error
Accounting information can be enhanced by what other qualities?
Comparibility
Timeliness
Verifiability
Understandability
What are the four stages of the Accounting Information System
- Information Identification
- Information Recording
- Information Analysis
- Information Reporting
What are the four main financial reports?
- The Statement of Cashflows
- The Income Statement
- The Statement of Changes in Owner’s Equity
- The Statement of Financial Position
Which main financial report shows the sources and uses of cash for a period?
The Statement of Cashflows
What is the purpose of the Statement of Cashflows?
The sources and uses of cash for a period…
is shown in the Statement of Cashflows.
Which main financial report shows measures and reports how much profit has been generated for a given period?
The Income Statement
What is the purpose of the “Income Statement”?
The Income Statement measures and reports how much profit has been generated for a given period?
What is the Income Statement traditionally known as?
Profit and Loss Statement
The Profit and Loss Statement is also known as…
The “Income Statement”
Which main financial report shows all changes in the owner’s interest in net assets from transactions during the period?
The “Statement of Changes in Owner’s Equity”
What is the purpose of the “Statetement of Changes in Owner’s Equity”?
Shows all changes in owner’s interest in net assets from transactions during the period.
Which main financial report shows the overall net financial position?
The Statement of Financial Position
What is the purpose of the Statement of Financial Position?
Shows the overall net finanical position.
What is the Statement of Financial Position otherwise known as?
The Balance Sheet.
What is the Balance Sheet formally known as?
The Statement of Financial Position
