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Finance for Managers > 1 chp 1 Introduction to Accounting > Flashcards

1 chp 1 Introduction to Accounting Flashcards

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1
Q

What is Accounting?

A

The process of identifying, measuring and communicating economic information.

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2
Q

What are the two distinct Accounting roles?

A

Stewardship and Decision Usefulness

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3
Q

What is meant by ‘Accounting Stewardship’?

A

Providing accountability by reporting on the status of transactions for a period.

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4
Q

What is meant by “Accounting Desision Usefulness”?

A

Assisting a wide range of users to make informed decisions about the allocation of scarce resources.

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5
Q

To be useful, accounting information must have what fundamental qualitities?

A

Accounting information must have “Relevance” and “Faithful representation”.

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6
Q

What is meant by Accounting information relevance?

A

Accounting information RELEVANCE means the accounting information is able to INFLUENCE DECISIONS, else there is no reason in producing it.

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7
Q

What is meant by Accounting Information Relevance Materiality?

A

Account information materiality means that the information has the potential to alter decisions that users make. Materiality must be present as part of relavance.

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8
Q

The process of collecting, measuring and communicatng economic information is known as?

A

“Accounting” is the process of collecting, measuring and communicating information.

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9
Q

What are “Stewardship” and “Decision-Usefulness”?

A

“The two roles of accounting” is Stewardship and Decision-Usefulness.

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10
Q

When Accounting information is releveant, what values can it have?

A 
Confirmatory value (confirms what happened in the past) and
Predictive value (attempts to predict future economic states/events)
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11
Q

What is meant by “Accounting Information Faithful Representation”?

A

Acccounting Information is:

Complete

Neutral

Free from error

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12
Q

Accounting information can be enhanced by what other qualities?

A

Comparibility
Timeliness
Verifiability
Understandability

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13
Q

What are the four stages of the Accounting Information System

A
  1. Information Identification
  2. Information Recording
  3. Information Analysis
  4. Information Reporting
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14
Q

What are the four main financial reports?

A
  1. The Statement of Cashflows
  2. The Income Statement
  3. The Statement of Changes in Owner’s Equity
  4. The Statement of Financial Position
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15
Q

Which main financial report shows the sources and uses of cash for a period?

A

The Statement of Cashflows

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16
Q

What is the purpose of the Statement of Cashflows?

A

The sources and uses of cash for a period…

is shown in the Statement of Cashflows.

17
Q

Which main financial report shows measures and reports how much profit has been generated for a given period?

A

The Income Statement

18
Q

What is the purpose of the “Income Statement”?

A

The Income Statement measures and reports how much profit has been generated for a given period?

19
Q

What is the Income Statement traditionally known as?

A

Profit and Loss Statement

20
Q

The Profit and Loss Statement is also known as…

A

The “Income Statement”

21
Q

Which main financial report shows all changes in the owner’s interest in net assets from transactions during the period?

A

The “Statement of Changes in Owner’s Equity”

22
Q

What is the purpose of the “Statetement of Changes in Owner’s Equity”?

A

Shows all changes in owner’s interest in net assets from transactions during the period.

23
Q

Which main financial report shows the overall net financial position?

A

The Statement of Financial Position

24
Q

What is the purpose of the Statement of Financial Position?

A

Shows the overall net finanical position.

25
Q

What is the Statement of Financial Position otherwise known as?

A

The Balance Sheet.

26
Q

What is the Balance Sheet formally known as?

A

The Statement of Financial Position

Finance for Managers (4 decks)

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