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Accounting - ICAEW > 1. Introduction To Accounting > Flashcards

1. Introduction To Accounting Flashcards

1
Q

define accounting

A

Accounting is a way of recording, analysing and summarising transactions of an entity

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2
Q

What are the three main types of profit making business entity

A

Sole trader
Partnership
Limited liability company (LLC)

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3
Q

What is a sole trader

A

Owns their own business by themselves

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4
Q

What’s a partnership

A

Two or more people going into business together sharing risks & rewards

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5
Q

What is a LLC

A

Companies owned by its shareholders and manager by directors

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6
Q

Who needs an entity’s financial information

A

Managers
Shareholders
HMRC
Employees
Trade contacts
Government

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7
Q

Why do users need an entity’s financial information

A

In order to make decisions relating to providing resources to an entity

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8
Q

What would users need to assess within a company?

A

Resources
Efficiency & effectiveness
Sustainability

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9
Q

What are the 7 influences upon financial accounting?

A

National law

Accounting standards

Sustainability standards

Ethical standards

Accounting concepts & individual judgement

GAAP

Other international issues

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10
Q

What are the 4 international influences on financial accounting?

A

EU

UN

IESBA (international ethics standards board for accountants)

OECD (the organisation for economic cooperation and development)

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11
Q

What are the four elements of accounting standards?

A

IFRS standards (international financial reporting standards)

IAS (international accounting standards)

IFRIC Interpretations (international financial reporting interpretations committee)

SIC Interpretations (standard interpretations committee)

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12
Q

What is the statement of financial position

A

AKA Balance sheet

Shows a list of assets controlled by the entity and liabilities owed by the entity on a particular date

Total assets = total liabilities + equity

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13
Q

What is equity?

A

Amount invested by owner

AKA capital

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14
Q

What is the purpose of the statement of financial position

A

To show the entity’s financial position at a point in time

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15
Q

What is the statement of profit or loss?

A

A record of income generated and expenditure incurred over a given period

AKA income statement

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16
Q

What is the purpose of the statement of profit or loss

A

Shows the entity’s financial performance over a period of time

17
Q

What are the two fundamental qualitative characteristics defined by the conceptual frameworks?

A

Relevance (predictive or confirmatory value)

Faithful representation (complete, neutral, free from error)

18
Q

What 4 things enhance relevant and faithfully represented information?

A

Timelessness

Understandability

Verifiability

Comparability

19
Q

What is ‘going concern’

A

An underlying assumption to the financial statements

20
Q

What are the 6 IFRS standards?

A

Going concern

Accruals

Business entity (business is separate from its assets)

Consistency

Materiality

Historical cost

21
Q

What are the 5 IESBA Code of ethics for professional accountants?

A

Integrity

Objectivity

Professional competency and due date

Confidentiality

Professional behaviour

22
Q

Define capital expenditure

A

Results in the acquisition of non-current assets, or an increase in their earning capacity

(E.g. property purchase, vehicle purchases, plant & machinery purchases)

23
Q

Define Revenue expenditure

A

Incurred for the purpose of trade or to maintain the existing earning capacity of the non-current assets

(E.g. property repairs, depreciation of assets, travel costs)

24
Q

What does IFRS stand for

A

International financial reporting standards

25
Q

What does IASB stand for

A

International accounting standards board

26
Q

What does GAAP stand for?

A

Generally accepted accounting principles

27
Q

What does IESBA stand for

A

International ethics standards board for accountants

28
Q

What does OECD stand for?

A

The organisation for economic cooperation and development

29
Q

What does ICAEW stand for

A

Institute of chartered accountants in England and wales

30
Q

What does ISSB stand for

A

International sustainability standards board

31
Q

What does IAS stand for

A

International accounting standards

32
Q

What does IFRIC interpretations stand for

A

International financial reporting interpretations committee

33
Q

What does SIC stand for

A

Standards interpretations committee

34
Q

Define prudence

A

The principle of recognising expenses immediately and not recognising income until it’s reasonably certain

Shrewdness, care, caution

Accounting - ICAEW (7 decks)

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