1. Introduction to Accounting Flashcards
What is the objective of financial reporting?
To provide information about the reporting entity that is useful to existing and potential lenders, investors and creditors.
What are the three reports that comprise the Financial Statements?
The Statement of Financial Position, The Statement of Profit or Loss and The Statement of Cashflows
What are the 7 main user groups of Financial Statements?
- Public
- Owners/Investors (PRIMARY)
- Employees
- Business contacts
- Analysts and Advisers
- Local and central government
- Lenders (PRIMARY)
What are the three main types of business entity?
A sole trader, partnership or company
Who are the users of Financial accounts vs Management accounts?
External users vs internal purposes
What is the information contained in Financial accounts vs Management accounts?
Summary information vs detailed information and analysis
What are the deadline specifications for Financial accounts vs Management accounts?
Normally have hard deadlines vs only internally set deadlines
What is the context of Financial accounts vs Management accounts?
Summaries of historical data (results and position) vs forward looking (budgets, cash flow forecasts etc)
What are the 2 main reasons that investors and lenders need financial information?
- To make decisions about providing resources to the business
- To assess the stewardship of the business
What is the main purpose of accounting regulations?
To ensure the financial statements give a fair presentation of the financial performance and position
What are the 4 main sources of regulation on Financial Statements?
- Companies legislation (Companies Act 2006 in UK for all companies)
- IASB International Financial Reporting Standards (All listed companies in UK)
- National accounting standards (Financial Reporting Council in UK)
- Stock Exchange Regulations
What is the role of the IFRS Foundation?
To bring about convergence of national and international standards, and to appoint and monitor the IASB, the IFRS AC and the IFRS IC.
What is the role of the IASB?
Issues the International Financial Reporting Standards
What is the role of the IFRS Interpretations Committee??
Provides timely guidance on the application and interpretation of IFRSs and guidance on new financial reporting issues not specifically addressed by IFRSs.
What is the role of the IFRS Advisory Committee?
Formal advisory body to the IASB and IFRS Foundation.
