1. the accounting scene Flashcards
Accounting elements
Recording
Summarising
Objective of accounting
Providing useful info to investors
Financial Statements
Statement of Profit or loss
Statement of financial position
Statement of cashflow
Statement of Profit or loss
Reflects the performance of a business over a period of time
Statement of financial position
Reflects the position of a business at a point in time
Statement of cash flow
Summaries the inflows and outflows of cash over a period of time
Who uses financial statements
Investors Customers Suppliers Lenders Government Competitors The public Employees Management
Who uses financial information: Investors
Helps to shape investment decisions
Who uses financial information: Lender group
Liquidity of the company
What’s the maximum they should lend
Will the interest and capital be repaid
Who uses financial information: Employees
Ability to pay salaries
Job security
Exec salaries vs. other companies
Who uses financial information: Suppliers
Will they get paid
Who uses financial information: The government
Business continuity of key services
Tax and vat
Who uses financial information: The public
Looking at public spend
Tax avoidance measures
Qualitative characteristics of financial statements
Accurate Complete Cost effective Understandable Relevant Accessible Timely Easy to use
Fundamental Qualitative Characteristics
Relevance
Faithful representation
