Accounting Documents and Systems Flashcards
What is accounting?
accounting is a way of recording, analysing and summarising the transaction of an entity
What are the three types of business entity?
sole trader
partnership
limited liability companies
soletrader
owner/manager - takes all liability
partnership
similar to sole trader but 2 or more people
limited liability company
share holders - owners
managers - directors
separate legal entity - if business fails, all shareholders lose their investment
Limited private
shares are not listed
Plc shares
listed could
What is the objective of financial reporting?
it mentions the primary users of financial info (eg. investors, lenders, and other creditors and other groups) may be interested in financial information
What would investors look for in a financial statement?
profitability
future prospects
risk and return
What would employees look for in a financial statement?
profitability
going concern - job security, cash, pension
What would lenders look for in a financial statement?
cash
assets
other loans
What would suppliers look for in a financial statement?
cash
future prospects
going concern
What would customers look for in a financial statement?
ethical
going concern - provide goods and services
profitability - value for money
What would government and their agencies look for in a financial statement?
profitability
stats - diversity, competition and environment
compliance with law
What would public look for in a financial statement?
customer - contribution to local economy and society
IFRS
International Financial Reporting Standard
IAS
International Accounting Standard
What does an IAS presentation of financial statement identify?
statement of financial position
statement of profit or loss
a statement of changes in equity
a statement of cash flows and notes
What is the statement of financial position in the UK called?
the balance sheet
Statement of financial position
a list of all the assets controlled and the liabilities owned by business as a particular date
What is the statement of financial position quantify?
the amount of shareholder interest is in the company = equity
What is equity?
amount invested in a business by the owners
What is equity known as for soletraders?
capital
What is a non-current asset?
assets and property owned by a business that are not easily converted to cash within a year
What is a current asset?
easily sold and highly liquidity
What is capital?
the assets and cash in a business
What’s a non-current liability?
debts a business owes, but isn’t due to pay for at least 12 months
What is a current liability?
debt a business owes which is due within 12 months
Trade payables
short-term expenses incurred by businesses when they use products or services from a third-party vendor or supplier to deliver their products to their customer
Accruals
amounts of money that have been earned or spent, but not yet paid
What is the statement of profit or loss called in the UK?
profit or loss account
What was the statement of profit or loss called in the UK?
income statement
Statement of profit or loss
a record of income recognised and expenditure incurred over a given period
it is a record of the entity’s financial performance over a period of time
the statement shows whether a business has had more revenue than expenditure (profit) or a loss
What is delivery inwards?
delivery costs
Sundry incomes
—-, dividend, rental
Delivery outwards
cost to deliver to consumer
Depreciation
charge forwarding non-current asset
Bad and doubtful debts
trade receivables
cost of sales =
opening inventory + purchase + cost of delivery - closing inventory
What is the purpose of a financial statement that lists and entity’s total assets and total capital/liability to show:
financial position of the entity at particular moment in time
What is the business entity concept?
business is separate to owner and personal transaction of the owner should never be mixed with business transaction
when considering a limited liability company that distinction is laid down in law - the company has separate legal identity
