Accounting Framework

Question 1

What is Managerial Accounting?

Answer 1

Internal info for decision-making and controls of operations
- Usually semi/annually

e.g For directors to make decisions

Question 2

What is Financial Accouting?

Answer 2

External info, like published financial statements, very detailed, whenever required
- e.g Companies house

Question 3

Internal users of Accounting data

Answer 3

Marketing, Management, Finance, HR
Shareholders = BOTH

Question 4

External users of Accounting data

Answer 4

Banks + lenders, Investors, creditors, Competitors, Government for tax

Question 5

What is Conceptual framework

Answer 5

Helps bring consistency to accounting concepts and practices

Question 6

Who are the 2 Accounting standards?

Answer 6

1. International Accounting Standards Board (IASB)
   - International Financial Reporting Standards (IFRS) - PLC, Private reporting - London Stock exchange
2. Financial Accounting Standards Board (FASB)
   - Generally Accepted Accounting Principles

Question 7

What are Assets?

Answer 7

Resources owed by company with future economic benefit
e.g office, trade receivables

A = Liabilties + Equity

Question 8

Liability

Answer 8

Obligation to transfer economics benefits as a result of past events
e.g money owed - accounts payable

Question 9

Equity

Answer 9

Interest in assets of entity after deducting all its liabilities
- e.g retained earnings and Ordinary share capital

Question 10

What is going concern?

Answer 10

The entity will continue in operation for foreseeable

Question 11

What is Accruals?

Answer 11

Revenue and costs are recognised as earned or incurred not when paid

Question 12

What is the components of a financial statement?

Answer 12

1. Statement of financial position
2. Statement of Income/ profit and loss
3. Statement of changes in equity
4. Statement of cash flows
5. Accounting policies and explanatory notes

Question 13

What are the two levels of qualitative characteristics of useful financial info?

Answer 13

• IFRS identifies

1. Fundamental Qualitative Characteristics - Useful
2. Enhancing Qualitative Characteristics - enhance usefulness

Question 14

Fundamental qualitative characteristics

Answer 14

1. Relevance - influences stakeholders decisions
2. Faithful representation - capture all economic activity - NEEDS - complete, neutral, free from error

Question 15

Enhancing qualitative characteristics

Answer 15

1. Comparability
2. Verifiability - similar
3. Understandability
4. Timeliness - not out of date

Question 16

Soletrader

Answer 16

Individuals, can borrow from banks, Unlimited Liability

Question 17

Is Accounting info needed for a Sole Trader?

Answer 17

Dont need to submit to company house but do need for Gov (tax), bank (lenders), Person intending to buy business

Question 18

General partnership

Answer 18

More than one owner but unlimited liability, profits shared (not =)

Question 19

Private limited company

Answer 19

LTD - Cant sell stocks but have limited liability

Question 20

Public limited company

Answer 20

Can sell shares to public and have limited liability