Chapter 1: The Role of Accounting (Part 1) Flashcards
What is accounting defined as?
The collection and recording of financial data, the reporting and analysis of financial information and the advising of users to assist decision making
What is the purpose of accounting?
To provide financial information to assist owners to make more informed decisions, in order to improve the performance of the firm
What is non-financial information?
Information that cannot be found in the financial statements generated by the accounting system, and is not expressed in dollars or cents
What are some examples of non-financial information?
The number of customer complaints per item or the weather report for the following week
What is the triple-bottom line?
An accounting framework broken into three parts of financial, social and environmental
Who is the sole trader?
The main person interested in the financial performance of the business
Who may other interested parties in financial performance of a business be?
Business managers, prospective owners, banks, suppliers and employees
What is financial data?
The raw facts and figures on which financial information is based, usually contained in source documents
What is financial information?
Financial data that has been sorted, classified and summarised into a more usable and understandable form
What are ethical considerations?
The social and environmental consequences of a financial decision
What is the accounting process?
The process used to generate financial from financial data, leading to advice which assists decision making
What is a transaction?
An exchange of goods or services with another party
What are source documents?
Documents which provide the evidence that a transaction has occurred and the details of the transaction itself
What are some examples of common source documents?
Receipts, cheque butts, invoices and memos
What are the four stages of the accounting process in chronological order?
Source documents, records, reports and advice
