Definitions Chapter 1 Flashcards
Accounting
The process of identifying, measuring and communicating information to permit informed judgements and decisions by users of the information
Finance
The study of how businesses raise funds and select appropriate investments
Relevance
The ability of accounting information to influence decisions.
Relevance is regarded as a fundamental characteristic of useful accounting information
Materiality
Accounting information is material where its omission or mid representation will alter the decisions that users make.
The threshold of materiality will vary from one business to the next.
Faithful representation
The ability of information to be relied on to represent what it purports to represent.
This is regarded as a fundamental quality of useful accounting information.
Comparability
The quality that helps users identify similarities and differences between items of information.
It enhances the usefulness of accounting information.
Verifiability
The quality that provided assurance to users that the information provided faithfully represents what it is supposed to represent.
It enhances the quality of accounting information.
Timeliness
The provision of accounting information in time for users to make their decision.
The quality enhances the usefulness of accounting information.
Understandability
The quality that enables accounting information to be understood by those for whom the information is primarily compiled.
This quality enhances the usefulness of accounting information
Accounting information system
The system used within a business to identify, record, analyse and report accounting information
Management accounting
The identification, measurement and communication of accounting information for the managers of a business
Financial accounting
The identification, measurement and communication of accounting information for external users (those users other than the managers of the business)
