Fabm Flashcards
Accounting uses a structured approach to manage financial data, ensuring consistency, accuracy, and completeness in reporting.
Systematic Process
Accounting primarily deals with numerical financial data, enabling objective performance analysis.
Quantitative Nature
Accounting blends creativity and systematic methodologies.
Art and Science
Accounting acts as an information system, communicating financial data to stakeholders for informed decision-making.
Information System
Accounting provides relevant financial information to aid stakeholders in economic decisions.
Decision-making Tool
Accounting ensures compliance with laws and regulations through financial statement preparation and audits.
Compliance and Accountability
Evaluates an entity’s profitability, liquidity, solvency, and efficiency over time to help stakeholders understand how well the organization meets its financial goals.
Assessment of Financial Performance
The foundational function of accounting is to systematically record financial transactions.
Recording Financial Transactions
Accounting facilitates the preparation of essential financial statements (balance sheet, income statement, cash flow statement).
Preparing Financial Statements
Accounting analyzes financial data to assess performance, identify trends, and evaluate operational efficiency.
Analyzing Financial Data
A critical function of accounting is creating budgets and forecasts using historical data to predict future needs.
Budgeting and Forecasting
Accounting ensures compliance with legal and regulatory requirements by preparing reports for stakeholders.
Compliance and Reporting
Effective accounting practices help identify potential risks by monitoring financial health and implementing controls.
Risk Management
Ensures they remain within budgetary limits by analyzing spending patterns
Cost Control
Arthashastra, written during the Mauryan Empire (around the 2nd century B.C.)provide financial record for governance.
Chanakya
Analyze financial statements to assess investment profitability and long-term viability.
Investors
Evaluate liquidity and financial stability to determine creditworthiness.
Creditors
Assess financial stability to ensure the company can honor commitments and continue operations.
Customers
Rely on detailed financial reports for operational decisions (budgeting, resource allocation, performance evaluation).
Management
Need comprehensive insights to guide investment decisions and assess returns.
Owners
Use financial information to gauge company stability and prospects for job security and wage increases.
Employees
It is exchanging of good instead of buying
Barter System
Who invented Double Entry, and who popularized it?
Benegetto Contrugi, Luca Pacioli
