Financial accounting intoduction Flashcards
What are the primary statements?
statement of profit or loss
statement of financial position
statement of changes in equity
statement of cash flows
how long is a fiscal year?
52 weeks
what is the statement of profit or loss?
its knows as the income statement and shows the financial performance of an entity such as a business within a given time period
what is the statement of financial position?
aka a balance sheet. It gives a snapshot of a businesses assets liabilities and equity at a single point in time
What does a statement of changes in equity do?
It enhances interest of owners during the period
what is the statement of cashflows?
presents all cash movements. Shows the cash inflows and outflows
what are the accounting policies?
holds all the rules followed in preparing financial statements
what are notes to the accounts?
provide details about the numbers in the financial statement
what is accounting?
the process of identifying, measuring and communicating economic information to make informed judgements and decisions by the users of the information
Give some examples of who uses annual reports
Shareholders
Banks
Employees
Managers and directors
Suppliers
Customers
HMRC
Credit rating agencies
What do users want from financial statements?
financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity’
what makes information in financial statements useful?
conceptual framework produced by the international accounting standard board which sets out underlying concepts for financial statements
What does IASB stand for?
international accounting standard board
what 3 things make for a faithful representation of information?
completeness neutrality and freedom from error
list 4 enhancing characteristics of financial information?
Comparibility
Verifiability
Understanability
Timliness
What des IFRS stand for?
international financial reporting standards
what is a sole trader?
one owner
what is a partnership
2-20 owners
what is limited liability?
legal protection which only allows shareholders to lose what you put into the business leaving them unresponsible for potential debts etc
what does IFRS stand for?
international financial reporting standards
who uses IFRS?
international businesses although it was used in EU only before
what is IFRS?
globally agreed upon guidelines that are followed internationally by firms when producing financial statements aka balance sheets
when was IFRS first published?
2003
who created the IFRS?
the international accounting standards board
what does IFRS aim to achieve?
comparability, global consistency, fair presentaion, relevance and reliability
how does IFRS enhance investor confidence?
it provides a standardised framework for assessment of financial performance which can attract investment and lead to a more efficient allocation of capital
how can IFRS reduce costs?
compliance with IFRS means that theres less worry of compliance of other rules as its standardised meaning companies can easily prepare statements making sure they’re fully legal
how does IFRS facilitate capital flows?
due to the standardised practises barriers of a complex or different process are avoided allowing for more efficient capital flows globally