Introduction & Ethics Flashcards
Statement of financial position
A snapshot of the financial position of a company at a particular point in time.
Statement of profit or loss
A statement reflecting a businesses performance over a period of time. Includes income and expenses.
Fundamental qualitative characteristics
Relevance and faithful representation
Relevance
Financial information is relevant if it has:
- predictive value;
- confirmatory value.
Faithful representation
Complete, neutral, and free from error
Enhancing qualitative characteristics
Comparability, verifiability, timeliness, and understandability
Going concern
The entity is viewed as continuing in operation for the foreseeable future.
Materiality
Omissions or misstatements are material if they could influence the economic decisions of users taken on the basis of the financial statements.
Historical cost
Transactions are recorded at their cost when they were incurred. Historical cost understates asset values and overstates cost.
IESBA Code of Ethics
Professional competence and due care, Integrity, Confidentiality, Objectivity, Professional behaviour.
The accounting equation
Assets = Capital + Liabilities
Net assets
Assets less liabilities
Business Entity Concept
A business is a separate entity from its owner
Accruals/matching concept
Income earned is matched with the expenses incurred in earning it
Gross Profit Margin
GPM = (Gross Profit x 100)/Revenue
