Introduction to Accounting Flashcards
What is Accounting?
Is a way of recording, analysing and summarising transactions of a business.
What are the key features of accounting?
It is a service activity
Provides quantitative information
Is primarily financial in nature.
Is intended to aid decision-making/ provide comparison.
Who are the internal users of financial information?
Owners
Management / Directors
Employees
Who are the external users of financial information?
Shareholders
Lenders / Creditors
Suppliers
Customers
Government
General public
In order to produce financial statements a business needs to keep a record of what?
All its transactions.
What is bookkeeping?
The process of keeping a record of all its transactions.
What should accounting records need to be if it is to be useful?
Accounting records should be complete accurate and valid if information produced is to be useful.
What are the limitations of accounting information?
It is only one of a number of sources of information available to decision makers.
Relates to the past and therefore of limited value when making decisions about the future.
Imperfect information, relying on a number of judgements and estimates.
Does not always take into account environmental factors (External)
Only takes into account transactions that can be measured.
What are the uses of accounting in the business context?
Central to the operation through internal flows of information
Influential across the business in driving decisions.
Provides evidence of whether the business is meeting its objectives.
Helps to evaluate and shape alternative strategies.
Key component for forward planning.
Vital for controlling and co-coordinating business activities
What are the uses of accounting in the wider context?
Determine the viability of business as a going concern/ potential investment.
Assess the creditworthiness of the business.
Ensure the firm is disclosing information in accordance with rules and regulations (to protect the interest of all stakeholders)
Do shareholders have the right to know how company is managing its investments?
Yes.
What are the determinants of accounting systems?
Data protection/Enhancement
Complexity of business process
System Cost
Data Access Needs
Resistance to change
Integration/Connectivity
Suitability/Outputs.
