Introduction - week 1 Flashcards
what is the definition of accounting?
Concerned with collecting, analysing and communicating financial information, with the ultimate aim for the users of the information to make more informed decisions.
What is meant by finance?
Concerned with the way in which funds for a business are raised and invested. ( A business exists to raise funds for investors (owners and lenders) and then to use those funds to make investments (in equipment, premises, inventories and so on) in order to create wealth.
Who are the main users of accounting / financial information of a business?
Owners - plan future Managers - control business lenders - is company solvent suppliers - will they be paid government - assess amount of tax due competitors customers employees and representatives - pay increase / employability security community and representatives
Why do we account information?
Formulate overall plans and strategies
Resource allocation
meeting external regulatory
reporting requirements
performance measurement and evalutation
Cost planning and control
What are the three core areas of accounting?
Financial accounting
Financial management
Management accounting
What is the definition of financial accounting?
recording and analysing the financial results of transactions as a means of arriving at a measure of the firms success and financial soundness
What are the characteristics of financial accounting?
Regulated and in standardised format
Historical orientation, backward looking
high degree of precision???? text book page 14 and powerpoint slide 15 say opposite.
not normally produced quickly
formal, legal communication to outsiders
externally verified by audit
infrequent (Half / annually)
What is the definition of management accounting?
The application of the principles of accounting and financial management to create, protect, preserve and increase value for the stakeholders of for - profit and not for profit enterprises in the public and private sectors
What are the characteristics of management accounting?
No prescribed format: Management decides - specific purpose no standard format
Intended for internal users ONLY and often commercially confidential; more details
contains estimates and approximates because information is needed quickly
often covers segmental details as well as whole organisation
much more regular; weekly, daily, real time. (As frequently as manager needs)
often provide information concerning future performance as well past performance.
Do a table like page 15 comparing financial and management accounting
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What are the characteristics of a competitive environment?
Cost efficiency and customer satisfaction
Customer focus
Continuous improvement
Total value chain analysis
Key success factors
– increasing focus on non financial measures for measuring performance
watch two videos on slide 28
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What is the definition of financial management
efficient and effective management of finances to achieve the objectives of the organisation
the primary financial goal is shareholder wealth maximisation
According to the ACCA 2010 Study, what areas of expertise for financial management are of most value?
Risk management control Financial analysis for decision making Ethics and professionalism Taxation Investor relations statutory and regulatory reporting corporate social responsibility issues
Slide 34
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slide 35 also contradicts text book
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what kinds of business ownership exist? Explain each one
Sole proprietorship; where an individual is the sole owner of a business. often quite small in terms of size however there are a lot of these businesses about
Partnership; two or more individuals carry on a business together with the intention of making a profit.
Limited company; can range in size from very small to very large. the number of individuals who subscribe capital and become the owners may be unlimited , providing the opportunity for it to become a very large scale business. the liability of owners is limited, which means that those subscribing capital are liable only for the debts incurred by the company up to the amount they have invested.
What are the reasons for a business and its managers to be ethical?
to stop the following from happening ;
paying bribes to encourage employees of other businesses to reveal information that could be useful
oppressive treatment of suppliers, for example making suppliers wait excessive periods before payment.
manipulating the financial statements to mislead users of them, for example overstate profit so that senior managers become eligible for performance bonuses known as creative accounting.
