Key Terms and concepts Flashcards
Accountability
Refers to management’s responsibility to provide an account/report on the way in which the resources entrusted to them have been used.
annual report
A document which contains the financial statements (with related notes) along with reports from management explaining what they are doing and what they plan to do. The supporting reports provided by management typically include the operating and financial review, the directors” report, the chairman’s statement and the corporate social responsibility report. They also provide information on how they govern themselves in a corporate governance report and information on director salaries is provided in the remuneration report
appropriation account
An account which is used to apportion the profit or loss for the period between the partners in a partnership business
assets
A present economic resource controlled by the entity as a result of past events.
available-for-sale assets
Investments that are denominated in money, or in paper (such as shares and bonds), which the entity holds for financial gain and which will be sold by the entity in the future.
balance sheet
The UK equivalent of the statement of financial position. It contains details of an entity’s assets, liabilities and capital.
bookkeeping system
A system to record the nature and monetary value of the transactions of an organization.
comparatives
Term used to describe prior year figures that are included in financial statements so that current year results can be easily compared to the previous year’s figures
current assets
Cash, cash equivalents and assets that are expected to be turned into cash within 12 months and all assets that are intended for sale or consumption as part of the entity’s normal operating (trading) activities of the business.
current liabilities
Liabilities that are due to be settled within 12 months or that are incurred as part of the firm’s normal operating (trading) activities. It also includes liabilities that are repayable on demand (overdraft).
double-entry bookkeeping
In double-entry bookkeeping each transaction is entered in the books twice. This duplication, considered to be a form of internal check, highlights any errors.
economic decision-making
A view of the function of financial accounting is that it facilitates the efficient and effective allocation of resources
economic resource
A right that has the potential to produce economic benefits (Conceptual Framework, IASB, 2018)
equity
The residual interest in the assets of the entity after deducting all its fiabihties.
equity shareholder
Another name for owner/proprietor (holds shares of ownership in the entity).
