Lecture 1 Flashcards
Define accounting
Accounting is a process of identifying, measuring and communicating economic information to make informed decisions by users of information
Accounting is a systematic way of…
recording business transactions in the books of account so that the state of the business is quickly revealed
Who is dubbed the ‘father of accounting’?
Luca Pacioli
What is a conceptual framework for accounting?
A statement of principles which provides generally accepted guidance for the development of new reporting practices and for challenging and evaluating the existing practices
When was the new conceptual framework completed by and who was it issued by?
Issued by the international Accounting Standards Board (IASB) in 1989, completed in 2018
Who are the users of the information financial accounting provides?
Wide range of external users ( e.g: banks, at it is released to the public
What is the nature of a financial accounting report like?
- It is a broad overview
- It is less detailed
- It covers a general purpose
Who are the users of the information management accounting provides?
Managers, as it is internal to the business
What is the nature of a management accounting report like?
- It is used for specific decision making
- It contains a high level of detail
- It is created for a specific purpose
What is the difference in interval time between financial and management accounting reports?
Financial reports are determined by rules and regulations and are produced annually or semi-annually. Management reports are produced when required.
What are the timelines of financial accounting reports like?
They are prepared to cover a past period of time and thus are mainly historical. Show what has happened to the entity.
What are the timelines of management accounting reports like?
They are prepared for future periods of time, and can therefore be both based on the past and future. Essentially predicting and setting aims
What kind of information are financial accounting reports made up of?
Quantifiable figures
What kind of information are management accounting reports made up of?
Both quantitative and qualitative information
What are the six key factors that enhance the usefulness of accounting information?
Relevance
Faithful representation (reliability)
Comparability
Verifiability
Timeliness
Understandability