Lecture 1 Accounting Flashcards
What is the definition of Accounting?
‘the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by users of the information’
Which Steps does Accounting incorporate?
- Capturing,
- Recording,
- Summarising,
- Reporting,
- Interpreting
What economic infromation is contained in Accountin?
Bot Financial and Non-Financial i.e expalations and strategy
What is the definition of Accountability?
the capacity and willingness to give explanations for conduct, stating how one has discharged one’s responsibilities … an explaining of conduct with a credible story of what happened, and a calculation and balancing of competing obligations, including moral ones’
Who does the firm and accounting need to be accoutable to?
- Shareholders
- Financiers
- Other Stakeholders
What are the Functions of Accounting?
- Scorekeeping
- Attention-directing
• Problem-solving
- Planning
- Decision-making
• Control
What is financial Accounting?
the recording of financial transactions, aimed principally at reporting performance to those outside the organization, with a primary focus on shareholders
What is comprised in the annual report to shareholders?
- the Statement of Comprehensive Income (or Income Statement);
- the Statement of Financial Position (or Balance Sheet);
- the Statement of Changes in Equity; and
- the Statement of Cash Flows
What is meant by Financial Accounting Legislation?
Accounting Standards: the International Accounting Standards Board (IASB) issues detailed accounting rules or standards called International Financial Reporting Standards (IFRSs)
Stock Exchange rules
Audit function
Professional accounting bodies: e.g. ICAEW, ICAS, ACCA, CIMA control the examination process and training for accountants. Also ethical code issuance.
What is the purpose of Management Accounting?
Provides financial and non-financial information to:
develop and implement strategy by planning for the future (budgeting);
make decisions about products, services, prices and what costs to incur (decision-making);
ensure that plans are put into action and are achieved (control).
What are the characteristics of a management accounting system?
A management accounting system must provide timely and accurate information to facilitate efforts to control costs, to measure and improve productivity, and to devise improved production processes. The management accounting system must also report accurate product costs so that pricing decisions, introduction of new products, abandonment of obsolete products, and response to rival products can be made
What is the difference between managerial accounting and financial accounting?
Managerial decisions, whether they relate to planning, decision making or control, involve decisions that will ultimately be reported in financial statements and affect shareholder reaction in stock markets.
The accounting system that produces financial reports is the same system that managers use for planning, decision making and control
What types of accounts exist?
Assets:
- Fixed
- Current
Liabilities:
- Long term
- Current
Equity
Revenue
Expense
What are some recent developments in Financial Accounting?
International Financial reporting standards
Large Corporate Failures (Enron)
Increased Complexity in Business Transactions
What are the recent developments in Management Accounting?
Value-based management;
Non-financial performance measurement;
Focus on horizontal business processes, rather than hierarchical reporting;
Quality management and environmental management;
Strategic issues beyond the boundaries of the organization and the annual reporting cycle; and
Lean methods of producing goods and services.
How is management Accounting Different From Financial Accounting?
How can Shareholder Wealth be Expalined?
Explain the concept underlying shareholder value chart?
