session 1: introduction to the accounting function Flashcards
what is accounting
the process of identifying, measuring, recording communicating economic information about the business entity to the users of the information
- concerned with the provision of information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of potential users in making economic decisions
what are the sources of various financial information
1. financial position
2. financial performance
3. changes in equity position
4. changes in financial position
- statement of financial position (SOFP)
- income statement( SCI)
- statement in movement in equity (SOCE)
- cash flow statement (CFS)
what is the process of providing information to users
- identify stakeholders
- assess stakeholders’ informational needs
- design the accounting information system to meet the stakeholders’ needs
- record economic data about business activities and events
- prepare accounting reports for stakeholders
what are the various stakeholders
internal:
1. owners
2. employers
3. managers
external
1. customers
2. creditors
3. government
why does financing need to serve the following functions
1. recording
2. measuring
3. stewardship
4. monitoring, planning and control
5. information for decisions
6. communication
- enable the production of summarised financial statements relating to the entity’s results and current state of affairs
- oso enables one-off requests for data to be compiled with - share out results among various parties, employees and shareholders
- provides record of how funds entrusted to managers have been used by them, and to what ends
- provides sufficient information on the result of past activities to enable management to monitor the results and take action if necessary, and to formulate the plans for the future
- allows assist for investors to decide how to allocate their resources
- communicate to both internal and external users
what are the different forms business structures can operate in
- sole proprietor
- partnership
- limited company
what is sole proprietor
a business that is owned by a single owner who is entitled to all the profits and is responsible for all the losses
what is a partnership business structure
ownership structure consisting of 2-20 people people carrying out a business in common with a view of making profits
what is a limited company structure
body of people granted a charter legally recognising them as a separate legal entity having their own rights, privileges and liabilities distinct from those of their members
( a legal entity separate and distinct from its owners)
what is the accounting cycle 1
- financial transaction
- journals
- general ledger
- trial balance
- year end adjustments
- adjusted trials balance
what is an asset
resource controlled by the entity because of past events and from which future economic benefits are expected to flow to the entity
( resources controlled by the business that yields future economic benefits)
what is a liability
present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits
what are current assets
either cash or any other asset that can be converted into cash or other benefits within one year from the fate of the SFP (state of financial position)
what are non current assets
assets that can be converted into cash or other economic benefits after one year from the date of SFP
what are current liabilities
obligations that are due within one year from the date of the SFP
