test 1 AC1102 Flashcards by Ale Alonso Sanchez

list 5 different entities?

Sole Traders
- Companies
- Partnerships
- Non-for-Profit Organisations
Government Organisations

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what is accouting?

the process of identifying, measuring, communicating information and preparing reports to aid the financial control, decision making and management of a business.

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what are the 3 steps in financial accounting process?

input: double entry book-keeping

process: turing raw material into useful information as required, classifying and recording data.

output: information for use by user,
- Required to show certain financial statements i.e.
- Statement of Profit and Loss
- Statement of Financial Position
- Statement of Cash Flows
- Accounting Policy and Notes to FS.

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what is the objective of accounting?

provide financial information about the reporting entity that is useful to existing and potential investors , lenders and other creditors in making decisions about providing resources to the entity

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what are the 2 main functions of financial accounting?

Decision making
(conceptual framework, which state the primary objectives of financial statements)

Stewardship:
Keeping track of what has happened to the financial resources entrusted to management

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financial vs management accounting?

financial:
primary use - external
type of information- summarised
Financial reports- SOPL, SOFP SOCF
time span of report - usually 1 year
time focus- historical

management:
primary use - internal
type of information- detailed
Financial reports- large variety of non-financial indicators of performance
time span of report- as required by management
time focus - past, present, future

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what are 8 usesr of accounting information?

investor
creditors/loan creditors
government
employees
customers
competitors
suppliers
public

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what regulatory framework do we find?

companies act
stock exchange
accounting standards

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what does IASB stand for:

international accounting standards board

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what ate the objectives of the IASB?

develop a single set of high quality, understandable and enforceable global accounting standards that require high quality, transparent and comparable information.
to promote the use and rigorous application of those standards.

TO promote and facilitate adoption of IFRSs,

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what does IFRS stand for?

international financial reporting standards?

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what are two accounting frameworks that can be applied in Ireland and UK?

International Financial Reporting Standards (IFRSs);
UK and Irish GAAP – FRS 100-102;

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The FRSME comprise of ?

FRS 100 Application of Financial Reporting Requirements
FRS 101 Reduced Disclosures for Subsidiaries and ultimate Parent
FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland

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what chapter do we find Conceptual framework?

the objective of general purpose financial reporting
qualitative characteristic
financial statement and the reporting entity
Elements of financial statements
Recognition and De-recognition
Measurement
Presentation and disclosure
concepts of capital and capital maintenance

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what is the objective of general purpose financial reporting

To provide financial information about the reporting entity that is useful to existing and potential investor, lenders and other creditors in making decisions, providing financial aid and the management of the business

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According to the framework, what do qualitative characteristics provide?

Make the information found in the financial statement useful for all users making decisions about the reporting entity.

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In qualitative characteristics To be useful, information must be what?

relevant and have faithful representation

Name 4 ways of enhancing qualitative characteristics?

timely
comparability
verifiability
understandability

what are 2 Constraints on the Qualitative Characteristics

balance between qualitative characteristics
Balance between benefits and cost

what do financial statements provide?

Information

what is a reporting entity?

Any entity that prepares financial statements, either by choice or under regualtion.

what are the elements of financial statements?

income
expenses
assets
liabilities
capital

What is SOPL?

Listing of revenue and expenses and whether profit/loss made for the year (historical)
Assesses Financial Performance of the entity
It represents the full year up to the year/period end, terminology used “for the year/period ended”

formula in SOPL

revenue - expenses = profit

what happens if expenses exceed revenue?

we have loss

what Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity other than those relating to contributions from owners

income

what Decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or increases of liabilities that result in decreases in equity, other than those relating to distributions to owners ?

expenses

what is revenue?

is income earned in the period from normal trading activities

what does SOFP show?

the financial position (net worth) of a business at a particular point in time

what do we find in SOFP

assets liabilities Equity/capital

what are assets?

An asset is anything of value or a resource of value that can be converted into cash.

What are liabilities?

Liabilities are what a business owes. It could be money, goods, or services. They are the opposite of assets, which are what a business owns. Businesses regularly owe money, goods, or services to another entity.

What is equity/capital?

The residual interests in the assets of an entity after deducting all its liabilities. The amount that the company owes to the owners (shareholders) or is the amount that the owner (shareholders) have invested directly/indirectly in the business.

what is recognition?

a monetary amount in the statement of financial position or the statement(s) of financial performance an item that meets the definition of one of the elements of financial statements – an asset, a liability, equity, income or expenses

what is de-recognition?

the removal of all or part of a recognised asset or liability from an entity’s statement of financial position.

when does recognition normally occur?

When that item no longer meets the definition of an asset or of a liability:

The Framework states that assets and liabilities are measured either at?

- historical cost - current value

What Capital Maintenance Concepts do we have?

financial capital Physical capital

what does SOCF show?

The actual cash received during the period and how this cash was spent during the period. Statement of Changes in Equity

what re the fundamental principles in the conceptual framework?

1) Going Concern 2) Accurals Concept 3) Earned and incurred concept 4) calcualtion of profit based of the accurals concept 5) Materiality concept 6) Historical cost concept 7) Dualility concept 8) Substance over form concept 9) consistency concept 10) Prudence concept 11) Entity concept 12) time period concept 13) Money measurement concept 14) separate determination concept