Week 1 Flashcards
What is accounting?
Accounting is an information system that identifies, records and communicates the economic events of an entity to interested users
Why is accounting important?
1: Prevent corporate collapses
2: Regulation and regulatory response
What is identified?
Economic events relative to an entity
What is recorded?
The economic events in a systematic and chronological diary
What is communicated?
The accounting information that is presented in financial reports is what is communicated
What is the role of accounting?
Accounting is the language of business. It is designed to assist people whether external or internal to make decisions about the allocation of scarce resources
What is corporate governance?
Corporate governance is the system in which entities are directed,controlled, managed and administered.
What does corporate governance do?
It influences the objectives of a company are set and achieved how risk is monitored and assessed and how the performance of the entity is optimised
Who are the 2 users of accounting data
Internal Users = Management
External Users = many (investors, creditors and regulators)
What is the difference between bookkeeping and accounting?
Bookkeeping records only economic events while accounting records others and has 2 fields financial and management accounting
Who does financial accounting concern
Financial accounting concerns external users who are presented financial statements every 6 months.
Who does management accounting concern
Management accounting concerns management who are presented with internal reports frequently that includes financial and non financial data
What is the basic accounting equation
Assets = Liabilities + Owner’s Equity
Why do liabilities come before owners equity
Because in the event of foreclosure creditors must be paid before ownership claims
What are the features of an asset
1: Controlled by an entity
2: Result of a past economic transaction
3: Provides future economic benefits
