Week 1 - The Accounting Environment Flashcards
Define Accounting
Accounting is an information system that identifies, records and communicates the economic events of an entity to interested users.
What is the purpose of Accounting?
The purpose of accounting is to aid people in making choices about the allocation of scarce resources, whether internal or external to an entity.
What are the three steps in the accounting process?
Identification
Recording
Communication
What is the difference between bookkeepers and accountants?
Bookkeepers only record the economic events (which is only one part of the accounting process. They do not communicate their findings
Define Internal Users of Accounting Data
Internal users of accounting information are managers who plan, organise and run a business.
Examples of Internal Users of Accounting Data
Marketing managers, production supervisors and chief financial officers.
Define External Users of Accounting Data
Investors to make decisions to buy, hold or sell shares
Creditors, to evaluate risks of giving credit and lending money
Government and regulatory bodies
Define Management Accounting
Management accounting provides economic and financial information for managers and other internal users.
Define Financial Accounting
Financial accounting is providing economic and financial information to external users such as creditors.
Who governs accountants?
Accountants are self-governed and self-regulated
What is accounting regulation formed by?
Accounting Regulation is formed by legislation (set by the government) and accounting standards (FRC, AASB, IASB)
What is conceptual framework?
Set out the concepts that underlie the preparation and presentation of financial standards for external users.
What does conceptual framework provide?
The framework is not an AAS (Australian Accounting Standards) standard but does provide information about the formulation of the AAS.
The framework assists the AASB in the development of future standards.
Explain Integrated Reporting
Concise reports about future prospects, in the context of its external environments.
They are required for financial stability
Explain Global Reporting Initiative
Voluntary organisation that has established requirements wen reporting on environmental and social aspects.