Week 11: Flashcards
Organizations take decisions on a daily basis and accounting is a central part of its management systems.
True; concerned with recording analyzing and sharing information. decision making
Organizations make decisions include the following and not limited to:
How financial plans are made. How investment decisions are made. Financing a business and cost management.
Accounting
is concerned with the collecting, analyzing and communicating financial information.
Finance also known as
Financial Management: like accounting, exists to help decision makers. It is concerned with the ways in which funds for a business are raised and invested.
How do you identify finance and the forms to choose?
the main forms of finance available
the costs and benefits of each form of finance
the risks associated with each form of finance;
the role of financial markets in supplying fiance
is accounting a form of business
yes
What does relevance mean in accounting?
accounting information should make a difference. capable of influencing user decisions. must help predict future events (such as next years profit) and to help confirm past events (such as establishing last years profit).
materiality
An item of information should be considered material, or significant, if its omission or misstatement could alter the decisions that users make.
What is faithful representation?
Accounting information should represent what it is supposed to represent.
Should be the following:
Complete
Neutral without bias
Free from error no errors in the way in which the estimates are prepared and described.
What are further qualities in accounting?
Comparability
Verifiability
Timeliness
Understandability
Further qualities
Comparability
comparisons. better comparisons can be made where the accounting system treats items that are basically the same in the same way where policies for measuring and presenting accounting information are made clear.
Further qualities
Verifiability
Quality provides assurance to users that the accounting information provided faithfully represents what it is supposed to represent. Accounting information is verifiable where different, independent experts would be able to agree that it provides a faithful portrayal.
Further qualities
Timeliness
Accounting information should be produced in time for users to make their decisions. A lack of timeliness will undermine the usefulness of the information.
Understandability
Accounting information should be set out as clearly and concisely as possible.
management accounting
seeks to meet the accounting needs of managers
financial accounting
seeks to meet the needs of the other users identified earlier in the chapter
the main areas of difference stands in accounting management are as follows
Nature of reports produced. level of detail regulations Reporting interval Time orientation Range and quality of information
Nature of reports produced
financial accounting reports tend to be general purpose. Aimed primarily at providers of finance such as owners and lenders, they contain financial information that will be useful for a broad range of users.