Workshop 1 Flashcards
What is accounting?
What 3 areas is it subdivided into?
The production, communication and interpretation of financial information.
Financial accounting, auditing and cost and management accounting
Financial Accounting
3 separate things it’s involved with?
When was it developed and why?
What did limited liability companies bring about?
Who mainly uses it?
Profit and loss, cash flow, liabilities,assets and capital
19th and 20th century due to growth of large businesses
Separation of management and ownership which needed extensive legislation governing financial reports
External user groups
Audits
What is an audit?
What does it monitor?
Objective
Accuracy of financial info
Cost and Management Accounting
When was it manly evolved?
What is the detailed cost info used for? (3)
What facilitates the detailed info?
20th century
Planning, decision making and control purposes
Computerisation
What should financial info be for maximum benefit to users? (3)
Relevant and concise
Reasonably accurate
Comprehensible
Accounting Concepts
Why do we have them?
What are they?
How often must organisations provide financial statements?
What is the name of this concept?
What is it?
Accounts are not as precise as thought, very subjective discipline
Financial statements all organisations must adhere to
Periodically (at least once a year)
Periodicity concept
The life of the organisation being divided into accounting periods
What 3 main features do accounts drawn up at the end of each year consist of?
What is in the statement of financial position?(3)
What is the equation for this?
What is in the statement of profit and loss?(3)
What is the equation for this?
What is in the cash flow statement?
Statement of Financial Position
Statement of Profit or Loss
Cash Flow Statement
Assets, Liabilities and Capital
A-L=C
Revenue,Expenses and Profit/Loss
R-E=P/(L)
Cash inflows and cash outflows
What is an asset?
It can be ……
What are claims on assets?
What 2 places can these come from?
What is a liability?
What is it expected to result in?
It can be ……
What is a loan?
A resource controlled by an enterprise from which economic benefits are expected to flow.
Measured reliably
The cash used to attain the asset
Capital or loans
An amount owned by an enterprise payable to other people or businesses.
In outflow
Reliably measured
Amount owed to trade payables for goods or service bought on credit
Equity
What is equity?
What does it represent?
What can it be described as?
Capital of business
Owners stake in the business
Residual claim on assets of an enterprise after liabilities have been deducted
What is a PLC?
What is a LTD?
Public limited company
Limited liability company
Accounting Equation
What is it?
What are the totals of each section?
What aspects of SFP will business transactions affect?
Why must both aspects be observed?
What is this known as?
Statement of financial position constructed in 2 sections
Equal to one another
Assets of cash at bank
Equity
They underpin the financial equation
Dual aspect concept
What is the business entity concept?
What is inventory?
Business owner and business are two separate things
Goods held by a business for resale
Accounting concepts when valuing inventory
What are the 3 concepts?
Prudence concept
What is everything valued with?
There is no what?
Realisation concept
What is not recognised until it is realised?
Why is inventory not valued at selling price?
Prudence concept, historical concept and realisation concept
Caution
Overstating or understating
Profit
Because that indicates a profit
Draw out an Accounting Equation including:
Cash at bank Trade creditors Motor vehicles Debtors Cash in hand Long term bank loans Inventory Land and buildings Bank overdraft Plant,fixtures and fittings
Use notes
Ordering and classification of assets and liabilities
How are they ordered?
What are non current assets?
What are current assets?
Example of non current liabilities?
What are current liabilities?
Reverse liquidity
Long life assets usually used over more than a year
Assets expected to be realised/held for sale or consumption within the entity’s cycle/next 12 months or cash/cash equivalents
E.g. Loan payable in 10 years
Liabilities expected to be settled in normal course of operating cycle/12 months that do not have unconditional right to be deferred for 12 months
