Introduction to Accounting: Concepts, Bases and Policies
Objectives of financial accounting
Financial statements
Trading
Profit and Loss acc
Balance Sheet
Cash Flow
Financial Accounting
Organisation of the current accounting period
Financial position at the end of the year
Managment Accounting
Future financial desicions
past transactions
Firm can:
Plan
Control
Make desicions
Qualities of financial information
Relevant
Meet requirements
Reliable
certified by director/auditor
Comparable
compared on consistent bases
Understandable
info. should be clear, concise and understandable
Users of Financial accounting
Banks, lending institutions
Trade Creditors
Ordinary Shareholders
Employees and trade unions
Government
Four Fundamental Concepts of Accounting
Going Concern
no intention that the business may close down
Accruals
all income and exp. must be included whether or not they have been paid or recieved
Consistency
Accounting items must be treated the same
Prudence
Caution!!! Profits shouldn't be overstated etc
Accounting Basis
the ways in which items are treated
Accounting Policy
when a business decided what base will they use
Other Accounting concepts
Entity
Distinction between business affairs and private affairs
Money measurement
items with monetary value
Materiality
greater than 5%of profits,then its a material
Realisation
profits are earned when goods/services are passed to customer
Double Entry
every Debit,a corresponding Credit
Period of account
one acc period consists with the next
Objectivity
accounts are prepared with no personal bias