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ACCY chap 1 (Concepts and principles (Monetary principle:
Items included…
ACCY chap 1
Concepts and principles
Monetary principle:
Items included in accounting records must be able to be expressed in monetary terms (e.g. $).
Accounting entity concept:
Every entity can be separately identified and accounted for.
Owner’s transactions are separate from entity’s transactions.
Accounting period concept:
The life of a business entity can be divided into artificial periods.
Useful reports covering those periods can be prepared for the entity.
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Cost principle:
All assets are initially recorded in the accounts at their purchase price or cost.
To provide useful information, sometimes entities need to deviate from cost principle (e.g. revaluation of non-current assets).
Full disclosure principle
All circumstances and events that could make a difference to decision-making process should be disclosed in the financial statements.
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Conceptual Framework:
consists of a set of concepts to be followed by preparers of financial statements and standard setter
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The reporting entity (SAC 1): an entity in which it is reasonable to expect the existence of users who depend on general purpose financial reports for information to enable them to make economic decisions.
(3) sizable in any of the following ways — sales, assets, borrowings, customers or employees.
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Financial statements:
Section in the annual report that contains the summarised financial information of an entity prepared in accordance with applicable accounting standards.
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Statement of Changes in Equity: Reports total comprehensive income for the period and other changes in equity
Profit-Dividend=Retained earning
Statement of Financial Position: Reports assets, liabilities and equity at a particular point in time.
A=L+OE
Statement of cash flows:
-Reports information regarding cash receipts and cash payments for a particular period of time.
-Shows the net increase or decrease in cash during the period, and the cash amount at the end of the period.
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The notes to the financial statements clarify information presented in the financial statements, as well as expand on it where additional detail is needed
Corporate governance statement disclose the extent to which they have followed the ASX corporate governance recommendations
Directors’ report: A section of the annual report that provides information about the directors and their views on the company’s performance.
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Ratio analysis
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Liquidity ratios:Measures short-term ability of entity to pay its maturing obligations and to meet unexpected needs for cash
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current cash debt coverage = net cash provided by operating activities / average current liabilities
Indicates the entity’s ability to generate sufficient cash to meet short term needs.
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