FAC1502: FINANCIAL ACCOUNTING CONCEPTS; PROCEDURES AND CONCEPTS 2024
ACCOUNTING - Planning; Recording; analyzing; interpreting financial
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PLANNING DECISIONS - Financial information is used to determine future actions. Historical information provided by the accounting process serves as a basis for forecasting.
CONTROL - Using financial information to evaluate the results of financial activities.
THE FUNCTION OF ACCOUNTING - 1. The value added to the networth of a person/entity during a particular period.
2. The accumulated networth of that person/entity
PROFIT ENTITIES - Sole traders; Partnerships; Close Corporations; Companies
NON-PROFIT ENTITES - Clubs; Charitable Organisations; Churches; Educational Institutions; Trusts
PUBLIC SECTOR - The Government; Provinces; Departments; Boards and Commissions; Municipalities
USERS OF FINANCIAL INFORMATION - 1. Investors - Providers of capital. Concerned with the risk involved in their investment. Need information to decide whether to invest, hold, or withdraw funds.
2. Employees - Interested in entity's stability and profitability for benefits and job security.
3. Lenders - Use financial information to determine if loans can be paid back with interest.
4. Suppliers and other trade creditors - Use informations for assurance that amounts owed are paid on time.
5. Customers - Need to know the state of the entity for reliability.
6. Government and their agencies - Use financial information for taxation, policies, and statistical purposes.
7. Public - Entities often contribute to the local economy by employing people and local structures:
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME - Financial results --> Financial Performance (financial period) ---> Financial Position
STATEMENT OF CHANGES IN EQUITY - Reflects the profit or total comprehensive income and reflects the capital or equity.
STATEMENT OF FINANCIAL POSITION - Reflects the networth of the entity at a specific time. Determined in terms of assets and interests. Affected by the entity's economic resources, structure, liquidity, solvency, capacity to adapt to economic changes.
STATEMENT OF CASH FLOWS - The ability to generate cash will determine whether the entity will be able to meet its economic comittments.
DOMAINS OF ACCOUNTING - 1. Financial accounting: External users - Creditors; Clients; Banking institutions.
2. Management accounting: Internal users - Management; Personnel
ACCOUNTING PRINCIPLES - The techniques used in the practice of accounting. Conceptual and Theoretical.
ACCOUNTING POLICY - A set of decisions abut how the entity will handle the same type of transaction in order to achieve consistency.
INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) - A general framework and accounting concepts; pricinciples; methods and procedures.
ACCOUNTING STANDARDS AND STATEMENTS - Aim to encourage widespread use of particular standards to eliminate bad alternatives.
GOING CONCERN ASSUMPTION - assumes an entity will remain in operation for the foreseeable future.
QUALITIVE CHARACTERISTICS OF FINANCIAL STATEMENTS - Attributes that make the information provided in financial statements useful. Relevance; Faithful Presentation; Comparibility; Verifiability; Timeliness; Understandability
ELEMENTS OF FNANCIAL STATEMENTS - Financial Position - Assets; Liabilities; Equity; Financial Performance - Income; Expenses
RECOGNITION OF ELEMENTS OF FINANCIAL STATEMENTS - 1. Concept of Profitability - Used in the recognition criteria
2. Reliability of Measure - An item must possess a cost or value that can be measured reliably before it can be recognized.
ACCOUNTING ENTITY - Is the organization for with financial data are to be collected.
FINANCIAL RESULT - Reported in the financial statements. Statemen of Financial Position; Statement of Profit or Loss and Other Comprehensive Income; Statement of Changes in Equity; A Statement of Cash Flows; Accounting Policies and Notes.
FINANCIAL PERIOD - The timeframe used to generate financial statements during the organization's existence. Statements prepared for 6 months or less are usually used for internal management; iplanning or control purposes. Statements prepared annually are used for external parties and internal use. [Show Less]