1 - Introduction to Accounting Flashcards
Define Financial Statements
They report on a business in monetary terms, and provide key information for internal and external decision making
Two types of accounting
Financial accounting & managerial accounting
What is financial accounting?
Provides information external decision makers (e.g. investors and lenders)
EXTERNAL
What is managerial accounting?
Focuses on information for internal decision makers (e.g. business managers)
INTERNAL
What are the two aims of tax accounting?
Complying with the tax laws
Minimising taxes to be paid
What is writ small sustainability?
Has to do with whether a business can continue to be profitable in the future as well in the present.
What is writ large sustainability?
Meeting the needs of the present without comprising the ability of future generations to meet their own needs
What is a proprietorship?
‘Sole trader’ of a small business establishment or individual professional business
What is a partnership?
Two or more individuals together as co-owners. Each owner is a partner
What is a company?
A business owned by shareholders, people who own shares have ownership in the business
Which type of business organisation has limited liability?
Company
Define Entity Concept
Business transactions are accounted for separately from personal activities
Define Accounting Period Concept
Defines the units of time for which accounting data are collected and the financial statements prepared
Define Cost Principle
Assets and services acquired should be recorded at their actual cost (reliable and objective data)
Define Matching Principle
All expenses must be matched in the same accounting period as the revenues they helped to earn
