Accounting Basics Flashcards
(17 cards)
Define accounting
It identifies, measures, and communicates the financial statement of a company to gather correct information for better decision making
What is a financial statement?
Way for accounting to communicate
What is a statement of financial position?
It describes everything that a company have
What is an asset?
Things that I have, whether I own it or not
Tangible/intangible
What is equity?
Things that I own, absolute control
What is a liability?
What I owe
What are the 4 conceptual frameworks?
- Going Concern
- Accounting Entity
- Time Period
- Monetary Units
What is conceptual framework
The foundation of accountancy
What is going concern?
It assumes that a business will last forever
What is an accounting entity, and why is it needed?
There should be something to account for
Why is time period important?
To measure and analyze what’s going on with the company
How does monetary units work?
Measured using a singular currency
Who are the primary users of the financial statements?
Owners/Investors/Creditors
- has direct financial connection
- they make big decision
Who are the other users of the financial statements?
The receivers/secondary
Three reasons why financial statements are important
- Info for decision making
- Info for future cash flows
- Info for resources & claims
2 qualitative characteristics
Relevance
Faithful representation
5 characteristics under faithful representation
Complete information Timely Neutral Substance over form Cost benefit
