Accounting principles and procedures Flashcards
(13 cards)
What is a balance sheet
A balance sheet uus a statement showing a buisness’s financial position at a point in time. It shows a buisness’s assets and liabilties at a given date, usually at the end of the financial year.
What are the types of asset
Asset: thing that you will benifit from e.g. property.
Current Assets: assets to be used within 1 year.
Non Current Assets: non fixed items such as plant and machinery.
Liabilities: what a business owes due to past transactions e.g. wages and loans
What is a profit and loss statement
A summary of a buisness’s income and expenditure transactions.
What is a profit and loss statement
A summary of a buisness’s income and expenditure transactions
What is a companys revenue
Income from buisness’s activities e.g. money from selling services
What a companys expenses
outgoings to provide services
What is th GAAP
Generally accepted accounting principles refer to a 10 common set of accountung, principles and procedures that companies and their accountants must follow when they compile their financial statements.
What are some exmaples of GAAP
Regularity,
Consistency,
Sincerity with an accurate repersentation of the companys financial situation,
Permanence of methods,
No expectation of compensation,
Prudence with semblance of speculation,
Continuity,
Dividing entries across appropriate periods of time,
Full disclosure in all financial reporting,
Good faith and honesty in all transactions.
What are international accounting standards (IAS)
Published between 1973 and 2001, issued by the international accounting standards committee.
What are the international financial reporting standards (IFRS)
Published 2001 onward. Set of international accounting standards, which state how particular types of transactions and other events should be reported in financial statements. Creates a common accounting language.
What are some differences between GAAP and IFRS
GAAP is rules based whereas IFRS is principle based,
GAAP are more detailed than IFRS,
IFRS is open to interpritation whereas GAPP is more rigid,
What are some issues with IAS
No one set of accounting methods has been universally adopted,
GAAP complex rules can cause unnecessary complications in the preperation of financial statements,
IFRS offers too much freedom so does not prescribe transparency of a companies financial health.
What is IAS 40
AS 40 defines investment property as property that is held to earn rentals or capital appreciation or both.
