Chap 1 Flashcards
(39 cards)
Accounting?
is concerned with collecting, analysing, communicating financial information.
Ultimate aim of Acc?
is to help those using this information to make more informed decisions.
The managers need accounting information to decide whether to? (5 ý)
- develop new products or services
- increase or decrease the price or quantity of existing products or services
- borrow money to help finance the business
- increase or decrease the operating capacity of the business
- Change the methods of purchasing, production or distribution
Vd cho develop new products or services?
(As with a computer manufacturer developing a new range of computers)
Vd cho increase or decrease the price or quantity of existing products or services?
(As with a telecommunications business changing its mobile phone call or text charges)
Vd cho borrow money to help finance the business?
(As with a supermarket wishing to increase the number of stores it owns)
Vd cho increase or decrease the operating capacity of the business?
(As with a beef farming business reviewing the size of its herd)
Vd cho change the methods of purchasing, production or distribution?
(As with a clothes retailer switching from UK to overseas suppliers)
Others outside the business need financial information to decide whether to? (3 ý)
- invest or disinvest in the ownership of the business
- lend money to the business
- offer the credit facilities.
Vd cho invest or disinvest in the ownership of the business?
(For example, investors who buy or sell shares)
Vd cho lend money to the business?
Banks providing loan
Vd cho offer the credit facilities.
Suppliers of goods or services offering delayed payment
Finance (or financial management)?
is concerned with the ways in which funds for business are raised and invested. (cái ni nằm at the heart of business)
Bản chất của Finance
In essence, business raises funds from investors (owners and lenders) -> make investments (in equipments, premises, inventories,..) với mục đích làm cho business vs owners giàu hơn. Funds cần được raised phù hợp với nhu cầu của business
Understanding of finance helps in identifying (4 ý)
- The main forms of finance available
- The costs and benefits of each form
- The risks associated with each form
- The role of financial markets in supplying finance
Understanding of finance helps in evaluating (2 ý)
- The returns from that investment
- The risk associated with that investment
Why does the quality of the investment decisions have profound impacts on the fortunes of the business?
Because business tends to raise and invest funds in large amounts for long periods of time.
There is a considerable overlap between the 2 subjects
Vd Acc reports are a major source of information for financing and investment decisions making.
Main users of financing/ acc of information relating to a business? (10 người)
- Customers
- Competitors
- Managers
- Owners
- Community representatives
- Employees and their representatives
- Government
- Investment Analysts
- Lenders
- Suppliers
Qualities that influence usefulness of Accounting information (7 cái)
- Reliability
- Relevance
- Understandability
- Comparability
- Verifiability
- Timeliness
- Cost straint
Nội dung đặc tính Relevance?
- Acc info must be relevant to the prediction of futures events (vd profits next year là nhiu) or relevant in confirming past events (vd profits earned last year). (2) quan trọng vì users cần check accuracy of earlier predictions mà họ have made để judge the accuracy of current predictions.
- To influence the decisions, acc info must be availabe when decisions are being made => Relevant info must be timely
Nội dung đặc tính Reliability?
Acc must be free from significant error and bias. It should be relied on by managers để represent information.
Problem của đặc tính Relevance vs Reliability?
Acc info which is highly relevant thì ko reliable và ngược lại. Khi strike the right balance between 2 cái ni thì needs of users should be overriding consideration.
Nội dung đặc tính Comparability?
- Enable users to identify changes in the business over time (vd trend in sales revenue trong 5 năm)
- Also help users to evaluate the performance of the business in relation to similar business
- Đặc tính ni đạt được bằng cách treating items that are basically the same in the same manner for acc purposes.
- Đặc tính ni được enhanced by making clear the policies adopted in measuring and presenting the info.