Flashcards in Introduction & Ethics Deck (15):
Statement of financial position
A snapshot of the financial position of a company at a particular point in time.
Statement of profit or loss
A statement reflecting a businesses performance over a period of time. Includes income and expenses.
Fundamental qualitative characteristics
Relevance and faithful representation
Financial information is relevant if it has:
- predictive value;
- confirmatory value.
Complete, neutral, and free from error
Enhancing qualitative characteristics
Comparability, verifiability, timeliness, and understandability
The entity is viewed as continuing in operation for the foreseeable future.
Omissions or misstatements are material if they could influence the economic decisions of users taken on the basis of the financial statements.
Transactions are recorded at their cost when they were incurred. Historical cost understates asset values and overstates cost.
IESBA Code of Ethics
Professional competence and due care, Integrity, Confidentiality, Objectivity, Professional behaviour.
The accounting equation
Assets = Capital + Liabilities
Assets less liabilities
Business Entity Concept
A business is a separate entity from its owner
Income earned is matched with the expenses incurred in earning it