Lecture 1 (24/9) Flashcards
(70 cards)
What do businesses need in order to function
need money
What is one of the main reasons to start a business
To make money
What will business owners WANT TO do in the future
MAKE MONEY MONEYYYY
What is accounting?
keeping track/producing reports to work out how to make money/ fix problems
-communicates the information they have created to decision makers
Why do businesses need accountants if they want to function
accountants will keep track of money, make sure money is under control
Why do buinsesses need accountants if they want to make money?
they would need them so they will be able to know how much money buisnesses are making (external people will also like this information eg. investors)
Why do businesses who want to make MORE money in the future need accountants
they will have detailed information to help them decide how to best do this
-by having a track record of their financial information they are able to improve.
What are the two core areas of accounting
Financial accounting and Management accounting
What is financial accounting?
recording what’s going on with the operations and money and product the business status so it can be published so ppl can know how it is doing
–done once a year
What is Management Accounting
record the info and use internally how to make businesses better –
e.g. changing prices/ stop making products
etc. make decisions to improve internally –inside business through the year –constantly looking at how to improve and get rid of stuff not making profit
What are the two specialists areas
Auditing and Tax
What is Auditing
basically checking financial accounts
= ensuring the data is reliable
- Independent checkers check the financial statement of the businesses to ensure this
What is tax accounting
financial statements work out how much tax – reduce tax bill etc
What are the reasons to study Financial Accounting before Management Accounting
-First introduced 500/600 years ago.
-easier to understand
What is the main goal of Accountants?
Work out how well a business did in a year
Goal of Financial accounting
Producing a financial statement
Why are financial statements important?
people need to know how the business is doing - they need to know for many reasons
e.g. Investors need to know so that they don’t make a risk investment - they need to make a return on investment
What will happen if there arent any financial statements?
The economy will go to a halt:
> people don’t know how the business is operating
> don’t know if they are making a profit/loss
> people are uncertain
> no one will invest/banks wont lend
>businesses wont be able to operate
without money
> = crashed economy = no taxes paid etc
List 8 people/groups of people who are interested in the financial statements.
-Owners/shareholders/potential investors
-Lenders (e.g. banks)
-Employees
-Competitors
-Suppliers
-Customers
-General Public
-Governments
Why are :Owners/shareholders/potential investors, interested in financial statements
Want to know:
- their Return on investment (e.g. is the business making profit)
Riskiness on investments (will they make a loss)
Why are Lenders, interested in financial statements
Want to know:
-Businesses ability to repay loan and interest
Why are Employees, interested in financial statements
Want to know:
-Job security (e.g. will be made redundant/wages etc)
-pay rises
Why are Competitors, interested in financial statements
Want to know:
-Rivals:
-sales
-margins
-cost structure
Why are Suppliers, interested in financial statements
Want to know:
-Ability o pay for goods/services (e.g. if got trade credit)
-continuity of operations
