LEcture 1ab and 1b Flashcards
(26 cards)
What is the main role of financial accountants?
To prepare financial statements and perform audits
Financial accountants focus on historical financial data and compliance with accounting standards.
What is the main role of management accountants?
To identify product/service costs, prepare budgets, and support financial decision-making
Management accountants provide information for internal management purposes.
What are creditors/trade payables?
Money owed to suppliers
This represents a liability on the balance sheet.
What are debtors/trade receivables?
Money owed by customers to the business
This represents an asset on the balance sheet.
What is a ledger?
A book containing all accounting information in T-account format
Ledgers are crucial for tracking financial transactions.
What does a profit and loss account/income statement show?
The amount of money made over a period of time
It details revenues and expenses to show profitability.
How is income calculated in an income statement?
Revenue from sales minus expenses like rent and wages
This calculation determines net income for the period.
What does a balance sheet/statement of financial position show?
The company’s worth at a specific moment in time
It provides a snapshot of assets, liabilities, and equity.
What are non-current assets?
Items kept for more than one year, like property, machinery, and vehicles
Non-current assets are essential for long-term operations.
What are current assets?
Items used within one year, like trade receivables and cash
Current assets are crucial for day-to-day operations.
What are non-current liabilities?
Money to be paid after one year
These liabilities impact long-term financial planning.
What are current liabilities?
Money to be paid within one year
Current liabilities must be managed to ensure liquidity.
What is the going concern concept?
The assumption that the business will continue operating in the future
This concept underpins financial reporting.
What is the accruals concept?
Transactions are recorded in the period they occur, not when cash is received or paid
This ensures that financial statements reflect true business performance.
What is the cost concept?
Transactions are recorded at their original cost
This principle ensures consistency in financial reporting.
What is the money measurement concept?
Each transaction must have a monetary value
This concept ensures that only quantifiable transactions are recorded.
What is the business entity concept?
The business has a separate identity from its owners
This principle is fundamental for accurate financial reporting.
What is the prudence concept?
Losses are recorded as soon as they are known
This concept prevents overstatement of financial health.
How does financial accounting differ from management accounting in terms of time orientation?
Financial accounting looks backward; management accounting looks forward
This distinction affects the type of information provided.
Who regulates financial and management accounting?
Financial accounting is regulated by law; management accounting is decided by companies
This leads to different compliance requirements.
How does the nature of information differ between financial and management accounting?
Financial accounting is certain; management accounting is based on predictions
This affects decision-making processes.
What is the main purpose of financial accounting?
To produce financial statements
Financial statements provide a basis for external reporting.
What is the main purpose of management accounting?
To support internal decision-making
This involves analyzing data for strategic planning.
What do merchandisers do?
Buy and sell finished goods
Merchandisers typically do not engage in manufacturing.
