Week 1 Flashcards
(20 cards)
what is the main purpose of accounting
communication of information for decision making
what is management accounting for
management decisions within the organisation
what is financial accounting for
external stakeholders decisions about organisations
who are the primary users of annual reports
investors, lenders, creditors
who are the secondary users of annual reports
customers, competitors, employees, government, investment analysts
what is the accounting entity
focus of the decision making
what is income
value received when goods/services are delivered to customers
what are expenses
costs to deliver goods/services
what are assets
resources controlled by the entity that are of future value
what are liabilities
obligations to transfer resources to third parties
what is equity capital
owners investment in the entity
how do you calculate assets
assets = liabilities + equity
how to you calculate equity capital (eq 2)
equity capital = assets - liabilities
how do you calculate profit
profit = income - expenses
how do you calculate equity capital (eq 4)
equity capital = amounts paid in by owners + profit - amounts withdrawn by owners
what is equation five
assets - liabilities = amounts paid in by owners + income - expenses - amounts withdrawn by owners
what is the statement of profit and loss
covers all income and expenses during an accounting period
what is the statement of financial position
includes all assets, liabilities and equity capital
what is the statement of cash flows
shows the movements of cash in and out the company
shows an entity’s financial adaptability
what is a bookkeeping system
maintaining a record of the nature and monetary value of transactions usually in books of the account
