Week 1 Flashcards
What is Accounting
Collecting, analysing, communicating financial information
What is Accounting used for?
Provides financial information to help different user groups make more informed decisions
What informed decisions can it help users make?
Investor- to invest? Lender- to lend money? Supplier- to sell goods? Manager- develop new product?- increase operating capacity?
Accountancy jobs
Financial Accountant, Management Accountant, Cost Accountant, Auditor, Tax Consultant, etc.
Accounting use in management
CEO/Managing director- which area to expand?
Sales director/manager- cost and price of product?
HR Director- costs and benefits of employee wellbeing scheme?
Marketing manager- Worth spending £Xm on new advertising campaign?
What is financial accounting?
Provides information to users outside the organisation
What documents are used in financial accounting?
Financial Statements:
SOPL (Income Statement), SOFP (Balance Sheet), Statement of Cash Flows
What is the time frame of financial accounting?
Information provided on past (historical) produced after accounting year end
Reporting cycle of financial statements
Annual, Semi-annual, Quarter
What format?
Standard as regulated by Company law and/or Accountong standards
What type of information provided?
Objective and verifiable
What is a bookkeeping system?
Collection and organisation of data and transactions
What is management accounting
Provides information to internal users (manager) and concerned with future
What does management accounting help with?
Decision making process and controlling resources
Reporting cycle of Management accounting
As frequently as needed by managers
Features of management accounting
More frequent than financial
Non subject to regulation- meets needs of managers
Information from various sources (financial and non- financial
Non- verifiable information used
What is business
Organisation or enterprising entity engaged in commercial, industrial or professional activities. Can be profit or non profit.
What is a plc?
Shares listed and traded on stock exchange
What is an ltd?
Shares cant be traded on stock exchange- shares held by members of family or larger company
What is limited?
Shareholders (investors) liability limited to amount they invest in company . If company becomes insolvent and can pay liabilities shareholders do not need to use personal wealth to pay back liabilities.
What is a sole trader?
A person in business alone
Capital raised by personal savings. loans from friends, banks etc
Liability unlimited- Creditors have right to require owner to use personal assets to pay back money
Accounting Information System
Identify and capture information
Record information in systematic manner
Analyse and interpret information collected
Report information in a way which suits needs of user (financial statements)
Capital
Amount owners have invested in business
Drawings
Amounts taken out of business for owners personal use
