Week 1 - Intro / Balance Sheet Flashcards
Accounting is
the process of recording and summarizing financial information in a useful way
Users of Financial Statements
Investors, empolyees, lenders/suppliers, customers, governments and their agencies, public
Financial accounting
concerned with recording, processing and presenting economic information after the event to interested people outside the organization
management accounting
concerned with meeting the information needs of managements (internal users). particular emphasis on planning, controlling, and decision making
Financial Statements (accounts) consist of:
Income Statement (Trading and Profit/Loss)
Statement of Financial Position (Balance Sheet)
Statement of Cash Flow
An asset is
a right to potential economic benefits (cash flow/sales) which are controlled by the entity as a result of past events (purchase of an asset). Refer to things that you own or are owed.
a resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide a future benefit
Assets are reported on
a company’s balance sheet
Non Current (Fixed) Assets are
used on a continuing basis (longer than one year)
ex: land and buildings, motor vehicles, plant and machinery, furniture and fittings, long term investments
Current Assets are
items of value owned by the business for short-term use (within than one year)
ex: stock, debtors/receivables, bank and cash, short term investments
A liability is
a present obligation of the entity to transfer an economic resource (usually payment) as a result of past events (purchase of stock). Refer to things that you owe or have borrowed.
Current liabilities are
a company’s short-term financial obligation that are due within one year or a normal operating cycle
ex. accounts payable, trade creditors/payables, bank overdraft, accrued taxes
Long-term (non-current) liabilities are
obligation listed on the balance sheet not due for more than a year
ex. long term loan, lease obligations
Capital/Equity is
the amount invested by owner or partners in the business in form of cash or assets having some monetary value
Assets = ___ + ___
Liabilities + Capital
Assets - Liabilities =
Capital
Assets - Current Liabilities =
Capital + Long Term Liabilities
Fixed Assets + Current Assets - Current Liabilities =
Capital + Long Term Liabilities
