ACCT1501 Notes
ACCT1501 Notes
Financial accounting
Accounting is a process of identifying, measuring and communicating economic information to allow informed decisions by the users of that information.
Financial accounting measures an enterprise’s performance over time and its position (status) at a point in time.
Accrual accounting
The method of making an economically meaningful and comprehensive measurement of performance and position by recognising economic events regardless of when cash transactions happen, as opposed to the simpler cash basis of accounting. (Compared to normal cash accounting accrual accounting provides a more accurate financial statement) – under this method, revenues and expenses are reflected in the accounts in the period to which they relate.
Financial statements
Financial statements are required to provide information such as financial position, financial performance, financing activities and investing activities
BALANCE SHEETS: shows the financial position at a point in time
INCOME STATEMENT: measures financial performance over a defined period (such as a month/year)
STATEMENT OF CASH FLOW: shows the sources and uses of cash during the period
Balance sheets
Features of balance sheets include at heading which provides the company name, title of the report and the date at which the financial position is shown. The three elements of a balance sheet are assets, liabilities and shareholder’s equity.
Assets (useful financial resources) are the future economic benefits that are controlled by an entity (organisation) as a result of past transactions or other past events (Measureable in monetary terms). E.g. enterprises cash, accounts receivable inventory.
Assets= Liabilities + Shareholder’s equity
Liabilities (obligations to be paid) are the future sacrifices of economic benefits that an organisation is presently obliged to make to other organisations or individuals as a result of past transactions or events.
Financial accounting
Accounting is a process of identifying, measuring and communicating economic information to allow informed decisions by the users of that information.
Financial accounting measures an enterprise’s performance over time and its position (status) at a point in time.
Accrual accounting
The method of making an economically meaningful and comprehensive measurement of performance and position by recognising economic events regardless of when cash transactions happen, as opposed to the simpler cash basis of accounting. (Compared to normal cash accounting accrual accounting provides a more accurate financial statement) – under this method, revenues and expenses are reflected in the accounts in the period to which they relate.
Financial statements
Financial statements are required to provide information such as financial position, financial performance, financing activities and investing activities
BALANCE SHEETS: shows the financial position at a point in time
INCOME STATEMENT: measures financial performance over a defined period (such as a month/year)
STATEMENT OF CASH FLOW: shows the sources and uses of cash during the period
Balance sheets
Features of balance sheets include at heading which provides the company name, title of the report and the date at which the financial position is shown. The three elements of a balance sheet are assets, liabilities and shareholder’s equity.
Assets (useful financial resources) are the future economic benefits that are controlled by an entity (organisation) as a result of past transactions or other past events (Measureable in monetary terms). E.g. enterprises cash, accounts receivable inventory.
Assets= Liabilities + Shareholder’s equity
Liabilities (obligations to be paid) are the future sacrifices of economic benefits that an organisation is presently obliged to make to other organisations or individuals as a result of past transactions or events.