Acct1501 Notes

Note of ACCT 1501 Accounting and financial management 1A:
Introduction to Financial Accounting & Key Financial Statements: * Accounting: the process of identifying, measuring, recording and communicating economic information to assist users to make decisions * There are specific business language used in accounting:
1, Grammar
2,Vocabulary: every accounting terminology has its specific meaning
3, Practice: all is based on accounting standards, disciplines and assumptions
Through understanding the business language, we can understand the accounting cycle.

2 main division of Accounting System: * 1, financial Accounting system: Periodic financial statements and related disclosures: mainly helps external decision makers (e.g.: investors, creditors, bankers, government, etc.) * 2, Managerial Accounting System: Detailed plans and continuous performance reports: mainly for Internal decision makers (managers throughout the organization)

Financial Accounting: * It focuses on the provision of information to users external to the enterprises. * The focus is on reporting financial position and financial performance:
Financial performance: profitability, sales performance etc (mainly income statement)
Financial position: liquidity, solvency etc (mainly balance sheet)

Management accounting: * focuses on the provision of information to users within the enterprises (to aid in operational planning and control decisions)

The economic consequences can influence business through using accounting to convey economic information to decision makers: (related to financial reporting) * Recently, there are different changes and development influencing this area * For example, economic consequences in equity market: * Decision makers’ (investor/owner) decision is based on what value they are willing to either buy or sell shares in the market.

Reason why enterprises have to disclose their financial statements: * Both