ACCT1511 Exam Revision
Topic 1 – Financial Reporting Principles and Accounting Standards
Accounting identifies, measures, records and communicates financial information to users – shareholders, creditors, regulators and other stakeholders via 4 financial statements.
Balance sheet
Income Statement
Cash flow statement
Statement of change in equity
Generally Accepted Accounting Principles (GAAP)
GAAP is a common set of standards and procedures developed by the accounting profession that are expected to be upheld in preparation of financial statements; developed when stock market crashed in 1929
SAC 1 – Definition of Reporting: require reporting entities to be identified by reference to the existence of users who are reliant on the general purpose reporting statement for decision making and evaluation
SAC 2 – Objective of General Purpose of Financial Reporting: is to provide useful information on a firm’s financial performance, position (structure, assets, liquidity) and cash flow to allow for economic decision making by users (mainly investors)
SAC 3 & 4 – Replaced by Framework for Preparation and Presentation
Components of GAAP:
Framework for the Preparation and Presentation of Financial Statements (The Framework)
Provides coverage of:
Objectives of financial report
Assumptions of underlying reports
Qualitative characteristics to determine usefulness of reports – assets and liabilities
Definition of elements which reports are constructed from – A, L, OE, Income, Expense
Recognition and measurement of elements
Distinguishes between general purpose financial report (for most user who rely on this as main info) and special purpose financial report (list for issue of shares)
Objective of financial reports - “The objective of financial statements is to provide information about the financial position, financial performance and cash flows of an entity that is useful to a wide range of users in making economic decisions”
Assumptions
Accrual basis of accounting:
Accounting identifies, measures, records and communicates financial information to users – shareholders, creditors, regulators and other stakeholders via 4 financial statements.
Balance sheet
Income Statement
Cash flow statement
Statement of change in equity
Generally Accepted Accounting Principles (GAAP)
GAAP is a common set of standards and procedures developed by the accounting profession that are expected to be upheld in preparation of financial statements; developed when stock market crashed in 1929
SAC 1 – Definition of Reporting: require reporting entities to be identified by reference to the existence of users who are reliant on the general purpose reporting statement for decision making and evaluation
SAC 2 – Objective of General Purpose of Financial Reporting: is to provide useful information on a firm’s financial performance, position (structure, assets, liquidity) and cash flow to allow for economic decision making by users (mainly investors)
SAC 3 & 4 – Replaced by Framework for Preparation and Presentation
Components of GAAP:
Framework for the Preparation and Presentation of Financial Statements (The Framework)
Provides coverage of:
Objectives of financial report
Assumptions of underlying reports
Qualitative characteristics to determine usefulness of reports – assets and liabilities
Definition of elements which reports are constructed from – A, L, OE, Income, Expense
Recognition and measurement of elements
Distinguishes between general purpose financial report (for most user who rely on this as main info) and special purpose financial report (list for issue of shares)
Objective of financial reports - “The objective of financial statements is to provide information about the financial position, financial performance and cash flows of an entity that is useful to a wide range of users in making economic decisions”
Assumptions
Accrual basis of accounting: