A - What is accounting?
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A - What is accounting?
1 2 what
What is accounting - Lecture 1 and 2
What are the three steps of accounting?
data to produce useful information >
info to interested parties
providers of accounting information?
Ltd / Plc
Clubs and societies
Why do entities undertake the accounting function? (Name 4 reasons)
Record money going in and out
Support decision making
Report activities and profit derived from these activities (performance)
Financial position (assets and liabilities)
Help assess benefit to society
Control a company (e.g. discipline, training, planning)
Plan for future
A basis for taxation
Supports legal relationships (business documentation support)
Name the users of accounting information (seven).
Why might investors use a companies accounts?
See return on capital and risk inherent in their investment (long term resources)
Stewardship of resources (how well are managers generating profit)
Share-trading/voting decisions (entitled to a say)
Ascertain future prospects (dividends)
Why might employees use a companies accounts?
Security - is job safe?
Pay - is it profitable? Good pay? Possibility of pay rise?
Promotions and opportunities (training)
Benefits and discounts
Why might lenders use a companies accounts?
Ability to repay capital and interest
Security of loan - in case of business failing, could assets be sold to repay loan
Why might suppliers use a companies accounts?
Credit worthiness of the organisation to pay (extend credit, cash flow, time to pay)
Time typically taken to pay suppliers (e.g. supermarkets take ages)
Why might customers use a companies accounts?
Security of supply - likely to continue or find new supplier?
Dependancy relationship - warranty fulfilled?
Why might government and their agencies use a companies accounts?
Regulation of companies
Why might the public use a companies accounts?
Range of activities of the company
utilities of financial information.
of methods used in preparing accounts and
of methods used relate to which utility of financial information?
sensibility of rigorously
applying accounting concepts relates to which utility of financial information?
value to evaluate relate to which utility of financial information?
factors are required to ensure accounts are reliable?
Faithful representation - reporting the substance of transactions
Neutral - Unbiased to all user groups
Free from material error - correct info
Complete - providing a rounded picture
Prudence - Not being overly optimistic, don't overstate assets and profits
Limitations of accounting informations (six)
Input affects output (GIGO)