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    This document provides an overview of key accounting concepts including accrual accounting, the four main financial statements (income statement, statement of changes in owners' equity, balance sheet, cash flow statement), and the nature and role of accounting. It discusses accounting as a service function that aims to provide relevant, faithful, comparable, verifiable, timely, and understandable information. Financial accounting prepares financial reports according to GAAP, while management accounting provides internal information to manage the organization. Finally, it briefly defines sole proprietorships, partnerships, and limited companies as types of businesses.

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    Notes

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    This document provides an overview of key accounting concepts including accrual accounting, the four main financial statements (income statement, statement of changes in owners' equity, balance sheet, cash flow statement), and the nature and role of accounting. It discusses accounting as a service function that aims to provide relevant, faithful, comparable, verifiable, timely, and understandable information. Financial accounting prepares financial reports according to GAAP, while management accounting provides internal information to manage the organization. Finally, it briefly defines sole proprietorships, partnerships, and limited companies as types of businesses.

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    This document provides an overview of key accounting concepts including accrual accounting, the four main financial statements (income statement, statement of changes in owners' equity, balance sheet, cash flow statement), and the nature and role of accounting. It discusses accounting as a service function that aims to provide relevant, faithful, comparable, verifiable, timely, and understandable information. Financial accounting prepares financial reports according to GAAP, while management accounting provides internal information to manage the organization. Finally, it briefly defines sole proprietorships, partnerships, and limited companies as types of businesses.

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    Notes

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    shotboi69
    This document provides an overview of key accounting concepts including accrual accounting, the four main financial statements (income statement, statement of changes in owners' equity, balance sheet, cash flow statement), and the nature and role of accounting. It discusses accounting as a service function that aims to provide relevant, faithful, comparable, verifiable, timely, and understandable information. Financial accounting prepares financial reports according to GAAP, while management accounting provides internal information to manage the organization. Finally, it briefly defines sole proprietorships, partnerships, and limited companies as types of businesses.

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    ACFI 1001 – WEEK 1 (27/02/20)

    Accrual Accounting – any transaction recorded going in or out of the business

    Assets (own)
    Liabilities (owe)
    Income (earn in the form of cash or credit transactions)
    Capital (equity)
    Expenses (incur in the form of cash or credit transactions)

    Financial Statements

    1. Income Statement
    - Also known as; Profit & Loss Statement, Statement of Comprehensive Income or
    Statement of Financial Performance
    Profit/loss - Finds the difference between total incomes against total expenses to calculate the
    profit/loss

    2. Statement of Changes in Owners Equity


    - Any profit or loss made by the company applies to the owner’s equity
    $10,000  $2,000 (dividends)
     $8,000 (retained earnings/profits)

    3. Balance Sheet
    - Also known as; statement of financial position
    - Contains the Assets, Liabilities and Capital
    - Assets = Liabilities + Capital (owner’s equity)

    4. Cash Flow Statement (cash-based accounting)


    - Records the flow of cash in/out of the business
    - Only applies to cash, not credit

    Accounting as a service function

    Relevance: able to be used to influence decisions


    Faithful representation: complete, neutral, free from error
    Comparability: to allow users to identify similarities and differences
    Verifiability: capable of being checked and verified by independent experts
    Timeliness: available early enough to be useful
    Understandability: clearly set out, as concisely as possible
    Nature and Role of Accounting
    - Financial accounting is the preparation and presentation of financial reports
    - Bounded by GAAP (General Accepted Accounting Principles)
    - Enable to make economic decisions regarding the firm, using historical costs

    Accounting
    - Financial Accounting
     Provides general-purpose financial info for a variety of users
    - Management Accounting
     Provides managers with the info they require to run the organisation

    Types of Businesses

    Sole proprietorship – an individual in business on his/her own account (unlimited liability)


    Partnership – two or more persons carrying on a business with a view to profit (unlimited
    liability)
    Limited Company – legal entity which has an identity separate from that of those who own
    and manage it

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