MFR - Lec1 Cards

Ray Welland
Flashcards by Ray Welland, updated more than 1 year ago
Ray Welland
Created by Ray Welland about 7 years ago


Preparation of Basic Financial Statement

Resource summary

Question Answer
Financial Accounting   Collection, analysis and communication of accounting information to interested parties within a regulated reporting framework  
Management Accounting   Seeks to meet mainly the needs of managers. Accounting information to enable short term decision making. (Break-even analysis, costing & budgeting, variance analysis)  
Financial Management   Ways in which funds for a business are raised Investment appraisal and long term decision making  
Entity   Is jargon term used by accountants to describe any type of organization  
Financial performance   Is usually judged by matching incomes received with expenditure incurred over a period of time (usually one year)  
Assets   Are regarded as being something that will result in a future economic benefit as a result of a past event. For example the purchase of plant and machinery will provide a benefit over many years  
Liabilities   Is defined as an obligation arising as a result of a past event. For example you may have bought some furniture but you do not have to start paying for it until next year. So for the time being, what you owe is a debt or an obligation, i.e. liability  
Capital Describes the amount that the owners have invested in an entity. In effect, 'capital' is the amount owed by the entity to its owners.
Private Company LTD Limited Liability Company
Public Company PLC Public Limited Company
Double Entry System Transactions are entered in the books of account using the “double entry” system. This means everything is entered twice - once as a debit and then again as a credit
Debit meaning to receive, or value received
Credit meaning to give, or value given
What the entity owns/possesses Assets = Capital + Liabilities
Trial Balance   At the end of the period a trial balance is produced to ensure the arithmetic accuracy of the double entries - the sum of the debit balances should equal the sum of the credit balances  
Capital expenditure   likely to provide a benefit for more than one accounting period e.g. the expenditure to buy an asset (machine)  
Revenue expenditure   is expenditure that is expected to provide a benefit for only one specific accounting period e.g. electricity, insurance  
Capital income   includes the finance provided by the owners and long term loans  
Revenue income   includes income from sales, dividends and rents  
Income Statement/Profit and Loss Account Consumption of cost of sales and expenses during the period.   Sales invoices raised during the period  
Balance Sheet   Statement of position. Investors. Assets, capital and liabilities at the year-end  
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