1971890
Description
Mind Map by marymcgrath895, updated more than 1 year ago
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Created by marymcgrath895
about 11 years ago
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The structure & content
of financial statements
- The analysis of
expenses may involve
determining
- The nature of
expenses
- The function of
the expenses
within the
organisation
- The nature of
expenses
- To enable the financial
statements to provide a
complete picture of the
changes affecting equity
accounts, Australian
accounting standard
AASB 101, Presentation
of Financial Statements,
requires an additional
statement to be
prepared called the
statement of changes in
equity.
- This statement highlights all those
items which have either increased or
decreased the opening balance of
owner's equity
- This statement highlights all those
items which have either increased or
decreased the opening balance of
owner's equity
- The statement of financial
position (balance sheet) is
intended to communicate
information about an entity's
assets, liabilities and owner's
equity.
- AASB 101, an
entity should
classify an
asset as
current when
- it expects to realise the asset, or
intends to sell it or consume it in it's
normal operating cycle
- it holds the asset primarily for trading purposes
- it expects to realise the asset, or
intends to sell it or consume it in it's
normal operating cycle
- According to AASB101
an entity should
classify a liability as
current when
- It expects to settle the
liability in its normal
operating cycle
- It holds the liability
primarily for the purpose
of trading
- The liability is due to be settled within
12 months after the end of the reporting
period
- It expects to settle the
liability in its normal
operating cycle
- Materiality is a test used to
asses the extent to which
relevant and reliable
information may be
committed, misstated or not
disclosed separately without
having the potential to
adversely affect the
decisions about resource
allocations by user
- Consolidation accounting is a method of
combining the financial statements of two
or more entities that are controlled by the
same owners
- The assets, liabilities,
income and expenses
are aggregated with
the parent company's
accounts.
- The assets, liabilities,
income and expenses
are aggregated with
the parent company's
accounts.
- An important function
of accounting is to
indicate an entity's
liquidity and solvency,
or it's ability to pay
debts when they fall
due
- Classification of cash flows
- Operating activities arise from principal income
producing activities of the entity. they generally
involve receipts and payments for the
production, sale and delivery of goods and
services.
- Investing activities relate to the
acquisition and disposal of long term
assets, including property, plant and
equipment, and other productive
assets
- Financing activities are activities that relate
to changes in the size and composition of the
financial structure of the entity.
- Operating activities arise from principal income
producing activities of the entity. they generally
involve receipts and payments for the
production, sale and delivery of goods and
services.
- A cash flow statement provides a link
between successive statements of
financial position, and presents a
dynamic picture of the entity's flows of
cash over a period
- Cash flow statements provide
users with information that
may assist them in assessing
the ability of the entity to
- Generate positive cash flows into
the future in order to meet its
financial commitments
- Fund changes in the scope of the entity
- Obtain external finance, where necessary
- Generate positive cash flows into
the future in order to meet its
financial commitments
- There are 2 ways to prepare a cash flow statement
- Transactions-based
method: analyses each
transaction in terms of its
effects on the entity's cash
position
- Financial
statement-based
method: works
from existing
accrual-based
financial statement
figures, making
adjustments for
non-cash
transactions and
events
- Transactions-based
method: analyses each
transaction in terms of its
effects on the entity's cash
position
- In order to use the transactions based method of
preparing a cash flow statement, the complete set of
cash transactions must be obtained. each transaction is
then classified and grouped according to the activity
that it affects; operating financing or investing
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