Accounting

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Aims of accounting:

To measure profit/loss

To place a value on assets

To place a value on liabilties

To know what the business is worth

To measure return on investment

How much cash they have,owe and are owed

Internal users of accounting:

Managers

Officers

Internal auditors

Sales staff

External users:

Lenders

Shareholders

Governments

Consumer groups

Customers

Entity concept:

Business exists seperately from it's owners

When a business is first created it owes and is owed nothing

Statement of financial position(Balance sheet), lists:

Assets

Liabilties

Capital

Accounting equation:

Resources in the business= Resources supplied to the business

Assets= Liabilties+capital

Assets:

Resources of a business,used to generate income

Probable future economic benefits obtained or controlled by a particular entity as a result of past events

Items of value owned or controlled by an organisation

Tangible and intangible

Non current Assets(Longer than 1 year)

Current assets( Less than 1 year)

Asset examples:

Inventory

Trade and other ecievables

Cash and equivilants

Land and buildings

Plant and equipment

Intangible assets( patents etc)

Liabilties:

Money owed to providers of the funds used by the business

Current Liabilties( Less than a year)

Non-current liabilties( Greater than a year)

Capital= Money owed by the business to the owner