ACCOUNTING AS A SYSTEM - created from Mind Map

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Accounting Info = Financial Statements

Input - daily monetary transactions = source docs = evidence of transaction

Output - 4 main reports Fin. Accounting

Internal = internal users = management = goals & responsibilities. Management Accounting (internal decision making)

External - Investors, suppliers, bankers, SARS. One set Fin. Statements for all. IFRS (external decision making)

Statement of comprehensive Income (Income Statement)

Measures Fin. performance of a business for a certain period - normally 1 year

Matches income earned with expenses incurred = calculate net P/L

Focus on only one accounting period

Statement of Financial Position (Balance Sheet)

What it owns (assets)

What it owes (liabilities)

Claim owners have against residual assets (assets less liabilities)

Shows where finance came from i.e. equity (owners), liabilities (external fin)

How they were invested (non-current & current)

Statement of cash flows (Cash Flow Statement)

Shows totals cash inflows & outflows during Fin year

3 categories - operating, investing & financing each with own inflows & outflows

Statement of changes in equity

Reconciles all opening equity & closing equity (beginning & year end) appearing on Balance Sheet (Statement of Fin. Position)