What is Accounting? definitions, processes, roles
What is accounting often referred to as?
The language of business.
What is the main goal of financial accounting?
To report financial information to external users.
Which form of organisation is this unit making financial reports for?
For profit-seeking businesses.
What are the three main types of accounting users?
Internal, External and Primary users.
What are the four processes in accounting?
Identifying, Measuring, Recording, Communicating.
Financial accounting follows specific rules and guidelines. What are these called?
Accounting standards or principles.
What are the three main choices in which a business seeking profit, can operate as?
Sole proprietorship, partnership and company.
How do internal users utilise their accounting information?
The accounting information is used to help managers plan and run the business. (i.e. how do they pay off debts)?
How is the accounting process usually communicated?
Within Financial Reports/ Statements.
Which financial statement shows what a company owns and owes at a certain date?
Balance sheet.
Which organisational structure would a professional service business like accounting, fall under?
Partnership - Professional services like accounting are often partnerships
What are the three categories of primary users?
Investors, Lenders and Other Creditors.
How is accounting concerned with sustainability?
It can help monitor the proper utilisation of resources and hold stakeholders accountable.
Which financial statement summarizes a company's revenue and expenses over a period of time?
Income statement.
Which out of the three main organisational structures, are held less responsible for debts incurred by the business?
Sole proprietorship and partnership - unlimited liability
What information needs do employees and trade unions use?
Information on whether the entity can pay increased wages and benefits, and offer job security.
What type of accounting would a charity use and what is their goal?
As a not-for-profit entity, they focus on fulfilling their mission and administrative goals - such as raising funds for marginalised communities - rather an focusing on making a profit.
Financial accounting involves recording transactions. What are these records commonly called?
Financial records or accounts.
How would accountants make financial reports for non-for-profit organisations (eg. charities)?
A non-for-profit financial statement summarizes it's financial activities and health over a fiscal or quarterly period. Various reports and disclosures would be made to show how resources are managed, in order to support the organisation achieving its mission, rather than through profit and loss financial reports.
What are the financing activities?
Involves cash flows related to changes in the financial position of the business, such as obtaining and repaying capital.