Accounting Objectives & Principles
The discipline that measures, records and processes information about an entity, providing reports to stakeholder for the purpose of making decisions
What is accounting?
The accounts used to complete the purchase of inventory on credit
What are inventory and accounts payable
I am known as being a 'special form of liability' as i represent the owner's investment into the business
What is owners equity
A business owned by one person
What is a Sole Trader?
A type of account owed by a business to third parties
What is a liability
A business must account for and record all assets at the original cost or purchase price at this on their Statement of Financial Position
What is the Historical Cost principle?
The accounts that increase if a property is purchased using a loan from a bank
What are Property & Bank Loan accounts?
A type of account that represent things of value owned by a business
What is an asset
Income impacting O.E. resulting from the operations of a business
What is revenue?
Revenue less Expenses is equal to this
What is Net Profit?
Investors, the ATO, banks, and creditors are examples of what type of users of accounting information?
What are external users?
The nature of these REALO accounts are credit in nature
What are revenue, liabilities and owner's equity
A financial statement that reports assets, liabilities, and owners equity on a specific date
What is the Statement of Financial Position?
An account which reduces owners equity when used by the owner to withdraw funds or assets from the business
What is the Drawings account?
Mr Gane has taught us that A + E + DR = L + OE + R + CC
What is the extended accounting equation?
(or the extended extended accounting equation)
The assumption that an entity will remain in business for the foreseeable future
What is the Going Concern principle?
The accounts that are used if an owner withdraws cash from the business for personal use
What are cash at bank & drawings
A business that performs an activity for a fee
What is service business?
A fundamental element of the accounting equation, is credit in nature, and can be classified as current & non-current
What is a liability?
Assets = Liabilities + Owners Equity
What is accounting equation?
The concept that states that the transactions associated with a business must be separately recorded from those of its owners
What is the Business Entity Concept?
The accounts that are used if services are sold on credit
What are Service Fee Revenue & Accounts Receivables accounts?
This financial statement that summarises the revenues, costs, and expenses incurred during a specified period
What is Statement of Profit or Loss
The Statement of Financial position that reflects the accounting equation in the form of A = L + OE
What is the T-Form or Account Statement of Financial Position?
Statement of Profit or Loss & Statement of Financial Position
What are the two financial statements