Summary: Accounting And Financial Reporting

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• 1 understanding the basic of financial reporting

• 1.1 chapter 1

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• Who are the two most common types of external users and how do they use accounting?

  - investors (owners): use accounting information to decide whether to buy, hold or sell ownership shares of a company
  - creditors (such as suppliers and bankers): use accounting information to evaluate the risk of granting credit or lending money

• What is the basic accounting equation?

  Assets = liabilities + equity

• What si equity?

  The ownership claim on a company's total assets

• What does accounting consist of?

  Accounting consist of three basci activities: it identifies, records and communicates the economic events of an organisation to interested users

• What is a comprehensive income statement?

  A financial statement that presents items that are not included in the determination of net income, referred to as other comprehensive income

• What is an economic entity assumption?

  An assumption that requires that the activities of the entity be kept separate and distinct from the activities of its owner all other economic entities

• What is the expanded accounting equation?

  Assets = liabilities + share capital - ordinary + revenue - expenses - dividends

• What is the fair value principle?

  An accounting principle stating that assets and liabilities should be reported at fair value (the price received to sell an asset or settle a liability)

• What is a faithful representation?

  Numbers and descriptions match what really existed or happened, they are factual

• What is the financial accounting standards board (FASB)?

  A private organisation that establishes generally accepted accounting principles in the United States (GAAP)