Cheatography
https://cheatography.com
for my own study but sharing my notes as well!
Role of Accounting
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What is the role of accounting? Provide accounting information for stakeholders to make informed decisions for the performance of business
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What is Decision-Making? Prepare accounting information and provide both accounting and non-accounting information for decision-making
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What is Stewardship? Manage business resources on behalf of owner
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Professional Ethics
Integrity |
Be straightforward and honest in the communication of financial information |
Objectivity |
Information must be unbiased and not be influenced by personal feelings |
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Types Of Business
Trading Business |
- Exchanges goods for money, e.g supermarkets/furniture/clothing shops |
Service Business |
- Exchanges services for money, e.g Dental/Tuition/Salon |
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Stakeholders
Internal Stakeholders |
Owner/Manager |
- Measure & Evaluate performance of the business |
Employee |
- Whether they should work for the business |
External Stakeholders |
Shareholders |
- Invest into the business |
Lenders and Suppliers |
- Whether to provide for the business |
Competitors |
- Compare performance |
Customers |
- Whether to buy from the business |
Government |
- Assess whether business is abiding laws |
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Accounting Theories
Accounting Entity |
Only business transaction is recorded |
Accounting Period |
Life of business is divided into regular time intervals |
Going Concern |
Business to have indefinite economic life unless credible evidence is shown that it may close |
Monetary |
Only things that can be recorded down in monetary terms |
Historical Cost |
Transactions to be recorded at original cost |
Accrual basis of accounting |
Business activities that have occurred should be recorded in relevant accounting period |
Revenue Recognition |
Revenue earned when goods delivered is provided |
Matching |
Expenses incurred must be matched against income earned in same period to determine profit earned |
Objectivity |
Accounting information recorded must be supported by reliable and verifiable evidence |
Prudence |
Least overstates assets and profits and understated liabilities and losses |
Consistency |
Once method is chosen, it should be applied for all periods to ensure consistency |
Materiality |
Transactions is considered material if it makes a difference in decision-making process |
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