Accounting Outcome 1

Assets (current, non-current), Liabilities(current, non-current), Owners Equity, Revenue, Expenses

A present economic resource controlled by the entity as a result of past events that has the potential to produce future economic benefits

Cash and other assets that are expected to be converted to cash within a year

A company's longterm investments where the full value will not be realised within the accounting year

A present obligation of the entity to transfer an economic resource as a result of past events.

A company's debts or obligations that are due within one year or within a normal operating cycle.

Long-term liabilities, which are financial obligations of a company that will come due in a year or longer.

The residual interest in the assets of an entity after deducting all its liabilities

The formula that represents the format of the balance sheet. (Assets = Liabilities + Owner’s equity)

A financial report that details a business’s financial position by reporting its assets, liabilities and owner’s equity at a particular point of time.

Cash at bank • Inventory • Accounts receivable • Vehicles • Equipment • Furniture • Fixtures and fittings • Machinery • Building

Revenues are increases in assets or decreases in liabilities that result in increases of owner’s equity, other than those relating to contributions of the owner.

Decreases in assets or increases in liabilities that result in a decrease of owner’s equity, other than those relating to distributions to the owner.

The total amount remaining after you subtract total expenses from total revenue

Revenue - Expenses = Net Profit

Fees – Service business • Sales – Trading business (Cash and credit sales) •

Advertising • Electricity • Insurance • Interest • Office Expenses • Rent • Telephone • Wages

Financial (Pros and Cons) then either Social or Environment (Pros and Cons)

Business Documents → Data Input →Business Reports →Business Decision Making

a raw collection of facts

data put into a meaningful form for a particular use

Business documents

Source of raw financial data - receipts, invoices, EFT documents etc

Data is sorted into groups and then noted in financial records

Financial reports providing useful information in summarised form

Generally accepted rules of how a business should record their accounting information

The requirement that a business must keep the set of financial records seperate to the owners or other business’

The belief that a business is expected to operate into the future and will continue forever

Revenues are reported in the period they are earned and expenses in the period they are incurred in order to determine profit (accounts payable/recievable)

Accounting take place over specific periods and that these set segments of time have an equal duration so that meaningful comparisons of progress can be made across the different periods.

This assumption enables users of accounting reports to make decisions based soley of the performance of the business

Allows business to recognise transaction that span over the course of one accounting period (like credit transactions) and enables businesses to distinguish between an asset and expense (expense is consumed within a reporting period whereas an asset has the ability to provide future economic benefit)

Allows for profit to be calculated based on the revenue earned and expenses incurred for a particular reporting period

Reporting periods should be consistent over the life of a business so comparisons can be made between reports

Standards that must be met when preparing financial reports so the information they contain is useful for decision making

timeliness, understandability, faithful representation, verifiability, comparability, relevance

A qualitative characteristic that requires financial information to be available for decision makers in time to be capable of influencing their decisions. The older the information, the less useful

A qualitative characteristic that requires financial information to be presented without any missing information, no misleading information. The report must be concise, clear in presentation with headings and subheadings. Making the report easy to navigate and cross reference. The report must be able to be understood with those who have a basic knowledge of finance

A qualitative characteristic that requires financial information contained in the reports to be complete, free from bias and without error

A qualitative characteristic that requires two or more independent observers to reach the same conclusion of the accounting report, that they are faithfully represented and the actual events of the business

Upheld through referencing and maintaining source documents as evidence for transactions (checked through auditing) If the reports are not verifiable then the information has not been faithfully represented

Information in the accounting reports can be useful when it is compared to previous reports and with similar information from other entity’s reports

Identify and understand similarities and differences among reports. Display changes in accounting procedures over time

an official financial inspection of a company and its accounts

Information available is capable of influencing decisions, helps confirm information and form predictions for future outcomes

A document containing financial information, that provides evidence that a financial transaction has occurred (a receipt verifies a business has received cash)

A document containing financial information, that has been issued when an EFTPOS sale. This confirms that funds will be taken from the account and deposited into the business account on behalf of the customer (quicker and can be processed online at any time)

A source document used to verify the details of a cash payment made by cheque

A source document issued by the bank as a record of all transactions affecting the bank account over a period of time

A source document containing financial information of goods and services sales on credit. This means the business has provided a good or service but is awaiting payment. An accounts receivable is created

Verifies the details of a credit transaction

A source document issued by a business to its credit customers summarising the purchases and payments between the customer and the business over a period of time

Cash Receipt

EFT receipt

Sales invoice

Statement of account

Cheque/Cheque butt

Bank statement

Memo

Evidence a financial transaction has occurred,

capital = assets - liabilities

an accounting report showing assets on one side and liabilities and owners equity on the other

an accounting report prepared in a vertical fashion down the page, highlighting the owners equity in the business

Owners equity (capital) → is represented by: → Assets (current/non-current) → Less: Liabilities (current/non-current) → Net assets

Understandability

OE = A - L

Working Capital = Current Assets - Current Liabilities

Working Capital ratio = Current assets/Current liabilities

the ability of a business to meet its short-term obligations as they fall due

a simple accounting system in which one entry is made for each transaction

a multi-column record used to record the daily receipts or payments of cash over a period

Cash Journal

a machine rented by a business owner from a bank to make EFTPOS transactions

a document used to confirm a request to a supplier to provide goods or services. (pro: firm has a record of goods ordered, which can be cross-checked with goods delivered). Includes description of goods, quantity, size, colour, range etc plus desired delivery date

a document that may come with goods when they are delivered, that the purchaser is required to sign to acknowledge delivery has occurred. Includes, a description of goods and quantity supplied. Not recorded in the accounting system

a document that informs a business’s customers of all transactions over the previous month.

Delivery Docket

Order form ( from business to supplier) → Delivery Docket (to business) → Invoice (to business) → Cheque/EFT payment (to supplier) → Statement of account (to business)

Cost of a decision to a business, Potential benefits to the business, effect on the reputation of the business, potential environmental damage of business decisions, Financial and emotional effect on individuals (including owners, managers and consumers)