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Concepts and definitions
Concept Definition
Enti
ty Busi ness &
ow ners
are t
reated
a s
sepa r
ate &
d i
sti
nct.
Accounti
n g
peri
od T he l
if
e
of
a n enter
p r
ise
is
divi
ded
int
o equal
ti
me i
nterval
s.…read more

Page 3

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Theory FAQ
1.I nt
e r
nal
co ntrols
Exp l
ain
brie fly
th e me aning
&
impo r
tance of
i
n t
ernal
co nt
rol
.…read more

Page 4

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T he
balance
in
share
p r
emium cannot
be used
for
payment
of
di
vi
dend
because:
Di
vidends
can onl
y be
dist
ri
buted
fr
o m r
etai
ned pr
ofi
ts.
Thi
s i
s i
n or
der
to
protect
t
he c
redit
ors.
Shar
e
premium account
i
s of
capi
tal
nat
ure
&
not
a r
eali
zed
prof
it
.
5.B o nus/
'scr
ip'
i
ssu e
vs.…read more

Page 5

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A dvantages
of
reval
uati
on :
Aff
ects
tangi
ble
assets
& capi
tal
geari
ng posi
ti
on.
I
ncrease i
n r
evaluat
ion
w i
l
l
improve gear
ing
rat
io.
Refl
ects
the
tr
ue
economic r
eali
ty
of
the
comp any
& may
be
capabl
e of
i
nfl
uenci
ng
the
deci
si
on
of
users.
D isadvant
ages of
r
evaluat
ion
I
ncur cost
,
e.g.
Cost
of
i
ndepe ndent
val
uer.…read more

Page 6

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To
meet
l
egal
const
rai
nts
.
9.Costi
ng
Defi
ne r
elevant
cost
s.
G i
ve one example
o f
a
rel
evant
cost
,
&
one example
of
an
i
rr
elevant
cost
,
in
a ma keor buy
decisi
on.
R elevant
cost
s ar
e costs
that
wil
l
be affect
ed /
changed
by t
he deci
si
on
under
consi
derat
ion.…read more

Page 7

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Useful
f
or
long
range
decisi
on maki
ng as
the
benef
it
s der
ived
fr
om
sel
li
ng
a pr
oduct
shoul
d cover
al
l
cost
s i
n t
he l
ong
run.
10.…read more

Page 8

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Lecture 1: Introduction to accounting
Definition
T o ol
i
n
provi
d i
ng useful
i
nforma t
ion
about
the
fi
nan ci
al
posi
ti
on,
per
for
ma nce
& cash
fl
ow
o f
an ent
it
y
for
decisi
on ma ki
ng
Sources of control of business
E xt
ernal:
by sharehol
de r
s
F i
na ncial
accounti
n g
I nt
e r
n al
:
by ma nageme nt
o f
the
comp any…read more

Page 9

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I nforma ti
on f
or
dec isi
on
maki
ng
Accounting entities (types)
S ole
p ro pr
ie t
orshi
p
L i
mite d comp any
9…read more

Page 10

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Lecture 2: Balance sheet, profit & loss statement, accounting equation
Accounting period
L i
fe on a n en terpr i
se i
s di
vided i
nto
eq ual
t
ime
int
ervals
F inancia l
yea r: 12
mo nths
How companies report to shareholders
B alance she e t
P rofi
t
& loss a c cou nt
C ash
flo w sta teme n t
Balance sheet
F inancia l
po siti
o n: what
a business
ow ns
vis àvis…read more

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