The collection and recording of financial data, and the reporting, analysis and interpretation of financial data
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Financial Data
raw facts and figures upon which financial information is based
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Financial Information
Financial data that has been sorted, classified and summarised into a more useable and understandable form
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The Accounting Process
Source documents - records - reports - provide advice
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Entity
the business is assumed to be seperate from the owner and other businesses, and its records should be kept on this basis
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Going Concern
The life of the business is assumed to be continuous, and its records are kept on that basis
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Reporting Period
The life of the business must be divided into periods of time to allow reports to be prepared; these accounting reports should reflext the reporting period in which a transaction occurs
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Historical Cost
The recording of a transaction at its original cost or value, as this value is verifiable by reference to the source document
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Conservatism
Losses should be recorded when probable, but gains should only be recorded when certain, so that liabilities and expenses are not understated and assets and revenues are not overstated
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Consistency
Accounting methods should be applied in a consistent manner to ensure that reports are comparable between periods
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Monetary Units
All items must be recorded and reported in a common unit of measurement; eg. Australian dollars
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Relevance
Accounting reports should include all information that is useful for decision making and exclude information that is not
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Reliability
Accounting reports should contain information that is accurate, and free from bias or error
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Comparability
Accounting reports should be compared over time, and between companies
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Understandability
Reports should be presented in a manner that makes it easy for them to be understood
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Assets
A resource controlled by an entity, as a result of past events, from which future economic benefits are expected to flow to the entity
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Liabilities
A present obligation of the entity as a result of past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits
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Revenue
An inflow of economic benefits (or saving in outflows) in the form of an increase in assets (or decrease in liabilties) that increases the owner's equity. Except for capital contributions by the owner
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Expense
An outflow or consumption of economic benefits (or reduction in inflows) in the form of a decrease in assets (or increase in liabilities) that reduces owner's equity, except for drawings by the owner
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Other cards in this set
Card 2
Front
Financial Data
Back
raw facts and figures upon which financial information is based
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