Four financial statements in order
income statement, retained earnings statement, balance sheet, statement of cash flows
Financial Accounting
For internal and external use
Management Accounting
Only used internally
General Accepted Accounting Principles (GAAP)
the common set of s...
current assets - ANSWERcash and other assets expected to be exchanged for cash or
consumed within a year
, Non-current assets - ANSWERItems owned by the business for more than one year ex.
land, building
Liabilities - ANSWERfinancing provided by creditors
Current Liabilities - ANSWERliabilities due within a short time, usually within a year
Non-current liabilities - ANSWERvalue of debts of the business that will be payable after
more than one year
Shareholders' Equity - ANSWERFinancing provided by shareholders
- Share capital/ common shares
- Retained earnings
Operating Activities - ANSWERMain revenue producing activities of the company
- interest and dividends received
Investing Activities - ANSWERPurchase and sale of long term assets sed to generate
future income and cash
- CF related to advances and loans made to other entities
Financing Activities - ANSWERResulting in changes in size and composition of a
company's equity and borrowing
Notes to the financial statements - ANSWERNotes clarify information presented in the
financial statements and provide additional detail.
Fundamental Qualitative Characteristics - ANSWER1. Relevance
2. Faithful Representation
Going Concern Assumption - ANSWERThe assumption that the company will continue
in operation for the foreseeable future.
Separate Entity Assumption - ANSWERstates that business transactions are separate
from the transactions of the owners
Historical cost assumption - ANSWERAssets recorded at purchase price
stable monetary unit assumption - ANSWERDollar's purchasing power is stable over
time
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