Summary
Summary Financial Accounting 188 A1S1
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Summary of financial Accounting 188. Chapter 1 to 10. This is a summary for A1S1. Diagrams and formats are included.
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What is Accounting?Measuring process for economic entities 1.4
Day 1 Financial Position
Financial / Accounting Activities
Day 2 Financial Position
(Has it improved or weakened? – Report)
,Financial Position / Frame of Reference – (Chpt 2 extended)
• It is the financial value of an entity at a particular moment in
time
• Expressed in a monetary value
Financial Activities
• Trade between two or more parties
• One party (X) delivers money, goods, services or legal rights
(legal claims) to other party (Y)
• Ownership or right to utilise is transferred from (X) to (Y)
• Terms and conditions (parties involved)
• Other party (Y) delivers money, goods, services or legal rights
(legal claims) with the same value to party (X)
, What is Accounting?
Measuring process for economic entities
Day 1 Financial Position
Financial
Financial / Accounting Activities Period
Day 2 Financial Position
(Has it improved or weakened? – Report)
,Purpose if Accounting (1.1)
• Measure Financial Position
• Measure any changes in the Financial Position
• Result of the entity’s financial activities
• Report financial information according to certain rules (GAAP
/ IFRS - 1.2) to the users of the information (1.3)
,Report – to users of information (1.3)
• Financial position
• On financial / accounting activities
• In the form of information and reports
– certain qualities (Chpt 2)
• Report to users of accounting information
o Investors
o Employees
o Lenders of money (Bank)
o Supplies
o Customers
o Government (SARS)
o Public
, What is Accounting?
Measuring process for economic entities
Day 1 Financial Position
Financial
Financial / Accounting Activities Period
Day 2 Financial Position
(Has it improved or weakened? – Report)
, Chapter 2 & 3:
• Financial Position (2.3 & 3.1):
ASSETS – LIABILITIES = FINANCIAL POSITION (E)
(Owner’s Interest / Equity / Capital)
Accounting work with positive amounts
A = L + E (Capital) – components explained in Chpt 2
• Owner’s Interest / Equity
- Result of accounting equation
- Represents the financial value +
- Value of funds invested by the owner in the entity
- Not the necessarily the same as market value
,Start Date Financial Position (A – L = E) or (A = L + E)
Subsequent Financial
Period Financial Activities Period
End Date Financial Position (A – L = E) or (A = L + E)
(Compile a financial report
on the financial position)
,Start Date Financial Position (A = L + E) or (A – L = E)
Money / goods / services / rights (claims) Balance
Subsequent =
Period Money / goods / services / rights (claims) Classify
End Date Financial Position (A = L + E) or (A – L = E)
(Compile a financial report
on the financial position)
, Entity Concept (2.3)
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