Summary CONCEPTUAL FRAMEWORK, CHARACTERISTICS AND ELEMENTS OF FINANCIAL STATEMENTS
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Course
Accounting (ACCN1010)
Institution
University Of The Witwatersrand (wits)
Book
Concepts-Based Introduction to Financial Accounting
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Conceptual framework, elements, characteristics of financial accounting
May 31, 2023
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2022/2023
Summary
Subjects
conceptual framework
financial accounting
accounts
financial statements
statements
elements of statements
assets
liabilities
expenses
income
equity
first year
qualitative characteristics
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CONCEPTUAL FRAMEWORK,
CHARACTERISTICS AND
ELEMENTS OF FINANCIAL
STATEMENTS
ACCN 1010/1006 Accounting study notes
Financial Accounting
ACCN1010
, Fundamentals:
• Basic economic problem (unlimited wants and need but limited resources
• Factors of production:
o Land
o Labor
o Entrepreneurship
o Capital
How a business works:
Businesses need funding:
• Liabilities (loans)
• Equity (investments)
Businesses use the capital obtained to purchase resources for production.
Business entities:
A business entity is a body (business) which has the ultimate/main goal of maximizing profit through
the use of resources
Forms of entities:
• Unincorporated entity:
o Mainly of partnerships and sole traders
o Do not have a separate legal persona
o Relationship between managements and ownership is negligible, as managers can
be owners (shareholders)
• Incorporated entity:
o Mainly consist of companies and closed corporations
o Has a legal persona
o And as a means to protect the public from exploitation, shareholders and managers
must be kept separate, (a manager may not be a shareholder in the company)
NB: economy consists of the private sector (households and businesses) and
the public sector (state owned enterprises)
Decision making and info.
The use of accounting to generate useful information which allows its users to make effective
economic decisions.
There are two types of users of financial info:
• Internal users (managerial accounting) (management)
• External users (financial accounting) (primary users such as investors and lenders)
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