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FAC1502 SUMMARY NOTES
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FAC1502 SUMMARY NOTES
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lOMoARcPSD|48680473http://wikistudent.ws/Unisa 1
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STUDY UNIT 1:
THE NATURE AND FUNCTION OF
ACCOUNTING
DEFINITION:
• Accounting can be defined as the orderly & systematic recording of the monetary values of
financial transactions of a business
• The reporting of results
• Providing financial information as a basis for decision making
3 main processes define the accounting process:
1. IDENTIFYING: Selecting evidence of economic / financial activity (transactions)
2. RECORDING transactions to provide a permanent history of the businesses financial
activities
3. COMMUNICATING the recorded information to interested users by use of accounting
reports IE Financial Statements
The Nature Of Accounting:
Accounting is used to convey the financial situation of an enterprise. It is therefore essential that
the recipient of such information is able to understand it.
Both words and figures are used to convey this information.
“Accounting is a language which is used to convey financial information to users”
Forms Of Ownership:
1. Sole Trader / Proprietor
2. Close Corporation
3. Company
4. Partnership
5. Non – profit Organizations
Users of Financial Information:
Financial information is required / used for analysis by:
1. INVESTORS:
The Shareholders with a Financial Interest in the business
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2. CREDITORS: The lenders of money, merchandise and services also have a Financial Interest
in the business
3. EMPLOYEES:
Regarding job security and wage negotiations and predictions for future employment
4. GOVERNMENT:
Regarding taxes, and also for statistical purposes. Also used as an indication for
MacroEconomic planning
5. MANAGEMENT:
In order to plan and set new goals for future economic growth
FIELDS OF ACCOUNTING:
Financial Accounting VS Management Accounting
• Recording transactions and preparing • Provides financial information for specific
financial statements regarding the entity purposes
as a whole • Used by management for decision making
• GAAP (Generally Accepted Accounting • Used to assist management reach financial
Practices) standards ensure comparability goals
of financial statements between
businesses
STUDY UNIT 2:
THE NATURE OF ACCOUNTING THEORY p.13
ACCOUNTING PRINCIPLES:
1 . Accrual Principle : (WHEN?)
The transaction must be recorded in the financial period it occurs, whether or not the cash
has been received or paid
2 . Consistency: (SAME)
Once a method has been chosen it must be maintained. If said policy is changed, this must be
reflected in the financial statements of the business
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