Deep analysis of finance, accounting, and difficult maths questions in this module. Everything in this document is made easy and simple for you to understand the content. This also covers notes for the whole semester.
Week 1: Introduction
What is accounting:
● Is the collection and analysing of financial data to allow informed decision
○ Eg the profit, revenue, bank loan
Finance is important to:
● Inside organisation: how the organisation works in thor control
● Outside organisation: the competitors needs to know your firm so they can
adaptation strategies governments: needs to know how much tax is required
● Lenders: you have the ability to pay them back
● Employees : needs to know how their employer is doing
2 brand of accounting:
1. Financial accounting - provides information to the shareholder, creditors - outside of
the organisation
2. Managements accounting - provides information to the managers who are the direct
control of the firm
Financial information should provide:
1. Finicla position
a. 1 to raise money f
b. Further development
i. Raise the equality interest by swelling ownership the shareholders
ii. After raising capitals then think about how to raise more
c. Assets, liability, equity
6,000 from the owners and 14,000 by the lender (liability) so depository 20,00
in the bank
2. Financial performance
a. profit of the company
b. To know the profit of the company we need to know the income and
expenses of the company
3. Cash flow
a. Money that you can actually hold
b. Pay employees, rent, suppliers
c. Cash is more important
d. Future application - if it still grow
Cash flow vs profit:
, ● Eg monthly income is 15,000 by selling ice-cream and it costed you 10,000 to
generate this money
○ Profit = 15,000 - 10,000 = £5,000
● When the cash inflow is bigger than the outflow then that is the positive cash
○ 10,000 income this months and the remaining 5,000 will be receive next
month
○ This is where the cash flow is the 0
● Revenue - is the activity of the business that allows the it to grow
Income statements:
1. Revenue
2. Expense S
★ If you need to know the profit of the company use Income statements
★ If you want to know the cash flow then choose the cash flow statement
○ Cost of sales: which is the ingredients needed to make the product
○ Operating expense; interested on the investment
○ Interesting expenses
○ Tax
Week 2: Income statement (1)
● Gross profit: buying and selling goods without including the any type of expenses
● Operative profit: expenses to run the business
● Net profit: financial wealth added to the equity sheet
, Revenue recognition:
● A simple example is when the the products are sold and the company receive money
ie revenue
● However, a difficult example of this: is when the the company receive money in
advance and then the company ship the product to the customers
○ The shop rent cost about 12K annually so the ice-cream shop pays 15K for
this yr and 3 months advance for the next yr
○ So under accrual accounting - recognize revenue is directly attributed to the
specific period of time
Recognising expenses:
● Matching principle (matching of cost with revenue)
○ Meaning the expenses should match to the same accounting period in which
the related revenue is gendered
○ For example, for every sales done to increase the revenues, the stuff receive
a communication so for the commission to be paid for thai year is 6K
■ But only 5K was the actual commission
■ Therefore the total revenue and expenses is 6K instead of 5k and that
it would be shown in the income sheet
Accrued expenses/ accrued liability - expense that is record before it has been paid
● Obligation to make future cash payments so this is shown in the balance sheet as
current liability
● So the company goals should be to meet the liability gold to pay of the debt
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller jasmine11. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £7.49. You're not tied to anything after your purchase.
