Financial Accounting with International Financial Reporting Standards
The summary includes all financial accounting information 1.
The summary is structured, making it easy to find information.
At the end, the summary offers a formula list, cheat sheet and brief explanation of accounts with a few examples
(note: the summary is written in English)
Summary notes for Financial Accounting with International Financial Reporting Standards
TEST BANK for Financial Accounting with International Financial Reporting Standards (IFRS) 5th Edition by Jerry Weygandt & Paul Kimmel | Complete 15 Chapters
Financial Accounting 1 for Business Administration after midterm
All for this textbook (4)
Written for
Universiteit van Amsterdam (UvA)
Economics and Business Administration
Financial accounting (6011P0230Y)
All documents for this subject (1)
Seller
Follow
cherisevanegten1
Reviews received
Content preview
Financial accounting
A Summary of fi nancial accounti ng
,Inhoud
Table of Contents
Inhoud....................................................................................................................................................2
H1. The basics.........................................................................................................................................4
H1.1. accounting equation..................................................................................................................4
H1.2. analysing business transactions.................................................................................................5
H1.3. financial statements..................................................................................................................5
H1.4. accrual versus cash accounting..................................................................................................5
H2. Recording process............................................................................................................................6
H2.1. accounts, debits and credits......................................................................................................6
H2.1.1. statement of financial position (balance sheet).................................................................7
H2.1.2. income statement/summary..............................................................................................7
H2.1.3. cash flow............................................................................................................................8
H2.1.4. retained earnings...............................................................................................................8
H2.1.5. change in equity.................................................................................................................8
H2.2. the journal, ledger and posting.................................................................................................9
H2.3. Trial balance............................................................................................................................10
H3. The accounting cycle......................................................................................................................11
H4. Types of firms (and income)...........................................................................................................13
H4.1. providing services....................................................................................................................13
H4.2. merchandising.........................................................................................................................14
H4.3. manufacturing.........................................................................................................................14
H5. Inventories.....................................................................................................................................15
H5.1. Types of inventory systems......................................................................................................15
H5.2. Other changes in financial statements....................................................................................16
H5.3. cost of goods sold (COGS)........................................................................................................17
H6.4. inventory cost flow..................................................................................................................17
H6. Cash and receivables......................................................................................................................19
H6.1. cash.........................................................................................................................................19
H6.2. receivables..............................................................................................................................19
H6.3. fraud........................................................................................................................................19
H7. Assets.............................................................................................................................................20
H7.1. depreciation............................................................................................................................20
H7.2. maintenance and repair..........................................................................................................21
H7.3. revaluation..............................................................................................................................21
H7.4. disposal...................................................................................................................................21
H8. Liabilities........................................................................................................................................22
, H8.1. current liabilities......................................................................................................................22
H8.1.1. value added tax (VAT).......................................................................................................23
H8.1.2. other wage payables........................................................................................................23
H8.2. non-current liabilities..............................................................................................................24
H9. equity.............................................................................................................................................25
H9.1. Accounting for shares..............................................................................................................25
H9.2. accounting for dividends.........................................................................................................26
H10. Investments..................................................................................................................................27
H10.1. debt investment....................................................................................................................27
H10.2. share investment...................................................................................................................27
H10.3. trading...................................................................................................................................27
H11. Cash flow......................................................................................................................................29
H11.1. operating activities................................................................................................................31
H11.2. investing activities.................................................................................................................31
H11.3. financing activities.................................................................................................................31
H12. Financial statement analysis.........................................................................................................32
H12.1. Typical analysis......................................................................................................................32
H12.2. Summary of ratios.................................................................................................................32
Calculations..........................................................................................................................................34
Financial statements.........................................................................................................................34
inventory..........................................................................................................................................36
Cheat sheet...........................................................................................................................................38
Accounting cycle...............................................................................................................................38
Chart of accounts..............................................................................................................................39
Increase and decrease account.........................................................................................................39
Common account notations.................................................................................................................41
,H1. The basics
Accounting is planning, recording, analysing and interpreting financial information. Accounting can be on a
small level, such as personal finance, but also on a business level, where you account for companies.
Three basic activities:
1. Identifying information
2. Recording information
3. Communicating accounting reports (most common are called financial statements)
Users of accounting data:
1. Internal users
2. External users
Four core accounting assumptions:
1. The monetary assumption: only transactions that can be expressed in monetary terms are recorded in
the accounting system.
2. The economic entity assumption: accounting is done on an economic entity basis.
3. Going concern assumption: the company will continue to exist in the foreseeable future.
4. The time period assumption: accounting is done for specific periods.
H1.1. accounting equation
The basics elements of a business are what is owns and what it owes. These two elements can be translated
into the accounting equation, which states:
Assets = liabilities – equity
Figure 1: expanded accounting equation
Always:
An account is an asset, liability or equity, if not- it is an expense of revenue
When an account increases/decreases, another account increases/decreases
Share capital-ordinary:
Capital value:
Value asset – value debt = total value organization
Share value:
Total value organization / total shares = value of one share
Retained earnings:
Revenue – expenses – dividend
,Revenue: gross increase in equity (due to normal business operations) / increase in value of a company
Expenses: decrease in equity (due to normal business operations) / decrease in value of a company
H1.2. analysing business transactions
Business transactions are business’s economic events recorded by accountants. Transactions may be external or
internal
External transactions: economic event between the company and some outside enterprise
Internal transactions: economic event within the company.
H1.3. financial statements
Companies prepare five financial statements from the summarized accounting date
Financial statements:
1. Income statement: present the revenues and expenses and resulting net income/loss
2. Retained earnings statement: summarizes the changes in retained earnings
3. Statement of financial position (Balance sheet): reports the assets, liabilities and equity
4. Statement of cash flows: summarizes information about the cash flows (receipts/ins and
payments/outs)
5. (comprehensive) income statement: presents other comprehensive income items that are not included
in the determination of net income
H1.4. accrual versus cash accounting
The main difference between accrual and cash basis accounting lies in the timing of when revenue
and expenses are recognized
Accrual basis accounting: record transactions in the periods in which this event occurs (most used
and recommended by the IFRS)
Cash basis accounting: record transactions in the period in which cash is received.
Differences in accounting:
Modified cash basis of accounting: a hybrid method between cash accounting and accrual accounting.
, H2. Recording process
Steps of recording progress:
1. The transaction occurs
2. The data of the transaction is recorded
3. The data is entered in a journal
4. The journal accounts are posted in a ledger
H2.1. accounts, debits and credits
An account is an individual accounting record of increases and decreases in a specific asset, liability or
equity
An account consist of:
1. A title
2. A debit side
3. A credit side
T-balance: Figure 2: T-balance example
Debit (Dr.): left side of account
Credit (Cr.): right side of account
Where some accounts can increase a side (let’s say the debit side), it can increase the other side (let’s say credit
side).
Summary debit/credit rules
1. Basic accounting equation:
Assets = liabilities + equity
2. Expanded accounting equation:
Assets = liabilities + share capital + retained earnings – expenses – dividend
3. Double-entry bookkeeping:
When debit changes, credit also changes, and vice versa. The total amount debited is equal to the total amount
credited.
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 or Stuvia-credit 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 cherisevanegten1. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $3.64. You're not tied to anything after your purchase.
