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Summary FKR111 Financial Accounting notes - summaries
- Institution
- University Of Pretoria (UP)
FKR111 Financial Accounting notes - summaries
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lOMoARcPSD|4339232Written by Lazie10
FKR111 Financial Accounting notes - A summary
of chapters 1-9 including formats
Financial accounting (University of Pretoria)
, lOMoARcPSD|4339232
Accounting
Chapter 1: Nature & Function
of Accounting
• Assets increase on the debit side(left) and decrease on the credit side(right)
• Equity and liabilities increase on the credit side and decrease on the debit side
• Accounting = the provision of financial information about an entity and the
communication of this info to those who may need it. A continuous scientific
process. Only involves bookkeeping of transactions. Involves reporting of
economic activities of an entity. Through financial statements to users thereof.
• Financial accounting= medium through which financial information is
communicated by means of 3 primary statements: statement of profit or loss and
other comprehensive income, statement of financial position and statement of cash
flows. Mainly external users of financial info
• Entity= operates separately from other units. Financial statements recorded
separately from other units. Required/chooses to prepare financial statements.
• Financial Statements= communication medium through which financial info of entity
is communicated to various people making economic decisions:
O Statement of profit or loss and other comprehensive income- report on
financial performance of an entity by recognising income and expenses
and resulting profit or loss for a specific period
O Statement of changes in equity- report on how equity of entity from one
financial year to another by reconciling equity at beginning of financial
year with that at the end of the financial year
O Statement of financial position- report on financial position of entity and to
reconfirm duality concept @ a specific point in time by recognising assets,
liabilities and equity
O Statement of cash flows- report on inflow and outflow of cash and for what
the cash of entity was used
O Notes to the financial statements- explain accounting policies, certain
items’ movements and calculations and a more in dept presentation of
financial information that can be provided on primary financial statements
• Financial performance- whether or not the entity has made a profit or loss
• Financial position- employment of funds
• Employment of funds must be = to generation of funds
• Accrual Concept= transactions should be recorded in financial period in which
they occur and not when the cash is received or payed
• Going Concern= assumed that entity will continue to operate in foreseeable future.
• Information must be of faithful representation (complete, neutral and correct)
• Historical cost= provide monetary info about assets, liabilities and related income
and expenses using info derived from price of transaction/ another event that gave
rise to them
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