P92_Ch7 (Main accounting princples and practices)

Financial accounting is a business discipline which consists of a series of techniques and procedures that are used to identify, measure, record and communicate information, including financial information, about an organisation to a range of people who may be interested in it.

• Structure (a/c equation)
• Sources (transactional/ varied)
• Format (monetary / non-monetary financial information)
• Time periods (historical / forcasts)
• Regulation
• Legal requirement to publish accounts
• access to management accounting information
• audit requirements

• Owners
• Directors & managers
• Employees
• The public
• Tax authorities
• Financial analysts
• Creditors & lenders
• Competitors
• Brokers
• Customers
• FSA

...the stake shareholders have in a company.

Calculating total value of assests less total value of liabilities

Capital: the sum of the equity and long term debt used to finance the business

Regulatory capital: the sum of the equity and long term debt that is classified as regulatory capital

...any individual / organisation to whom a debt is owed. Once the money is paid then the relevant accounting entries will be made to reflect the elimination of the liability and the reduction in cash available.

...the cost of an assest will be apportioned over the financial period during which the business will benefit from the use of that assest.

• Cost of asset - scrap or residual value
• The life of the assest

The a/c equation express the relationship between the things owned by a business and the funds which were used to buy them.

Assets = Equity + Liabilities

• Current (in use for less than one year)
• Cash
• Stock > raw materials, WIP & finished goods
• Debtors

• Non-current (in use for more than one year)
• Goodwill and other intangible assets
• Property
• Investments

• Current (> 1yr)
• Bank overdraft
• Trade creditors

• Non-current (> 1yr)
• Loans
• Mortgages
• bond issues

• Share Capital
• Reserves

...money used to pay for day to day trading activities. Used to pay for wages, raw materials and other overheads

• Current assests - current liabilities
• (aka net current assests)

Non-current assests + working capital

• segment reporting (direct, broker, ect)
• continued & discontinued operations
• effect on profit of a change in accounting policy
• investment return
• operating expences
• employee information
• earnings per share
• directors' remuneration
• tax
• dividend