for my own study but sharing my notes as well!
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What is the role of accounting?
Provide accounting information for stakeholders to make informed decisions for the performance of business
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What is Decision-Making?
Prepare accounting information and provide both accounting and non-accounting information for decision-making
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What is Stewardship?
Manage business resources on behalf of owner
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Integrity
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Be straightforward and honest in the communication of financial information
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Objectivity
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Information must be unbiased and not be influenced by personal feelings
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Trading Business
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- Exchanges goods for money, e.g supermarkets/furniture/clothing shops
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Service Business
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- Exchanges services for money, e.g Dental/Tuition/Salon
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Internal Stakeholders
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Owner/Manager
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- Measure & Evaluate performance of the business
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Employee
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- Whether they should work for the business
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External Stakeholders
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Shareholders
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- Invest into the business
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Lenders and Suppliers
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- Whether to provide for the business
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Competitors
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- Compare performance
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Customers
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- Whether to buy from the business
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Government
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- Assess whether business is abiding laws
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Accounting Entity
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Only business transaction is recorded
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Accounting Period
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Life of business is divided into regular time intervals
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Going Concern
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Business to have indefinite economic life unless credible evidence is shown that it may close
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Monetary
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Only things that can be recorded down in monetary terms
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Historical Cost
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Transactions to be recorded at original cost
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Accrual basis of accounting
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Business activities that have occurred should be recorded in relevant accounting period
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Revenue Recognition
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Revenue earned when goods delivered is provided
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Matching
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Expenses incurred must be matched against income earned in same period to determine profit earned
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Objectivity
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Accounting information recorded must be supported by reliable and verifiable evidence
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Prudence
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Least overstates assets and profits and understated liabilities and losses
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Consistency
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Once method is chosen, it should be applied for all periods to ensure consistency
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Materiality
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Transactions is considered material if it makes a difference in decision-making process
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