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Week 2
| Term | Definition |
|---|---|
| Financial reporting | Relates to financial accounting and involves external users |
| Conceptual framework | Includes the general principles of financial reporting |
| General purpose financial statements | Aim to provide an overview of performance, position and cash flow to all users to evaluate the efficiency and effectiveness of management |
| Reporting entity | Entity that is required or chooses to prepare financial statements for the public |
| General purpose financial statements include | Income statement, statement of changes in equity, balance sheet for position, statement of cash flows |
| Annual reports | Include extensive notes to the financial statements and directors, independent auditors and corporate governance report |
| Monetary principle | Anything in financial statements should be expressed in monetary terms |
| Accounting entity concept | If an owner takes money from the business, it should be recorded |
| Accounting period concept | Every year, one must prepare financial statements for the financial period |
| Going concern assumption | Prepare reports, expecting that the business will continue to operate |
| Historical cost principle | An item should be recorded at the value at which it was purchased at |
| Full disclosure principle | Information presented should be honest and open and anything that is misleading or ambiguous, the users should be told about it |
| 2 qualitative characteristics in conceptual framework | Fundamental Enhancing |
| Fundamental qualitative characteristic | Relevance Faithful representation Vital to ensure information is useful for decision making |
| Relevance | Information provided must be helpful in decision making |
| Faithful representation | Information should be presented in a complete, neutral and error free way |
| Enhancing qualitative characteristics | Understandability Comparability Timeliness Verifiability vital to improve decision usefulness of accounting information |
| Understandability | Presented clearly and concisely |
| Comparability | Uses consistent policies |
| Timeliness | Released before it loses value |
| Verifiability | Representative of what occurred |
| Accounting standards | Set out the required accounting treatment for specific types of transactions and events AASB |
Created by:
tacoloco135
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