Accounts Lecture 2 22/10/2007
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Accounts Lecture 2 22/10/2007
Accounting is the measurement of income and values which is communicated to interested parties for economic decisions.
Stewardship concept – the separation of owners and managers.
Equity divided into:
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Capital
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Ordinary
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Preference
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Reserves
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Capital reserves – undistributable;
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Revenue reserves – distributable.
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Ordinary – not owners of business. Participate in profit and loss of business.
Preference – not owners of business. Are only entitled to fixed dividends e.g. 7% preference.
Revenue reserves – profits arising from business e.g. General reserve, P&L balance.
Capital reserves – capital gains e.g. Share premium.
Financial Statements
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Income statement;
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Statement of changes in equity;
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Balance sheet;
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Cash flow statement.
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Statement of accounting policies;
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Notes to financial statements.
The objective of financial statements
The objective of financial statements is to provide information about the financial position, performance and changes in financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions.
In order to meet their objectives, financial statements must follow certain concepts:
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Accrual concept;
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Going concern concept;
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Substance over-form concept;
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Prudence concept;
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Comparability concept;
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Completeness concept.
International financial reporting standards
Conceptual framework
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IAS;
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IFRS;
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SFC.
Aims of financial statements
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Definitions;
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Presentation;
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Measurement;
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Disclosure.
Inventories – IAS allows FIFO and Average Cost (weighted).
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