|What is the definition of an asset?
|A resource controlled by an entity as a result of past events & from which future economic benefits are expected to flow to the entity.
|What is the definition of a liability?
|A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.
|What is the definition of equity?
|The residual interest in the assets of an entity after deducting all its liabilities, so EQUITY = NET ASSETS = SHARE CAPITAL + RESERVES
|What is the definition of income?
|Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases in liabilities that result in increases in equity, other than those relating to contributions from equity participants.
|What is the definition of an expense?
|Decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or increases of liabilities that result in decreases in equity, other than those relating to distributions to equity participants.
|What are the 5 elements of the financial statements?
|1. Asset 2. Liability 3. Equity 4. Income 5. Expenses
|What is the process of recognition of the elements of financial statements
|The item is recognised in the statement of financial position or statement of profit or loss with a description in words & a £ value: 1. When it meets the definition of an element of the financial statements and 2. It is probable that any future economic benefit associated with the item will flow to or from the entity and 3. The item has a cost or value that can be reliably measured
|Measuring the elements of financial statements What are the 4 key measurement techniques?
|Historical cost Current cost Realisable value Present value
|What are the main purpose of accounting standards?
|Credibility - ensure give true & fair view Comparability - compare company results Discipline - less scope for manipulation
|What are the duties & responsibilities of directors?
|1. Keeping proper accounting records 2. Preparing financial statements & having audited & presented to shareholders in AGM 3. Filing financial statements with Companies Hse
|What are the objectives of the Conceptual Framework?
|To provide financial information about the reporting entity that is useful to: Existing & potential investors Existing & potential lenders & other creditors
|Who are the secondary users of financial statements according to the Conceptual Framework?
|Management Regulators Employees Individuals
|What are the secondary users of Financial statements interested in ?
|The entity's assets / resources Claims against the assets / liabilities Stewardship - how efficiently and effectively management have used resources
|What 2 categories are the qualitative characteristics of useful financial information categorised in?
|1 Fundamental qualitative characteristics 2 Enhancing qualitative characteristics
|What are the fundamental qualitative characteristics
|Relevance Faithful representation Materiality
|What are the enhancing qualitative characteristics?
|Comparability Verifiability Timeliness Understandability
|What other consideration should be given when reporting information?
|The cost constraint Do the benefits justify the costs
|What is the underlying assumption when preparing financial statements?
|What is the accounting equation?
|Assets = Equity + Liabilities