21642 Chapter Notes - Chapter 1: Cash Flow Statement, Income Statement, Management Accounting
13 Jun 2018
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Introduction to Business and Accounting I
Business - a series of value adding activities that are designed to link suppliers with customers.
Accounting - a financial representation of the operations of a firm, a systematic process of
recording in monetary terms the many activities currently undertaken by the firm.
External Users of Accounting Information:
•Customers - influencing consumption decisions
•Suppliers - reward of supplying resources
•Shareholders - value creation
•Government - taxation incentives and charges
•Competitors - diversity and mimicry
Internal Users of Accounting Information (Managers):
•Price - charged for consumption
•Quantity - volume produced
•Variable Costs - efficient cost of supply and employment
•Fixed costs - reducing fixed costs
Qualities of accounting information - relevance, reliability, comparability, understandability
Stages of accounting information:
•Information identification - recognition of a business activity and measuring in monetary terms
•Information recording - recording and processing using accounting conventions
•Information analysis - analysis and interpreting
•Information reporting - reporting informations products in a form that satisfies the requirements of
end users
Balance Sheet:
•Assets = Liabilities - Owners Equity
•CA and CL
•NCA and NCL
Income Statement:
•Gross Profit = Sales less COGS
•Earnings before interest and taxes
•Net profits = Gross Profit (Revenue) - Expenses
•Other components of comprehensive income or losses i.e. asset revaluations, unrealised gains
Cash Flow Statement:
•Cash at beginning or period
•Add cash receipts
•Less cash payments
