AOS2

Period assumptions

Financial activities are recorded and reported for a specific period.

Accrual Basis

Recognizes revenues when earned and expenses when incurred, focusing on economic benefits and verifiable source documents.

Going Concern

Assumes the business will continue operating, allowing for credit transactions and recognition of non-current assets and liabilities.

Accounting Entity

Record all transactions related to the business. The business has its own financial status and is separate from the owner and other businesses.

Supporting relevance by excluding personal assets from reports.

Faithful Representation

Information reported must be complete, without bias and free from errors.

Verifiability

Financial information should be supported through evidence on source documents.

Comparability

Financial information should be able to be compared over different reporting periods.

Understandability

Financial information should be presented clearly and concisely for users to comprehend their meaning.

Timeliness

Financial information should be available ASAP so that it remains useful for decision-making.

Relevance

Reports should include all information that is useful for decision-making

Statement of receipts and payments

Cash receipts & payments journals summarised to generate a single report during a reporting period, the change in bank balance opening and closing is also included.

Balance sheet

An accounting report that shows the business’ Assets, Liabilities and Owner’s Equity at any point in time. Must always be balanced.

Cash flow statement, Include purpose

An accounting report that details all cash inflows and outflows from operating, investing and financing activities, and the overall change in the firm’s cash

• Decision- making

• Performance evaluation

• Whether business is generating enough cash from operating

• Planning

Operating

• cash flows related to day to day trading activities

  • Cash sales, GST received, Payments of Expenses, Materia

Investing

• cash flows related to the purchase and sale of non- current asset

  • Furniture, purchased, sale of land

Financing

• cash flows related to changes in the financial structure of the firm

  • Capital contribution, Repayments of loans, Taking out loans and drawings of cash

Use of balance sheet and income statement

• Use the Balance Sheet for a snapshot of the company's financial position at a specific moment.

• Use the Income Statement for understanding profitability and performance over a period.

Name Source documents and according journals

EFT payments - Cash