Financial Reporting and Analysis Vocabulary

Vocabulary flashcards generated from the Financial Reporting and Analysis (FIN1003) lecture notes, covering core accounting definitions, financial statement types, business structures, and UK corporate governance rules.

Accounting

The process of identifying, measuring, and communicating financial information.

Statement of Financial Position

A financial statement (also called a balance sheet) that measures the amount of wealth of a business entity at a particular moment in time, categorised by assets, liabilities, and owners' equity.

Income Statement

A financial statement that measures the flow of wealth generated by an entity over a period of time, listing sales revenue, cost of goods sold, expenses, and taxation to report profit.

Cash Flow Statement

A financial statement that details the net changes in cash and cash equivalents over a period, divided into cash flows from operating, investing, and financing activities.

Financial Statement Interrelationship

The structural linkage between statements, where the income statement and cash flow statement reflect the flows of wealth and cash over a period between two consecutive statements of financial position.

Management Accounting

Accounting information designed primarily for internal users (managers), focusing on specific-purpose, detailed, and forward-looking data such as budgeting, pricing, and investment appraisal.

Financial Accounting

Accounting practice designed primarily for external users, providing broad, regulated, and historical summaries of financial performance based on objective and verifiable evidence.

Sole Trader

An individual operating a business alone who bears all financial risks, retains all profits, and is treated as a separate economic entity for accounting purposes, though not protected by limited liability.

Partnership

A form of business where two or more individuals pool resources and skills under an agreement to share in running the business, receiving profits, and bearing liabilities.

Joint and Several Liability

A legal condition in a partnership where an individual partner can be held responsible for all debts and obligations of the partnership if other partners lack sufficient personal assets.

Limited Liability

A legal protection mechanism for business owners ensuring that if the business fails, their personal wealth is safe and their maximum loss is limited to the money agreed to pay for shares.

Private Limited Company (Ltd)

A form of limited liability company that is prohibited by law from offering its shares to the general public.

Public Limited Company (plc)

A form of limited liability company permitted to offer its shares to the public while complying with strict regulatory disclosure requirements.

Executive Director (ED)

A company director who is a full-time employee involved in the day-to-day management of the business, with the senior ED designated as the Chief Executive Officer (CEO).

Non-Executive Director (NED)

A board member who is not an employee of the company and provides independent oversight, with the senior NED designated as the Chair.

Corporate Governance

The system and process by which companies are directed and controlled, as established in the Cadbury Report (1992).

Comply or Explain Approach

The regulatory framework governing the UK Corporate Governance Code, where compliance is not mandatory by law, but entities must publicly explain any failure to comply with code provisions.

Cadbury Report (1992)

The seminal report that provided the first corporate governance code in the United Kingdom, establishing guidelines for board composition and oversight.

Primary Users of Accounting Information

Existing and potential investors (owners and long-term lenders) whose needs shape general-purpose financial reports.

FIN1003 Exam Structure

A 100-mark examination comprising Question 1 on the income statement and statement of financial position (40 marks), Question 2 on the cash flow statement (30 marks), and Question 3 on investment appraisal (30 marks).