Introduction to Accounting

These flashcards cover essential terms and concepts in accounting, providing definitions to aid in understanding key topics for examination preparation.

Management Accounting

The provision of accounting information within the business entity.

Financial Accounting

The preparation and presentation of financial reports.

Accounting Process

The process of identifying, measuring, recording, and communicating the economic transactions and events of a business operation.

Identifying

Taking into consideration all transactions which affect the business entity.

Measuring

Quantifying transactions in monetary terms.

Recording

Analysing, recording, classifying, and summarising transactions.

Communicating

Preparing accounting reports, including analysis and interpretation.

Transactions

Economic activities relevant to a particular business.

Sole Proprietorship

A business owned by one person with full autonomy and few legal formalities.

Partnership

An association between two or more entities to conduct business with shared control and unlimited liability.

Company

A separate legal entity formed through incorporation, with limited liability for shareholders.

Share Capital

The total amount paid by shareholders for shares of a company.

Accounts Receivable

An asset representing the right to receive money in the future.

Revenue

Sales and other increases in equity arising from ordinary business activities.

Expenses

Costs incurred in generating revenue.

Profit

Occurs when revenue exceeds expenses.

Statement of Profit or Loss

Reports revenues less expenses for a specific period; also known as the income statement.

Statement of Changes in Equity

Reports total comprehensive income for the period and other changes in equity.

Statement of Financial Position

Reports assets, liabilities, and equity at a specific point in time; also known as the balance sheet.

Statement of Cash Flows

Reports cash receipts and payments for a specific period of time.

Current Assets

Assets expected to turn into cash within one year.

Non-Current Assets

Assets not expected to be consumed or sold within one year.

Depreciation

The allocation of the cost of tangible assets over multiple periods.

Intangible Assets

Assets that have no physical substance but are often valuable, such as patents and copyrights.

Current Liabilities

Obligations to be paid within the entity's operating cycle.

Corporations Act 2001 (Cth)

The principal statute that sets out legal requirements for financial reporting in Australia.

Australian Accounting Standards Board (AASB)

The body that issues accounting standards in Australia, based on the IFRS.

Conceptual Framework

Guidelines that provide the underlying principles for preparing financial reports.

Accrual Basis

Records transactions when they occur, providing an accurate financial picture.

Cash Basis

Records transactions only when cash is received or paid.

Matching Principle

Revenues and expenses should be matched in the accounting period they occur.

Accrued Revenues

Amounts not yet received and recorded for goods or services provided.

Prepaid Expenses

Amounts paid in cash and recorded as assets until used.

Adjusted Trial Balance

Prepared after adjusting entries to prove the equality of total debits and credits.

Perpetual Inventory System

Cost of inventory is maintained continuously, showing real-time inventory levels.

Periodic Inventory System

Detailed inventory records are not maintained throughout the accounting period, with counts taken at the end.