2. Financial statements

Why are the accounting policies important

Following the rules makes it easier to compare companies financial statements

What is the idea of financial reporting

Provide information about an entity that is useful to existing and potential investors.

FR CUTV

Faithful representation, reliability, consistency, understandability, timelessness, verifiability

Who developed the Conceptual Framework for Financial Reporting?

International Accounting Standard Board (IASB)

Purpose of Conceptual Framework for Financial reporting

Provides underlying principles and concepts used by the IASB to develop IFRS and IAS

SoPL

Income refers to the increase in assets or decrease in liabilities

Accounting equation

Assets = Equity + liabilties

What is an asset

A present economic resource controlled by psat events.

Equity

What the owner’s own in the business after debts are called.

Current asset examples

Cash, Inventory, Trade receivables, Prepayments

Current liabilities example

Overdraft, trade payables, Tax payable, Accruals