BUS114 Lecture 4: Characteristics & Branches of Accounting

A set of vocabulary flashcards covering the qualitative characteristics of accounting information, stages of the accounting system, branches of accounting, financial statements, and management accounting techniques from Lecture 4.

Relevance

A characteristic influencing the usefulness of accounting information, requiring that it be able to influence user decisions.

Reliability

A characteristic of accounting information requiring that it must be free from serious error or bias.

Comparability

A characteristic of accounting information that should facilitate the comparison among various aspects or benchmarks of business performance.

Understandability

A characteristic of accounting information stating it should be expressed in a way that will make it understandable by its users.

Materiality

The threshold of whether an item's omission or misrepresentation will alter the decisions that users make.

Stages of an Accounting Information System

The four sequential stages through which accounting processes information: Information Identification, Information Recording, Information Analysis, and Information Reporting.

Financial Accounting

A strand of accounting (also known as 'External accounting') that adopts an external focus seeking to meet the needs of outside users through general-purpose reports.

Management Accounting

A strand of accounting (also known as 'Internal accounting') that adopts an internal focus seeking to meet the needs of managers for decision making, planning, and control.

Book-keeping

Stage-1 of financial accounting, defined as the recording of day-to-day business transactions.

Financial Statements

Stage-2 of financial accounting, prepared from book-keeping records to summarize the performance of the business, usually over the period of one year.

Income Statement

A financial accounting statement (also known as the Trading, Profit or Loss account) that shows how much wealth was generated or lost in the form of profit or loss over a period of time.

Statement of Financial Position

A financial accounting statement (also known as the balance sheet) that shows the form and the amount of wealth accumulated through a business's activities at the end of a period of time, usually a year.

Cash Flow Statement

A financial accounting statement (also known as the Statement of Source and application of Funds) that shows the cash movements that took place over a particular period of time.

Cost

The amount of resources used to produce or buy a good or service.

Marginal Costing

A management accounting technique that shows the cost of producing one extra unit of output.

Absorption Costing

A costing method in which a 'fair share' of all production overheads (fixed costs) is included when calculating the cost of a particular product or service.

Budget

A short-term business plan that a company aims to achieve, which is mainly expressed in financial terms.

Capital Budgeting

The use of investment appraisal techniques for long-term or capital investments.

UK GAAP

National reporting standards developed in the UK to enhance the comparability and transparency of financial statements.

IFRS

International Financial Reporting Standards developed at an international level to enhance the comparability and transparency of financial statements.