Accounting VCE terminology

VCEVCEVCEVCEVCE

Source Documents

Documents that provide both the evidence that a transaction has occurred and the details of the transaction itself.

Period Assumption

The assumption that reports are prepared for a particular period of time, such as a month or year, in order to obtain comparability of results.

Comparability

Financial information should be able to be compared with similar information about other entities and with similar information about the same entity for another period or another date.

Going Concern Assumption

The assumption that the business will continue to operate in the future, and its records are kept on that basis

Accounting Process

The process used to generate financial information from financial data leading to the provision of advice to assist decision-making.

Relevance

Financial information must be capable of making a difference to the decisions made by users by helping them to form predictions and/or confirm or change their previous evaluations.

Understandability

Financial information should be understandable or comprehensible to users with a reasonable knowledge of business and economic activities, and presented clearly and concisely

Timeliness

Financial information should be available to decision makers in time to be capable of influencing their decisions.

Faithful Representation

Financial information should be a faithful representation of the real-world economic event it claims to represent: complete, free from material error and neutral (without bias).

Accounting Standard

A technical pronouncement that sets out the required Accounting for particular types of transactions and events for businesses reporting under company law.

Reporting

The preparation of financial statements that communicate financial information to the owner.

Recording

Sorting, classifying, and summarising the data contained in the source documents so that it is more useable.

Verifiability

Financial information should allow different knowledgeable and independent observers to reach a consensus (agree) that an event is faithfully represented.

Advice

The provision to the owners of a range of options appropriate to their aims/objectives, together with recommendations as to the suitability of those aims/ objectives.

Accrual Basis Assumption

The assumption that revenues are recognised when earned and expenses are recognised when incurred, so profit is calculated as revenue earned in a particular period less expenses incurred in that period.

Transaction

An exchange of goods or services with another party.

Account Entity Assumption

The assumption that the records of assets, liabilities and business activities of the entity are kept completely separate from those of the owner of the entity as well as from those of other entities.

Assets

Economic resources controlled by an entity as a result of past events with the potential to produce future economic benefits for the entity.

Liabilities

Present obligations owed by an entity to transfer economic resources as a result of past events.

Owner’s equity

Residual value of the assets of an entity after its liabilities have been deducted.

Revenue

Increases in assets, or decreases in liabilities, that result in an increase in owner’s equity (other than those relating to contributions by the owner).

Expenses

Decrease in assets or increase in liabilities, that result in a decrease in owner’s equity (other than drawings, by the owner).