Summary Financial Accounting 188 A1S1

What is Accounting?


Measuring process for economic entities 1.4



Day 1 Financial Position



Financial / Accounting Activities



Day 2 Financial Position
(Has it improved or weakened? – Report)

,Financial Position / Frame of Reference – (Chpt 2 extended)

• It is the financial value of an entity at a particular moment in
time
• Expressed in a monetary value

Financial Activities

• Trade between two or more parties
• One party (X) delivers money, goods, services or legal rights
(legal claims) to other party (Y)
• Ownership or right to utilise is transferred from (X) to (Y)
• Terms and conditions (parties involved)
• Other party (Y) delivers money, goods, services or legal rights
(legal claims) with the same value to party (X)

, What is Accounting?

Measuring process for economic entities



Day 1 Financial Position



Financial
Financial / Accounting Activities Period



Day 2 Financial Position
(Has it improved or weakened? – Report)

,Purpose if Accounting (1.1)

• Measure Financial Position

• Measure any changes in the Financial Position

• Result of the entity’s financial activities

• Report financial information according to certain rules (GAAP
/ IFRS - 1.2) to the users of the information (1.3)

,Report – to users of information (1.3)
• Financial position
• On financial / accounting activities
• In the form of information and reports
– certain qualities (Chpt 2)

• Report to users of accounting information
o Investors
o Employees
o Lenders of money (Bank)
o Supplies
o Customers
o Government (SARS)
o Public

, What is Accounting?

Measuring process for economic entities



Day 1 Financial Position



Financial
Financial / Accounting Activities Period



Day 2 Financial Position
(Has it improved or weakened? – Report)

, Chapter 2 & 3:
• Financial Position (2.3 & 3.1):

ASSETS – LIABILITIES = FINANCIAL POSITION (E)
(Owner’s Interest / Equity / Capital)

Accounting work with positive amounts
A = L + E (Capital) – components explained in Chpt 2

• Owner’s Interest / Equity
- Result of accounting equation
- Represents the financial value +
- Value of funds invested by the owner in the entity
- Not the necessarily the same as market value

,Start Date Financial Position (A – L = E) or (A = L + E)




Subsequent Financial
Period Financial Activities Period




End Date Financial Position (A – L = E) or (A = L + E)


(Compile a financial report
on the financial position)

,Start Date Financial Position (A = L + E) or (A – L = E)



Money / goods / services / rights (claims) Balance
Subsequent =
Period Money / goods / services / rights (claims) Classify




End Date Financial Position (A = L + E) or (A – L = E)


(Compile a financial report
on the financial position)

, Entity Concept (2.3)