Accounting and Finance for Non-specialist Exam
Summary
Written by Maria do Mar Pinto
Breda University of Applied Sciences
Table of contents
- Chapter 1 (Introduction to accounting and finance) 2
- Chapter 2 (Measuring and reporting financial position) 4
- Chapter 3 (Measuring and reporting financial performance) 7
- Chapter 5 (Measuring and reporting cash flows) 9
- Chapter 6 (Capacity) 12
- Chapter 7 (The relevance and behaviour of costs) 14
[1]
, Chapter 1
1.1 Definition of Accounting and Finance
Accounting reports are not made to be understood by everyone; only people
who know how to read them and how to deal with finance and accounting.
Businesses tend to produce accounting information that exceeds the minimum
requirements required by accounting regulations.
The purpose of accounting is concerned with collecting, analysing and
communicating financial information. The ultimate aid is to help those using
this information to make more informed decisions.
Accounting exists primarily to help user decision-making.
Finance also helps users to improve the quality of their decisions and is
concerned with the financing and investing activities of the business.
Aspects that resulted in the business environment becoming more turbulent and
competitive:
Rapid changes in technology
Increasing sophistication of customers
Increasing pressure from owners for economic returns
Managers should deal with risk when setting objectives by balancing it against the
likely return. The higher the risk, the higher the expected return
1.2 Users of accounting
Managers have the most control over the range and content of the information
they receive.
The various groups seeking to get access to the financial reports of a business
are referred to as user groups.
1.3 Usefulness of Accounting
There are two fundamental qualities (faithful representation and relevance) and four
qualities that enhance the usefulness of accounting information (comparability,
verifiability, timeliness and understandability).
Accounting information should be produced until the point where the cost of
providing it is no longer less than the benefits.
Relevance is most concerned with predictive value and confirmatory value;
influencing user decisions concerning the prediction of future events and the
confirmation of past events. To be relevant, accounting information must have a
materiality. What’s considered to be material differs for every business. For
example, while a small, family-owned grocery store may need to record a small
expense for promotional coupons, Whole Foods may not need to record a large
one for a similar offer. It’s all relative.
[2]
Summary
Written by Maria do Mar Pinto
Breda University of Applied Sciences
Table of contents
- Chapter 1 (Introduction to accounting and finance) 2
- Chapter 2 (Measuring and reporting financial position) 4
- Chapter 3 (Measuring and reporting financial performance) 7
- Chapter 5 (Measuring and reporting cash flows) 9
- Chapter 6 (Capacity) 12
- Chapter 7 (The relevance and behaviour of costs) 14
[1]
, Chapter 1
1.1 Definition of Accounting and Finance
Accounting reports are not made to be understood by everyone; only people
who know how to read them and how to deal with finance and accounting.
Businesses tend to produce accounting information that exceeds the minimum
requirements required by accounting regulations.
The purpose of accounting is concerned with collecting, analysing and
communicating financial information. The ultimate aid is to help those using
this information to make more informed decisions.
Accounting exists primarily to help user decision-making.
Finance also helps users to improve the quality of their decisions and is
concerned with the financing and investing activities of the business.
Aspects that resulted in the business environment becoming more turbulent and
competitive:
Rapid changes in technology
Increasing sophistication of customers
Increasing pressure from owners for economic returns
Managers should deal with risk when setting objectives by balancing it against the
likely return. The higher the risk, the higher the expected return
1.2 Users of accounting
Managers have the most control over the range and content of the information
they receive.
The various groups seeking to get access to the financial reports of a business
are referred to as user groups.
1.3 Usefulness of Accounting
There are two fundamental qualities (faithful representation and relevance) and four
qualities that enhance the usefulness of accounting information (comparability,
verifiability, timeliness and understandability).
Accounting information should be produced until the point where the cost of
providing it is no longer less than the benefits.
Relevance is most concerned with predictive value and confirmatory value;
influencing user decisions concerning the prediction of future events and the
confirmation of past events. To be relevant, accounting information must have a
materiality. What’s considered to be material differs for every business. For
example, while a small, family-owned grocery store may need to record a small
expense for promotional coupons, Whole Foods may not need to record a large
one for a similar offer. It’s all relative.
[2]
