Summary Accounting Book & Knowledge Clips

Accounting – An Introduction
Summary ch. 2,3,6,7 & 14

Chapter 2 | Measuring & reporting financial position
+ Knowledge Clip “Financial Statements & Annual Report”

Major financial statements
Balance sheet
 statement of financial position: what is the accumulated wealth of the business at the end of a certain period?

Income statement
 profit & loss account: how much wealth (profit) was generated/lost by the business over a certain period?

Cash-flow statement
 what cash movements (in/out) were made by the business over a certain period?

Relationships




Balance Sheet
 assets of business on one hand, claims against business on other hand

Assets
Characteristics of Assets
 business has right to control the resource
 probable future monetary value (use in company / hire / sale)
 benefit must arise from some past action / event (asset already bought before, not in future)
 asset must be measurable in monetary terms
Types of Assets
 property  plant & equipment
 fixtures & fittings  patents & trademarks
 trade receivables / debtors (able to pay!)  investments
 inventory  cash
 tangible assets (e.g. machines) & intangible assets (e.g. patents)