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Introduction to Accounting

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Amanda Abraham

on 8 May 2016

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Transcript of Introduction to Accounting

Introduction to Accounting
Financial Accounting
Financial Accounting

Types of Business Entity
Sole trader

Simplest form
Owned and operated by one individual (may employ others)
No legal distinction
Owner receives all profits
Unlimited Liability
Normally small (limited resources)
Flexibility and autonomy
Key Features
Receive all profits
Unlimited liability
At least two owners
Joint and several liability
Can introduce and withdraw capital
Separate legal entities
Process of incorporation
Invest capital
Share of residual assets
Not personally liable for debts
Perpetual succession
Transferable shares
Loan security
Separate taxation
Corporate Governance
The system by which companies are directed and controlled
Financial Reporting Objective

Provide financial information
To users of financial statements
To assist in making economic decisions
More resources
Low administrative expenses
Disadvantages of Incorporation
File formal constitution documents
Annual financial statements
Statutory audits
Accounts open to public inspection
Strict rules - Introduction and withdrawal of capital
Members cannot take part in management
unless they are directors
Regulatory System
IFRS Foundation
Standards Board
IFRS Interpretations Committee
IFRS Advisory Council
Legal responsibilities of directors
Directors are responsible for:
The preparation of the financial statements in accordance with IFRS
The internal controls needed to prepare financial statements
The prevention and detection of fraud
Compliance with laws and regulations
Users of financial information
Employees and managers
(requires most detailed information)
Business Contacts
Analysts and advisers
Local and central government
Management accounting and Financial Accounting
Full transcript