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    BM Cheat Sheet PDF

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    LittleMing
    The document discusses key accounting concepts and principles: 1. Accounting involves recording, classifying, summarizing, and communicating financial information. 2. Financial accounting provides external users information on profitability, financial stability, and performance. Management accounting provides internal users cost and pricing data. 3. Fundamental assumptions like the business entity, historical cost, and going concern concepts ensure accounting information is accurate, uniform, and useful to different stakeholders.

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    BM Cheat Sheet PDF

    Uploaded by

    LittleMing
    30 views1 page
    The document discusses key accounting concepts and principles: 1. Accounting involves recording, classifying, summarizing, and communicating financial information. 2. Financial accounting provides external users information on profitability, financial stability, and performance. Management accounting provides internal users cost and pricing data. 3. Fundamental assumptions like the business entity, historical cost, and going concern concepts ensure accounting information is accurate, uniform, and useful to different stakeholders.

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    BM Cheat Sheet.pdf

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    The document discusses key accounting concepts and principles: 1. Accounting involves recording, classifying, summarizing, and communicating financial information. 2. Financial accounting provides external users information on profitability, financial stability, and performance. Management accounting provides internal users cost and pricing data. 3. Fundamental assumptions like the business entity, historical cost, and going concern concepts ensure accounting information is accurate, uniform, and useful to different stakeholders.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    30 views1 page

    BM Cheat Sheet PDF

    Uploaded by

    LittleMing
    The document discusses key accounting concepts and principles: 1. Accounting involves recording, classifying, summarizing, and communicating financial information. 2. Financial accounting provides external users information on profitability, financial stability, and performance. Management accounting provides internal users cost and pricing data. 3. Fundamental assumptions like the business entity, historical cost, and going concern concepts ensure accounting information is accurate, uniform, and useful to different stakeholders.

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    of 1

    The function of Accounting: accounting method for similar items from one period to another.

    A change
    - Recording transactions is allowed only if it can provide a more accurate view. Accrual Concept
    - Classifying data (Revenue should be recognized when earned and expenses should be
    - Summarising data recognized when incurred, not when money is received or paid.)
    - Communicating information
    Importance of Accounting: A = (C+R+E-D) + L A+D+E = C+L+R
    - Reporting
    - Planning
    - Controlling
    Financial Acct: Ex&internal users; info on profitability, financial stability,
    overall financial performance, operating result(IS); Standard format,
    regular basis.(BS/SoFP: Liquidity, Solvency, long-term growth potential,
    financial position.)
    Management Acct: Internal; cost and pricing, operation efficiency;
    Non-standard format, available anytime
    Acct cycle: A series of standard procedures for recording and processing a
    firm’s accounting data in a certain period.
    1. Collecting&verifyug sources documents for transaction
    2. Recording transaction in bk of original entry
    3. Posting double entry
    4. Balancing off the accounts
    5. Trial Balance
    6. Preparing balancing day-adjusting entries
    7. Prepare financial statements
    8. Closing entries
    Trial balance: Def: A list of all the dr.&cr. Balance of ledger accounts at
    the end of a period. /To detect errors made in the recording of transactions/
    Form a basis for the preparations of financial statements/ Only can detect
    double entry or arithmetic errors, bookkeeping errors cannot be detected.
    Ledger accounts:
    Personal accts: Individuals/entities having transactions with the firm
    (Trade/Other receivables, Trade/Other payables)
    Impersonal accts: anything not personal accts
    Nominal accts: accts that will be closed off after the end of an accounting
    period. (Expenses/revenue.)
    Real accts: accts will be carried forwards to the next period (assets,
    liabilities, capital)
    Users:
    Business owner (decide if the business shd be continued, or put more funds
    and resources)
    Management (resources allocation); Employees (stay or not)
    Lender (lend money or not); Potential investor (invest or not) Gross profit = Net Sales - COGS; Net Sales = Sales - RI
    Supplier (know if the firm can pay on time if they sell goods on credit); Net Profit = GP + other revenue - E Net purchases = Purchases-RO
    Customer (know if the firm can keep on supplying them good COGS = Opening inventory + Net purchases + carriage inwards - closing
    services/goods); Gov (need to know the tax payment of the firm; Police inventory
    whether to prosecute criminals crims)
    Limitations:
    Different acct methods(Misleading); Reporting oast results (irrelevant to
    current/future decision making); Involvement of personal judgement
    (subjective, errors, manipulation and fraud); Lack of qualitative info
    (crucial and relevant to the decision, e.g. staff morale.) Assets valued at
    historical cost (cannot reflect their true worth since not based on actual
    value) Provide a summary without details (may not be aware of the hidden
    issue.)
    Fundamental acct assumptions (Def: rules to follow when recording daily
    transactions, and preparing financial statements) (Purpose: make
    accounting info accurate, uniform and useful to different users):
    Fundamental acct assumptions: Business entity concept (A business is
    treated as an entity separate from its owner. Only transactions affecting the
    business should be recorded). Historical Cost principle (Assets of a
    business are valued at their original cost of purchase or production. Any
    changes in market value should be ignored.) Going Concern Concept (It is
    assumed that a business will continue to operate for the foreseeable future
    with no intention to liquidate the business or cease operations, or
    significantly reduce its scale of operation, Thus, assets are valued at
    historical cost.) Consistency Principle (A firm should keep using the same

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