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Introduction to accounting
Measuring And Reporting Financial Positions
Assets
Main characteristics:
OR
Examples of assets
Chapter 2
Introduction to accounting
Measuring And Reporting Financial Positions
Chapter 2
Introduction to accounting
Measuring And Reporting Financial Positions
Liabilities
Equity
Chapter 2
Introduction to accounting
Measuring And Reporting Financial Positions
Chapter 2
Introduction to accounting
Measuring And Reporting Financial Positions
Operating cycle
The businesss operating cycle is the time between the acquisition
of the assets and their ultimate realisation in cash or cash equivalents
Current
Non-current
cash at bank
accounts receivable
inventory
short-term investments
Classification of liabilities
Chapter 2
Introduction to accounting
Measuring And Reporting Financial Positions
accounts payable
bank overdraft
bank loan (repayable within 12 months)
revenue received in advance (e.g. subscriptions)
Non-current
mortgage loan
long-term loans
Chapter 2
Introduction to accounting
Measuring And Reporting Financial Positions
Horizontal format
Chapter 2
Introduction to accounting
Measuring And Reporting Financial Positions
Example 2.2
Vertical format
Two choices within vertical format:
Example 2.3
Chapter 2
Introduction to accounting
Measuring And Reporting Financial Positions
Chapter 2
Introduction to accounting
Measuring And Reporting Financial Positions
Accounting conventions
Chapter 2
Introduction to accounting
Measuring And Reporting Financial Positions
Fair value
Fair value means the current market value (i.e. the exchange value in
an arms length transaction)
Impairment of assets
Chapter 2
Introduction to accounting
Measuring And Reporting Financial Positions
Provides insights about how the business is financed and how its funds
are deployed
Provides insights into the liquidity of the business
Can provide a basis for assessing the value of the business
Provides insights into the mix of assets held by the business
Performance can be assessed against amount of investment