This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Accounting is the process of
i..,
m and
c.
financial information about an e
to permit informed j.. and
d
by u of the information.
A conceptual framework for accounting is a which
provides generally accepted guidance for the development of new reporting practices and for
challenging and evaluating the existing practices.
Who are the u. of financial statements?
What are the i n.. of users?
What types of f s will best satisfy their needs?
What are the c of financial statements which meet these needs?
What are the principles for d and r..items in
financial statements?
What are the principles for m. items in financial statements?
Financial Accounting
A conceptual framework is particularly important when practices are being developed for
reporting to those who are not part of the day-to-day running of the business.
This is called .. or financial accounting.
For those who are managing the business on a day-to-day basis, special techniques have been
developed.
This is called .. or management accounting.
S.
P..
L
An individual may enter into business ., either selling goods or providing a
service.
If cash is not available, the sole trader may to start the
business.
The sole traders business may be very much intertwined with the sole traders personal life.
For accounting purposes, the business is regarded as a separate
g (in the form of HM Revenue and Customs) for tax collecting
purposes;
the .. for the purposes of lending money to the business; or
a person when the existing owner
retires.
Financial Accounting
One method by which the sole trader may expand is to enter into partnership with
persons.
This permits a pooling of skills or may allow one person with ideas to work with another who
has the money to provide the resources needed to turn the ideas into a profit.
However, there are real financial risks if the business is unsuccessful.
Need for accounting information:
P.. wishing to be sure that they are receiving a fair share of the partnership
profits
HM R.and C
B. who provide finance
Other persons who may be .
The major risk attached to either a sole trader or a partnership is that
.
including the family home if the business fails.
To encourage the development of larger business entities, owners needed the protection of
; this meant that if the business failed, then the owners
might lose all the money they had put into the business but their personal wealth would be safe.
A private limited company has the word (abbreviated as Ltd) in its
title.
A public limited company has the abbreviation . in its title.
Financial Accounting
A private limited company is prohibited by law from offering its shares to the public
(appropriate to a family-controlled business). The public limited company is
. In
return, it has to satisfy more onerous regulations.
Some major differences
Formation
Running the business
Accounting information
Meeting obligations
Financial Accounting
Management
Owners as investors
Employees
Lenders
Governments and their agencies
Public interest
Each user group has its own specific information needs.
However, there is a view that a ..
financial statement can be designed, which is useful to more than one user group.
Owners and long-term lenders are regarded as . but all potential users
are interested in .
Relationship between .. (principal) and (agents)
There is an inherent conflict between the interests of owners and managers. This conflict is
partly resolved by the managers being required to provide information on a regular basis to the
owners so that their decisions and behaviour can be monitored and assessed.
Trusted by Thousands of
Students
Here are what students say about us.
Resources
Company
Copyright ©2022 All rights reserved. | CoursePaper is not sponsored or endorsed by any college or university.