FA1 intro

• How does financial accounting differ from managerial accounting?

  Financial accounting is external, managerial is internal
• Who are the main users of financial information?

  • Business
  • Competitors
  • Lenders
  • Managers
  • Suppliers
  • Investment analysts
  • Community representatives
  • Government
  • Employees and their representatives
  • Customers
  • Shareholders
• What is the purpose of financial accounting?

  Provide overview of periodic performance
• What is a sole proprietorship?

  Business owned by one individual
• What is required to set up a sole proprietorship?

  Inform His Majesty’s Revenue and Customs
• What are the characteristics of a sole proprietorship?

  • Easy to set up
  • No formal procedures
  • Flexible
  • Simple to wind up
  • Minimum accounting information required
• What is the focus of managerial accounting?

  Support internal decision making
• What type of reports does financial accounting provide?

  Standardized reports for various stakeholders
• How does the quality of information differ between financial and managerial accounting?

  Financial is mainly backward-looking, managerial is forward-looking
• What are the different types of accounting?

  • Financial accounting
  • Managerial accounting
• What are the three forms of business ownership discussed?

  • Sole proprietorship
  • Partnership
  • Limited company
• What is the focus of financial accounting?

  Provide an overview of periodic performance
• What is the role of stakeholders in a business?

  They have interests in company operations
• What is the purpose of the accounting cycle?

  To summarize financial transactions
• What is the focus of the income statement?

  To summarize revenues and expenses
• What is the role of the balance sheet?

  To present a company's financial position
• How do financial statements assist stakeholders?

  By providing insights into financial health
• What does financial accounting provide an overview of?

  Periodic performance and financial position
• What is the purpose of managerial accounting?

  To support internal decision making
• Who are the primary users of financial accounting?

  External users
• How does the quality of information differ between financial and managerial accounting?

  Financial is mainly backward-looking; managerial is forward-looking
• What are the three forms of business ownership?

  • Sole Proprietorship
  • Partnership
  • Limited Company
• What is a key characteristic of a sole proprietorship?

  Owner is personally liable for all debts
• What must a sole trader inform for tax purposes?

  His Majesty’s Revenue and Customs
• How is a partnership similar to a sole trader?

  Both have flexibility in operations
• What distinguishes a limited company from other forms of ownership?

  Separation of ownership and management
• What is the role of a board of directors in a limited company?

  Conduct performance evaluation and financial oversight
• What is the main legal difference between private and public limited companies?

  Public can sell shares to the public
• What must public limited companies do to raise funds?

  List on a stock exchange
• What are the three main financial statements?

  • Statement of Financial Position (Balance Sheet)
  • Statement of Profit or Loss (Income Statement)
  • Statement of Cash Flows (Cash Flow Statement)
• What is an "Accounting period"?

  A timeframe for preparing financial statements
• How long is a typical accounting period?

  Normally 12 months
• Why is the accounting period important?

  It specifies the timeframe for financial reporting
• What does the Balance Sheet provide?

  A snapshot of financial position at period end
• How does the Income Statement differ from the Balance Sheet?

  It shows revenue and expenses over the period
• What does the Cash Flow Statement show?

  Flows of cash in and out during the period
• What is the profit formula?

  Profit = Revenues - Expenses
• What does the term "cost of sales" refer to?

  Expense for the number of snacks sold
• What is the financial position at the end of Week 1?

  Assets and claims at period end
• What does the Statement of Cash Flows calculate?

  CASH GENERATED = CASH IN - CASH OUT