Accounting

• The accrual principle states that revenue and expenses should be recognized when they are earned or incurred, regardless of when the cash is received or paid.
• Accounting can be regulated by government, parlament, the market, stock exchange and accounting professions
• Goals of economic entities are: liquidity, profitability and market value maximization
• Accounting can be divided by structure into financial accounting and managment accountig
• Definition of accounting: The process of recording, classifying, and summarizing financial information for decision making purposes.
• Accounting regulations can be found in International Accounting Standards, International Auditing Standards, Accounting Act, EU Directives and regulations of the Ministry of Finance
• Financial statements include balance sheet, income statement, cash flow statement and notes to the accounts
• Balance Sheet - shows assets, liabilities and equity at a specific point in time
• Income statement shows revenues, expenses and net income or loss over a period of time
• Cash flow statement shows inflows and outflows of cash during a specific period
• Functions of accounting are informative, analytival, controllling and stimulation
• Whole accounting process consists of data collecting, analysis and interpretation
• Double entry bookkeeping ensures accuracy by balancing debits with credits
• Data collecting is a process of measurment, documentation, recording, cost settlement, cost calculation and reporting
• Users of accounting informations are managers, investors, employees, suppliers, customers, public and government
• Plan of accounts is the principles of their functioning and relationship between them
• Cash principle - only cash income is income
• Going concern assupmtion - assuming that the company can survive
• True and fair view - accounting should cover inflation, currency, fluctations and market site
• Prudence principle - real and updated information (if not sure, use pessimistic option)
• Periodicity principle - in income statement use specific periods
• Matching principle - expenses are matched with revenue
• Spearate entity assupmtion - accounting in other units should be separated
• Consistency principle - need to be consisrent year by year
• Accounting systems divide into anglo-american model, continental model, south-american model, communist model and mixes
• Anglo-American model is based on double entry bookkeeping system
• South American model has similarities to the Anglo-American model but also includes cash basis accounting
• Asset - resource controlled by the entity as a result of past events and from which it expects to benefit in the future (all value you poses)
• Liability - a present obligation of the entity arising from past events, settlement of which is expected to result in outflow from the entity of resources embodying economic benefits
• Equity - residual interest in assets of an entity that remains after deducting liabilities
• Shareholder's equity - total value of all the shares in a company, including the value of any reserves
• Fixed assets - long term use, don't change their form, are consumed gradually
• Current asset - short term use, can be converted into cash within one year or less
• Entity is classified as a current liability, when

  • it expects to settle liability in normal operating cycle
  • it holds the liability solemny for the purpose of trading
  • is due to be settled within 12 months after reporting period
  • it doesn't have an unconditional right to defer settlement of the liability for at least 12 months after the reporting period (terms of the liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification)
• Research - original and planned investigation undertaken with the prospect of gaining gnew scientific/technical knowledge and understandin
• Research consists of

  • activities aimed at obtaining new knowledge
  • the search for evalutaion and final selection of application of research findings and other knowledge
  • the services for alternatives for materials, devices, products, processes, systems or services
  • the forumulations, designs, evaluation and final selection of possible alternatives for new or improved materials, devices, products, processes , systems or services
• Development - application of research findings or other knowledge to a plan or design of a product or service before the start od commercial production and use
• Depraciation - decreasment of value of units of account, usually due to inflation
• Amortization - reduction in the value of fixed asset and the intengible assets as the result of its consumption
• Amortization methods

  • linear method (the amortization allowance is the same year
  • degressive methods (the amortization changes for lower year by year)
  • progressive methods: