FABM2 | M1L1

• Accounting is the process of identifying, measuring, recording, and communicating economic information about an organization or other entity, in order to permit informed judgements by users of the information.
• Accounting refers to the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by users of the information (American Accounting Association)
• What is the process in accounting?

  • Business Transactions

  • Identification

  • Measurement

  • Recording

  • Communicating Useful Financial Information
• Financial statements are a collection of summary-level reports about an organization's financial results, financial position, and cash flows.
• Financial Statements include the income statement, balance sheet, and statement of cash flows.
• TITLE | CONTENT

  Statement of Financial Position > Assets, Liabilities, and Equity

  Statement of Comprehensive Income > Revenues and Expenses

  Statement of Changes in Equity > Transactions Owners

  Statement of Cash Flows > Transactions Involving Cash

  Explanatory Notes > Other Information
• A Statement of Financial Position represents the company’s assets, liabilities, and equity.
• A Statement of Financial Position represents a company’s position.
• A Statement of Comprehensive Income represents the company’s revenues and expenses incurred.
• Statement of Comprehensive Income tells about the “performance” and activities of the company.
• Statement of Changes in Equity tells about the beginning stake of the owner(beginning capital), any additional investments, withdrawal of resources, and share in net income or net loss
• The Statement of Cash Flows tells about the cash transactions of the company.