Accounting and Financial Management 1A

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Accounting and Financial Management 1A Introduction to Financial Accounting & Key Financial Statements •Accounting is the process of identifying, measuring, recording and communicating economic information to assist users to make decisions

•There are 2 separate accounting systems:

oFinancial accounting system – periodic financial statements and related disclosure ▪Designed for extern decision makers oManagerial accounting system – detailed plan and continuous performance reports ▪Information used by managers throughout the organization Financial Accounting •Financial accounting focuses on the provision of information to users external to the enterprise •Focused on reporting financial position and financial performance

•Users of accounting information include:

oBankers – likelihood the company will meet its interest payments oASIC – Financial position and performance of a company issuing shares to the public in IPO’s oSuppliers – suppliers do not want to deal with non-profitable companies oAustralian Tax Office oTrade Unions oManagement – in making business decisions oShareholders oBoard of directors oImpacts community oImpacts employees Annual Report •An annual report is a magazine that contains a lot of descriptive information about the company and general purpose financial statements Key Financial Statements •Balance Sheet – Financial position of an enterprise at a particular point in time oWhat are the entity’s resources and how are they financed?•Income Statement – Financial performance of an enterprise over a period of time oHas the entity used its resources efficiently and effectively 4 / 5