Accounting Finance

Finance & Accounting

H1: The internal accounting system, which may be in addition to the system which underpins the financial reporting system, is often referred to as the management accounting function. The major difference is that management accounting is primarily directed toward providing information of specific use to managers, whereas financial accounting information, which is often produced in summary form, has many users apart from managers. Financial accounting is based on the past and takes no account of future uncertainties. The accounting system not only influences business strategies but is itself influenced by the goals, size and structure of the organization. H2: Profit measurement: the measurement of changes in wealth over time Wealth: the stock at a particular point in time. The difference between the wealth at the start of a period and the end of it, is the profit or loss for that period Original cost: the cost of the item at the time of the transaction between buyer and seller. Historic cost: the cost incurred in acquiring an item measured at the time of the originating transaction. (mostly used in accounting) Replacement cost: the amount that would have to be paid at today’s prices to purchase an item similar to the existing item Economic value: the value of the expected earnings from using the item discounted at an appropriate rate to give a present-day value Net-realizable value: the amount that is likely to be obtained by selling an item, less any costs incurred in selling H3: Liquidity: the ease with which assets can be converted into cash in the normal course of business Accrue: received by the enterprise at some point in time Fixed asset: an asset that is acquired for the purpose of use within the business and is likely to be used by the business for a considerable period of time Current asset: one which is either part of the operating cycle of the enterprise or is likely to be realized in the form of cash within one year Liability: a...