Financial Accounting 30Q at Technische Hochschule Ingolstadt

Flashcards and summaries for Financial Accounting 30Q at the Technische Hochschule Ingolstadt

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Exemplary flashcards for Financial Accounting 30Q at the Technische Hochschule Ingolstadt on StudySmarter:


2. How should financial reporting be different from data provided to management? (cost accounting)


Exemplary flashcards for Financial Accounting 30Q at the Technische Hochschule Ingolstadt on StudySmarter:


3. Why is financial accounting highly regulated?


Exemplary flashcards for Financial Accounting 30Q at the Technische Hochschule Ingolstadt on StudySmarter:

4. How long is the FY /accounting period in general?

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Exemplary flashcards for Financial Accounting 30Q at the Technische Hochschule Ingolstadt on StudySmarter:


5. What are the four financial statements?


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6. What must be true according to the accounting equation?


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7. Could you determine the equity of a company when you know its assets and liabilities?


Exemplary flashcards for Financial Accounting 30Q at the Technische Hochschule Ingolstadt on StudySmarter:

8. Where in the balance sheet can you see the net profit/loss of a company?

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9. Are financial statements an objective picture of a company? Why?


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10. What is the IFRS?


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11. What is local GAAP?


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12. What is the connection between IFRS and local GAAP?


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  1. Who is the target group of financial accounting information?


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Financial Accounting 30Q


2. How should financial reporting be different from data provided to management? (cost accounting)


  • It has an incentive to keep relevant information secret. 
  • Picture of company might not be “true and objective”
  • Only provided once by year instead of frequently over the year
  • Conflicting interests between management and outside users of information

Financial Accounting 30Q


3. Why is financial accounting highly regulated?


It is highly regulated in order to protect the economy from tremendous damage if investors or other third parties would lose confidence in corporate accounting, many companies have  no incentive to tell the full truth (they either want more investors, therefore overvaluing assets and undervaluing liabilities or they want to pay less dividends and paint a more depressive view of the company, reliable information is needed for outside parties for economic decisions.

Financial Accounting 30Q

4. How long is the FY /accounting period in general?

It is 12 months in general

Financial Accounting 30Q


5. What are the four financial statements?


IFRS

  1. Statement of comprehensive income (US: Profit- and- loss accounts -P&L) 
  2. Statement of financial positions at the end of the accounting period
  3. Statement of changes in equity 
  4. Statement of cash flow 

German GAAP

  1. Income Statement, Profit and Loss accounts (P&L), Gewinn und Verlustrechnung (GuV)
  2. Balance Sheet, Statement of financial positions, Bilanz 
  3. Not mandatory 
  4. Like statement of cash flow 

Financial Accounting 30Q


6. What must be true according to the accounting equation?


Total Assets shall always be equal to Total liabilities and equity

Financial Accounting 30Q


7. Could you determine the equity of a company when you know its assets and liabilities?


Yes, by subtracting the total liabilities from total assets (accounting equation)

Financial Accounting 30Q

8. Where in the balance sheet can you see the net profit/loss of a company?

At the equity column (Change of assets from previous year and current one)

Financial Accounting 30Q


9. Are financial statements an objective picture of a company? Why?


They are not always objective because the company must keep some information secret, it is provided just once per year and therefore is not able to show every change during the year and/or the company could paint a too positive or negative picture of the company.

Financial Accounting 30Q


10. What is the IFRS?


International Financial Reporting Standards (IFRS) set common rules so that financial statements can be consistent, transparent and comparable around the world. IFRS are issued by the International Accounting Standards Board (IASB). They specify how companies must maintain and report their accounts, defining types of transactions and other events with financial impact. IFRS were established to create a common accounting language, so that businesses and their financial statements can be consistent and reliable from company to company and country to country.

Financial Accounting 30Q


11. What is local GAAP?


Generally accepted accounting principles (GAAP) refer to a common set of accounting principles, standards, and procedures issued by the local or national financial accounting standards board. Depending on the country it may follow the IFRS, allow the IFRS or demand to just use the local GAAP.

Financial Accounting 30Q


12. What is the connection between IFRS and local GAAP?


Both are set rules pf accounting principles, standards and procedures and try to function as an understandable language of accounting. IFRS and local GAAPS share mostly the same 4 financial statements.

Financial Accounting 30Q

  1. Who is the target group of financial accounting information?


  1. Managers -> Decisions makers in company decides about alternative course of actions 
  2. Investors -> Owners (Stockholders) 
  3. Other Lenders -> Lenders (such as banks) are interested in whether loans, and interests attached to them, will be paid when due. 
  4. Employees -> Employees and their representative groups are interested in the profitability of their employers. They also want to assess the ability of the entity to continue to provide remuneration, retirement benefits and employment opportunities. 
  5. Suppliers -> Suppliers want to be able to assess whether amounts owing will be paid when due. Suppliers are likely to be interested in an entity over a shorter period then lenders, unless they depend upon the entity as a major continuing customer.
  6. Costumers -> Costumers need information about the continuance of an entity, especially when they have a long- term involvement with the entity.
  7. Government -> Governments and their agencies need information in order to regulate the activities if entities and to collect taxation. 
  8. Public -> Entities affect members of the public in a variety of ways, for example, entities pollute the atmosphere or spoil the countryside. Accounting statements may give the public information about trends and recent developments of the entity and the range of its activities. 

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