Financial Accounting 30Q at Technische Hochschule Ingolstadt | Flashcards & Summaries

Lernmaterialien für Financial Accounting 30Q an der Technische Hochschule Ingolstadt

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


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TESTE DEIN WISSEN
  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. 
Lösung ausblenden
TESTE DEIN WISSEN


3. Why is financial accounting highly regulated?


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TESTE DEIN WISSEN

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.

Lösung ausblenden
TESTE DEIN WISSEN

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

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TESTE DEIN WISSEN

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

Lösung ausblenden
TESTE DEIN WISSEN


5. What are the four financial statements?


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TESTE DEIN WISSEN

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 
Lösung ausblenden
TESTE DEIN WISSEN


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


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TESTE DEIN WISSEN

Total Assets shall always be equal to Total liabilities and equity

Lösung ausblenden
TESTE DEIN WISSEN


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


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TESTE DEIN WISSEN

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

Lösung ausblenden
TESTE DEIN WISSEN

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

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TESTE DEIN WISSEN

It is 12 months in general

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TESTE DEIN WISSEN


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


Lösung anzeigen
TESTE DEIN WISSEN

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.

Lösung ausblenden
TESTE DEIN WISSEN


10. What is the IFRS?


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TESTE DEIN WISSEN

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.

Lösung ausblenden
TESTE DEIN WISSEN


11. What is local GAAP?


Lösung anzeigen
TESTE DEIN WISSEN

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.

Lösung ausblenden
TESTE DEIN WISSEN


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


Lösung anzeigen
TESTE DEIN WISSEN

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.

Lösung ausblenden
TESTE DEIN WISSEN


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


Lösung anzeigen
TESTE DEIN WISSEN
  • 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
Lösung ausblenden
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Q:
  1. Who is the target group of financial accounting information?


A:
  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. 
Q:


3. Why is financial accounting highly regulated?


A:

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.

Q:

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

A:

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

Q:


5. What are the four financial statements?


A:

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 
Q:


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


A:

Total Assets shall always be equal to Total liabilities and equity

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Q:


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


A:

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

Q:

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

A:

It is 12 months in general

Q:


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


A:

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.

Q:


10. What is the IFRS?


A:

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.

Q:


11. What is local GAAP?


A:

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.

Q:


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


A:

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.

Q:


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


A:
  • 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

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