Financial Reporting and Accounting Standards
Expert-defined terms from the Certificate in Compliance with German Commercial Code course at Stanmore School of Business. Free to read, free to share, paired with a professional course.
Accounting Equation is a fundamental concept in financial reporting and a… #
Related terms include Accounting Standards, Assets, Balance Sheet, Equity, Financial Reporting, Liabilities. The accounting equation is a crucial tool for businesses to understand their financial position and make informed decisions. For example, a company's assets may include cash, inventory, and property, while its liabilities may include loans, accounts payable, and taxes owed. The equity portion of the equation represents the company's net worth, which is the amount of money that would be left over if the company were to liquidate all of its assets and pay off all of its liabilities.
Accounting Period refers to the specific time frame during which financia… #
Related terms include Accounting Standards, Financial Reporting, Financial Statements. The accounting period is usually a calendar year, but it can also be a fiscal year or a quarterly period, depending on the company's needs and the requirements of the relevant accounting standards. For instance, a company may have a fiscal year that ends on June 30, while another company may have a fiscal year that ends on December 31.
Accounting Policies are the specific principles and procedures that a com… #
Accounting policies are crucial because they help to ensure that financial statements are presented in a consistent and comparable manner, which facilitates the decision-making process for stakeholders. For example, a company may have a policy of valuing its inventory at the lower of cost or market, which means that the inventory is valued at the lower of its historical cost or its current market value.
Accounting Standards are the official guidelines that govern the preparat… #
Related terms include Financial Reporting, Financial Statements, Generally Accepted Accounting Principles. Accounting standards are essential because they help to ensure that financial statements are presented in a consistent and comparable manner, which facilitates the decision-making process for stakeholders. For instance, the International Financial Reporting Standards (IFRS) are a set of accounting standards that are widely used around the world, while the Generally Accepted Accounting Principles (GAAP) are a set of accounting standards that are used in the United States.
Accrual Accounting is a method of accounting that recognizes revenues and… #
Related terms include Accounting Standards, Cash Accounting, Financial Reporting. Accrual accounting is widely used because it provides a more accurate picture of a company's financial performance, as it matches revenues and expenses with the period in which they were earned or incurred. For example, a company may recognize revenue from a sale when the sale is made, even if the customer has not yet paid for the product.
Asset is a resource that is owned or controlled by a company, and is expe… #
Related terms include Accounting Equation, Balance Sheet, Financial Reporting. Assets are classified into different categories, such as current assets, non-current assets, and intangible assets, and are reported on the balance sheet. For instance, a company's current assets may include cash, accounts receivable, and inventory, while its non-current assets may include property, plant, and equipment.
Audit is an independent examination of a company's financial statements,… #
Related terms include Auditor, Financial Reporting, Financial Statements. An audit is conducted by an independent auditor, who reviews the company's financial statements and provides an opinion on whether they are presented fairly and in accordance with the relevant accounting standards. For example, an auditor may review a company's financial statements to ensure that they are accurate and complete, and that they comply with the relevant accounting standards.
Auditor is an independent professional who conducts an audit of a company… #
Related terms include Audit, Financial Reporting, Financial Statements. An auditor is responsible for reviewing the company's financial statements and providing an opinion on whether they are presented fairly and in accordance with the relevant accounting standards. For instance, an auditor may be a certified public accountant (CPA) or a chartered accountant (CA), and may work for a public accounting firm or be employed by a company.
Balance Sheet is a financial statement that presents a company's financia… #
Related terms include Accounting Equation, Assets, Equity, Financial Reporting, Liabilities. The balance sheet is divided into three main sections: Assets, liabilities, and equity, and provides a snapshot of a company's financial position at a specific point in time. For example, a company's balance sheet may show that it has $100,000 in assets, $50,000 in liabilities, and $50,000 in equity.
Cash Accounting is a method of accounting that recognizes revenues and ex… #
Related terms include Accrual Accounting, Accounting Standards, Financial Reporting. Cash accounting is simpler to use than accrual accounting, but it may not provide a complete picture of a company's financial performance, as it does not match revenues and expenses with the period in which they were earned or incurred. For instance, a company may recognize revenue from a sale when the customer pays for the product, rather than when the sale is made.
Certified Public Accountant (CPA) is a professional certification that is… #
A CPA is qualified to conduct audits and provide other accounting services, and is recognized as an expert in the field of accounting. For example, a CPA may work for a public accounting firm or be employed by a company, and may provide a range of accounting services, including audit, tax, and consulting services.
Chartered Accountant (CA) is a professional certification that is awarded… #
A CA is similar to a CPA, but the certification is awarded in different countries, such as the United Kingdom, Canada, and Australia. For instance, a CA may work for a public accounting firm or be employed by a company, and may provide a range of accounting services, including audit, tax, and consulting services.
Consolidated Financial Statements are financial statements that combine t… #
Related terms include Financial Reporting, Financial Statements, Group Accounting. Consolidated financial statements are required when a parent company has control over one or more subsidiaries, and provide a comprehensive picture of the group's financial position and performance. For example, a parent company may have several subsidiaries, and the consolidated financial statements would combine the financial information of all of these entities.
Cost of Goods Sold is a financial metric that represents the direct costs… #
Related terms include Financial Reporting, Financial Statements, Gross Profit. The cost of goods sold is calculated by adding the beginning inventory to the cost of purchases and subtracting the ending inventory, and is reported on the income statement. For instance, a company may have a cost of goods sold of $100,000, which would be subtracted from its revenue to calculate its gross profit.
Current Assets are assets that are expected to be converted into cash or… #
Current assets are classified into different categories, such as cash, accounts receivable, and inventory, and are reported on the balance sheet. For example, a company's current assets may include $100,000 in cash, $200,000 in accounts receivable, and $300,000 in inventory.
Current Liabilities are liabilities that are expected to be paid within o… #
Current liabilities are classified into different categories, such as accounts payable, taxes owed, and loans payable, and are reported on the balance sheet. For instance, a company's current liabilities may include $50,000 in accounts payable, $20,000 in taxes owed, and $30,000 in loans payable.
Depreciation is a financial metric that represents the decrease in value… #
Depreciation is calculated using a variety of methods, such as the straight-line method or the declining balance method, and is reported on the income statement. For example, a company may have a piece of equipment that costs $10,000 and has a useful life of 5 years, and the depreciation expense would be $2,000 per year.
Equity is a component of the accounting equation that represents the resi… #
Related terms include Accounting Equation, Assets, Balance Sheet, Liabilities. Equity is classified into different categories, such as common stock, preferred stock, and retained earnings, and is reported on the balance sheet. For example, a company's equity may include $100,000 in common stock, $50,000 in preferred stock, and $200,000 in retained earnings.
Financial Reporting is the process of preparing and presenting financial… #
Related terms include Accounting Standards, Financial Statements, Stakeholders. Financial reporting is regulated by accounting standards and regulatory bodies, such as the Securities and Exchange Commission (SEC) in the United States. For instance, a company may be required to file its financial statements with the SEC and to provide them to its shareholders.
Financial Statements are reports that provide information about a company… #
Related terms include Balance Sheet, Income Statement, Cash Flow Statement. Financial statements are prepared using accounting standards and are used by stakeholders to make informed decisions. For example, a company's financial statements may include a balance sheet, an income statement, and a cash flow statement, which provide a comprehensive picture of the company's financial position and performance.
Generally Accepted Accounting Principles (GAAP) are a set of accounting s… #
GAAP is regulated by the Financial Accounting Standards Board (FASB) and provides a framework for preparing financial statements. For instance, GAAP requires companies to use accrual accounting and to recognize revenues and expenses when they are earned or incurred.
Gross Profit is a financial metric that represents the difference between… #
Related terms include Financial Reporting, Financial Statements, Cost of Goods Sold. Gross profit is calculated by subtracting the cost of goods sold from the revenue, and is reported on the income statement. For example, a company may have a revenue of $100,000 and a cost of goods sold of $60,000, and the gross profit would be $40,000.
Group Accounting is the process of preparing financial statements for a g… #
Related terms include Consolidated Financial Statements, Financial Reporting, Financial Statements. Group accounting is regulated by accounting standards and provides a comprehensive picture of the group's financial position and performance. For instance, a parent company may have several subsidiaries, and the group financial statements would combine the financial information of all of these entities.
Income Statement is a financial statement that presents a company's reven… #
Related terms include Financial Reporting, Financial Statements, Revenue. The income statement is divided into different sections, such as revenues, cost of goods sold, and operating expenses, and provides a comprehensive picture of a company's financial performance. For example, a company's income statement may show that it has a revenue of $100,000, a cost of goods sold of $60,000, and an operating expense of $20,000.
Intangible Assets are assets that are not physical in nature, such as pat… #
Intangible assets are classified into different categories, such as patents, copyrights, and trademarks, and are reported on the balance sheet. For instance, a company may have a patent that gives it the exclusive right to manufacture a certain product, and the patent would be valued and reported on the balance sheet.
International Financial Reporting Standards (IFRS) are a set of accountin… #
IFRS is regulated by the International Accounting Standards Board (IASB) and provides a framework for preparing financial statements. For example, IFRS requires companies to use accrual accounting and to recognize revenues and expenses when they are earned or incurred.
Liabilities are obligations that a company is required to pay or settle,… #
Liabilities are classified into different categories, such as current liabilities and non-current liabilities, and are reported on the balance sheet. For instance, a company's liabilities may include $50,000 in accounts payable, $20,000 in taxes owed, and $30,000 in loans payable.
Non #
Current Assets are assets that are not expected to be converted into cash or used up within one year or within the company's normal operating cycle, and are a critical component of financial reporting and accounting standards. Non-current assets are classified into different categories, such as property, plant, and equipment, and intangible assets, and are reported on the balance sheet. For example, a company's non-current assets may include $100,000 in property, plant, and equipment, and $50,000 in intangible assets.
Non #
Current Liabilities are liabilities that are not expected to be paid within one year or within the company's normal operating cycle, and are a critical component of financial reporting and accounting standards. Non-current liabilities are classified into different categories, such as loans payable and deferred tax liabilities, and are reported on the balance sheet. For instance, a company's non-current liabilities may include $100,000 in loans payable and $20,000 in deferred tax liabilities.
Retained Earnings is a component of equity that represents the accumulate… #
Related terms include Dividend, Equity, Financial Reporting. Retained earnings is calculated by adding the net income to the beginning retained earnings and subtracting any dividends declared, and is reported on the balance sheet. For example, a company may have a net income of $100,000 and beginning retained earnings of $200,000, and the retained earnings would be $300,000.
Revenue is a financial metric that represents the income earned by a comp… #
Related terms include Financial Reporting, Financial Statements, Income Statement. Revenue is recognized when it is earned, regardless of when cash is received, and is reported on the income statement. For instance, a company may recognize revenue from a sale when the sale is made, even if the customer has not yet paid for the product.
Stakeholders are individuals or groups that have an interest in a company… #
Related terms include Financial Reporting, Financial Statements, Accounting Standards. Stakeholders are entitled to receive financial information about a company, and use this information to make informed decisions. For example, shareholders may use a company's financial statements to decide whether to buy or sell the company's stock, while creditors may use the financial statements to decide whether to lend money to the company.
Tax Accounting is the process of preparing tax returns and other tax #
related documents, and is a critical component of financial reporting and accounting standards. Related terms include Financial Reporting, Financial Statements, Taxation. Tax accounting is regulated by tax laws and regulations, and provides a framework for preparing tax returns and other tax-related documents. For instance, a company may be required to file a tax return with the tax authorities and to pay taxes on its profits.
Taxation is the process of imposing taxes on individuals and businesses,… #
Related terms include Financial Reporting, Financial Statements, Tax Accounting. Taxation is regulated by tax laws and regulations, and provides revenue for governments to fund public services. For example, a company may be required to pay taxes on its profits, and the tax authorities may use this revenue to fund public services such as education and healthcare.
Working Capital is a financial metric that represents the difference betw… #
Working capital is calculated by subtracting the current liabilities from the current assets, and is reported on the balance sheet. For instance, a company may have $100,000 in current assets and $50,000 in current liabilities, and the working capital would be $50,000.