Financial Accounting: Methodology

Measuring Financial Performance

WHY KEEP FINANCIAL ACCOUNTS?

THE FIVE BASIC CONCEPTS

• Accruals
• Consistency
• Prudence
• Separability
• Going Concern

A WORKED EXAMPLE

1. Issue of Shares
2. Borrowing
3. Buying an Asset
4. Buying Stock
5. Spending on Expenses
6. Making a Sale
7. Buying on Credit
8. Selling on Credit
9. Write Offs
10. Paying a Dividend
11. Accruals
12. Depreciation

THE PROFIT AND LOSS ACCOUNT

NOTES TO THE PROFIT AND LOSS ACCOUNT

CASHFLOW

SUMMARY

The Three Accounting Statements

The Double Entry System