Chapter 1:

Business transactions: any action that include movement of money within a business.
External users: shareholders, employees, investors, suppliers, bank, ect. Anybody that is concerned with
the financial stability of the company but are not themselves managers
Internal users are management.
Financial accounting is the use of financial information for all interested parties as a presentation
Historical cost is the original value of an asset, the original amount you spent to acquire the object
A financial statement is the combined statement of cashflows, balance sheet, and income statement.
A statement of cash flows consists of operating, investing and financing activities, but specializes in
showing movement of cash from an entity in these categories.
An income statement shows the end profit of an entity after a predetermined amount of time.
A balance sheet (statement of financial position) shows the assets and liabilities and in many cases the
equity of the company.
Management accounting is a field of accounting that provides information souly for the managing
parties including budgeting and economic information. Can be made at any time and any level of
information.
Australian Securities and Investments Commission (ASIC) is the company watchdog. Enforces company
and financial service laws.
Corporations act 2001
Australian Securities Exchange (ASX) is the Australian stock exchange. Provides data.
International Financial Reporting Standards (IFRSs)
Australian Accounting Standards Board (AASB)
A disclosing entity is an entity that issues securities that are quoted on the stock market.
Due process is the process followed that follows the agreed on rules (AASB, IFRSs, ect.)
Equity is the residual interest in the assets of the entity after deducting liabilities. Or for in layman terms,
its the money placed in to the company by the owners of the company.
Chapter 3:
A partnership is when more than one entity is in control of a company.
A mutual agency is when both entitys in a partnership has the right to create or break contracts, acting
as an agent for the company.
A company is a form of business with owners known as shareholders who are people outside of the
organization each owning a part of the company.

A dividend represents an amount as cents per share owed to the shareholders and is labeled as a
liability.
Limited liability is a term given to shareholders because of the nature of their relationship with the
company, in the event of the companys collapse, which is share worth minus amount payable.
Company types include; proprietary companies, companies limited by shares, companies limited by
guarantee, no-liability companies and unlimited companies.
An Australian Company Number (ACN) is a unique number given to a company after it is registered.
A proprietary company is a small company that contains at least one shareholder but no more than 50,
while also possibly containing more than one director. This is the preferred form for a small company.
Preference shares are better than ordinary shares as the dividend is paid first and is usually at a fixed
rate.
Limited by guarantee companies are companies that agree (guarantee) to in the case of problems offer
their own set amount of assets and financing to help support the company.
No-liability companies are companies controlled by shareholders that have no liability when the
company goes under.
An unlimited company is one who has no limit on their liability (mostly restricted to investment type
organizations).
The disadvantages to a company going public or floating is; increased disclosure, cost of IPOs,
potential loss of control, separation of ownership and control and trouble meeting investor expectations.
Chapter 4:
Business transactions are merely when an entity trades resources or services.
arms length distance is the concept of two entities who make a fair trade as neither has an advantage
over the other.
The entity concept is the idea that the personal transactions of the owner are kept separate from the
businesses transactions and finances.
Personal spending of the owner out of the companies expenses are called drawings.
Source documents are the original transaction documents such as invoices, credit card imprints or ATM
receipts.
Cash transactions are immediate transactions of cash, while credit transactions are where the amount is
to be payed in the future.
Personal transactions are un-related to the company and are trnasactions made by the shareholders or
owner which do not effect the company.
Business events are occurances that have the potential to effect the business in some way but the
transactin is not recorded until both partys have rendered services (accural accounting).

The accounting equation is the equation assets = liability + equity and uses the concept of duality.
The errors are; single entry error (only one side of the equation is entered), transposition error (two
numbers are transposed) (results in the difference being divisible by 9) and incorrect entry (the wrong
value was increased and decreased instead of the opposite).
Chapter 5:
General vs special perpose financial accounting: special perpose is the act of maiking a statement
tailored to a specific need while genereal referes to a reort made for those that are unable to command
the creation of a report.
Public accountability is the act of trading in the public market who has securities dept or equity.
Investing descisions are as it sounds, as any descision involving the sale or aquisition of assets.