Financial Statement Reporting Glossary PDF

FINANCIAL STATEMENT REPORTING GLOSSARY Term/ Definition Abbreviation Accounting A financial year (12 months) from 1 July to 30 June (in Australia). period Accounting entity concept Accounting period concept Accrued expenses Accrued revenue Asset Items of value owned o...

FINANCIAL STATEMENT REPORTING GLOSSARY Term/ Definition Abbreviation Accounting A financial year (12 months) from 1 July to 30 June (in Australia). period Accounting entity concept Accounting period concept Accrued expenses Accrued revenue Asset Items of value owned or controlled by a business. Bad debts Accounts receivable who cannot pay their debt. Bad debts When an accounts receivable that has previously been written off recovered as a bad debt pays the amount originally owed. Balance Day Adjustments Comparative financial statements Sourced: https://www.investopedia.com/terms/c/comparative-statement.asp Current ratio Depreciation The allocation of the depreciable amount of an asset over its useful life. The term is usually used in relation to physical assets. Doubtful debts Doubtful debts are an estimate of debts we expect to be bad from the sales a business has made in that financial year. They are necessary because of the matching principle. Expenses The outflow of resources to the business as a result of the sale of inventories, services performed and the general operations of the business. Going concern principle Gross profit ratio GST credits GST that is paid on expenses and the acquisition of assets. received GST collected GST that is collected on sales of inventories, sales of assets and services provided and is payable to the ATO. GST clearing GST clearing is a ledger account used on Balance Day to calculate the amount of GST owing to the ATO by a business, or in some cases, calculate the amount of GST owed to the business by the ATO. GST collected and GST credits received are both transferred to GST clearing and the net value is the amount owed/owing by/to the business. Historical cost principle Inventory An adjustment made to the inventory account on Balance Day. This adjustment adjustment is required because the inventory counted during a stocktake does not match the accounting records. An adjustment needs to be made to ensure the inventory value in the accounting records is correct. This adjustment can be an inventory shortage or surplus. Liability Amounts owed by a business to external parties. Limitations of Accounting reports are prepared using accounting concepts and financial reports principles which can be limitation to the effectiveness of the accounting data. The assumptions are necessary, but at the same time they can limit the accuracy and reliability of the data. Matching The principle of matching revenue for one period of time with the principle expenses incurred in earning that revenue. Materiality The importance of an item to a particular entity. Only material costs are included in the cost price of an asset. Monetary principle Net profit ratio Non-current Assets that are purchased by the business and are not intended for assets resale but are to be used within the operation of the business to earn revenue, and will normally be kept and used for longer than one accounting period. Over-provision When the opening balance of Provision for Doubtful Debts is more for Doubtful than the bad debts that occurred during the period. Debts Owner’s Equity Owner’s equity is the difference between the assets and liabilities of a business, and equals the amount of the owner’s interest or investment in the business. Prepaid expenses Provision for Doubtful Debts Qualitative Accounting information should have certain characteristics in order characteristics to be included in general purpose financial reports. These are called qualitative characteristics of financial information and have been judged to be the characteristics of most use to thise decision makers who are relying on these financial reports. The qualitative characteristics are: relevance (including materiality), reliability, comparability and understandability. Quick ratio Revenue The inflow of resources to the business as a result of the sale of inventories, services performed and the general operations of the business. Return on owner’s equity Return on total asset This ratio shows how Statement of A general purpose financial report presents the assets, liabilities Financial and owner’s equity of an organisation at a particular point in time. Position This report shows how much the business is worth. Statement of A general purpose financial report that provides details of the Profit or Loss various revenues and expenses for a period and calculates the resultant profit or loss. Turnover of accounts receivable Turnover of inventory Under-provision When the opening balance of Provision for Doubtful Debts is less for Doubtful than the bad debts that occurred during the period. Debts Unearned revenue Write-off debt When a business writes-off a bad debt they are cancelling the debt.