Cost Classification – by Function (1)

This is a classification that represents costs in respect of why the cost was incurred. For financial accounting purposes, costs are split into production and non-productioncosts: Production costs – this is also known as “cost of sales”. This category would includeproduction labour costs, materials, factory supervisor salaries, factory rent. Theseare any costs which are directly … Read More

FRS 18

FRS 18 sets out two main qualitative characteristics (relevance & reliability) and fourenhancing qualitative characteristics that information in the financial statements shouldpossess in order for the content of the financial statements to be useful to its users.When an accounting policy is to be selected, its appropriateness to the businessshould also be considered against these qualities. … Read More

What are the financial statements?

  WHAT ARE THE FINANCIAL STATEMENTS IN ACCOUNTS? Transcending from the trial balance, the financial statements will need to be prepared using the closing balances derived from the trial balance. The two main financial statements are the: ·        Statement of profit or loss (profit or loss account) and the ·        Statement of financial position (balance … Read More

The Entity Concept

WHAT IS THE ENTITY CONCEPT? This is where a business is usually seen and treated as a separate party from the business; so, the records of the business must be kept separate from the personal records of the owner of the business. The entity concept states that business transactions must be separately recorded from those … Read More