Acca Fa1 Basics

ACCA
FA1
FINANCIAL ACCOUNTING
BASICS
INFORMATIVE NOTES
PREPARED BY: MUHAMMAD

HARIS.
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TOPICS INCLUDED IN BASICS:
Page 1|6
PREPARED BY: MUHAMMAD HARIS.

1. BUSINESS.
 NATURES OF BUSINESS.
 BUSINESS CLASSIFICATION/TYPES OF
OWNERSHIP/BUSINESS ENTITIES.
2. ACCOUNTING.
3. TRANSACTIONS.
 TYPES OF TRANSACTIONS.
4. STAKEHOLDERS.
 LIST OF RELEVANT STAKEHOLDERS/USERS OF
FINANCIAL STATEMENTS.
5. COMPONENTS OF FINANCIAL STATEMENTS.
6. OBJECTIVES OF FINANCIAL STATEMENTS.
1] BUSINESS:
1. Any Legal Activity Undertaken With The Objective Of Earning
Or Making A Profit.
2. A Business Is An Organization Or Entity That Sells Goods Or
Services For Making Or Earning A Profit.
NATURES OF BUSINESS:
1. TRADING: Selling And Buying Goods On A Daily Basis.

2. MANUFACTURING: Making Or Producing Goods From Raw Materials
To Finish Goods.
3. SERVICES: Providing Services To Customers E.G Hairdressing, Computer
Technician.
BUSINESS CLASSIFICATION/BUSINESS ENTITIES/TYPES OF
OWNERSHIP:
FOLLOWING ARE THE SOME TYPES OF BUSINESS:
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1. SOLE PROPRIETORSHIP
 Only Single-Owner Business.
2. PARTNERSHIP
 Maximum 2 To 20 Members Business.
3. JOINT STOCK COMPANY
 Public Limited Company
 Unlimited Owners, 7 To Unlimited Owners.
 This Company Offers The Public To Purchase Shares.
 Private Limited Company:
 Maximum 50 Owners, 5 To 50 Owners.
 This Company Doesn’t Offer The Public To Purchase Shares.
 It Is Also Called A Family Business.
2] ACCOUNTING:
1. Accounting Is The Art Of Recording, Classifying & Summarizing
Business Transactions In The Form Of Financial Statements, Which Is
Communicated To The Relevant Stakeholders.
3] TRANSACTIONS:
1. A Transaction Is An Agreement Carried Out Between Separate Entities,
Involving The Exchange Of The Items Of Value, Such As Goods,
Information, Services & Money.
2. A Transaction Is An Exchange Of Interest Between Two Parties Or The
Process In Which The Seller Transfers The Goods Or Services To The
Buyer And The Buyer Makes The Payment For It Is Called Transaction.
3. Every Business Sells Goods Or Services To Customers And Gets Paid For
What It Sells.
4. Every Business Buys Goods And Services From Suppliers And Pays For
What It Buys.
5. For Example; A Garage Has To Buy Car Parts And Components To Do
Repairs On Customers’ Cars, And Business Buy Stationery And
Computers For Their Office Work.
6. Many Businesses Have Employees And Have To Pay For Their Labour.
7. All Business Incur Expenses For Various Services, Such As The Supply Of
Electricity, Telephone Services, Etc.
TYPES OF TRANSACTIONS:
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Most Business Transactions For Buying & Selling Goods Or Services Are Either
CASH TRANSACTIONS OR CREDIT TRANSACTIONS.
CASH TRANSACTION:
 The Buyer Pays For The Item Either Upon Exchange Of Goods/Services
Or They Pay In Advance.
 For Example; Sales In A Shop Or Supermarket Are Cash Transactions
Because The Customer Pays At The Cash Desk.
 Cash Sale: Goods Or Services Are Provided And The Customer Pays
Immediately.
 Cash Purchase: Goods Or Services Are Purchased And Paid Immediately.
 In Cash Transactions, Hand-To-Hand Payment Without Any Delay.
CREDIT TRANSACTION:
 The Buyer Does Not Have To Pay Immediately For The Exchange Of Item
On Receipt,
 But Is Allowed A Credit Period, Before Having To Make The Payment.
 Most Transactions Between Two Businesses Are Credit Transactions.
 Businesses Usually Buy From Other Businesses And Sell To Other
Businesses On Credit.
 The Credit Terms, How Long The Buyer Has To Pay, Are Agreed Upon
Between The Buyer And The Supplier In Advance.
 Credit Sale: Goods Or A Service Are Provided And The Customer Pays
Later.
 Credit Purchase: Goods Or A Service Are Purchased And Paid For Later.
 Example Of Credit Transaction:
4] STAKEHOLDERS:
 Any Person Who Has Some Sort Of Interest In The Business.
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 A Stakeholder Has An Interest In A Company And Can Either Affect Or Be
Affected By A Business, Operations & Performance.
LIST OF RELEVANT STAKEHOLDERS/USERS OF FINANCIAL
STATEMENTS:
1. SHAREHOLDERS (OWNER)
2. MANAGEMENT
3. EMPLOYEES
4. CUSTOMERS
5. SUPPLIERS
6. LENDER (FINANCE PROVIDER e.g. BANK)
7. GOVERNMENT BODIES (e.g. TAX DEPARTMENT).
5] COMPONENTS OF FINANCIAL STATEMENTS:
1. STATEMENTS OF COMPREHENSIVE INCOME (INCOME STATEMENT).
2. STATEMENTS OF FINANCIAL POSITION (BALANCE SHEET).
3. STATEMENTS OF CHARGE FLOW.
4. STATEMENTS OF CHANGES IN EQUITY.
6] OBJECTIVES OF FINANCIAL STATEMENTS:
 The Objective Of A Financial Statement Is To Provide Information About
The Financial Position, Performance And Changes In Financial Position Of
An Enterprise That Is Useful To A Wide range Of Users In Making
Economic Decisions.
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ACCA

PREPARED BY: MUHAMMAD

TOPICS INCLUDED IN BASICS:

PREPARED BY: MUHAMMAD HARIS.

1. TRADING: Selling And Buying Goods On A Daily Basis.

PREPARED BY: MUHAMMAD HARIS.

PREPARED BY: MUHAMMAD HARIS.

PREPARED BY: MUHAMMAD HARIS.

PREPARED BY: MUHAMMAD HARIS.

PREPARED BY: MUHAMMAD HARIS.

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