Accounting Unit 1 Revision

State FOUR reasons why financial statements do not provide users with all the information they need.

Explain the difference between the cash basis and the accrual basis of accounting.

https://www.youtube.com/watch?v=T_TSsCYPRgA

Answer explanation

Historically, cash basis was the first form of recording financial transactions

Suggest FOUR ways in which the use of the cash basis could impact on the assessment of performance.

https://www.youtube.com/watch?v=T_TSsCYPRgA

Identify TWO reasons why an organization would use 'accrual basis accounting' instead of 'cash basis account

• Fairer representation of the performance of the business

• Meet requirements of IFRS

• Taxation purposes

• Legal requirements

Explain THREE purposes of accounting standards in the commercial activity of a country

• Allow for fair comparison of performace

• Fair application of taxes

• Minimise fraud and money laundering

• Political gain

State any FOUR steps that lead to the establishment and issuance of an Accounting Standard.

Give TWO reasons why it became necessary to develop IFRS for SMEs.