Chapter 1

Part A: Foundations

The accounting framework

Last updated November 20267 sectionsabout 27 min read

Key takeaways

Accounting turns what happened in a business into a document a stranger can rely on, by identifying, measuring, recording, classifying, summarising, interpreting and communicating its transactions.
Bookkeeping records the transactions, financial accounting presents them to outsiders under IFRS, and management accounting serves the people running the business with no external rulebook.
The IASB framework builds every statement from five elements: assets, liabilities, equity, income and expenses. Capital introduced and drawings move equity directly, never through profit.
Assets = Liabilities + Equity holds after every transaction, and double entry is that equation enforced one transaction at a time.
Each year end adjustment rests on a concept: accrual fixes the period, matching ties an expense to its revenue, conservatism holds back unrealised gains, and economic entity keeps the owner's spending out.

This opening chapter fixes the vocabulary and the reasoning that every later chapter of this paper assumes without restating. By the end of it you should be able to:

Define the terms an examiner uses without warning.
Name the five elements a set of financial statements is built from.
Apply the accounting equation to any transaction put in front of you.
Say which concept a given adjustment rests on.

None of that is memory work for its own sake: a candidate who cannot say what a credit is cannot post a journal in the chapter on recording transactions, and a candidate who cannot state the accrual principle cannot make a single year-end adjustment in the chapter on assets and liabilities.

Two Kenyan businesses run through this chapter and reappear in the ones that follow. Wanjiru owns Riverside Agrovet, a sole trader in Nyeri selling seed, feed and veterinary supplies. Bidii Millers Limited is a maize miller in Nakuru, a private company with three shareholders and a loan from Equity Bank. They are deliberately different in scale and in legal form, because much of what this paper teaches is the same technique applied to entities that are governed differently.

Key terms

KASNEB opens this syllabus with a glossary, and examiners test it directly: a two or three mark part asking you to define a term, and then a longer part that only works if the definition was understood rather than recited. Each term below is given with the distinction that makes it examinable, not just a dictionary line.

Accounting

The process of identifying, measuring, recording, classifying, summarising, interpreting and communicating the financial transactions and events of an entity, so that those who rely on that information can make informed economic decisions. Note that recording is only one verb in that list. Accounting includes the judgement about what to record and the communication of the result, which is why it is a profession rather than a clerical task.

Accounting period

The span of time over which an entity measures and reports its performance, most commonly twelve months. Riverside Agrovet's runs 1 January to 31 December, so a sale on 31 December falls in one period and a sale on 1 January in the next. The period is the boundary that makes profit measurable at all: without it, profit could be computed only once, when the business finally closed.

Accrual basis of accounting

The basis on which income is recognised when it is earned and expenses when they are incurred, regardless of when cash is received or paid. Its opposite is the cash basis, under which nothing is recorded until money moves. IFRS requires the accrual basis for general purpose financial statements, and this paper uses it throughout except where a question expressly asks for a receipts and payments account.

Credit

An entry on the right hand side of an account. A credit increases a liability, an equity or an income account, and decreases an asset or an expense account. Note carefully what a credit is not: it is not a decrease, and it is not money coming in. The word carries none of the everyday meaning it has in the phrase "my account was credited".

Debit

An entry on the left hand side of an account. A debit increases an asset or an expense account, and decreases a liability, an equity or an income account. Debit and credit are directions, not values, and every transaction carries at least one of each in equal total amount.

Accruals

Expenses that have been incurred by the reporting date but not yet paid, and income that has been earned but not yet received. An accrued expense sits in the statement of financial position as a liability, because the entity owes it, while the matching charge has already been taken to profit or loss. The chapter on assets and liabilities accounts for these in full, under accruals and prepayments.

Closing the books

The end of period routine that transfers the balances on income and expense accounts to the statement of profit or loss, leaving those accounts at nil to start the new period, and carries the balances on asset, liability and equity accounts forward as opening balances. It is the mechanism that keeps each period's performance separate while the entity's position continues uninterrupted.

International Financial Reporting Standards

The standards issued by the International Accounting Standards Board (IASB), governing how transactions are recognised, measured, presented and disclosed. ICPAK adopted the International Accounting Standards from 1 January 1999. Standards issued from 2001 are titled IFRS while the earlier IAS keep their own names, so this paper cites both; IFRS is the collective term.

Debit and credit are directions, not good news and bad news
Riverside Agrovet receives KES 40,000 cash from a customer settling an invoice.
  Debit  Cash                40,000     an asset increases, so it is debited
  Credit Trade receivables   40,000     an asset decreases, so it is credited
Both sides here are assets. Nothing was earned, because the sale was already
recorded as income when the invoice was raised. The bank statement will say
'credit' against this deposit, which is the bank describing its own books:
the bank owes Wanjiru more money, so its liability to her is credited.

Common mistake

The single most persistent Foundation error is reading 'credit' as 'decrease' and 'debit' as 'increase'. It is true for assets and expenses and false for everything else. Fix the rule to the type of account first, never to the transaction's mood: a credit to sales is excellent news for the business, and a credit to a bank loan account means the entity now owes more.

What accounting is

Nature and purpose

Accounting exists because the people who need to make decisions about a business are usually not the people who watched its transactions happen. Wanjiru knows what her agrovet took yesterday because she was there. A loan officer at Equity Bank appraising her application for stock finance was not there, has never met her, and must decide on the strength of a document. Accounting is the discipline that turns what happened into a document that a stranger can rely on.

That purpose explains the shape of everything in this paper. Transactions are recorded from source documents rather than memory because a stranger needs evidence. They are recorded by double entry because a stranger needs a system with an internal check. They are presented in a prescribed format because a stranger needs to find the figure without being told where to look. And they follow a common rulebook because a stranger needs Wanjiru's accounts to mean the same thing as the next applicant's.

Accounting is conventionally split into three branches, which in a small Kenyan business are three uses of the same underlying data rather than three separate jobs.

Bookkeeping

The routine recording and classifying of transactions as they occur, the input side of accounting. Wanjiru's daily sales book and her file of supplier invoices are bookkeeping.

Financial accounting

The preparation of general purpose financial statements for users outside the business, following IFRS. This is the subject of this paper.

Management accounting

The preparation of information for the people running the business, to plan, control and decide. It follows no external rulebook, because no external party relies on it. It is the subject of ATD Fundamentals of Management Accounting.

The three run on different rhythms over identical raw data. Wanjiru's till roll is bookkeeping, daily. At month end she totals which product lines earned the most margin and decides what to reorder, which is management accounting and answers to nobody but her. At year end the same transactions, adjusted and classified, become financial statements the bank and the Kenya Revenue Authority read. The numbers underneath never changed; who they are for, and how strictly their presentation is prescribed, did.

Common mistake

Offering a bank a set of internal management accounts in place of financial statements, or arguing that management accounts must comply with IFRS, are both examinable errors and they are the same error from opposite ends. The rulebook applies precisely where external parties rely on the output, and does not apply where they do not.

The objective of financial accounting

The objective of general purpose financial reporting, as stated in the IASB's Conceptual Framework for Financial Reporting, is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. Every requirement in this paper serves that one objective.

Read the objective closely, because two of its words are examinable. It says decisions, not record, so the statements are forward looking in purpose even though they report the past: the bank cares about last year's profit only as evidence about next year's capacity to repay. And it names investors, lenders and other creditors specifically rather than everyone with an interest, because those are the parties who supply the entity's resources and whose decisions determine whether it can continue operating at all. Other users are served (the section on users, below, lists them), but the statements are built around the capital providers' needs.

Conceptual Framework

The Conceptual Framework for Financial Reporting is not itself a numbered IAS or IFRS. It is the document the IASB uses to develop the standards, and it is the source of the objective above, the elements below and the qualitative characteristics of useful information.

The elements of financial statements

Every figure in a set of financial statements is one of a small number of elements. The syllabus lists ten, which is the wider United States framework list. The IASB's own framework recognises five: assets, liabilities, equity, income and expenses. It gets there three different ways:

Gains are treated as a form of income and losses as a form of expense.
Investments by owners and distributions to owners are presented as movements in equity rather than as elements in their own right.
Comprehensive income is the total of the income and expenses recognised in the period rather than a separate element at all.

Both lists are examinable, so the definitions below give all ten.

Assets

Present economic resources controlled by the entity as a result of past events, with the potential to produce economic benefits. Riverside Agrovet's delivery motorcycle, its stock of seed, and the money owed to it by a farmer on credit are all assets. Control matters more than ownership: goods held on hire purchase are an asset of the buyer once the risks and rewards have passed.

Liabilities

Present obligations of the entity to transfer an economic resource as a result of past events. The balance owed to a Nairobi wholesaler and Bidii Millers' Equity Bank loan are liabilities. The obligation must arise from something that has already happened, which is why an intention to buy stock next month is not a liability.

Equity

The residual interest in the assets of the entity after deducting all its liabilities. Equity is defined by subtraction, not measured directly, which is why it absorbs every gain and loss the entity makes.

Revenues

Inflows or enhancements of assets, or settlements of liabilities, arising from the entity's ordinary activities. Riverside Agrovet's sales of seed and feed are revenue.

Expenses

Outflows or depletions of assets, or incurrences of liabilities, arising from the entity's ordinary activities. Shop rent, casual wages and the cost of the goods sold are expenses.

Gains

Increases in equity from transactions that are peripheral or incidental to the entity's ordinary activities. If Riverside Agrovet sells its old motorcycle for more than its carrying amount, the surplus is a gain, not revenue, because selling motorcycles is not what the agrovet does.

Losses

Decreases in equity from peripheral or incidental transactions, the mirror of gains. Stock destroyed by flooding gives rise to a loss.

Investments by owners

Increases in equity from transfers of value to the entity by its owners, in order to obtain or increase an ownership interest. Wanjiru banking KES 300,000 of her own savings into the business account is an investment by owners. It is emphatically not income, because nothing was earned.

Distributions to owners

Decreases in equity from transfers of value by the entity to its owners. Drawings by a sole trader and dividends paid by a company are distributions to owners, not expenses.

Comprehensive income

The total change in equity during a period from all sources other than investments by, and distributions to, owners. It therefore comprises the profit or loss for the period plus other comprehensive income, being items such as revaluation surpluses that standards require to be recognised outside profit or loss.

Notice that the definitions of revenue and expense both run through assets and liabilities rather than standing on their own. Income is fundamentally an increase in net assets from trading, other than the owner putting more in; an expense is fundamentally a decrease in net assets from trading, other than the owner taking money out. This is why the double entry system in the next chapter never needs an eleventh type of account: every account a business keeps is one of these elements or a subdivision of one.

Classifying six transactions of Riverside Agrovet by element
Wanjiru banks KES 300,000 of her savings into the business account
    -> Asset (bank) up, Equity up as an investment by owners. NOT revenue.
The agrovet buys a delivery motorcycle for KES 150,000 cash
    -> Asset (motorcycle) up, Asset (bank) down. No effect on equity at all.
It sells seed for KES 80,000 on credit
    -> Asset (trade receivable) up, Equity up through Revenue.
It pays KES 12,000 shop rent for the month
    -> Asset (bank) down, Equity down through Expense.
It sells the old motorcycle, carrying amount KES 40,000, for KES 55,000
    -> Asset (bank) up 55,000, Asset (motorcycle) down 40,000,
       Equity up 15,000 as a Gain, not as revenue.
Wanjiru takes KES 20,000 for household use
    -> Asset (bank) down, Equity down as a Distribution to owners. NOT an expense.

Common mistake

Two classification errors cost marks in almost every sitting. The first is treating capital introduced as income, and drawings as an expense: both move equity directly, while income and expenses move equity only through profit. The second is calling the profit on disposal of an asset 'revenue'. Ask one question and both resolve: did this arise from the trade the business is actually in, or from the owner's own capital, or from something incidental?

Accounting concepts

Accounting concepts are the assumptions a preparer is entitled to make, and the constraints they must observe, when deciding what figure to put in the accounts. They matter in this paper because almost every year end adjustment in the chapter on assets and liabilities is a concept being applied, and an examiner will often ask you to name the concept that justifies an adjustment you have just made.

Accrual principle

Transactions are recorded in the period in which they occur, not the period in which cash moves. Riverside Agrovet's December electricity bill, paid in January, is a December expense and a liability at 31 December. Without this principle a business could flatter its profit simply by delaying payment of its bills until after the year end.

Conservatism principle

Also called prudence. Where uncertainty exists, exercise caution so that assets and income are not overstated and liabilities and expenses are not understated. It does not license deliberate understatement: creating a hidden reserve by writing stock down below its real recoverable amount is as wrong as overstating it, because both mislead.

Consistency principle

The same accounting treatment is applied to the same class of item from one period to the next. If Bidii Millers depreciates its mill on the reducing balance basis this year, it does so next year too, and if a change is genuinely justified it is disclosed and its effect quantified. Without consistency, a comparison between two years says nothing about performance.

Cost principle

Assets are recorded initially at their historical cost, being what was actually paid to acquire them and bring them into use, rather than at what the owner believes they are worth. Historical cost is verifiable from a document, which is precisely why a stranger can rely on it.

Economic entity principle

The business is accounted for separately from its owners and from any other business they run. This holds even where the law makes no such separation: Riverside Agrovet is a sole trade, so Wanjiru is personally liable for its debts, yet her personal rent and school fees never enter its accounts. Money she takes out is drawings, which is the accounting mechanism that keeps the two apart.

Full disclosure principle

Any information that would influence the judgement of a user of the financial statements is disclosed, whether in the statements themselves or in the notes. A pending court case that might cost Bidii Millers a substantial sum is disclosed even though no figure is yet recorded.

Going concern principle

The financial statements are prepared on the assumption that the entity will continue in operation for the foreseeable future and has neither the intention nor the need to liquidate. This assumption is what allows an asset to be carried at cost less depreciation rather than at what it would fetch in a forced sale. Where the assumption fails, the basis of preparation changes and that fact must be disclosed.

Matching principle

Expenses are recognised in the same period as the revenues they helped to generate. The cost of the seed sold in November is a November expense; the cost of seed still on the shelf at 30 November is an asset, not an expense, because it has not yet earned anything.

Accrual and matching applied to Riverside Agrovet's first full year
An EARLIER year of the agrovet, deliberately smaller and simpler than the one
worked in the later chapters: returns, discounts and bad debts are all ignored
here so the accrual point stands on its own.
Facts for the year: cash received from customers 1,100,000; cash paid to suppliers 700,000.
At 31 December: customers owe 140,000; the agrovet owes suppliers 95,000;
December rent of 12,000 is unpaid; closing stock is 120,000; opening stock was 70,000.
Revenue on the accrual basis   = 1,100,000 + 140,000           = 1,240,000
Purchases on the accrual basis =   700,000 +  95,000           =   795,000
Cost of sales (matching)       = 70,000 + 795,000 - 120,000    =   745,000
Rent expense (accrual)                                         =    12,000
Gross profit = 1,240,000 - 745,000 = 495,000
On a pure cash basis the 'profit' would look like 1,100,000 - 700,000 = 400,000,
which is neither the revenue earned nor the cost of earning it. The 95,000 owed
to suppliers and the 12,000 rent are real December obligations, and the 120,000
of stock on the shelf has not yet helped to earn anything.

Common mistake

Accrual and matching are related but they are not the same concept and an examiner asking for one will not accept the other. Accrual fixes the period an item belongs to by reference to when it occurred. Matching goes further and ties an expense specifically to the revenue it generated, which is why it, and not accrual alone, is the concept that keeps closing stock out of cost of sales.

Naming the right concept

Candidates lose marks here by naming a concept that is true but not the one asked for. Work from what the adjustment does. If it moves an amount between periods, the concept is accrual. If it holds an expense back until the related revenue arrives, it is matching. If it declines to recognise a gain that has not yet been realised, it is conservatism. If it keeps the owner's personal spending out of the business, it is economic entity.

Types of accounts

The traditional classification divides every ledger account into three types, and attaches a rule of double entry to each. This classification predates the elements above and sits alongside them: the elements say what an item is, the account types say how to post it.

Real accounts

Accounts for assets and properties, whether tangible like the motorcycle and the stock, or intangible like a software licence. Real accounts are not closed at the period end; their balances carry forward into the statement of financial position.

Personal accounts

Accounts for persons and organisations the entity deals with: individual customers, suppliers, the bank, the owner's capital account. Like real accounts, their balances carry forward.

Nominal accounts

Accounts for incomes, gains, expenses and losses: sales, rent, wages, discount received. Nominal accounts are closed off to the statement of profit or loss at each period end and begin the next period at nil, which is what 'closing the books' in the key terms refers to.

Account type	Golden rule: debit	Golden rule: credit	Worked instance
Real	What comes in	What goes out	Motorcycle bought for cash: debit motorcycle (comes in), credit cash (goes out)
Personal	The receiver	The giver	Goods sold on credit to Kamau: debit Kamau (receiver), credit sales
Nominal	Expenses and losses	Incomes and gains	Rent paid: debit rent expense, credit cash

The golden rules and the modern element based rules always give the same answer, because they are two descriptions of the same system. Use whichever the question's wording invites, but do not mix them mid answer: an examiner reading 'debit the receiver' followed by 'credit because assets decrease' cannot tell whether you understood either.

The accounting equation

The elements described above relate to each other through a single identity that never breaks, no matter how large or complex the entity.

The accounting equation

Assets = Liabilities + Equity

Assets: Everything the entity controls and expects benefit from
Liabilities: Everything the entity owes to parties other than its owners
Equity: The owners' residual claim, being assets less liabilities

The expanded accounting equation, over a period

Assets = Liabilities + Opening equity + Income - Expenses - Drawings

Opening equity: Capital at the start of the period plus capital introduced during it
Income - Expenses: The profit for the period, which belongs to the owner
Drawings: Value taken out by the owner, called dividends in a company

Because the equation must always hold, a transaction that changed only one side of it would mean value had appeared from nowhere. That is the whole basis of double entry, covered in the next chapter: the system is nothing more than this equation enforced one transaction at a time. Whenever a posting confuses you, work it from the equation rather than trying to recall a rule, because the equation always resolves it.

Applying the equation: Wanjiru's first five transactions
1. Wanjiru banks KES 300,000 of her own savings as capital.
     Assets (Bank +300,000) = Liabilities (0) + Equity (Capital +300,000)
2. She takes a KES 150,000 Sacco loan and immediately buys a motorcycle with it.
     Assets (Bank +150,000, then Motorcycle +150,000 and Bank -150,000)
       = Liabilities (Loan +150,000) + Equity (unchanged)
3. She buys stock worth KES 80,000 on credit from a Nairobi wholesaler.
     Assets (Inventory +80,000) = Liabilities (Payable +80,000) + Equity (unchanged)
4. She sells half that stock for KES 60,000 cash.
     Assets (Bank +60,000, Inventory -40,000) = Equity (Profit +20,000)
5. She pays KES 12,000 rent and takes KES 15,000 drawings.
     Assets (Bank -27,000) = Equity (Expense -12,000, Drawings -15,000)

Proving the equation after all five transactions
Bank      = 300,000 + 150,000 - 150,000 + 60,000 - 27,000  = 333,000
Motorcycle                                                  = 150,000
Inventory = 80,000 - 40,000                                 =  40,000
Total assets                                                = 523,000
Sacco loan 150,000 + Trade payable 80,000                   = 230,000
Capital 300,000 + Profit 20,000 - Rent 12,000 - Drawings 15,000 = 293,000
Check: 230,000 + 293,000 = 523,000, which equals total assets exactly.

Users of accounting information

Users are conventionally split into those outside the entity, who must rely on the published statements because they have no other access, and those inside it, who can ask for whatever they need. The external users come first.

Creditors

Suppliers and lenders who are owed money, or are considering extending credit. A wholesaler deciding whether to give Riverside Agrovet 30 day terms is asking one question of the accounts: can this business pay, and does it pay on time? They look hardest at liquidity, meaning current assets against current liabilities, rather than at profit.

Investors

Existing and prospective providers of equity, who assess the return they are getting and the risk attached to it, in order to decide whether to hold, add to or exit their investment. Bidii Millers' three shareholders read the accounts for exactly this.

Government

Principally the Kenya Revenue Authority, which uses financial information to assess income tax, corporation tax and value added tax, and to check compliance through iTax and eTIMS. Government also uses aggregated accounting data for national statistics and economic planning.

Trading partners

Customers and other businesses in a continuing commercial relationship, who need to know the entity will still be there to honour it. A cooperative contracting Bidii Millers to mill its members' maize for a season needs assurance the mill will not fold mid contract.

Regulatory agencies

Bodies with statutory oversight of the entity or its sector, such as the Capital Markets Authority for listed companies, the Central Bank of Kenya for banks, and the Sacco Societies Regulatory Authority for deposit taking Saccos. They read the accounts to enforce the requirements of the sector they regulate.

International standardisation agencies

Standard setters such as the IASB, and locally ICPAK, which monitor how standards are applied in practice and use what they find to develop and revise them.

Journalists and internal users

Journalists and financial analysts form the last of the external group. They interpret and republish financial information for a wider audience, and their reporting influences how investors, customers and the public regard the entity. The internal users follow.

Owners

The providers of the entity's capital, who want to know the return the business is producing on what they put in, and whether to put in more or take it out. In a sole trade the owner is also the manager, which is why Wanjiru reads her accounts for two different purposes at once.

Directors

In a company, the persons charged with governing it. The Companies Act 2015 splits the duties: the company must keep proper accounting records (s.628), while the directors must prepare financial statements giving a true and fair view (ss.635 and 636). They therefore read the accounts as both preparers and stewards.

Managers

Those running the entity day to day, who need detailed and timely information to plan, control and decide. Their needs are largely met by management accounting rather than by the annual financial statements, which arrive too late and in too summarised a form to run a business by.

Employees

Assess the security of their jobs, the entity's capacity to pay wages and benefits, and the credibility of any promise made in a collective bargaining negotiation.

User	The question they are really asking	Where they look first
Lender or creditor	Can this business pay what it owes, and when?	Liquidity and cash flows
Investor	What return am I getting, and at what risk?	Profit and equity
KRA	Is the declared taxable profit accurate?	Revenue and expense detail
Employee	Is my job and my pay secure?	Profitability and going concern
Regulator	Does this entity meet the rules of its sector?	Disclosures and the notes

These users want different things from the same document, and several of them have interests that pull against each other. That conflict is the reason financial accounting is rule bound and neutral rather than tailored: a single set of general purpose statements prepared under one consistent rulebook is what allows all of these readers to be served from one document without any of them being written for.

Exam tip

When a question gives you a fact pattern and asks which user is affected, answer with the decision that user is about to make, not with a definition of the user. 'A supplier considering 30 day terms will look at the current ratio and the payment history, because their exposure is short term' earns the mark; 'suppliers are creditors of the business' does not.

Self-check

Kiptoo opened Rift Valley Hardware in Eldoret on 1 March. During March: (1) he banked KES 500,000 of his own savings as capital; (2) he took a KES 200,000 bank loan and used all of it the same day to buy a pickup; (3) he bought stock worth KES 150,000 on credit from a Nakuru supplier; (4) he sold three quarters of that stock for KES 175,000 cash; (5) he paid KES 18,000 shop rent and took KES 25,000 for household expenses.

(a) Determine total assets, total liabilities and total equity at 31 March, using the accounting equation. (8 marks)

(b) State the element to which the KES 25,000 in (5) belongs, and the concept that requires it to be kept out of the profit or loss. (2 marks)

Show worked answer

(a) Working through each transaction (8 marks: 1 per transaction analysed, 3 for the totals and the check)

1. Capital introduced: Bank +500,000; Equity (Capital) +500,000

2. Loan drawn and spent: Bank +200,000 then -200,000 (net nil);

Pickup +200,000; Liabilities (Loan) +200,000

3. Stock on credit: Inventory +150,000; Liabilities (Payable) +150,000

4. Sale: cost of the three quarters sold = 150,000 x 3/4 = 112,500

Bank +175,000; Inventory -112,500; Equity (Profit) +62,500

5. Rent and drawings: Bank -43,000; Equity: Expense -18,000, Drawings -25,000

Bank = 500,000 + 175,000 - 43,000 = 632,000

Pickup = 200,000

Inventory = 150,000 - 112,500 = 37,500

Total assets = KES 869,500

Loan 200,000 + Trade payable 150,000 = KES 350,000

Capital 500,000 + Profit 62,500 - Rent 18,000 - Drawings 25,000

Total equity = KES 519,500

Check: 350,000 + 519,500 = 869,500 = total assets. The equation balances.

(b) (2 marks: 1 for the element, 1 for the concept)

The KES 25,000 is a distribution to owners (drawings), not an expense, because it

did not arise from trading. The economic entity principle requires it to be kept

out of profit or loss: the business is accounted for separately from its owner,

so Kiptoo's household spending is a reduction of his claim on the business, not a

cost of running it.

The accounting framework

Key terms

What accounting is

Nature and purpose

The objective of financial accounting

The elements of financial statements

Accounting concepts

Types of accounts

The accounting equation

Users of accounting information

Journalists and internal users

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