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26 Cards in this Set
- Front
- Back
Objectivity Concept |
Objectivity: financial statement information is supported by independent, unbiased evidence other than someone’ s opinion or imagination. This concept increases the reliability and verifiability of financial statement information |
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cost principle is also called |
measurement principle |
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cost principle |
(=measurement principle) requires that assets be recorded at the cash amount (or its equivalent) at the time that an asset is acquired. |
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revenue recognition principle |
revenues be shown on the income statement in the period in which they are earned, not in the period when the cash is collected. |
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revenue recognition principle - accural or cash basis? |
revenue recognition principle is part of the accrual basis of accounting (as opposed to the cash basis of accounting) |
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expenses recognition, definition |
match expenses with related revenues in order to report a company's profitability during a specified time interval. |
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expenses recognition, is also called |
matching |
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full disclosure principle |
requires information pertinent to an investing or lending decision to be included in the notes to financial statements or in other financial reports |
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ongoing concern assumption |
the company will continue on long enough to carry out its objectives and commitments |
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time period assumption |
allows the accountant to divide up the complex, ongoing activities of a business into periods |
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monetary unit assumption |
the U.S. dollar is assumed to be constant (no change in purchasing power) over time. |
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economic entity assumption |
keep the sole proprietor's business transactions separate from the owner's personal transactions even though a sole proprietorship is not legally separate from the owner. |
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The statement of cash flows |
The statement of cash flows cash inflows and outflows from a company’ s operating, investing, and financing activities. |
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accounting |
the recording of financial transactions plus storing, sorting, retrieving, summarizing, and presenting the information in various reports and analyses |
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managerial accounting |
Managerial accounting is the process of identifying, measuring, analyzing, interpreting and communicating information for the pursuit of an organization's goals. also known as cost accounting |
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Record keeping vs accounting |
record keeping = book keeping = recording financial events. accounting is more. also measuring and analyzing events and transactions |
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fraud triangle |
3 factors typical exist for fraud to occur: opportunity, rationalization, financial pressure. focus on prevention. Ex. good records, locks (passwords and physical locks), independent reviews. |
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what is GAAP (what do letters stand for) |
Generally accepted accounting principles |
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aims of GAAP |
to make information relevant reliable and comparable |
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what is SEC |
SEC is legal authority to set GAAP. A government agency. |
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what is FASB |
Financial Accounting Standards Board private sector group delegated by SEC to set US Generally accepted accounting principles. |
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The 4 accounting principles |
measurement (cost) principle revenue recognition principle expense recognition principle full disclosure principle |
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3 types of business entitites |
sole proprietorship partnership corporation |
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retained earnings |
For month ended RE start plus NI less DIV = new RE |
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where does common stock on on balance sheet |
equity. not under liability |
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non executive employee |
a non-executive employee is an external information user. similar to labor union.
Uses financial statements to judge fairness of wages etc. |