ACCOUNTING PRINCIPLES VOLUME 1
COMPLETE PREPARATION GUIDE WITH
JOURNAL ENTRIES AND FINANCIAL
STATEMENTS REVIEW
◉ GAAP (generally accepted accounting principles).
Answer: Financial accounting is governed by concepts & rules.
1. Relevant info affects decision of user
2. Reliable info trusted by users
3. Comparable info aids in contrasting organizations
◉ SEC- Securities and Exchange Commission.
Answer: Federal agency congress has charged to set reporting rules
for org that sell ownership shares to public
◉ FASB (Financial Accounting Standards Board).
Answer: Independent group of full-time members responsible for
setting accounting rules
◉ IASB (international accounting standards board).
Answer: Group that identifies preferred accounting practices &
encourages global acceptance; issues IFRS
,◉ Measurement/cost principle.
Answer: Accounting info based on actual cost.
-if cash is given for a service, cost is measured by cash paid
-if other is exchanged (car traded for truck), cost is measured as cash
value of what is given up or received
This ensure reliability, verifiability
◉ Revenue Recognition Principle.
Answer: Recognition = recording
-happens when goods or services are provided to customers
-is recorded at the amount received
◉ Expense Recognition Principle.
Answer: A company records the expenses it incurred to generate
revenue reported
◉ Full disclosure principle.
Answer: A company must report the details behind financial
statements that would impact users' decision. Often found in
footnotes
, ◉ Going Concern Assumption.
Answer: Accounting info reflects a presumption that the business
will continue operation instead of being closed or sold.
-implies business/property is reported at cost instead of, say,
liquidation value that insists closure
◉ Monetary Unit Assumption.
Answer: We can express transactions & events in monetary units.
Money being the common denominator in business
◉ Time Period Assumption.
Answer: Presumes that the life of a company can be divided into
time periods, months/years, & useful reports can be prepared for
those periods
◉ Business entity assumption.
Answer: a business is accounted for separately from other business
entities, including its owner.
◉ Materiality constraint.
Answer: Only information that influences decisions (through
importance/dollar amt) need be disclosed
◉ Cost-benefit constraint.
COMPLETE PREPARATION GUIDE WITH
JOURNAL ENTRIES AND FINANCIAL
STATEMENTS REVIEW
◉ GAAP (generally accepted accounting principles).
Answer: Financial accounting is governed by concepts & rules.
1. Relevant info affects decision of user
2. Reliable info trusted by users
3. Comparable info aids in contrasting organizations
◉ SEC- Securities and Exchange Commission.
Answer: Federal agency congress has charged to set reporting rules
for org that sell ownership shares to public
◉ FASB (Financial Accounting Standards Board).
Answer: Independent group of full-time members responsible for
setting accounting rules
◉ IASB (international accounting standards board).
Answer: Group that identifies preferred accounting practices &
encourages global acceptance; issues IFRS
,◉ Measurement/cost principle.
Answer: Accounting info based on actual cost.
-if cash is given for a service, cost is measured by cash paid
-if other is exchanged (car traded for truck), cost is measured as cash
value of what is given up or received
This ensure reliability, verifiability
◉ Revenue Recognition Principle.
Answer: Recognition = recording
-happens when goods or services are provided to customers
-is recorded at the amount received
◉ Expense Recognition Principle.
Answer: A company records the expenses it incurred to generate
revenue reported
◉ Full disclosure principle.
Answer: A company must report the details behind financial
statements that would impact users' decision. Often found in
footnotes
, ◉ Going Concern Assumption.
Answer: Accounting info reflects a presumption that the business
will continue operation instead of being closed or sold.
-implies business/property is reported at cost instead of, say,
liquidation value that insists closure
◉ Monetary Unit Assumption.
Answer: We can express transactions & events in monetary units.
Money being the common denominator in business
◉ Time Period Assumption.
Answer: Presumes that the life of a company can be divided into
time periods, months/years, & useful reports can be prepared for
those periods
◉ Business entity assumption.
Answer: a business is accounted for separately from other business
entities, including its owner.
◉ Materiality constraint.
Answer: Only information that influences decisions (through
importance/dollar amt) need be disclosed
◉ Cost-benefit constraint.
