FINANCIAL ACCOUNTING IVY SOFTWARE DEFIONITION OF TERMS
Revenue/Epense matching - ✔✔ accounting entities should aspire to recognize expenses in the
same accounting periods as the revenues they generate
Conservatism - ✔✔ given an uncertain and imprecise environment, it is better to understate than
overstate economic well-being
Understandability - ✔✔ Financial conditions and results should be communicated so that they
are understandable by an educated user of financial information
Relevance - ✔✔ Financial data must also be relevant to a user to be of value, extraneous
information need not appear
Consistency - ✔✔ accounting entities must consistently apply the elections available to them so
that results from different periods can be compared
Materiality - ✔✔ there is a cost/benefit aspect to financial reporting; insignificant data need not
be reported if it would not affect a user's decision making
Economic Entity - ✔✔ one firm, one set of books
Going Concern - ✔✔ a firm has value beyond the liquidation value of its assets
Monetary Unit - ✔✔ financial transactions are denominated in a stable unit of measure
Revenue/Epense matching - ✔✔ accounting entities should aspire to recognize expenses in the
same accounting periods as the revenues they generate
Conservatism - ✔✔ given an uncertain and imprecise environment, it is better to understate than
overstate economic well-being
Understandability - ✔✔ Financial conditions and results should be communicated so that they
are understandable by an educated user of financial information
Relevance - ✔✔ Financial data must also be relevant to a user to be of value, extraneous
information need not appear
Consistency - ✔✔ accounting entities must consistently apply the elections available to them so
that results from different periods can be compared
Materiality - ✔✔ there is a cost/benefit aspect to financial reporting; insignificant data need not
be reported if it would not affect a user's decision making
Economic Entity - ✔✔ one firm, one set of books
Going Concern - ✔✔ a firm has value beyond the liquidation value of its assets
Monetary Unit - ✔✔ financial transactions are denominated in a stable unit of measure
