CH 2

Accounting 321 with Hwang at Bloomsburg University of Pennsylvania

About this deck

By: Ryan Gr
Textbook: Coddled Canine: Practice Set with Peachtree Software

Intermediate Accounting
Created: 2010-09-18
Size: 29 flashcards
Views: 13

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Like a constitution, leads to consistent rules.

Conceptual Framework

Presents goals and purposes of accounting (3 objectives)

Objectives of Financial reporting by business enterprises

Examines the characteristics that make accounting information useful.

Qualitative characteristics of accounting information

Provides definitions of items of financial statements, such as assets, liabilities, revenues, and expenses. (10 elements)

Elements of financial statements of business enterprises

Sets forth fundamental recognition and measurement criteria and guidance on what information should be formally incorporated into financial statements and when.

Recognition and measurement in financial statements of business enterprises

Replaces number 3 and expands its scope to include not for profit organizations.

Elements of financial statement

Provides a framework for using expected future cash flows and present values as a basis for measurement

Use of cash flow information and present value in accounting measurements

Objectives of Financial Reporting

1. Information that is useful to those making investment and credit decisions who have reasonable understanding of business and economic activities.

2. Information helpful to present and potential investors, creditors, and other users in assessing the amounts, timing, and uncertainty of future cash flows.

3. Information about economic resources, the claims to those resources, and changes in them.

Information that is measured and reported in a similar manner for different companies in considered comparable.

Comparability

When a company applies the same accounting treatment to similar events, from period to period, the company shows consistent use of accounting standards. A company CAN change methods.

Consistency

Assets, liabilities, equity

Moment in time

Figures in one financial statement corresponds to balances in another.

Articulation

4 Basic Assumptions

1. Economic entity

2. Going Concern

3. Monetary Unit

4. Periodicity

A company keeps its activities separate and distinct from its owners and any other business unit. Does not necessarily refer to a legal entity

Economic Entity

Means a company will have a long life

Going Concern

Means money is the common denominator of the economic activity and provides an appropriate basis for accounting measurement and analysis.

Monetary Unit

Means a company can divide its economic activities into artificial time periods.

Periodicity

4 Basic Accounting Principles

1. Measurement

2. Revenue Recognition

3. Expense Recognition

4. Full Disclosure

Companies account for and report many asset and liabilities on the basis of acquisition price.

Historical Cost

The price that would receive to sell an asset or paid to transfer a liability in an orderly transaction between marked participants at the measurement date.

Fair Value

Material, labor, and overhead

Product Cost

Salaries or administrative expenses

Period Cost

Sales and COGS match in the same year

Matching Principle

If you believe the information is useful you disclose this on the financial statement

Full Disclosure Principle

2 Constraints

1. Cost – benefit relationship

2. Materiality

Companies must weigh the costs of providing the information against the benefits that are dirved from using it

Cost-Benefit Relationship

Concerns an items impact on a company’s overall financial operations.

Materiality

Means when in doubt choose the solution that will be least likely to overstate assets and income. Goal is to provide a reasonable guide in difficult situations.

Conservatism

Valuing inventories, and the rule that companies recognize accrued net losses on a firm purchases commitments for goods and services.

Lower-Cost-or-Market

About this deck

By: Ryan Gr
Textbook: Coddled Canine: Practice Set with Peachtree Software

Intermediate Accounting
Created: 2010-09-18
Size: 29 flashcards
Views: 13

About StudyBlue

“I have used this website for three exams, and I see a huge difference in my test results.”
Naj