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20 Cards in this Set
- Front
- Back
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fiscal period assumption
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states that the operating life of an economic entity can be divided into time periods over which such measures can be developed
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fiscal year
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companies report on twelve-month periods
end on dates other than Dec 31 |
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going concern assumption
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follows logically from the fiscal period assumption
extend beyond current fiscal period |
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stable dollar assumption
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implicit in the measures of performance and financial condition used to evaluate and control management's decisions
no inflation (constant purchasing power) |
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purchasing power
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defines dollar's value (amount of G/S it can buy at a given point in time)
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economic entity
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profit-seeking entities, which are separate and distinct from their owners and other entities, can be identified and measured
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two markets of operation:
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input market
output market |
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input market
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purchase inputs
normally less than output prices |
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output market
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sell outputs
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four valuation bases
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present value
fair market value replacement cost original cost |
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present value
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discounted future cash flows associated wuth a particular financial statement item
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fair market value
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sales price (value on output market)
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replacement cost
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current cost (current price paid for an item in input market)
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original cost
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input price paid when item was originally purchased
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objectivity
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states that financial accounting information must be verifiable and reliable
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matching
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efforts of a given period should be matched against the benefits that result from them
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revenue recognition
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provides the guidelines for answering a question
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consistency
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companies should choose a set of methods and use them from one period to the next.
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materiality
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only those transactions dealing with dollar amounts large enough to make a difference to financial statement users need be accounted for
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conservatism
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when in doubt, financial statements should understate assets, overstate liabilities, accelerate recognition of losses, and delay recognition of gains
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