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9 Cards in this Set
- Front
- Back
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Continuity Assumption
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Businesses are assumed to continue to operate into the foreseeable future
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Separate-Entity Assumption
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Business transactions are accounted for separately from the (personal) transactions of owners, all other persons and entities.
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Historical Cost Principle
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Assets are recorded at historical cost-cash paid plus the current dollar value of all noncash considerations on the date of the exchange. (The sum of what was exchanged for the asset) ie; 15K cash plus 2K Old van = 17k total cost for new van. (UPGRADE)
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Materiality
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small amounts can be accounted for in the most cost-beneficial manner
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Conservatism
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Don't overstate or understate liabilities and expenses
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Transaction
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(1) an exchange or assets or services for assets, services or promises to pay between a business and one or more external parties to a business or (2) a measurable internal event such as the use of assets in operations.
A contract (the exchange of promises) is not a transaction and is thus not recorded. |
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Declared Dividends
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When a company declares dividends, retained earnings is reduced.
Retained Earnings (-SE) $3,000 Dividends Payable (+L) $3,000 |
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T Accounts
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On left side (asset side):
+Debit -Credit On right side (liabilities and stockholder equity side) -Debit +Credit Ending balances are always listed on the + side of the T account. (Left side for Assets, Right side for Liabilities or SE) |
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Compound Entry
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Any journal entry affecting more than two accounts.
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