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3 Cards in this Set
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In addition to the fundamental qualities, there are a number of enhancing qualities of useful infomration. They are COMPARABILITY, VERIFIABILITY, TIMELIESS, & UNDERSTANDABILITY. What does each term mean as it relates to accounting for a business. |
COMPARABILITY -- comparability [accounting] is a term used when different companies use the same accounting principles. Ergo, financiallly speaking, the results of the company were formulated using a similiar account practice VERIFIABILITY -- Information has this quality if accounting information presented by a company can be independantly verifiable using the same accounting method, can achieve similiar financial results. TIMELINESS -- for information to be relevant, accounting informaiton must be timely in order to make important decisions affecting important business decisions UNDERSTANDABILITY--financial information is presented in a fashioin that is clear and concise and thereby able to be interpreted |
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Are all company events included in the financial statements? (ie. is a new hire included? Yes or no? Explain. |
No. Only events that changes in the business's economic resources or changes to the claims on those resources are recorded. When recorded they are called FINANCIAL TRANSACTIONS. |
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ABC Company, a lawncutting service, meets with a customer in April and agrees to cut their lawn while they are away on vaction in June. In June, ABC Company cuts the customer's lawn as agreed and invoices the customer for the work completed. When the customer returns in July, he pays ABC Company the invoiced amount in cash. ABC Company's year-end is June 30. y's year-end is June 30. Assuming that this company adheres to the REVENUE RECOGNITION PRICINPLE, when should this company recognize this revenue for work completed? April June July Its Year-end Never. Its a cash transaction. Explain. |
June. In adhereing to REVENUE RECOGNITIION PRINCIPLE, ABC Company is required to recognize revenue in the accountng period regardless of whether cash is received. |
